Three months after the Bronfman-Fisher group and real estate company Mega Or won the tender for a plot in Beersheva, construction of the fourth Israeli branch of the IKEA international furniture chain is expected to begin soon. The investment in this site, which will host another commercial center, in addition to IKEA, is estimated at NIS 250 million (including the plot price). The Swedish furniture chain IKEA currently operates three other branches in Israel in Netanya, Rishon Lezion and Kiryat Ata near Haifa. IKEA's franchise in Israel is controlled by Shalom Fisher and Matthew Bronfman. In August, Mega Or, controlled by CEO Tzahi Nahmias, reported on this partnership that was formed for the Beersheva project, after winning a tender for a 73 dunam (18 acre) plot together with Bronfman-Fisher for NIS 43 million (Mega Or's share was NIS 18 million). After winning the tender, estimates at Mega Or were that the cost of building an IKEA store on the site will be NIS 100 million.
Another joint Mega Or and Bronfman-Fisher venture
As part of this partnership, Mega Or will control one third of the rights for the land in the Ikea plot and half of the rights for the additional compound to be built nearby. The project's overall buildings will cover an estimated 40,000 sq.m. - 25,000 sq.m. for the Ikea store and the rest for other commercial activity. Mega say that according to the urban building plan, the plot is zoned for "commerce, including showrooms, food venues, entertainment (reception halls, clubs, cinemas and video game halls) and parking spaces."
According to estimates, the partners will receive an annual lease of NIS 20 million for the site, half of it for Mega Or, which at present has an annual revenue of NIS 100 million. This is not the first time Mega Or and Bronfman-Fisher have been cooperating. Last year, Mega Or and the Bronfman-Fisher subsidiary Shefa Success Logistics built a 19,000 sq.m. logistic center at Ashdod [prt, at an investment of a few dozen millions of shekels, a part of which is leased to Shefa Logistics.
When Mega Or reported on the purchase of the Beersheva plot, it said that it "did not yet decide how to acquire the funds it requires for the construction of the site, either via a banking loan, a loan from a financial institution or bond offering." In September, the company completed a NIS 50 million financing in debt.
Mega Or share skyrockets
Mega Or, which is developing, building and managing commercial centers, is traded at a market cap of NIS 820 million, after a 50% boom in share prices since the beginning of the year, which reflects a NIS 370 million value for Nachmias' holdings (45%). Rising share prices have also benefitted several financial institutions, including Yelin-Lapidot Investment House Ltd., Altshuler Shaham, each controlling a 9% stake and Psagot Investment House Ltd., with a 7% stake.
Mega Or controls over 20 income producing properties and over 20 properties still being planned and constructed. According to the company's results for the first half of 2016, revenue jumped 25%, to NIS 44 million; together with a reappraisal of property, these figures helped the company to report a 115% jump in profits, to NIS 67 million.
Bronfman and Fisher, who have benefited from Ikea's success in Israel, have recently sold a significant part of their holdings in the Shufersal Ltd. (TASE:SAE) retail chain are no longer controlling shareholders in the chain, which they entered in 2007, with the intentions of assuming control (after selling their stake in the competing chain Mega). After controlling holdings in Shufersal for a decade and making a NIS 900 million investment, the partners have made no profit.
Published by Globes [online], Israel business news - www.globes-online.com - on November 1, 2016
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