Hello,

Thank you for expressing an interest in Caesarea and Total Project Development. I hope that this Article provides you with some useful information. We will address four topics: What is Caesarea, the state of the market including trends and Comps, the location of opportunities in the market and finally where TPD Ltd. (Total Project development) may be of assistance.  

What is Caesarea?

Caesarea is located almost mid-way between Tel-Aviv and Haifa, on the Mediterranean Coast. Its earliest roots trace back to the Phoenicians who used it as a natural port and way point in their trading network. Herod built the largest man made port here where it served as their administrative and economic capital of Palestine. Subsequently it was of vital importance to the Byzantines and Crusader and ultimately the Ottomans. By the late 16th century it had been abandoned and virtually entombed by the sands of the Middle East. It was in the late 1800’s that the Barron de Rothschild purchased the land of Caesarea as part of his efforts to repopulate Zion. Caesarea is the only instance where a private Corporation is responsible for the development of a township. The results are immediately visible in the landscaping, services offered to the residents, the investment in archeological sites and Museums. The community of 6,000+ residents enjoy Caesarea’s many attractions- a world class golf course, intact Roman theatre where concerts are regularly held, an ancient city filled with art galleries and restaurants and an immediacy to the sea that boast some of the most pristine beaches in the Mediterranean basin. These factors among others such as an unparalleled quality of life combine to make Caesarea a unique and exclusive residential choice for the well off, as well as a world class tourist attraction.

State of the Market

Caesarea is rebounding in a significant fashion. After a six year boom in Caesarea where the population nearly doubled the market declined 65% between 1996-2000. This was due to three primary factors: The implosion of the high-tech bubble, the assassination of Rabin and the beginning of the intifadah with its concomitant terrorist attacks on Israel proper. From 2000-2003 the market was for the most part flat. In the last quarter of 2003 it began a broad and steady rebound. I will describe the dynamics of this rebound momentarily but first let me pause to give a brief description of the 5 categories of Caesarea real Estate.

There are 11 neighborhoods or “clusters” in Caesarea. Caesarea real estate is made up of: The lower market which consists of semi-attached homes. Each semi-attached home is typically 2800 square feet and is situated on ½ of a Dunam. (1 dunam is equivalent to ¼ of an acre) They run in price between 550,000 USD to 850,000 USD.

The second section of the market is made up of older Single family villas on ordinary plots. By ordinary I mean that they possess no sea views, golf views or other ameliorating factors. These villas average around 4,500 square feet and require complete revamping. They are typically situated on at least 1 Dunam. The average price for such a property is between 900,000USD and 1,300,000 USD.

The third category is single family homes that are situated on the golf course or possess access/views of the sea. The price per Dunam (1000 square meters) of land has reached an average of 1,500,000 USD. On top of this price is the house evaluation. The typical valuation for these houses is 1,000 USD per square meter.  In other words the going price for one of these properties is between 1,300,000 USD and 2,000,000 USD.

The 4th category is beautifully constructed/deluxe homes on the first line to the sea or golf course. Typically they are situated on over a Dunam and run between 4,000,000 USD to above 12,000,000 USD. These homes as a general rule seldom come to the market.

The final category is un-built land. All such land is located in a new neighborhood (cluster 13) which lies between the coastal highway and the eastern side of the golf course. ½ dunam parcels average 360,000 USD. 1 Dunam parcels on the golf course cost 850,000 USD.

Now, back to the aforementioned rebound. In the latter part of 2004 there were signs of revitalization in the market. In cluster 13 for example 23 parcels of un-built land where sold. In addition gross sales of pre-owned homes nearly doubled from 8.200,000 USD to 15,900,000 USD. The bulk of these sales where of semi-attached homes typically located in clusters 7 and 11. It is noteworthy that during this period no homes over 1,723,000 USD where sold. Subsequently, in fiscal year 2005, 58 plots of land where sold in cluster 13. In addition, gross sales in Caesarea (excluding cluster 13) jumped to 57,000,000 USD with over 5 properties selling above 3,000,000 USD and at least 27 properties selling over a 1,000,000 USD apiece.

