The competition between the many shopping malls opened in recent years in Beersheva has affected the bottom line of income-producing real estate company Azrieli Group Ltd. (TASE: AZRG), which has written down 20% of the value of the Negev Mall in the city. The write-down cut the Azrieli Group's 2014 profit by 9% to NIS 860 million.
The Azrieli report stated that the Israel Securities Authority had conducted a comprehensive audit during the report period for the fair value of income-producing properties in the Beersheva region. The Securities Authority staff had made a number of objections to the method of calculating the revenue presented and the value of management activity, and had set the fair value of the Azrieli Negev shopping mall in the reports for 2012 at a level reflecting a 12% write-down, compared with 2012.
The report also stated that the company had expressed its opinion that the methodology it had used, and was still using, to determine fair value was the methodology accepted in Israel for income-producing properties. The company said that the fair value of the Azrieli Negev mall had been written down by 20% as of the end of 2014, in comparison with its value the preceding year, in view of the adjustments in rents during the report period.
The Azrieli mall in Beersheva opened in March 1989. The project, which covers 21.4 dunam (5.35 acres) on Ben-Zvi St. in the city center, contains 60,000 sq.m. in gross built-up space. The mall has three commercial floors, office space, and a parking lot.
In addition to the Beersheva mall, the value of the company's shopping mall in Kiryat Ata was also written down, with the values of the two malls dropping by an aggregate NIS 230 million. Azrieli Group stated that without the revaluations, its annual net profit would have jumped 33% to NIS 838 million. The company's net profit in the fourth quarter of 2014 was NIS 213 million.
Azrieli Group CEO Yuval Bronstein said today, "We are summing up a very good year, with extensive activity and great accomplishment. The results show significant cost-cutting and major growth in net operating income (NOI) and funds from operations (FFO). We were affected by a one-time write-down, primarily for the Beersheva mall, but we feel positive about the mall there, and receipts in it in the fourth quarter were higher than in the preceding quarters. Proceeds per sq.m. in the mall there were the highest among the properties in Beersheva, and we are planning renovations in it. We are confident that these measures, including the fact that the mall is in the best location in Beer Sheva, with good access to public transportation, will cause it to prosper in the future."
Azrieli Group's annual revenue fell 13.5% to NIS 7.3 billion. Azrieli's operating parameters were good, with NOI up 3% to NIS 1.1 billion and a 5% rise to NIS 293 million in the parameter in the fourth quarter. NOI was negatively affected by a drop in rent in the lease renewals, mainly in Beersheva and the north.
FFO attributable to real estate business was up 4% to NIS 787 million in 2014, and up 5% to NIS 207 million in the fourth quarter. In view of the improvement in these figures, simultaneously with the publication of its reports, Azrieli Group announced the distribution of a NIS 320 million shareholders dividend, 14% more than what was distributed in 2014. The company said that since the distribution of its first dividend in 2010, its dividends per share had risen 33%.
Published by Globes [online], Israel business news - www.globes-online.com - on March 18, 2015
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