Delek Real Estate Ltd. (TASE: DLKR) and REIT Asset Management (Israel) Ltd. (formerly Azorim Properties) bought half of the Givatayim Mall today for $64 million. Delek Real Estate’s 50% of the deal is estimated at $32 million, which it will finance from its own resources. Delek Real Estate’s CEO is Ilik Rozanski.
Delek Real Estate and REIT Asset Management bought Housing and Construction Holding Co. Ltd. (Shikun u'Binui) (TASE: HUCN) subsidiary Shikun Ovdim Ltd.’s stake in the Givatayim Mall. The 61,600-sq.m. mall includes 21,200 sq.m. of commercial space, and has building rights for office space amounting to NIS 16 million.
The Givatayim Mall generates an estimated NIS 60.8 million a year in rent and management fees, before expenses, reflecting a gross return of 9.4%. Industry sources believe that the return on investment is 7.8%, after taking the mall’s expenses into account.
Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and Israel Phoenix Assurance Ltd. (TASE: PHOE1;PHOE5) own the other half of the Givatayim Mall in equal shares, and have first refusal rights to Shikun Ovdim’s stake. Clal Insurance and Israel Phoenix acquired their stake in early 2004 for $48 million, reflecting a secured return of 9.5% for four years.
Under the contract between Shikun Ovdim and Clal Insurance and Israel Phoenix, if the return on the Givatayim Mall is less than 9.5% in 2008, the purchase of their stakes will gradually fall to $44.5 million, in which case Shikum Ovdim will repay the buyers up to $4 million. If the actual return is higher than 9.5%, the price for the insurance companies’ stake will gradually rise to a ceiling of $52.5 million.
Shikun Ovdim is selling its stake in the Givatayim Mall in order to improve its liquidity. Housing and Construction lost NIS 132 million in January-September 2005.
Published by Globes [online], Israel business news - www.globes.co.il - on March 19, 2006
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