The rebound has expanded in the past 8 months to the mid and upper portion of the market. The highest demand is found in clusters 2,4,5,6 and part of cluster 7. (See attached maps) Within these clusters the highest demand is for properties that are either on the sand dunes or that offer direct views of the Mediterranean Sea. In many instances clients are purchasing the properties in these locals, demolishing the older pre-existing homes and building exclusive, well constructed homes on the land. In other words, if you wish an exclusive home in a prime location in Caesarea one either pays a high premium for a pre-existing one or the client builds for themselves.

Competition and Opportunity

In order to understand why Caesarea is an attractive market one must take into consideration several factors. Allow me to address 8 of the key factors.

1. Caesarea if locate 30 minutes from the heart of Israel’s Military Industrial complex. This area is located in Haifa and is a large source of employment, research and development. With its dense population, higher institutions of learning such as the Technion and Haifa University it is a dynamic area that is beginning to grow southward towards Caesarea. To the south, Tel-Aviv has grown into Hertzelia which in turn is growing into Southern Netanya. This represents the high-tech corridor of Israel. This entire region is bustling with International firms that are building large research plants, (Intel, IBM, Microsoft etc.) and literally thousands of Israeli firms (Amdocs, Teva, Checkpoint etc,). Caesarea is a logical residential area for CEO’s and upper management.

2. Over the past 12 years Israel has made sizable investments in infrastructure and transportation networks. There is a new train station in Caesarea’s High tech industrial area that links it to Tel-Aviv (35 minutes) Haifa (25 minutes) and Jerusalem (1hour 20 minutes). In addition, there is a new toll road, Highway 6, which links Haifa-Caesarea-Hertzelia-Jerusalem- Ber- Sheva. This is in addition to Highways 2(coastal) and 4 Inter- Coastal.

What this infrastructure has accomplished is to turn what were previously isolated towns and cities into growing satellite suburbs of Tel-Aviv and Haifa. Examples are Ashkelon and Ashdod. Once they where linked to the rail network and with the completion of the trans-national highway (Highway 6) they have nearly doubled in size within the past 5 years.

3. The third factor is the infrastructure that has been laid by the Rothschild foundation. Caesarea’s High Tech Industrial Park is one of the most advanced in the world. Stages 1 and 2 have been completed with a third zone being planned. Currently there are over 270 High-tech companies that have relocated to the Caesarea Industrial Park. In the residential areas of Caesarea, every cluster has top notch streets, lighting, garbage collection services, security gates and patrols, open parks, preservation areas, restaurants, galleries, theatres and much more. All of these features make Caesarea quite unique.

4. The broad rebound in the Israeli economy as is evidenced by the amount of foreign investment, factory production, dropping unemployment, export numbers, significant increase in tourism and Hotel occupancy rates in addition to a nicely growing GDP and a growing demography all bode well for Israel. If one combines these factors with the fact that Israel has grossly under built in the exclusive end of the market it accounts for the substantial rise in prices across this category. Although Caesarea has risen some 40% from its bottom it is still substantially cheaper in absolute terms than its competition in Savion, Tel-Aviv, Hertzelia, Jerusalem, Kfar Shmariyahu and Beit Yanai.

5. An additional source of momentum in the market has been the privatization of Israeli banking which has resulted in a great choice in financing vehicles and development loans. There are now available through a plethora of banks many types of mortgages and loans, from standard ARMS to 100% development loans. 

6. Due to the security fence that is being constructed in Israel, the ability of terrorist to strike at Israel proper has been significantly reduced. This has translated into a greater sense of domestic and economic stability.

7. In addition, the greater sense of stability and security in Israel has paradoxically been bolstered by a change in mentality in the world post Sept the 11th. Many of my American clients have expressed that after 9-11 they realized that in many respects Israel may be more and not less secure than other parts of the West. Add to this the attacks in Spain and the pressure being exerted on French Jewry and Israel has begun to look comparatively secure. 

