Israeli real estate and energy company JOEL Jerusalem Oil Exploration Ltd. (TASE: JOEL) wants to replicate the success of its Airport City Ltd. (TASE:ARPT) business park near Ben Gurion Airport through Nitsba by building a similar business part near the Kesem Interchange not far from Rosh HaAyin. Sources inform "Globes" that a building permit was recently obtained for the project.
The project, to be called Nitsba City, will have 330,000 square meters of space zoned for commerce and offices. Its projected cost is NIS 1.8 billion. Now that a building permit has been issued, Nitsa is planning to hold an auction for selecting its performance contractor.
As far as is known, the new business park, to be located at the intersection of Highway 5 and Highway 6, will be constructed in several stages. The first, which will cost NIS 400 million, will include 80,000 square meters in five buildings and 60,000 square meters of underground parking.
The buildings will have seven storeys each and 3,000 square meters on each floor. According to the plan, they will ready for occupancy in 2020.
Close to the project, Nitsba is building a residential project in Rosh HaAyin under a similar name with 1,200 apartments. This projects is slated for completion in mid-2019. Nitsba co-CEO Sharon Toussia-Cohen told "Globes," "Like the successful Airport City business site we developed and built in the previous decade, this site will have an unusual location and access."
Nitsba is a private company controlled by Airport City, which has a NIS 5.3 billion market cap. In addition to its real estate business, JOEL, which holds 45% of Airport City's shares, engages in oil and gas exploration through the Isramco partnership. The controlling interest in JOEL is held by Haim Tsuff, an associate of Koby Maimon, and the Livnat family through Equital Ltd. (TASE:EQTL).
Construction of Airport City took place gradually starting in the late 1990s. The site now includes nine office buildings with over 118,000 square meters that account for most of the park's NIS 111 million in revenue in 2017. The office space also accounts for most of Airport City's value, which amounted to NIS 1.35 billion at the end of 2017.
Airport City is constantly developing the space in the park. 31,000 square meters of commercial, storage, and office space was built in it last year, plus 16,500 square meters of underground parking. The company has also begun the process of obtaining a building permit for a hotel with 250 rooms. The company has construction rights for 10,000 more square meters of office space.
Airport City owns 120 income-producing properties, including 100 in Israel. Its revenue was down 2% to NIS 776 million in 2017, mainly due to Egged leaving one of its properties and a decline in rent from several other properties, plus the sale of an office and logistics building in France. Its gross profit fell 6% to NIS 593 million.
At the same time, the value of Airport City's properties rose strongly by NIS 515 million, following a NIS 21 million drop in value in 2016. This increase boosted operating profit 85% to over NIS 1 billion, and net profit jumped 50% to NIS 742 million.
Airport City attributed the increase in the value of its properties in 2017 mainly to "a revaluing of land and the value of construction rights resulting from progress in various planning procedures," and a decline capitalization rates for some of its properties.
NIS 470 million of Airport City's increase in value came from properties in Israel, and nearly NIS 350 million of this resulted from progress in planning procedures and additional construction rights. One prominent plan was Tel Aviv 5000 for the construction of two projects in southern Tel Aviv (on the outskirts of Jaffa). Airport City said that this project had contributed over NIS 180 million to the rise in its value.
Airport City's report also shows that the conclusion of its activity in the area of the former central bus station in Herzliya and purification of the land, which enabled the company to obtain a building permit for the construction of 150 apartments, had contributed nearly NIS 70 million to its increase in value.
Concerning the fall in its capitalization rates, Airport City says that lower risk in the logistics sector and updating of the proper rents on some of its properties had contributed over NIS 200 million to the increase in its value.
The nearly NIS 50 million increase in the value of the company's properties in Europe, where it is active principally in France, was primarily a result of higher rents, lower capitalization rates, and a rise in the value of land.
On the other hand, Airport City lost over NIS 150 million in value on some of its properties, "mainly from a drop in rents and lower occupancy rates" and an increase in management expenses, especially security and maintenance costs.
Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2018
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