Ashwagandha loves real estate. This can be seen in the exceptional investment in choosing projects and in each of them separately. This is also attested to by Ofer Ziv, who has served as CEO since 2009. "The thing that characterizes us the most is that we really love dealing with real estate in all its diversity and I don't think there's anyone who loves the profession as much as we do," he says.
Shutterstock,
"You see it in our buildings. We invest in new technologies, specifications and finishing. Even if the construction costs are higher than usual, in the end customers appreciate it and come to us because of our love for the industry."
Ziv, a resident of Herzliya, testifies that he is not an ordinary CEO, and is involved in the highest level of work: "I started out as a construction engineer and therefore there is value in my personal involvement in projects down to the smallest details. It was important for me, for example, to examine the type of stone they assembled on the industrial buildings in the project in Nes Ziona, I personally examine the visitors and whether the construction of finishes is good enough, making sure that the bicycle room in the building was built properly. I always have something to say and add. In the end, I believe that if you pay attention to the small details, a better result will result. That's how we succeeded in bringing Teva to the infantry level."
Investing in sustainability and visibility
The relationship with Teva began when Ashwagandha negotiated with it the construction of a 40,000 square meter project for it in Petah Tikva.
Ziv: "We invested a lot of resources and money in this project, but during the negotiations, a new CEO entered Teva and decided to stop the deal in order to see if such a large project was really suitable for them. Despite this, we made sure to maintain good relations with them.
"At the infantry level, we were already in the middle of constructing a new building when they came to us with a proposal to use a new technology for a double envelope, which was not yet in the construction market in Israel. That was about seven years ago, and we thought that within a year or two everyone would be using this technology, so we decided to bet on long-term thinking about building a building that needs to be well built and function for 30-40 years ahead.
"This shell spoke to Teva very much and they also loved the construction of the lobby and the connection to the parking lot. Combined with our good relationship with them, the people in nature were persuaded to move here, even though they tend to build their own buildings."
Ziv's good relationship with Ashwagandha's chairman, Ehud Samsonov, led the two to examine the company's project at Har Hotzvim in Jerusalem. "I convinced Ehud to go to Jerusalem, to Har Hotzvim, in order to check the potential," Ziv says, "When we saw the location of the project, the level of buildings and Teva's maintenance, we immediately understood the potential and bought the rights, which at the time amounted to about 70,000 square meters. We are currently renting out the place itself, and the Jerusalem Municipality, which is very much promoting the development of employment areas in the city, wants us to increase the rights there to about 130. 000 sqm.
Mount Hotzvim - Ofer Zim A project of Ashwagandha. Photography : (Simulation) - Yashar Architects,
"The current mayor (Moshe Leon) is very much pushing the whole issue of employment in Jerusalem, and if it continues like this, it will change its face in the coming years in terms of modern employment. This is the first mayor I encountered, who after a first introductory meeting understands the potential, and only three months later set up a follow-up meeting to promote the project. I expect that already this year we will begin carrying out the expansion work."
Is there no advanced technology in the construction industry in Israel?
"In income-producing real estate, the technology in Israel is actually very advanced and the level of sophistication is high and approaching the best levels of construction in the world. At Ashwagandha Tel Aviv, one of the most advanced mixed-use projects being built in Israel, we use new and unique construction technology that will enable us to advance faster and build better.
This is an innovative technology that has hardly been used in Israel and makes it possible to advance to a height with the construction of the building's core at a rate of two meters a day. Our aluminum envelopes are also among the most advanced of their kind in the world."
But construction costs carry up rental prices as well.
Is the customer willing to pay a higher price because he understands that it's better?
"It depends on who the customer is. Surprisingly, today it is precisely for high-tech companies that the building's visibility – even from the outside – is very important, the finish, the materials and especially the standards. They really want standards of sustainability. I was surprised to find that such companies have an expert who understands this and knows what to look for. The negotiations, for example, with Monactive, which leased 21 floors in our Ashwagandha Tel Aviv project on a long-term contract, were very convenient, because they knew exactly what they were looking for and we had the ability to provide them with these demands."
Direction - Entrepreneurship and Management
Ziv (69), lives in Herzliya, married with one daughter. During the Yom Kippur War he was an officer, a graduate of a military boarding school, with a future and perhaps a military career ahead of him, but an injury he sustained shuffled the cards.