8. Several years ago, Israel and America signed a tax treaty. This eliminated many of the barriers to American investment in Israel. As mentioned in a recent Jerusalem Post article, among the so called developing markets Israel is now considered a “safe haven.” Add this to fact to the investment of individuals such as Warren Buffet, Donald Trump and others in Israel and Moody’s increase of Israel’s credit rating and the picture here begins to come into sharper focus.

Business Opportunity and the TPD Group

Currently in Caesarea we have a strong domestic and foreign demand for exclusive high end homes in prime locations. We have a small supply of these types of properties. In addition, a significant portion of my clientele would like such a product but for reason that I will touch upon, are fearful of entering into the building process. These clients are willing to pay a premium for a finished quality home.

Q: Why are many clients afraid of construction here in Israel?

A: Although Israel has made tremendous advances in building techniques as well as an enormous explosion in the variety of materials available for construction, the ability of most Israeli contractors and workman to turn out quality product is still Byzantine in nature. Add to this the still convoluted construction and real estate laws and a lack of accountable guilds or construction oversight and there is just cause for concern. It is not by accident that Intel’s Fab Three plant that is currently under construction in Quriat Gat (1.5 Billion Dollars) is being project managed by a German construction company. I do not wish to sound overly pessimistic. There are good contactors and even world class Architects. However, the challenge is finding them and obtaining a reasonable cost for their services.

Q: How does one evaluate the cost of construction?

A: The most basic quality construction costs between 800-1000 USD per square meters. Good construction runs around 1500 USD per square meter with top of the line construction (marble, top of the line fixtures, intricate plasterwork etc,) running between 2000-2300 USD per square meter.

Q: What is the typical profit margin of a top contractor?

A: Two answers. The first is as much as they can get. The more legitimate answer is that they aim for at least a 50% profit margin. However TPD has demonstrated an ability to obtain top contractors with a 25% margin.

Q: What are some of the greatest hidden costs?

A: One of the greatest hidden costs is the 5-10 percent “referral” fee that is collected by contractors from sub-contractors and suppliers. This “referral” fee inflates the end cost to our clients. TPD is able to eliminate these from the equation. In essence we pass the savings onto our clients thereby reducing the overall build cost by an additional 5-10%. This 5-10% savings in addition to the 20-25% savings achieved in the competitive bidding process translates into an average savings of 30% to our clients. In real terms this means that we can achieve a 2300 USD per square meter result for around the1600 USD rate.

Additional “hidden” costs are the time and resources squandered by missed deadlines, an inefficient oversight process and the need to redo incorrectly performed work.

Q: How does TPD address these additional “hidden” costs?

A: First of all, we bring to our clients only those architects and contractors whom we have properly vetted. We visit their current and previous projects; speak to their end clients as well as the subcontractors that they have worked with in the past. We only work with contractors that are fully bonded and who are able to provide at least a 10% bank guarantee on the proposed project.

In addition, TPD has an in house a suite of some of the leading real estate lawyers who draw up some of the toughest contracts in the industry.

Q: What else can TPD do for me?

A: TPD is a complete solutions provider. We are on sight every day. We take full responsibility for ensuring a quality product that is delivered on time and just as importantly on budget. Total Project Development this year alone has sold over 10,000,000 USD in homes and currently has 4,400,000 USD in project oversight. We are small enough to take every project personally while using the multiple of projects under development to reduce the bulk cost of supplies.

In addition, we offer an approach which is novel in the Israeli market. There is a joke in Israel that goes, “In America they plan for 3 years and execute in a year, while in Israel they plan for a year and take 5 years to execute.” We come from the American school while knowing how to maximize the strengths of the Israeli system.

TPD offers additional services. We place digital cameras on each work site so that our clients can be virtually present. We offer regular video conference calls so that architects, contractors, specialists and the clients always have an open and dynamic line of communication.

We offer interior design solutions and have access to some of the largest importers of specialty items. If a client wants it we will obtain it.

The list goes on and on. However, one of the most important aspects we bring to the table is the approach that the end result is directly linked to how personally you take the project. I guarantee you that we take it very seriously.

Respectfully yours, 

Benjamin J. Rettig - President & Cofounder