"I have been through crises, and what they all have in common is that people say, 'This never happened before.' Every crisis is unique and arises from different circumstances. I'm not talking about capital market cycles, but about crises caused by an exogenous event, as in this case," Chaim Katzman, controlling shareholder and CEO of income-producing real estate company Gazit-Globe Ltd. (NYSE: GZT; TASE: GLOB), told "Globes" today.
"It reminds me of the crisis that resulted from the events of September 11, 2001, in which hundreds of people were killed," Katzman said. "There was an absolute loss of confidence, with people thinking that the enemy was among us, and being unwilling to leave their homes. In the US, people in New York had to be encouraged to go shopping.
"It was extremely unpleasant, but it was temporary, and that's what I also think about this crisis. From what I see, all in all, the world recognizes the problem and is addressing it, and in my opinion, will solve it. I don't know how long it will take - a month, three months, or six months. It's obviously not enjoyable for our tenants, like all crises.
"One of Gazit-Globes' leading advantages in its portfolio is diversity, and all of the supermarkets and pharmacies that they say will remain open are part of it," Katzman added. "I think that our portfolios are much more robust. Furthermore, people have been telling me for a long time that all of our properties should be in Israel, but it turns out that dispersal of assets around the world isn't so bad. We're spread out over 11 countries, and the conditions are obviously not the same in different countries, so I expect the damage to our portfolio will not be substantial, and certainly temporary.
"We know how to deal with tenants. It's nothing new for tenants to experience difficulties under crisis conditions, and of course we'll work with our tenants everywhere in the world, and emerge from this crisis strengthened by what we've been through."
High liquidity and a spread-out repayment schedule
Gazit-Globe posted a NIS 222 million net profit attributable to shareholders in the fourth quarter of 2019, compared with a NIS 160 million net profit in the corresponding quarter in 2018. The company's net profit in all of 2019 was NIS 655 million, compared with a NIS 235 million loss in all of 2018.
Katzman commented, "Gazit-Globe's financials continue to be strong, with growth in all of its markets. The strategy of multiple use in densely populated urban areas is still proving itself in a rise in the value of the properties and rent, in net operating income (NOI) from the same properties, and in our high occupancy rates."
Gazit-Globe's NOI rose 2.1% in the fourth quarter, or 8% excluding the strengthening of the shekel against other currencies. The NOI of the private companies grew 19.2% to NIS 435 million. At the same time, net interest expense fell by NIS 165 million, 31.6%, to NIS 357 million.
Gazit-Globe benefited in the fourth quarter from a NIS 627 million increase in the value of properties fully owned by its private companies, mainly in Brazil and Israel. In 2019 as a whole, the value of the company's real estate was up NIS 698 million, and its equity totaled NIS 8.2 billion as of the end of December.
Gazit-Globe finished the fourth quarter with NIS 3.4 billion in liquid balances and unused approved lines of credit, including NIS 1.3 billion in cash, marketable securities, and short-term deposits. In early 2020, the company sold 14.6 million more shares in Canadian company FCR for NIS 771 million.
"As part of our policy, we maintain high liquidity levels and a repayment schedule spread out over many years," Katzman said. "We are in a period of a global medical and economic crisis, but Gazit-Globe is well prepared to deal with the challenges of the period."
Gazit-Globe's current market cap is NIS 4.9 billion, after losing 30% of its value since the beginning of the year. Simultaneously with its reports, the company announced that it would buy back NIS 750 million more of its bonds as part of its measures for reducing its financing expense.
Published by Globes, Israel business news - en.globes.co.il - on March 16, 2020
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