Income-producing real estate company Melisron (TASE: MLSR), controlled by Liora Ofer, posted a net profit of NIS 1.5 billion for 2021, versus a loss of NIS 250 million in 2020.
Melisron, like other income-producing real estate companies, benefitted from a rise in valuations of investment assets last year, in its case by NIS 1.02 billion, after a decline of NIS 571 million in 2020. Rises in rents, the rise in the Consumer Price Index, which boosted revenue, a 0.25% reduction in the weighted capitalization rate applied to its income-producing assets, and a revaluation of the Landmark project in Tel Aviv, contributed to the rise in the value of the company's assets.
Net operating income (NOI) rose by 33% last year to NIS 1.03 billion from NIS 779 million in 2020. Melisron says that the sharp rise stems from a reduction in discounts given to tenants during the Covid-19 pandemic, and from a rise in rents in new leases and the rise in the CPI.
Funds from operations (FFO) grew 57% last year to NIS 723 million. FFO in 2019 totaled NIS 717 million. The company estimates that after new projects under construction, due to be completed by 2025, are occupied, and further debt recycling in the current interest-rate environment, FFO will be NIS 1.2 billion.
Melisron says that since the reopening of shopping malls at the end of February 2021, when Israel's third lockdown ended, proceeds have risen by 6% in comparison with the corresponding period of 2019, despite eleven days of the Guardian of the Walls operation in the Gaza Strip in May last year, and the effects of the fourth and fifth waves of the coronavirus pandemic.
Melisron currently has six projects at various stages of construction. These are expected to yield NOI of some NIS 220 million when they are completed. The most prominent project is the Landmark project in Sarona in Tel Aviv (held in equal shares with a partner company). In 2021, Melisron raised its projected annual income from this project from NIS 190 million to NIS 307 million (of which its share will be NIS 154 million) in the light of record demand for rented office space in Tel Aviv, mainly from large technology companies. The first tower in the project is due to be completed by the end of 2023. Leases have so far been signed on a third of its space.
The company has also announced that within the next two years construction will start on twelve new projects consisting of 400 rental housing units, and nine further commercial and office projects consisting of 160 square meters of space, and an advanced, 16 megawatt server farm. These projects are expected to yield annual NOI of NIS 200-230 million once they are completed.
Melsiron CEO Ofir Sarid said, "2021 was a special year of activity that brought the company excellent results. Although the year began with a lockdown, it went on to be a year of unprecedented growth both in the malls sector, where we saw record proceeds, and in the office and high-tech parks sector, where we are seeing extremely high demand for new office space. We are currently achieving the milestones we set for ourselves, and are promoting the development of a variety of projects, some of them mixed-use projects, which will represent a substantial growth engine in the coming years."
Melisron has a market cap of NIS 11.7 billion, after a rise of 33% in its share price in the past year. Its share price rose 2.75% on the Tel Aviv Stock Exchange this morning after its results were released.
Published by Globes, Israel business news - en.globes.co.il - on March 14, 2022.
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