With dozens of malls and offices, profits up 110% for Israel’s biggest property firm

Israel’s Azrieli Group, a real estate and holding company that develops and builds the most shopping spaces and office buildings of any in the country, announced profits of NIS 803 million ($248 million) in the second quarter of 2022 (April, May, and June), up 110% compared to the same period last year.

Year-on-year net operating income is up 16% to NIS 473 million ($146 million), according to the company’s most recent quarterly report published this week.

The company, which floated on the stock exchange in 2010, issued a NIS 650 million ($201 million) dividend to shareholders in May. The strength of its latest results suggests that despite rising inflation and increases in the Consumer Price Index and the Construction Price Indexes, Israel’s real estate sector is flourishing.

The company noted that the last COVID-19 wave, which was still in progress this past quarter, had minimal effect, and it is confident that any future waves will be similarly contained in their impact on Israel’s businesses.

Although Azrieli acknowledges the interest rate rises and the impact on the cost of its own borrowings, it also states that much of its income is index-linked, so the costs are offset by corresponding increases in rental income. The construction giant is more concerned about the increases in the construction index and the overall costs of building.

The Azrieli Group dominates not just Tel Aviv (with the famous Azrieli Towers and the accompanying shopping center), but the infrastructure of towns and cities across Israel. It owns 19 shopping malls, 17 high-end (Class A) office buildings, and four luxury retirement complexes in Israel, as well as eight office buildings, mainly in Texas. Azrieli Group also owns a 26% stake in a holding company that operates data centers in Norway and acquired a firm that does the same in the UK, according to the report.

Illustrative: Israelis wear protective face masks near the Azrieli towers in Tel Aviv, on October 25, 2020. (Miriam Alster/Flash90)

Retail space makes up the largest part of the Azrieli portfolio and is showing 99% occupancy, while the office portfolio is 97% full. Residents are continuing to move into its luxury senior homes, with occupancy numbers now at 99%, the group reported. Overseas data centers which now make up 14% of its holdings are based in the United States and in Norway and are 95% full.

The company said it sees data centers as a key growth category for the future and will be looking at new opportunities in this sector.

The company also sees potential in the hotel sector, as an owner and operator. In 2020, it bought the Mount Zion Hotel in Jerusalem and, following a shut-down due to the pandemic, the group is now renovating the property which will include 350 rooms. The hotel is expected to re-open as an Azrieli Hotel in 2025.

Azrieli Group also has a work-in-progress currently at Azrieli Town in Tel Aviv, which offers mixed-use towers with office spaces, long-term residential rentals, and retail spaces. The group said that
100% of office accommodation is currently leased out and the whole project will be completed later this year.

The company also set out its development pipeline, consisting of 0.7 million square meters (7.5 million square feet) of additional space. The expansion of the Azrieli Center in Tel Aviv through the addition of the Spiral Tower is scheduled for completion in 2026, and will add 150,000 square meters (1.6 million square feet) of combined office, retail, hotel and residential space.

The planned Spiral Tower is a 91-story, 350-meter-high (1,150-foot) tower that looks set to be the second-tallest structure in the country.

The upcoming Spiral Tower by Azrieli Group in Tel Aviv. (PRNewsfoto/Azrieli Group)

The company also has further projects in Modi’in and Petah Tikva in the planning stages, and a mall in Eilat set for completion. Azrieli Holon 3, containing 250,000 square meters (2.7 million square feet) of retail and office space, is under construction

In total, Azrieli Group now controls 1.4 million square meters of leasable property, and puts its total assets at NIS 43.7 billion ($14.45 billion).

The company suggested in its report that its cash flow and borrowing facilities are well positioned to help to fund the NIS 284 million ($88 million) currently committed to future growth.