Without getting into the question of from where Yakir Sha'ashua will bring the hundreds of millions of shekels needed to buy part of the controlling core in Azorim Investment, Development and Construction Ltd. (TASE: AZRM), it can be asserted that it is an interesting investment opportunity: an owner under pressure, a bank under pressure, and an interesting real estate portfolio left at a company in crisis, can all bring the anonymous Sha'ashua to a new league.
But it is no less interesting is to consider how Azorim - until recently the jewel in the crown of the local real estate market - reached a situation in which it was possible to buy control of it essentially for a pile of beans, especially in light of the highflying state of the sector in recent years.
The controlling shareholder in Azorim, Shaya Boymelgreen, arrived in Israel in mid-1990s amid praise for the investments on which he collaborated with Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) in the US real estate market. In May, 2006, the hardworking entrepreneur from Brooklyn bought control of Azorim, a brand which represented then reliability, quality, and stability, from Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH)
Looking back, Azorim, with a top-line project inventory, and land in in-demand areas, was in an excellent take off position to reap the fruits of the price rises in the sector in recent years. All that Boymelgreen had to do was to continue to focus on what the company knew how to do so well: build apartments in Israel.
But Boymelgreen had other plans for Azorim, and within a short period of time he turned a solid company into a leveraged and adventurous investment company, with wasteful management.
Hundreds of millions of shekels went from Azorim's coffers to speculative real estate markets in Eastern Europe, and they never came back.
A huge investment in the local hotel industry also came at a high price. Executives came and went, each one in his turn enjoying an inflated salary. Quality properties were sold under time pressure, in order to finance cash flow needs.
Azorim, a company which it would have just frozen its operations in the past four years apparently could have doubled or even tripled its value, became during those year synonymous with failure and heavy losses. This morning the controlling shares held by Boymelgreen traded at a value of only NIS 400 million, a third of the amount that was paid for them.
Published by Globes [online], Israel business news - www.globes-online.com - on October 14, 2010
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