He was discharged from the service and found himself recalculating his route. "I reached out to a social worker at the Ministry of Defense who suggested that I do a preparatory course for the Technion. It sounded quite tempting to me at the time, and since I also had a management orientation – after all, an officer in the Haruv Patrol – I thought about studying industrial engineering and management.
"At some point, civil engineering captivated me and I decided to study at the Technion.
Unfortunately, the profession today suffers from an acute shortage of engineers, and precisely in a field that seems to be difficult to find a substitute for an engineer - a human manager. The funny thing is that one of the main reasons I chose this field was because I was assured that construction engineers get a private car, a very tempting perk in those days."
After his studies, Ziv was accepted as a project manager at Azorim and from there moved to Azorim Properties and was exposed to the world of entrepreneurship and asset management. "That's where I actually realized what I wanted to do in life. I was one of the founders of Azorim Park, which later changed its name to Ofer Park, and I built the building for IBM in a very short time. Thus, for the first time, I was also exposed to business work and dealing with high-tech companies.
From there I moved to Solel Boneh, managing the residential division, and later I came to Delek Real Estate and was the deputy CEO and responsible for the company's activity in Israel.
"One of Delek Real Estate's last and largest transactions was the acquisition of 50% of the shares of Vitania Ltd., which was still a private company at the time. In 2009 I was appointed CEO of the company and in 2015, together with its chairman, Ehud Samsonov, I led its IPO on the Tel Aviv Stock Exchange."
From cesspits to glittering tower
Ziv mentions that at the beginning of the COVID-19 pandemic, when people switched to working from home and many predicted blackness for the office market, he remained optimistic. "I didn't think people would really be able to lock themselves in their homes forever, with all the limitations that entailed. Indeed, we see that most employees have returned to work from the office. Even organizations that enable hybrid work still need the right office space for the days when employees arrive.
"The main problem was the extreme price increases over a period of a year or two. It was a crazy reaction of prices and not the normal behavior of income-producing real estate. I've been in the business for 40 years and suddenly there was an extreme jump, so obviously the market will stabilize. Once upon a time, when we saw a 5% increase a year in prices, it was surprising. Today the volatility is higher.
"In general, there are more dramatic elements that affect high-tech than the contracts of companies in office buildings, such as wages, which are among the highest in the economy, or the shortage of engineers. High-tech may be in a kind of recession because of the macroeconomic effects on the economy, but it is not in such a difficult situation as one might think from reading the economic press. Most companies have long-term contracts, and those who have leased large areas according to a growth forecast that has not yet materialized make subleases. You can see this very well in the fact that there is no empty building in Tel Aviv."
So your forecasts for the office sector are not as pessimistic as the feeling of the market?
"We have already been in situations of a high interest rate environment in the past, and in the end the market knew how to cope. There are forecasts that talk about real estate companies seeing a decline in profits in the future because of the discount rates that are expected to rise, but companies like Ashwagandha, which hold fixed rental properties and take care of maintaining and improving them, increase profitability in this way so that there is a balance. So far, we haven't heard of breach of contract or dissolution of contracts."
Ziv says of the new project in south Tel Aviv: "When we set out with the construction of 'Ashwagandha Tel Aviv' on LaGuardia Street, it was completely pristine, there was no access road to the project area and instead of sewage infrastructure there were cesspits. When I talked about building 40,000 square meters, people in the field didn't believe in the area as an attractive place for offices, and in general that we would be able to market the project or build it. But we overcame all the obstacles and today it is one of the most glamorous and sought-after towers in Tel Aviv, housing companies such as Monactive, Gornitzky GNY law firm and more.
"The one who still chose to believe in the project and in the area is Bank Hapoalim, which purchased an entire tower from us and plans to move its headquarters there, which is currently scattered in various places. Ultimately, in real estate, the processes are long-term and you must remain optimistic. If you can't, you're better off finding another profession."
Don't rush to take risks
Even regarding the level of the infantry, according to Ziv, many were skeptical when the company began building there. "A lot of people didn't see this area as part of Tel Aviv, and that's a historic mistake. I strongly believe in this location. Our offices have been sitting here for a very long time, and although we had previously considered moving to our tower in Ashwagandha Tel Aviv, we decided that it was actually convenient for us to stay here. Here in the employment area there is the most classic mix of uses you can find. There are leading communications companies such as Keshet and Radio 102 FM, police headquarters, offices, a hospital, advanced private medicine, high-tech, a park and excellent restaurants.
