Israeli real estate giant Azrieli Group Ltd. (TASE: AZRG) is expanding its retirement community assets. The firm signed a conditional agreement Thursday to acquire its fifth property in the sector - the “Ahuzat Bayit” complex in Ra’anana from Yochi Schneider for NIS 55 million. Ahuzat Bayit is publicly traded on the Tel Aviv Stock Exchange through bonds it issued in 2014.
Azrieli noted the payment for the deal will be made on completion, and the deal represents a return of 8.5%-8.75% for assisted living and 7.8% for the commercial portion of the project. The Ahuzat Bayit project comprises 335 residential units, an assisted living wing, and a commercial space of 4,500 square meters with 20 tenants.
Azrieli believes the NOI (net operating income) from the property will reach NIS 5.4 million annually.
The deal is conditional on the approval of the Antitrust Authority; it is expected to be concluded within 120 days. The agreement includes a clause guaranteeing the seller additional compensation if additional building rights are granted for the property in the next decade - worth a third of the new rights.
The purchase comes two weeks after Azrieli announced it was awarded a tender for a lot in Rishon LeZion East for NIS 26 million, where it will build at least 250 retirement units alongside 3,000 square meters of commercial space.
Group chair Dana Azrieli said the two deals were “implementations of the strategic vision of the group, which includes expanding in the retirement community sector, which is an additional driver of growth beside commercial realty. The demand for retirement communities is rising, and we believe the resoluteness of the group, our management experience, and the national reach of our assets, will contribute to this activity.”
Previous investments in Tel Aviv and Modiin
It appears Azrieli has stepped up its pursuit of retirement community assets; in the past few months, the group has spent NIS 270 million on the acquisition of the “Palace” retirement community in Tel Aviv, adjacent to the Sourasky Medical Center (Ichilov Hospital).
In 2014, Azrieli purchased land to build a retirement home in Modi'in for NIS 51 million and won a tender to establish a retirement home in the village of Lehavim in southern Israel for NIS 21 million.
To manage its retirement home assets, Azrieli founded the Palace network, which currently oversees its first three projects in Modi'in, Lehavim, and Tel Aviv. The Azrieli Group, run by Yuval Bronstein, ended 2015 with a slight drop of 4% in its net profit - down to NIS 828 million.
Excluding subsidiary Granite Hacarmel - which is being offloaded - the group's annual profit actually increased by 26% to NIS 906 million.
Azrieli declared a NIS 400 million dividend. During 2015, Azrieli raised NIS 2.2 billion by issuing bonds on the exchange, thereby lowering the average interest rate on its debt, and this year it plans to offer another NIS 1.3 billion of debt.
Published by Globes [online], Israel business news - www.globes-online.com - on March 27, 2016
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