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Azrieli Group Plans Property Expansion in Northern Israel After Share Sale
Azrieli Group Ltd., Israel’s largest real-estate developer, will use part of the 2.5 billion shekels ($658 million) raised in June to buy or develop shopping malls and commercial properties with a focus on the country’s north.
“We are now seeking out real-estate investments and looking to grow outside of the center of the country in areas such as northern Israel,” President Menachem Einan said yesterday in an interview on the top floor of the Azrieli Center’s circular tower in Tel Aviv. “We are also considering investments in North America and Europe although Israel will continue to be our primary area of investment.”
Azrieli, owned by Canadian billionaire David Azrieli, said in May it planned to invest 1.5 billion shekels in more than 220,000 square meters of property, according to an investor presentation filed with the Tel Aviv Stock Exchange. The company will use between 1.3 billion shekels and 1.5 billion shekels to fund existing projects such as two shopping centers in the Israeli towns of Kiryat Ata and Acre in the north, Einan said.
The company has 17 shopping malls and business complexes in operation or under development, most of which are located around Tel Aviv, Israel’s business capital. Azrieli shares were listed on June 7 after it raised 2 billion shekels in an initial public offering and another 514 million shekels in a private placement. The developer has no plans to raise more money in the “near” future and seeks to consolidate mall management, Einan said.
Owning Stakes
“We are probably going to make more acquisitions of quality malls,” the president said. Azrieli is also looking to develop a “large” project that will include a mall and an office tower in Rishon Le-Zion, outside of Tel Aviv, he said.
The real-estate market in Israel is “strong” and occupancy rates near Tel Aviv are around 100 percent, Einan said. Growing consumption and the arrival of foreign banks and stores in the country, such as Hennes & Mauritz AB, Europe’s second-largest clothing retailer, are helping boost demand for leases, he said.
The shares gained 9.8 percent since the listing and were trading 0.6 percent higher at 89.48 shekels in Tel Aviv at the 4:30 p.m. close, giving the company a market value of 10.9 billion shekels.
“This is one of the most defensive stories in the sector,” said Elena Rogovina, a Tel Aviv-based analyst at Meitav Investment House Ltd. “We see only modest upside for the stock price if there are no new catalysts.” Rogovina has a “market perform” recommendation on the shares.
Banking Stake
The company, which owns about 61 percent of holding company Granite Hacarmel Investments Ltd., last year bought a 4.8 percent stake in Bank Leumi Le-Israel Ltd., the country’s largest lender. Azrieli on Aug. 29 reported second-quarter net income of 62.28 million shekels, little changed from the 62.85 million shekels posted a year earlier.
Azrieli has no immediate plans to expand into residential property or increase its stake in Leumi, Einan said. “We invest in income-producing properties, period,” Einan said. “We have stated before that our Leumi stake could be sold. We are not interested in getting into the banking business.”
To contact the reporters on this story: David Wainer in Tel Aviv at dwainer1@bloomberg.net; Calev Ben-David in Jerusalem at cbendavid@bloomberg.net
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