"I also think it's very convenient to come here. I have been traveling here for 14 years, mostly relatively comfortably and without serious movement problems, neither at the entrance nor at the exit. There is a plan for Raoul Wallenberg's connection, which is supposed to meet Highway 4, and this will further upgrade traffic, along with the completion of work on the light rail route."
And what about other employment areas outside Tel Aviv?
"The municipalities have realized in recent years that it is much more profitable to increase employment areas in the city, mainly because municipal taxes from businesses are much higher than residential property taxes and consume cheaper services. Therefore, in some places these areas were increased disproportionately to the needs. Developers build quite a bit but there is a certain rate of occupancy. I predict that in places like Savyon Junction it will be more difficult to populate everything that will be built there in the coming years.
"On the other hand, Ness Ziona and Petah Tikva are building quite a bit, but there is high demand. In Petah Tikva's renewed employment area, for example, we are building a very unique project together with Carasso Real Estate. We have advanced contacts with prominent companies in the economy, which are interested in renting an independent building in areas between 10,000-15,000 square meters with adjacent parking spaces. Unlike other office buildings in the area, we are building a unique work environment rather than a standard office building."
Will prices in the market still rise?
"Income-producing real estate responded solidly to the recent surge in prices because there are no large gaps between supply and demand like in residential. I think income-producing real estate will continue to rise. Maybe in the near future they won't rent space in Tel Aviv at NIS 200 per square meter, but there will be an upward creep in prices. It has to do with everything getting more expensive. Interest rates are high and execution prices are rising. In addition, new regulations and standards that did not exist in the past, including in income-producing real estate, green standards and lead standards that make the project more expensive, are constantly being introduced. Sometimes this is a demand that comes from the renting companies.
"Execution costs have also increased, including the costs of building the parking lots, and this greatly affects the project's pricing. If not so long ago we built at NIS 1500 per square meter underground, today the cost starts at NIS 3500-4000 per square meter, mainly because of the cost of iron and concrete, which have risen considerably. It's already almost impossible to own a parking lot if you rent a parking space for NIS 400 a month."
Are you developing into other avenues, such as housing, for example?
"We're definitely making strides in that. Ashwagandha has established itself from the beginning as a solid and solid company, one that may not be the largest in the market but with the most prominent and reality-changing projects. We examine every new entrepreneurial project with critical eyes, take confidence factors and are in no hurry. We also have a significant change in the company's ownership, which is also a change for the better in terms of its growth.
"Over the past year, Telcar has become Ashwagandha's largest shareholder and I think they will bring with them some change in strategy. I have always said that we are a small company with large projects, I think this has a considerable advantage because it allows you to be personally involved in everything. We're growing slowly and surely."
Where do you see Ashwagandha in 10 years?
"I think the ownership structure will change and so will the company. If Telcar does indeed lead, it will be a company that will combine income-producing real estate, with a large backlog of properties that will give investors a high return, along with increased activity in the residential sector. I think there will be fewer strong players in the market. We are already seeing entrepreneurs looking to realize or bring in partners in places where they won tenders, paid quite a bit of money for the land because of market conditions and now need to start marketing and building.
"The slowdown in sales combined with the high execution costs put them in a difficult problem. Therefore, many of them are also in no hurry to bid for new tenders and take additional risks. This may eventually lead to an additional shortage of construction, mainly residential, but also opens up possibilities for players like us, who did not gamble in the past on tenders that reflected expected price increases of 20% a year and preserved the money of the company and investors."
Reisdor Kiryat Gat Photo: Chen Khalifa Levy,
"I think income-producing real estate will continue to rise. Maybe in the near future they won't rent space in Tel Aviv at NIS 200 per square meter, but there will be an upward creep in prices. It's about everything getting more expensive."
"In general, there are more dramatic components that affect high-tech than the contracts of companies in office buildings, such as wages, which are among the highest in the economy, or the shortage of engineers."
Wrong? We'll fix it! If you find a mistake in the article, please share with us