Focused on real estate, infrastructure, PPPs, renewable energy and water management, Israel’s Shikun & Binui prides itself on its considered relations with local communities. Chairman Moshe Lahmani explains what’s next for the Israeli Superbrand.
The Israeli economy ranks among the fastest growing economies in the world, way ahead of heavyweights such as the U.S. or Germany. What factors explains both the resilience and the success of the Israeli economy?
One of the reasons it is the Israeli DNA itself. It is a unique country, like an island in the Middle East. Israelis have a DNA where innovation and entrepreneurship are the main factors. Bringing business outside of Israel is another point, because exporting is also one of the priorities of our economy, incubating businesses in Israel but going outside to develop them as a priority.
The DNA of innovation and entrepreneurship can, in part at least, be explained by the fact that Israel is a (relatively) very young country, still in the “entrepreneurial insight and flexibility” stage in its life cycle. Israel was founded only 67 years ago by immigrants who, in large, came to Israel with no or little property. This fact, combined with unfriendly borders (some of which have become friendly over the years), has forced Israel as a country to develop at a fast pace, becoming a fast growing economy. This corporate culture came out from necessity.
Israel is a small economy, but the companies have the business capabilities, the strong investment in R&D and the capacity to export.
What are the challenges that you identify for Israel right now?
The challenges come from different angles.
One of them is the history or the heritage. We are a young country and therefore we don’t have the history of having large-scale companies. I’m thinking of Nestle or Unilever as an example. Currently, we are seeing Israeli operations that are coming to these dimensions. Most companies are still small or medium-scale operations. The challenge is to build this methodological large-scale operation through our entrepreneurship and innovative DNA. We still don’t have that skill but I think we will manage to bring our companies to world-scale companies if we continue this way.
Why do you think the U.S. is so attractive for Israeli companies after the FTA between both nations and the U.S. being the number 1 trade partner with the State of Israel?
On the business side, Israel and the U.S. share similar values in terms of initiative, entrepreneurship and innovation. That’s the main reason why Israeli companies tend to start operations in the U.S., knowing that the U.S. market is huge and very appealing to start any international expansion. The obvious example is the high-tech industry of course, with a very similar DNA and business view, then the pharmaceuticals, with TEVA as one of the world leaders, also with Netafim and Adama, which are the main Israeli players in the U.S. market.
The capital market is very open to ideas, and that’s where the infrastructure sector, which is much more traditional, wants to expand its activities there.
Bearing in mind your huge road infrastructure project in Texas, what is your strategy to expand in the U.S. and also in other regions of the world, not only in terms of roads, but also regarding energy, water and residential projects?
Our vision is to expand business in the U.S., not only in the road infrastructure sector but also in some of the branches you just mentioned. Going into social buildings, PPPs, the energy business, and more. Of course we are a small company with only $1.5 billion revenue. Three years ago we had our first deal in Texas and we established our head office in the U.S. in Dallas. Infrastructure and concessions will be our core business there at a first stage. We are starting to send our engineers and our teams for this project and another team to explore the other opportunities in the U.S. It’s a mini continent and we have to focus. Texas, Virginia, Florida and in some extent California, and that’s it. In a couple of years we expect to see other activities in these states, especially in energy and water projects.
We are active in 20 countries and four continents. I mean activity, not just present. Either in real estate, or in infrastructure. We will continue to work in emerging markets, in sub-Saharan Africa, East and West Africa, and South America, in Colombia, Guatemala, Peru in 2017. The first step will be infrastructure, and then we’ll move into energy and water. That’s our main strategy for all those developing economies.
Hand in hand with those emerging markets, we see another kind of emerging economies in central and Eastern Europe in which we are developing mostly residential projects. We are active in four or five capital cities in real estate development activity: Warsaw, Prague, Belgrade, Bucharest and Budapest, in that order. The markets are coming back from the crisis and we are seeing the potential of all of these cities regarding the real estate business market over there. We are there and the business there is now strong for us. We mainly sell apartments and commercial buildings, and we are very proud. We invested large amounts and we plan to invest more in real estate in central Europe. In the residential market, we also have very strong operations in Berlin in the rented apartment market, which is booming. We took the name of the operations as ADO; we turned the operation public on the Frankfurt Stock Exchange in July 2015 and that was a major success for us. The share price grew by 15% in a few months in a very volatile period, so we are very encouraged with these operations, because we have shareholders from all over the world.
Your company has been recognized for the third consecutive year as a Superbrand. How are you going to proceed to make Shikun & Binui a truly global brand?
We believe in execution and delivery. We have to brand ourselves based on our execution, delivery and results. As long as we continue to succeed with new large-scale projects, impactful and respectful to the environment, we will make this happen. Nevertheless, we also started giving interviews to international media, attending some sectorial conferences internationally, appearing in local papers in Texas showing how our role is boosting both the economies and the communities surrounding our projects.
Roads and bridges are always the first step. The branding comes always after, but in our developing stage, we need to work on that too. Our partnerships with international construction conglomerates will also help us to brand our company as a global leader in our sector.
Roughly 50% of your overall revenue business comes from outside Israel. What are your expectations for the short term and how do you believe this figure is going to evolve?
First of all we need to set up targets and objectives. In the Shikun & Binui 2020 (plan) we established a target of 65-70% of our business would be international. The right measurement may be the invested capital or the net asset value and not revenue. The business in Israel will not shrink, but we will definitely increase our business abroad. The goal is to play more in a global market, entering other stock exchanges apart from Frankfurt or Tel Aviv; the aim is to be more global.
Regarding your CSR program, every department of your company has to report in terms of sustainability to a specific department that takes care of these issues. What is your real sustainability commitment?
Arison Investments is the major shareholder of our company. Shari Arison, the owner of Arison Group, is very committed to sustainable practices in all of the holding’s subsidiaries. We build a division and a strategy to tackle these issues through a VP on sustainability. We established a protocol on how to manage projects following specific rules that take care of criteria such as the impact on the communities, the environmental issues… from the very early stages. Each year we are raising the bar in order to become more committed to our sustainability practices and targets in every country we operate.
For example in Israel we are building a solar plant in the Negev Desert, in the southern part of Israel. The farmers around that solar plant were scared because they had huge chicken farms around and they thought they would have problems during the four years of works. These farmers thought their business would be ruined. We started the discussions with them in order to understand their concerns, also with the local authorities, and we realized that we could minimize the damage and the dust, explaining every part of the construction process and collaborating with them in order to decrease the impact of the construction site on their businesses. They were very happy after those discussions, because we kept working and collaborating together during the start of our works there. We would like to implement this in other construction sites as we saw that was the proper way to operate, and we are very proud of that because it’s a win-win situation with the local community. We train them, we hire them and we give them the infrastructure to be able to work in the future.
What motivates you to come and work here in Shikun & Binui?
First of all, I have the responsibility. For the employees and for the shareholders, we are building huge projects and I think also about the families or our workers, and also the communities surrounding our projects because we impact on a lot of people through our decisions. Both inside or outside Israel, where the impact is more tangible because those are not fully developed countries.
The second is the impact of our business itself. I know that our business affects the lives of many people, not only those related to our company but also the community who will see their lives change because of a new bridge, a new road or a new apartment – especially in developing economies you can feel it – and I hope to be able to reach the objectives during the following years.