Overseas Real Estate Investments Face Severe Distress and Insolvencies

For years, foreign real estate investments were marketed to Israelis as an opportunity to secure higher yields than those available in the domestic market. However, the foundational formula of this model has shifted drastically: interest rates surged, financing costs ballooned, asset values eroded, and debt refinancing became severely restricted. The consequences are now hitting private investors directly.

One of the major players in Israel's private overseas real estate investment sector is SDB. An investigation by Calcalist reveals that several projects backed by its clients have fallen into insolvency, receivership, or severe cash flow distress. Across four SDB properties in the UK where public purchase and realization prices could be tracked, the discrepancies already amount to tens of millions of pounds, illustrating how changing financing conditions can turn a seemingly attractive investment into a loss-generating trap.

During the previous decade and the early 2020s, Israeli investment firms rushed into overseas real estate markets under the assumption that the US and the UK offered superior yields compared to local alternatives. For years, this model thrived on cheap money, but those conditions have vanished. At the beginning of 2022, the Federal Reserve interest rate stood in the 0%-0.25% range, but within roughly a year and a half, it spiked to 5.25%-5.5%. This dramatic hike fundamentally altered the economics of leveraged real estate deals.

Mounting Losses in the UK Market

Calcalist has revealed in recent weeks that several investments marketed by Israeli firms to private investors were highly sensitive to rate hikes, falling asset values, and debt rollover difficulties. In some cases, the risks have already materialized to the point of a complete loss of capital. SDB, which manages a real estate portfolio exceeding $1 billion across the US, the UK, and Spain with 1,700 investors, is currently navigating this crisis. The company is led by co-founders and co-CEOs Shmulik Hanoch and Dan Lieberman.

Over the past two years, several projects funded by its clients have faced receivership, the appointment of external managers, forced liquidations, or acute cash flow stress. For example, the company's major project, The Spires in north London, a commercial center with dozens of stores, was acquired in 2021 for 28 million pounds. On March 30 of this year, special managers were appointed for the holding company due to failures in servicing debt amid high financing costs. The local developer, BYM Capital, entered insolvency back in 2023.

Another telling asset is Riverview, which was sold last year for 9.25 million pounds. The project was intended to convert two office buildings into residential units, but the asset was handed over to a receiver after developers missed payments. The realization yielded approximately 8.65 million pounds for Mizrahi Tefahot as a secured creditor, leaving other SDB-backed investors with virtually nothing.

US Exposure and Broader Industry Stress

SDB's prominent Treaty Centre commercial hub in London, acquired in 2022 for 46 million pounds with a 31 million pound loan, has also faced enforcement proceedings by lenders following the collapse of developer BYM and soaring financing costs. Similarly, Astral Towers was acquired in April 2021 for 11 million pounds and sold in April 2025 for 4.5 million pounds, representing a staggering 59% drop in asset value.

Altogether, known purchase or realization prices across these four properties total roughly 110 million pounds (nearly 440 million shekels at current exchange rates). Adding to these troubles is SDB's East 101 residential project in Manhattan, New York, a 34-unit building acquired for $12.5 million. The project faced cash flow strains in the first quarter of the year due to high maintenance costs, failing to meet debt service coverage ratios and putting it up for sale under conditions that risk a partial or total loss of investor capital.

The total volume of SDB company assets currently under severe business pressure and risk approaches half a billion shekels.

While SDB has historically completed 86 exits across 158 projects, the concentration of troubled assets is alarming. According to an investor who spoke with Calcalist, SDB recently offered some clients waivers on certain claims in exchange for profit-sharing rights in other projects, should any materialize. While many agreed, affected investors are beginning to organize to protect their legal rights.

The crisis is not isolated to SDB. Electra Real Estate, one of Israel's most institutional and largest players in US real estate investments, has also endured a severe downturn, with its share price plunging 75% over four months to a valuation of 1 billion shekels. Similar distress has recently surfaced at other firms such as Relico and Volore, where banks have initiated foreclosure proceedings on multiple multi-million dollar assets, highlighting systemic vulnerabilities in leveraged overseas property funds formed during the era of cheap money.