Adam Neumann's new dream: Can Flow turn Canada Global into a billion-dollar success?
Adam Neumann's new dream: Can Flow turn Canada Global into a billion-dollar success?
The WeWork founder partners with Israeli real estate moguls to target Miami's booming market.
How is it that a company that, in its current form, has only made two transactions, reported annual revenue of approximately 220,000 shekels ($61,000), and recorded a loss of 3 million shekels ($840,000) in the first half of the year, with an estimated equity of around 112 million shekels ($31M), is now valued at nearly 680 million shekels ($190M) on the Tel Aviv Stock Exchange? Apparently, Adam Neumann, the founder of WeWork, is once again managing to sell dreams, or at least present them.
This time, however, the dreams are being sold to Israeli investors. Will these dreams materialize? The burden of proof lies with Neumann and his partners at the real estate company Canada Global: Barak Rosen and Asaf Touchmair, the controlling shareholders of Israel Canada, and Assaf Rappaport, founder and CEO of cybersecurity company Wiz.
Canada Global's stock surged by more than 6% on the Tel Aviv Stock Exchange last week, with trading volume doubling the daily average. This was in response to news revealed by Calcalist about another deal in the United States. The real estate company, controlled by Rosen and Touchmair, signed an agreement to purchase land in Miami in partnership with Neumann's real estate company Flow and the venture capital fund Andreessen Horowitz for $70.5 million. Canada Global will hold 62% of the land, while Flow will own the remaining 38%.
The land, purchased at a court auction following the conviction of its previous owners, is zoned for 2,380 apartments and includes 4 million square feet (371,000 square meters) of commercial space. Canada Global plans to negotiate with local authorities to increase building rights. The company estimates that the project could generate profits of about $1 billion.
This is Canada Global's second deal with Neumann's Flow since the latter became a shareholder in Canada Global in late September, alongside Rappaport. In November, Canada Global and Flow purchased three office buildings on 42 dunams of land in Aventura, near Miami, for $116 million. Canada Global held a 70% stake in the deal, with Flow holding 30%.
As these transactions illustrate, Neumann is more than just an investor for Canada Global—he is effectively its growth engine. Canada Global has decided to concentrate its efforts on the Miami real estate market, focusing on initiating and developing rental housing projects, which Flow will operate. Consequently, Flow, with its expertise in the Miami real estate market, has the right to become a partner in each deal at up to 50%, helping generate a robust pipeline of opportunities for Canada Global.
Since Neumann and Rappaport joined Rosen and Touchmair, who acquired control of the company in late 2022, Canada Global's stock has soared by more than 97%. The company's market value now stands at 680 million shekels. However, when measured against its fundamental financial data, this valuation appears particularly inflated, highlighting the high expectations—or dreams—of Israeli investors regarding this company and its high-profile stakeholders.
Canada Global reports semi-annually, so its latest reports do not reflect the two deals made after the new investors joined. As of the first half of 2024, it reported revenues of just 111,000 shekels, reflecting an annualized rate of 222,000 shekels. The half-year loss amounted to 1.5 million shekels. Equity was reported at 23 million shekels, translating to a capital multiple of approximately 31—a remarkably high figure for a real estate company.
The relatively high equity capital compared to the volume of assets stems from a fundraising round in January 2023. When Neumann and Rappaport joined in September, Flow acquired 29% of the shares for 98.8 million shekels, while Rappaport purchased 1% for 3.4 million shekels. Most of the funds raised—88.7 million shekels—were directed into the company's coffers, with the remainder used to buy out existing shareholders. Following the deal, the company's equity jumped to an estimated 115 million shekels, giving it a capital multiple of 6.3, still high for a real estate company. For comparison, Dimri, Israel's largest real estate developer, trades at a multiple of 3.
Armed with new investors and ambitious controlling shareholders, Canada Global now faces the challenge of proving that its dreams can become reality. It has made two deals so far: one involving a yielding asset and the other promising substantial future profits. The company will ultimately be judged on its long-term performance.
Meanwhile, the partnership between Rosen, Touchmair, Neumann, Andreessen Horowitz, and Rappaport has already generated significant paper profits for those involved. Flow's stake is currently worth 211.5 million shekels, a significant increase from its 98.8 million shekel investment, yielding a paper profit of 112.7 million shekels. Rappaport's 3.4 million shekel investment is now worth 7.3 million shekels, a profit of 3.9 million shekels. Rosen and Touchmair, who acquired 90% of the company—then called Aviv Elron—for 11 million shekels in late 2022, now see their stake valued at 427 million shekels, a staggering 416 million shekel profit on paper, with 216 million of that amount generated after the deal with Neumann and Rappaport.
In total, the current partners' paper profits from their entry into the company amount to approximately 333 million shekels.
Even so, Canada Global remains a relatively small enterprise for Touchmair and Rosen, who also control 33.9% of Israel Canada, a major real estate company traded on the stock exchange with a valuation of around 5 billion shekels.
Flow, founded by Neumann in late 2022, raised $350 million from Andreessen Horowitz at a valuation of $1.7 billion—the venture capital fund's largest-ever single investment. Andreessen Horowitz, which manages $42 billion across 28 funds, has invested in software, crypto, biomed, cybersecurity, artificial intelligence, and defense tech. For the fund, the partnership with Canada Global marks its first investment in an Israeli public company.