After the rumors and the asset sales, it was the turn of the official profit warning: Africa-Israel Investments (TASE: AFIL), controlled by Lev Leviev, announced this morning that in the financials due to be released at the end of the month it will report a loss of NIS 2.7 billion for the fourth quarter of 2008.
$380 million of the loss is due to an accounting write-down the company has been forced to make on the value of the New York Times Building. This follows a recent valuation of the building that put its value at $315 million. The accounting write-down is larger than Africa-Israel's exposure to the building. The remaining fall in value of Africa-Israel's assets around the world amounted to NIS 1.3 billion.
Between September 2008 and now AfricaIsrael has paid principal and interest on marketable bonds and securities to the tune of NIS 1.8 billion.
Africa-Israel CEO Izzy Cohen said, "Because the economic crisis has continued to worsen over recent months, we have continued the process of examining the value of investment assets and other real estate assets owned by the company in all the territories in which it operates.
"Owing to the fact that an updated valuation was received for the unique New York Times Building, and since the commercial terms in negotiations with the Far Eastern investment fund have not yet been finalized, Africa-Israel will post a write-down of its fair value, to an extent that it estimates reflect correctly the situation of the world real estate market in general and that of New York in particular.
"We continue to act to complete the large projects at various stages of construction in Russia and Europe, as well as to expand the company's liquid balances. We are doing this while reducing its short-term liabilities, mainly through realizing and refinancing assets in Israel and overseas," Cohen added.
Speaking to "Globes", Cohen added, "The repayment of our debts at this difficult time is testimony to Africa-Israel's strength. In 2009 and in the coming two years, the company will meet its commitments, while realizing assets and optimizing asset prices through financing that defers the realization date until a time when Africa-Israel will receive a worthwhile price."
Clal Finance analyst Yuval Ben Ze'ev told "Globes", "Africa-Israel's write downs are no surprise, considering the tough conditions in the income-producing real estate market. We won’t be surprised is other income-producing real estate companies, such as Electra Real Estate and Delek Real Estate, post write-downs because of lower asset valuations."
On the Tel Aviv Stock Exchange, Africa-Israel's share price is currently down nearly 5%, at NIS 30.85.
Published by Globes [online], Israel business news - www.globes.co.il - on March 9, 2009
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