Mediterranean Towers to build biggest home in Or Yehuda

Mordechai Kirschenbaum
Mordechai Kirschenbaum

New sheltered housing to be constructed by Mediterranean Towers will bring the chain's total to 2,400 housing units in nine different facilities.

Israeli sheltered home company Mediterranean Towers Ltd. (TASE: MDTR) has won an Israel Land Authority tender to purchase land in Or Yehuda zoned for construction of a building for its chain at a cost of NIS 210 million. The company, controlled by chairman Mordechai Kirschenbaum and his partners, announced today that the land is Or Yehuda's Ayalon Park neighborhood, close to the Mesubim Junction, and contains space for construction of over 87,000 square meters including 500 sheltered housing units. Mediterranean Towers said that the project would be the largest for the chain in Israel's sheltered home sector, and would also have a nursing unit and related services.

Mediterranean Towers' bid was NIS 180 million, and the company will also pay NIS 30 million in development costs, to be paid "at the times listed in the tender documents," the company said, adding that it was "considering how to fund the purchase of the land if it chooses not to finance the full price from its independent resources."

Mediterranean Towers currently has seven sheltered homes with 1,650 housing units, and in recent years began building its eighth facility in Rehovot with 250 housing units; together with the Or Yehuda project, this will bring the company's aggregate housing units to 2,400, plus 420 nursing ward beds.

Mediterranean Towers' triumph in the tender follows a quite successful year for the company's share price, during which it climbed nearly 70%. The share price rose a further 3-4% following the news about the tender, and is now less than 10% short of its peak last November. Mediterranean Towers' current market cap is over NIS 1.5 billion.

Following the chain's expansion, it finished the first nine months of 2019 with 11% growth in revenue, which reached NIS 144 million. A downward revaluation of its properties and lower projected cash flow from the activity of three nursing wards, however, detracted from the company's operating profit. The chain's financing expenses also rose, reducing its net profit in January-September 2019 to NIS 8 million, a 60% drop.

Support for Bayit Bakfar offering

The growth in Mediterranean Towers' activity has also attracted interest from large investors over the past year, with two changes taking place in the company's controlling core. The KCPS Manof fund, which held 5% of Mediterranean Towers' capital, sold it to several investors for NIS 50 million, half of which was reportedly invested by Chen Lamdan, the controlling shareholder in delivery and logistics company Orian Shm. Shortly afterwards, the company made a private allocation of 4% of its capital to Fattal Holdings founder and controlling shareholder David Fattal for NIS 40 million.

The interest in Mediterranean Towers and the increase in its activity and valuation is also supporting the offering on the Tel Aviv Stock Exchange by its competitor, Bayit Bakfar, controlled by the Blustein family, which is likely to set a valuation in the hundreds of millions of shekels in the offering, as reported in recent weeks by "Globes."

Mediterranean Towers' business model is based on a NIS 1-2 million deposit paid by the tenant, which gives the tenant a right to use the apartment that he gets for the rest of his life. The deposit has eroded over time at an annual rate of 3-4%, reaching 40% of the original sum. In addition to the deposit, tenants in the assisted living facilities pay a monthly maintenance fee of NIS 7,000-10,000, and receive the basic services offered by the property, other than food. The company derives addition revenue from leasing the nursing ward and additional space on the property, and from payments "for services not included in the building's basic basket of services." As far as is known, the competing chains work on similar models. Mediterranean Towers believes that the assisted living facilities market in Israel consists of 12,500 housing units in 70 buildings. The competing chains are Mishan, Ahuzot Rubinstein, Habayit Bakfar, AD 120, and Azrieli Group subsidiary Palace.

Published by Globes, Israel business news - en.globes.co.il - on January 1, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Mordechai Kirschenbaum
Mordechai Kirschenbaum
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