Azrieli ends 2019 strongly ahead of virus challenge

Danna Azrieli Photo: Eyal Yitzhar
Danna Azrieli Photo: Eyal Yitzhar

Occupancy in Azrieli's properties in 2019 was 98% in shopping malls and 99% in offices.

"We are currently engaged in responsible and firm management of the coronavirus crisis. It is important to emphasize that the group enters the global crisis well prepared, with very solid financial soundness and high cash and cash equivalents balances, a low leverage rate, and a significant volume of unencumbered assets. We have a long average loan duration with an excellent payment schedule and a robust annual cash flow, which is expected to remain strong also in various scenarios we considered," Eyal Henkin, CEO of income-producing real estate Azrieli Group Ltd. (TASE: AZRG), said when the group's 2019 financial statements were published.

Azrieli Group, controlled by Danna Azrieli, finished the fourth quarter of 2019 with NIS 408 million in net operating income (NOI), 5% more than in the corresponding quarter in 2018. Funds from operations (FFO) totaled NIS 314 million, down 29% compared with the fourth quarter of 2018, because the company reported NIS 150 million in FFO in the fourth quarter of 2018 for assisted living facilities, mostly from initial occupancy of Azrieli Modi'in, compared with NIS 28 million in the fourth quarter of 2019, which included more limited occupancy of the house in Modi'in, since most of the tenants had already occupied the house.

98% occupancy in shopping malls

In the bottom line, Azrieli Group reported a NIS 1.1 billion net profit in the fourth quarter of 2019, 141% more than in the corresponding quarter in 2018. Contributing to net profit were NIS 560 million from revaluation of properties and a NIS 380 million capital gain resulting from the completion of the sale of Supergas to the Elco group for NIS 817 million in November 2019.

Azrieli finished 2019 with a 6% rise in NOI to NIS 1.6 billion and a 3% improvement in FFO to NIS 1.3 billion. NIS 694 million from revaluation of properties boosted the group's net profit 75% to NIS 2.1 billion.

Azrieli Group had NIS 2.9 billion in cash and short-term deposits at the end of 2019. The group also holds shares in Bank Leumi worth NIS 1.1 billion. The company's net debt amounted to NIS 8.6 billion, and its unattached properties were worth NIS 23 billion.

In 2019, before the beginning of the economic crisis caused by the spreading of the coronavirus, occupancy in the group's shopping malls in Israel was 98%, and occupancy in its offices was 99%.

NIS 300 million dividend

Simultaneously with the public of its reports, Azrieli announced that it would distribute a NIS 300 million dividend to its shareholders in May. The group said, "For the sake of caution, as is characteristic of the Group and despite its exceptional strength, the board of directors decided to distribute a NIS 300 million dividend, and to re-discuss a distribution of up to NIS 300 million more during the year."

In its presentation to investors, Azrieli Group stated that in 2019, before the coronavirus epidemic, proceeds in same properties grew 1.8% in comparison with the preceding year. In the last four months of the year, proceeds from same properties grew 1.9%, compared with the corresponding period in 2018. The ratio of rent to proceeds remained at 11.2%, the same ratio as in 2018.

Following the coronavirus crisis, Azrieli's share price has fallen 25% this year, push its market cap down to NIS 24 billion,

Financial aid fund for tenants

Azrieli Group has 18 shopping malls with 350,000 square meters of space, 14 office properties with 547,000 square meters of space, and three assisted living facilities in Israel. The company also holds eight overseas office properties, mainly in the US. Its total rental space comes to 1.2 million square meters, in addition to ten projects under construction and planning and eight projects for expanding and upgrading properties.

Azrieli Group announced last week that it was setting up a NIS 100 million fund for financial assistance to its tenants. In its report to the TASE, Azrieli said that it would immediately found a special designated fund with NIS 100 million for assistance to its tenants. The money will be made available to tenants in order to maintain their economic security and business continuity.

According to the company's announcement, the fund will be distributed through grants to tenants and loans on special terms that will be repaid only starting twelve months after being granted. Furthermore, the repayments will be spread over a long period derived from the lease period for the properties.

At the same time, Azrieli followed the example set by income-producing real estate company BIG by also publishing a series of relief measures for tenants, in view of the current situation. Azrieli said that it would grant a six-month exemption from rent for the second half of March 2020, and for businesses that were closed down following government decisions. Rent and management fees will also be frozen for businesses closed by government order for a period starting on April 1 and continuing until a return to normality.

Published by Globes, Israel business news - en.globes.co.il - on March 25, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Danna Azrieli Photo: Eyal Yitzhar
Danna Azrieli Photo: Eyal Yitzhar
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