David Azrieli, the founder and chairman of real estate developer Azrieli Group, and the company's president Menachem Einan have been together for 16 years. Azrieli lets Einan take the lead in a recent interview. Einan, for his part never wavers in his support for Azrieli. Interspersed throughout the entire interview are utterances like "I learned that his knowledge is priceless. It is David's internal design concepts (with regard to the new Azrieli mall in Modiin) that made all the difference."
While an employee's deference to his employer can never be perceived as untainted, Azrieli's life story, like the way he manages his business, arouses profound admiration. Azrieli, 86, was one of the few who understood the realities of the anti-Semitism that was sweeping through Europe on the eve of the Holocaust, and in an escape plan that repeatedly changed course, he managed to evade the clutches of the Germans. He is a man of vision, and the Azrieli towers are evidence of this. His Israeliness is expressed in his decision to reinvest all his profits in businesses in Israel rather than overseas. Aware of the advantage he has thanks to the positive image this fact has given him, Azrieli makes a point of reiterating it from time to time.
His quiet tone of voice may, perhaps, conceal his business characteristics, but there should be no mistake. Azrieli may not have a reputation for elbowing his way to success, but he has a sense of conviction and stubborness that few people are capable of. This sense of purpose also lay behind his decision last Tuesday to dedicate the new city center in Modiin including the Modiin shopping mall, at an investment of NIS 500 million.
The fact that the center looks like a building site - which meant that tenants had no opportunity to prepare in advance for the opening (merchandise was only delivered to the mall the day before) - did not stop Azrieli from announcing the opening of the mall. He declared, as far back as month earlier, that the "mall would open as scheduled," (the third in a row), and brought in an extra contractor. He has visited the site dozens of times since then, and closely followed progress there.
Globes: Wouldn't it have been better to wait until the construction was complete?
Azrieli: "The work was completed. Had we postponed the opening for another month or two months, it would have been the same thing at the last moment. That's how it has been at almost every place we've opened. You have to make one final push to put the finishing touches and made adjustments. You get 98% of the job done and then you make a few final touches. It's just like moving into a new home."
Isn't this mall a bit big for a city of 72,000 people?
"No. absolutely not. The city has grown, and is adding nearly 8,000 new residents a year. I've always noticed how excited the local community is when a mall is due to open. We saw this at the Ayalon Mall, to a greater degree in Beersheva, and then in Jerusalem. But I've noticed it more in Modiin than anywhere else. This is a young city with young families who are just waiting for the mall to open. I have been told that sometimes people come here at night and try to get in and look around. The curiosity is phenomenal."
Room for more
The mall which Azrieli Group has dedicated in the city center, also includes office space and 67 rental apartments. The mall is thought to be the group's crowning achievement in terms of architectural design. "Since Modiin is traditionally associated with the Maccabees and Hasmoneans, we gave the mall, a little bit of the character of that period. Each exit is marked with a large medallion with the engravings of ancient coins from that period on it, and has a name connected to the period."
How will the mall affect commerce in Modiin?
Einan: "Modiin is the best planned city in Israel, with a projected population of 200,000. It used to rely on Tel Aviv and Jerusalem. It now has an alternative, and the mall will help the city expand further. We have 140 stores of different sizes, and we're creating a lot of jobs for the city's residents. There are more jobs in the mall's stores than there are people who can fill them. We are giving residents access to the same kind of quality shopping as in Jerusalem and Tel Aviv, and our mall will give Modiin the sort of impetus that any city wants - an urban center, followed by commerce and industry."
What sort of revenue are you expecting at the mall's stores?
Azrieli:"We haven’t discussed figures, but the sales will be among the top ten malls in Israel. It will certainly reach $700, maybe even $800 per square meter."
And how it will rank among your own malls?
Einan:"It will start at third or fourth place, and it will compete well with the others."
Haven't we reached the saturation point in commercial space in Israel in general and malls in particular?
Azrieli:"No. If we take the number of square meters per population, there are far more malls in the US than in Israel."
How many more malls do we have room for?
"I can't answer that."
We're currently entering a period with steady increases in prices. How will this affect business at the malls?
"I think prices will rise slightly, but I don't think the effect will be that great."
Won't the decrease in free income affect the consumer culture?
I don't think so. It may, perhaps, have an effect on purchases of expensive items, luxuries."
Many fashion chains have reported lower sales in May-June compared with the same period last year, alongside more intense competition. Where is all this heading?
"That's how it should be. Competition is a good thing."
Haven't rental costs at malls now reached levels that chains will find difficult to afford?
"I don't think we've reached that situation anywhere."
How would you characterize Israeli consumers?
"Consumers are now more discerning in the choice of goods they buy, and they don't just buy obsessively. The Israeli consumer has learned to differentiate between those things he needs, and those he doesn't, just like everywhere else."
Azrieli now operates in the income producing real estate, industrial, fuel and credit sectors. Azrieli Group holds nine malls, as well as holdings in Sonol Israel Ltd,, Tambour Ltd. (TASE:TMBU), Supergas Ltd., and GES - Global Environmental Solutions Ltd. through Azrieli Group subsidiary Granite Hacarmel Investments Ltd. (TASE: GRNT). In addition, the group, through Granite Hacarmel's Israeli operations, owns gas delivery and waste removal businesses in Serbia, and an Indian company with a chain of gasoline stations in India.
"We are quite definitely not be stopping there, and we're looking at further investments. We will bid in the major desalination tender at Nahal Soreq, and we also intend to bid for the gas transportation businesses in Israel. There are several things in building, production and acquisitions that we are looking at but don't wish to comment on at present. I don't think we're lagging behind. One could even say we're moving pretty quickly."
In the past you planned to float the group. Where does this stand at present?
"It's in the cards. We always give some thought about how the business should be run in the future, and I don't deny that this is one of the issues that we've been considering, but there is no news for the time being."
Published by Globes [online], Israel business news - www.globes-online.com - on June 22, 2008
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