Katzman’s dream – to enter the US mortgage market – the capital market

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Gazit Globe
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Haim Katzman opened the company’s reports yesterday to see what the corona did to rental income at the end of 2020 and what happened to FFO during the period, and found in a row on behalf of the CEO about entering two areas of activity, new-but-tangent. The first, renewable energy, more The second is still largely obscure: the company has announced that it will set up SPAC, a skeleton company that will look for an investment company that will merge into it within two years and have $ 250 million in its coffers. Tech, but where’s the connection to real estate? In a conversation with BizPortal, Katzman details what is behind these titles, so that the investors in turn know what to imagine after all the foreign exchange.

“With fintech companies we mainly want to turn to the mortgage market. In the United States it’s a huge market estimated at $ 15 trillion, and as sophisticated as it may seem, fintech people claim it’s not sophisticated enough. There are also fintech companies that know how to do a due diligence for a real estate project, price the risks in them and offer financial entrepreneurs, usually banks and institutions, to buy layers of senior debt or the Maznin loan (bridging loan to complete equity for bank support for projects – AP). These are just two ideas from the last few weeks we have received, and every week three new ideas come to us.

“Pro-Tech refers to companies that offer developments designed to develop the real estate process in shopping centers. A familiar example is placing light bulbs in parking lots that indicate whether a parking space is occupied or available, but there are more elaborate things, like bouncing passers-by near a particular store alerts on relevant coupons or vouchers – something Gropon has done in the past. In addition, there are developments in the Back Office for property management with the tenants, for example, proper management of the electricity in the properties, of the lighting, etc. “When we talk about retail tech, these are developments that deal with services related to the tenants’ field of activity, such as the establishment of a digital store, a system for centralized collection or transportation of goods from the store to customers, and more.”

Is there a rule of thumb you have formulated regarding the company you will invest in through the Spack? For example, income at a certain level in the past year, a minimum growth rate decided upon, etc.?
“No. We are not there yet.”

Why would you rush the way to invest in a company through this Spack mechanism? A company worth investing in will be relevant even if you go the longer way of a regular purchase and IPO.
“We believe ours has a relative advantage because a lot of entrepreneurs come to us and I guess we can locate an opportunity investment. Simple and to the point.”

Have you announced that you are negotiating with a leading local renewable energy company. The intention is to place solar panels on existing Gazit buildings, or also to approach tenders for the construction of “solar fields” in open areas?
“Both. For a start, we will use our existing assets. It must be said that the increase in income in Israel will not be significant, but in the other areas of activity we are talking about higher numbers.” We thought Gazit had a fan and infrastructure in 14 countries, and we can take advantage of the reputation “Ours with the regulatory, financial systems, with the capital markets and the law firms in each area for the benefit of an activity that launches into what we do in the meantime.”

What about the IPO of the activity in Brazil? At the end of September, the value of the company’s assets it would issue was NIS 1.6 billion. In the current report, you talked about the partial business activity in the country. Made in the properties there negative revaluations?
“There were no negative revaluations as of the end of December – if there were any positive revaluations, but not on a large scale either. We are still working on a schedule that assumes an IPO in the second quarter, but in the meantime Brazil has closed which is slowing down the process.”

No recruits so far
Gazit Globe acquires, improves and manages real estate for residential, office and commercial use in North America (USA and Canada), Brazil, Northern, Central and Eastern Europe (as well as in Germany) and in Israel, and owns 105 properties in a built-up area for rent of about 2.5 million NIS 37 billion. The company is controlled (55%) by Norstar, which Katzman controls (20%).

The company has just announced that the FFO in the fourth quarter of 2020 amounted to NIS 105 million (0.7 shekels per share) and the NOI to NIS 244 million (in a relative consolidation without change in exchange rates in the quarter), a decrease in both parameters compared to NIS 144 million ( NIS 0.78 per share) and NIS 306 million in the corresponding quarter. In the last 12 months, Gazit’s share has fallen by 5.7%, but has recovered by 3.8% since the beginning of the month, when it is currently traded at a value of NIS 3.4 billion, while the equity attributed to shareholders amounted to NIS 5.5 billion at the end of December 2020.

You could say your stock is still a bit “depressed” – investors are giving you a 7-8 multiplier on the FFO in 2020.
“I really hope it goes up, in the end we do the job and the market has its say. I think we give investors a full and realistic picture of the situation – do not beautify or tarnish it. The corona has hurt us all, we run exceptional assets and yet we are not magicians.

“I said unequivocally that I do not see us returning to what our portfolio produced in 2019 before 2022. Of course I hope this year will be better than its predecessor, but it can not be ignored that at least in the current quarter there will be an impact on routine activity. The reductions and the depth of the vaccines, the depth of the recovery, it’s very simple. ”

The average interest rate on your debt has risen from 3.4% to 3.5% – how much does it represent, what interest rates have you received in recent fundraisers and are there more fundraisers on the horizon?
“Our bond from the Tu series at 5.7 years ago is representative, we issued it more than two months ago and its yield is 0.34%. We currently have cash balances of NIS 2.4 billion, including receipts from assets that have been sold and are in binding contracts, while a total of NIS 350 million in payments awaits us this year. “Noor Say Noor, but I do not see recruitment on the horizon.”

The group’s average collection rate in the quarter was 88%, while in Israel it was 62% – significantly lower than in the other areas of activity. What causes the gap?
“Unlike our competitors, we gave the collection percentage from one hundred percent, that is, from the planning in the 2020 budget. We did not do what others did, who published the collection rate after the relief given to tenants and not from the original amount. As for the difference between Israel and other regions, Closed during the reporting period. ”

“I think the most important thing is to understand the immunity of the business, and at its core, Gazit Globe is a strong company. This can be seen through two parameters: occupancy rates and the rate of renewal of lease agreements and tenant exchanges. In private companies we renew 285 lease agreements, “The new ones are 5% higher than in the old contracts. Despite the epidemic, the tenants continue to come and rent space. What is interesting to see is that when there is a recovery the curve is in a V shape: in our G mall in Kfar Saba the number of visitors this month was higher than in March last year.”

On the other hand, Kfar Saba is not Europe. Do you believe that activity on the continent will recover by the middle of the year or that it may have to wait for the third quarter?
“I do not have the ability to give a good forecast. There is no limit to the union’s bureaucracy and it is clear that the immunization rate should not have been as it is – it is inconceivable that the United States would reach 30% while in Europe it would be perhaps 12%.