US Banks Foreclose on $28 Million in Assets Owned by Israeli Firm VALORE

The crisis in the US real estate market is hitting even the most veteran Israeli developers. US banks Merchants Capital Corp and Merchants Bank of Indiana have initiated foreclosure proceedings on three properties owned by the Israeli real estate firm VALORE. The assets are valued at $28 million, while an additional property worth $10 million faces a similar threat.

VALORE, which means "value" in Latin, was founded by controlling shareholder Roy Meudi. According to the company's website, it represents hundreds of investors and manages an asset portfolio worth $330 million (approximately 1 billion NIS).

High Interest Rates Shatter Business Models

The three properties currently undergoing foreclosure are located in Indiana—two in Evansville and one in Indianapolis. The bank takeovers began after VALORE struggled to meet debt payments due to prolonged high interest rates in the US market and the lending banks' desire to "cut losses," according to a senior company official.

Regarding another property in Evansville, Indiana, VALORE's management has approached investors requesting additional capital injections to save the asset from foreclosure. Discussions between the company and the bank are still ongoing in an attempt to prevent the transfer of control.

Founded in 2011, VALORE marketed itself as a real estate investment vehicle tailored for high-tech professionals, focusing on the US multi-family residential rental sector. Over the years, the company raised capital from Israeli investors to acquire residential complexes, primarily in the US South and Midwest. The business model relied on a combination of investor equity, bank debt, property renovation, rent increases, and subsequent asset sales after several years. VALORE is estimated to have raised $150 million from investors over its years of operation.

The Leverage Trap

VALORE's situation highlights the severe impact of high leverage on developers who acquired properties during the low-interest-rate era. These transactions were executed under the assumption that properties could be upgraded to increase income, allowing for easy refinancing or profitable sales. However, since 2022, US interest rates have surged, driving up financing costs and capitalization rates. This combination eroded property values even when occupancy remained stable. Business plans that looked excellent on paper lost relevance as financing costs jumped from 3.5% to 9%.

An investment industry expert criticized the lack of conservatism among Israeli developers:

"Israeli developers are characterized by a very low level of conservatism. Anyone investing with them must understand how risky these ventures are. Furthermore, in almost all of these investments, developer fees are collected upfront at closing, regardless of the project's ultimate yield or success."

VALORE's documents indicate that the investment fund manager is entitled to an acquisition fee of up to 3%. However, investors told Calcalist that, unlike other developers, Meudi took on personal guarantees. Financial investigations initiated by affected investors ruled out any irregularities or misconduct, meaning Meudi faces severe personal financial exposure and may be required to repay the bank debts directly.

Banks Lose Patience

Industry experts warn that the refinancing challenge could intensify by 2027, when a massive wave of older, low-interest loans matures. Even properties currently generating positive cash flow could face distress when forced to refinance at current market rates.

A senior investment executive noted:

"Regional US banks lending to Israeli developers have lost patience and are looking to cut losses, taking over assets and selling them off. There is $1 trillion in maturing loans, and banks must now realize their losses. When a loan matures, the developer must refinance at a much higher rate, inject more equity, or hand the keys to the lender. We expect many Israeli developers to surrender assets in the coming months."

A Broader Funding Crisis

VALORE's distress follows a series of collapses among Israeli firms marketing US real estate. Recently, Rielco, founded by Tomer Hai and Guy Rejwan, sold an Ohio office building for just $2 million—five years after purchasing it for $17 million. Forty-two Israeli investors had poured nearly $7 million into the property, with the remainder financed by the bank, which ultimately took over the asset.

An even more severe case is the collapse of Vision & Beyond (VNB), founded by Stas Grinberg and Peter Gizunterman. At its peak, VNB held assets worth $250 million, largely raised from Israeli military personnel and reservists who lost nearly all their capital. The founders are currently facing legal proceedings amid allegations of fraud and mortgage document forgery.

VALORE's Response

Roy Meudi stated in response:

"The macroeconomic shifts and the surge in US interest rates between 2021 and 2023 created an unprecedented systemic financing crisis in the commercial real estate market. In the case of these transactions, the situation does not stem from operational failure, but from the banks' refusal to extend loans amid a market-wide 30% decline in property values.

Throughout our years of operation, we have never encountered such an event. We did not draw a single cent in management fees from these deals, nor did we issue capital calls to our investors. I injected millions of dollars from my personal funds to stabilize these assets and deal with the banks, as I am the largest investor and personally signed full guarantees. We will continue to manage these market challenges with transparency and responsibility."