Thursday, April 28, 2011
Atrium CEO Rachel Lavine happy to be empire-building in real estate
Rachel Lavine: “The fact that I’m Israeli hasn’t interfered with my ability to close deals.”
Atrium, whose balance sheet exceeds 3 billion euros, is controlled by the Gazit-Globe conglomerate run by Chaim Katzman and Dori Segal, and is dual-listed on the Vienna and Euronext Amsterdam stock exchanges.
“Israelis in Europe say when in Europe be like the Europeans, but I’m not entirely sure that’s the way to go,” says Rachel Lavine, CEO of Atrium European Real Estate, in an interview with TheMarker. “I think Israelis have a clear advantage abroad because they’re hungry, diligent, savvy, and have a drive that Europeans lack. As guests we need to respect European culture but we don’t need to turn into Europeans.
“Europeans are more unassuming, calmer and don’t flaunt their wealth,” continues Lavine. “They don’t feel an existential threat like in Israel and their ambitions are different. In Israel a BA graduate is confronted with: ‘Why don’t you keep up?’ and ‘What are your plans?’ But there’s no drawback to being versatile like Israelis, who are knowledgeable in many fields and can work 20-hour days and multitask. The fact that I’m Israeli hasn’t interfered with my ability to close deals. Israelis are readier to work hard and quicker to close deals than the locals.”
Lavine, 45, has spent three years in Amsterdam and is a prominent figure in Israeli real estate and capital market circles. She is considered one of the top two women in Israel’s property sector, along with Segi Eitan, CEO of Property & Building Corporation (part of Nochi Dankner’s IDB group).
Atrium, whose balance sheet exceeds 3 billion euros, is controlled by the Gazit-Globe conglomerate run by Chaim Katzman and Dori Segal, and is dual-listed on the Vienna and Euronext Amsterdam stock exchanges. The company owns more than 150 income-generating properties in 11 central and eastern European countries.
Until now Lavine has kept a low profile and avoided interviews, but it seems that her experience heading Atrium and its heightened activity with capital markets have softened her media stance. Her time at Atrium has involved difficulties both in adjusting to living abroad and dealing with the market crisis, and she’s had to cope with a shaky management structure and wariness on the part of investors. But surmounting all these obstacles, she has led Atrium to considerable improvement in revenues, profitability, and occupancy rates.
Lavine, though, is well aware that Atrium is still some way from fulfilling its potential. Former owner Julius Meinl V still haunts the company: the heir to an Austrian coffee shop chain and Gazit-Globe have been exchanging multi-million euro lawsuits this past year, charging each other with mismanaging Atrium. Last week the case was put into arbitration and Lavine felt the time was right to grant an interview.
Real estate academy
An accountant by training, Lavine gained her experience in real estate and finance at Elbit Imaging, under the guidance of controlling owner Motti Zisser. Elbit Imaging currently focuses its activities on real estate, hotels, retailing and the medical field and is active in Israel, India and Europe. The company’s market cap is about NIS 1 billion.
Shortly after joining Zisser’s group as an assistant controller at the age of 23, Lavine discovered that the world of accounting wasn’t all that exciting. But Zisser’s business activities were still relatively limited and through the 1990s Lavine took part in bringing his vision to fruition.
This included expanding into hotel operations in Europe, where she served as CEO of Elscint, and establishing an empire of shopping malls and commercial and entertainment centers in Europe, serving as CEO of Plaza Centers. Lavine left the Zisser group in 2006, just before her company went public in London at a $1 billion valuation.
“Motti is a great developer who built everything he had from scratch and reached an international standing,” says Lavine. “It was an honor being at his side. From a real estate perspective, it ranked with the best international business schools. I went through almost everything with Motti for several difficult years when the business didn’t take off, but we didn’t give up and continued the struggle. Then, after 18 years, I felt it was enough and decided to move on.
“It was obviously a difficult decision, but I needed a break from the madness,” adds Lavine. “Every week I had to go abroad. I tried completing my graduate studies three times but didn’t have time because of work. They say someone who changes companies every three years is unstable, but being in the same place 18 years can be considered as being stuck. At Elbit I grew, learned and digested what I had learned, and now I’m applying those insights.”
