Gaia, Harel partner to buy rental properties

By David Jones | October 04, 2010 05:30PM

Clockwise from top left: Danny Fishman, 5 West 91st Street, 320 South Harrison Street, 38 Balaban Road and Amir Yerushalmi

Gaia Real Estate said it has partnered with Harel Insurance Investments & Financial Services in a move to acquire rental properties, starting with three rental buildings in the New York area for $52.2 million.

Midtown-based investment firm Gaia and Harel, the third largest insurance firm in Israel, bought a 20-story high-rise at 320 South Harrison Street in East Orange, N.J., for $30 million, and a 92-unit complex at 38 Balaban Road in Colchester, Conn., for $5.4 million.

In addition, the companies purchased the 48-unit former Mitchell Lama property at 5 West 91st Street from developer Larry Gluck for $16.75 million, as The Real Deal previously reported.

Gaia, led by investors Danny Fishman and Amir Yerushalmi, formed the partnership with Harel to help it pursue distressed real estate in the New York market and is actively pursuing a number of residential deals in the New York area, as well as one commercial office building in the area.

“The advantage of this deal with Harel is we don’t need outside financing,” said Yerushalmi, who noted that Harel participated in both the equity and debt financing on these deals. “They want exposure to U.S. real estate.”

The partnership is mainly focused on buying rental buildings in the New York area for a minimum of $10 million, but he called $30 million the “sweet spot.” Most of the buildings would remain as rentals, though the firm would consider converting some to condos when the market strengthens. The partnership is also considering bulk purchases of unsold inventory in rental or condo buildings through its Park River Properties unit, he told The Real Deal.

As part of the partnership, Harel will invest up to 50 percent of the partnership’s equity on new acquisitions, along with other investment partners and high net worth individuals. The insurance firm will also provide short-term bridge loans and longer term financing for these deals.

Vision Property Management, the real estate management arm of Gaia, will manage the properties, which will all be rebranded under the Gaia name.

The partnership is in discussions to acquire two additional rental properties, one each in Harlem and Stamford, Conn.

The 35-unit Harlem property is expected to go for about $8 million, Yerushalmi said, but he would not divulge any additional details. He also would not offer any additional details about the Stamford property except to confirm that it is a rental building.