Israeli commercial real estate company Gazit-Globe Ltd. (NYSE: GZT; TASE: GZT; TSX: GZT) yesterday completed the sale of its holdings in Regency Centers, a company listed on the New York Stock Exchange that operates shopping centers allover the US. Gazit-Globe reported today that it had sold its 5.6 million remaining shares in Regency Centers for $347 million (NIS 1.27 billion) (gross).
This sale followed a previous sale of 2.5 million shares in Regency Centers. Gazit-Globe has thus sold shares in Regency Centers for $502 million (NIS 1.83 billion) since early June - all of its holdings in the company.
Gazit-Globe purchased a 13.2% holding in Regency Centers in early March 2017, following a merger in a share swop deal between Regency Centers and Gazit-Globe subsidiary Equity One. Gazit-Globe has since gradually reduced its holdings in Regency Centers, with most of the sales since the US tax reform became effective in early 2018. This reform substantially reduced the tax on the profit from the sale of the shares.
At the same time, the price of Regency Centers' share dropped by over 10% in the year following completion of the deal as a result of a downturn in the business of retail chains in the US and the resulting recession in the shopping malls sector. The fall in the share price led to criticism in the local capital market of actions by Gazit-Globe, which allegedly delayed its sale of the shares in Regency Centers that it obtained from the merger deal. According to a recent calculation by Gazit-Globe, however, the saving in taxes resulting from waiting for President Trump's tax reform to become effective, together with the financial protection purchased by the company through sale options on a basket of income-producing real estate shares in the US, generated $100 million more than the net proceeds that would have been obtained through a quick sale of shares in Regency Centers 18 months ago.
Following the completion of the sale, Gazit-Globes founder and CEO Chaim Katzman said that the company had received its shares in Regency Centers as part of the merger deal between Equity One and Regency Centers, which gave Equity One's shareholders a 14% premium on the price of their shares. He added that after Gazit-Globe maximized the value of its holding in Equity One nearly two years ago, when the merger deal with Regency Centers was signed, it had today completed another extremely important stage in its strategic plan for reducing its holdings in public companies, increasing the top-quality private real estate component, and reducing its leverage.
Expanding a bond buyback
"We are determined to continue implementing our plan that will return the company to its roots - an operating company with great experience and capability with ownership of non-replaceable real estate in densely population urban areas with strong growth that we believe will generate better returns in the long term. At the same time, we will further reduce our public holdings in and continue reducing the company's leverage in order to adapt it to the standards needed for receiving an international credit rating and creating value for the shareholders," Katzman explained.
Following the sale, Gazit-Globe today announced an expansion from NIS 250 million to NIS 500 million of its buyback of previously issued bonds. Up until now, the company bought back NIS 228 million in bonds, so it can now continue buying back NIS 272 million more in bonds. These purchases are designed to reduce Gazit-Globe's financing costs.
Gazit-Globe purchases, develops, and manages shopping center and mixed-use properties in urban areas with growth. In addition to Regency Centers, Gazit-Globe also holds 31.3% of the shares in Canadian shopping centers company First Capital Realty with a current market value of C$1.58 billion (NIS 4.4 billion). This holding is also up for sale, with Gazit-Globe attempting to duplicate its success in selling Equity One.
Gazit-Globe CEO is Chaim Katzman.
Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2018
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