What did you do after leaving Plaza Centers at the end of 2006? “I finally finished the Kellogg-Recanati MBA program, devoted some time to my family and served on the boards of several public companies.”
So how did the connection to Chaim Katzman come about? “I knew Ronen Ashkenazi, CEO of Gazit-Globe Israel. When Gazit acquired a controlling stake in U. Dori Group in 2007, he recommended me to Katzman as the company’s deputy chairwoman on behalf of Gazit. It seemed to me to be a good company and not so big that it would completely chain me down.”
A hard offer to refuse
It wasn’t long before Lavine’s plans changed: She was on her way to a new challenge, perhaps even greater than establishing Plaza Centers.
Toward the end of 2007, before the economic crisis hit, Gazit-Globe was quietly preparing to acquire the controlling share in Atrium, formerly Meinl European Land, with its 154 income-generating properties and swaths of land slated for development. Atrium was suffering from management problems and was shedding a great deal of its market value.
To perform the due diligence Katzman and Segal needed an expert on real estate development in Eastern Europe. They turned to Lavine, and from that point the path to becoming Atrium’s CEO was relatively short.
Did you expect to return so quickly to the insane pace?
“Not at all. I expected to do a few months of consulting work and leave quietly. But during the due diligence things began to gather steam and at the beginning of April 2008 I received an enticing offer from Gazit: If the deal came through I would get to run the company. The offer entailed so many challenges it was hard to resist. In Plaza Centers I had to build everything from scratch, while here I would need to rehabilitate the company and rebuild its value. So in April 2008 we set out on a capital markets road show.”
How did the road show go?
“We went on an intensive tour of Europe, the United States and other places. We encountered frustrated shareholders and tried to convince them to leave their frustrations behind. We explained that the company could be turned around, put on a proper corporate governance footing, and benefit from added value on the basis of Gazit-Globe’s operational history and Katzman’s and Segal’s worldwide reputations, and by instituting a proper dividend distribution policy and appointing a professional managerial staff.”
Gazit-Globe wasn’t the only contender for Atrium considered by Merrill Lynch. Why was it chosen?
“I think it was exactly for the reasons I mentioned before: Shareholders saw the combination of a professional group like Gazit, with a proven track record in the U.S., Canada, Europe and Israel, and a strong financial entity like Citigroup Property Investors declaring its intention to invest for a period of at least five years, despite it being a fund interested in maximizing its stockholders’ returns in the shortest possible turnaround time.”
Why did you think Atrium was a good company to buy?
“I worked for many years in Eastern Europe and I smelled the opportunity. Building such an infrastructure in so many countries isn’t a trivial undertaking. There are few private or public competitors focused solely on commercial centers. Atrium was one of these, an established public company focusing on supermarket-anchored centers, so it fit Gazit-Globe’s specialization like a glove.”
The crisis ended too early
After Atrium’s shareholders voted in July 2008 to allow Gazit-Globe and CPI into the company at an investment of several hundred million euros, and after she persuaded her husband and two children to join her on the new adventure, Lavine and family moved to Amsterdam, where she began building the company anew.
What made you choose Holland?
“Vienna didn’t have any comparative advantage. The dilemma was whether the offices should be closer to the capital markets or the assets. But Holland has obvious tax advantages, and from Amsterdam you can get to everywhere in Europe quickly. The city also attracts quality people.
“I had to rent office space and recruit staff − not so simple considering Atrium’s reputation − and build a headquarters to control its huge assets portfolio. And then in September 2008 the economic crisis hit.”
To what extent did the crisis interrupt your plans?
“At that time there was a tangible risk of the banks failing, and we had 1.2 billion euros on deposit. Managing investments during this period was also not simple. In addition, the company had intended to invest about 1 billion euros to develop properties and the market situation created some difficult decisions. It wasn’t clear if the leases would remain in effect, if tenants would honor their contracts, and if builders would stand by their commitments. It was a turning point, posing some very hard decisions.
“In retrospect, the crisis was a great opportunity for us. Since the company had an abundance of cash and no credit exposure, we could have taken time out to build a proper infrastructure for managing the assets and adapt our development plans to the new reality. In some ways the crisis ended too quickly from our perspective.”