Gazit NY Discount to Tel Aviv Narrows: Israel Overnight

Gazit-Globe Ltd. jumped the most in three months in New York, narrowing its discount to the company’s Tel Aviv-traded shares, on prospects that rental income at the real estate holding company will keep climbing.

New York-traded shares of the Tel Aviv-based company surged 3.6 percent yesterday to $13.74 after the stock in Tel Aviv advanced 2.8 percent, paring the discount by 52 percent to 7 cents. Trading volume in the U.S. was 10 times the daily average over the past three months. The Bloomberg Israel-US Equity Index gained 0.9 percent yesterday, the most in a week.

Gazit-Globe, which has real estate in more than 20 countries including the U.S. and Brazil, said yesterday that its rental income rose 6.4 percent to 1.34 billion shekels ($360 million) in the first quarter. The growth will continue this year as demand outpaces supply, according to forecasts by research firm Reis Inc. The Israeli property owner’s occupancy rate was 95 percent as of March 31, compared with a 10.6 percent average vacancy rate for retail spaces in the U.S., according to data compiled by Reis.

“They have a strong portfolio of rent-producing properties,” Zach Herzog, head of international sales at Psagot Investment House Ltd. in Tel Aviv, said by phone yesterday. “In a market where maybe people have a bit of concern about the sustainability, it certainly is a place where one can feel more comfortable.”

Mall Operators

Gazit-Globe is outperforming the Bloomberg REIT Shopping Center Index in the stock market by the most since April 5. Shopping centers reached their widest premium on a valuation basis relative to total real estate investment trusts since mid-2009, data compiled by Bloomberg Industries on May 24 show.

Gazit-Globe’s subsidiary Equity One Inc., based in North Miami Beach, Florida, reported first-quarter rental income on May 1 of $86 million, the most in at least a decade. Its Toronto-based First Capital Realty Inc. unit posted a record high of C$157.8 million, or $151.9 million in the three months to March 31.

While Gazit-Globe said its rental income increased from North America, the company has been cutting its holdings in the region, Dori Segal, the president and chief executive officer of First Capital said on the conference call yesterday.

“They’ve been trimming North American properties on valuation, selling some good assets to buy great assets,” David Ragan, a portfolio manager at Mawer Investment Management Ltd. in Calgary, which oversees $16.4 billion including Gazit-Globe shares, said by phone yesterday. “I’m expecting more capital to be invested outside of North America.”

Poland, Brazil

Gazit-Globe is looking to invest in the Nordic countries, such as Sweden, Finland and Norway, as well as Poland and Brazil, Chairman Chaim Katzman said in a May 7 Bloomberg TV interview.

Gazit-Globe added 3.6 percent yesterday in New York, the most since Feb. 19, to $13.74. The shares slipped 1.5 percent to 50.40 shekels, or $13.66, in Tel Aviv today.

The Bloomberg Israel-US Equity Index climbed to 92.39 yesterday, led by Gazit-Globe. Israel’s benchmark TA-25 Index fell 0.7 percent, the first time in four days, to 1,232.07 today.

Taro Pharmaceutical Industries Ltd., based in Yakum, Israel, slumped the most on the gauge, retreating 1.9 percent to a one-month low of $59.30.

Gilat Satellite Networks Ltd., based in Petah Tikva, Israel, rose the most in a week, by 2.1 percent to $5.45. The maker of satellite Internet connection systems introduced new technology for its SkyEdge II-c product that will improve efficiency and performance, according to a press release yesterday. Shares in Tel Aviv gained 0.5 percent to 20.17 shekels, or $5.47.

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