Energy company Paz Oil Company Ltd. (TASE:PZOL) is reporting to the Tel Aviv Stock Exchange (TASE) in detail for the first time about the real estate that it owns, and the amount of unused space held by the company. Paz is planning on selling and improving its real estate over the coming five years, thereby generating added value for its core gasoline business.
Sources inform "Globes" that the company is planning on increasing its construction rights in the real estate it owns to 106,000 square meters and using it for residences, business, and commerce. This is in addition to the space occupied by its existing filling stations and commercial space, which generate revenue from rent and managing fees. Market sources estimate that Paz's construction rights that the company is trying to increase are worth over NIS 1.5 billion.
The land owned by the company constitutes a gold mine, following the jump in land prices in Israel over the years. The company has now decided to improve its land and increase its construction rights in it.
Paz is a gasoline company with the largest amount of filling stations on land that it owns. Of Paz's 275 filling stations, 104 are on land that it owns (11 of them in partnership with other owners). The filling stations include 244 Yellow convenience stores, plus a total of 59 retail sites with 21,500 square meters of commercial space owned by the company and leased to third parties, which entitle Paz to rent and management fees. In its reports, Paz stated that these areas are expected to grow by 7% in 2018.
Paz's reports show that the company has approved construction rights on land that it owns amounting to 44,000 square meters in high-demand urban areas that have not yet been utilized. The big money, however, is in future improvement of 106,000 square meters of land for real estate zoned for residential, business, and commercial construction in cities such as Tel Aviv, Haifa, Jerusalem, Ramat Gan, Beer Sheva, and Rehovot.
Paz expects to promote planning for this land in various planning committees in the next five years until plans are approved for increasing its construction rights. The largest volume of improvement will probably be in the central region, which the company currently owns 21,500 square meters in approved construction right for commerce and business that are likely to increase to over 70,000 square meters zoned for commerce, business and residences. The volume of Paz's construction rights in the southern region is also expected to leap from just 3,300 square meters zoned for commerce to 25,000 square meters zoned for commerce, business, and residences.
Large areas for construction in Tel Aviv
Some of Paz's filling stations are on lots on which Paz is promoting individual plans. At the filling station on Yitzhak Ben Zvi Road in Tel Aviv, for example, Paz currently has a filling station with 18,000 square meters of approved construction rights for business, including a nine-storey building zoned for commerce. As part of the planned project, the filling station will be demolished and rebuilt. Issuance of a building permit is expected during the coming year.
In other cases, Paz's filling stations are on land in which large-scale plans are being promoted, including nearly lots belonging to other owners. When the plans are approved, Paz will obtain rights in the framework of the new plan, according to its relative share of the plan.
On Salame Street in Tel Aviv, for example, Paz's filling station is included in a large plan in which owners of nearby lots are partners. This plan is for a large 50,000-square meter plan with business, residence, and commerce. Paz's rights in this project amount to 5,000 square meters. Paz's filling station in the Baka neighborhood of Jerusalem is also included in a 30,000-square meter plan in which the owners of the nearby lots are partners. Paz's share of the construction rights in the project totals 9,000 square meters.
Whether and when to exercise the construction rights
Paz is promoting planning for a large proportion of the land reserves that it owns, while it has decided to sell other land, such as a 164-dunam (41-acre) land parcel on the Pi Glilot site, which it sold to a group of investors led by Israel Canada ITR) Ltd. (TASE:ISCN) for NIS 237 million.
As for the decision when to exercise Paz's rights, whether to sell them in the planning stages at the building permit stage, or to wait for construction and hold the properties as income producing properties, Paz CEO Yona Fogel told "Globes," "We have aimed to hold the land we own, and we will continue to try to utilize the commercial potential of the space we own.
"Over the years, a large proportion of the land has lost its original zoning, and we have decided to sell it, such as at Pi Glilot, for example, development of which is in the long term, and is no longer related to our going concern activity. We are assessing all of the land and asking how its optimal zoning can help the existing business and our lives, and we are making a decision about which land to improve, on which to build, which to sell, and when. Every possibility is being considered for each parcel of land. In general, we're aiming at projects in which filling stations will be built, because filling stations are an anchor requiring attention."
In March, Paz began cooperating with Israel Postal Company and delivery companies, so that automated lockers will be built in 105 retail centers owned by Paz, including Yellow stores. The lockers will constitute collection stations for online orders by Israelis from websites around the world.
Published by Globes [online], Israel Business News - www.globes-online.com - on March 18, 2018
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