Ahouvi, Delek RE buy Swiss land for NIS 12.2 billion

Blenheim Properties and Delek Real Estate units bought Jelmoli Holding’s portfolio of 88 properties.

Igal Ahouvi and Yitzhak Tshuva are expanding their collaboration from the UK to the Continent. Ahouvi’s Blenheim Properties Group Ltd. and Tshuva’s Delek Real Estate Ltd. (TASE: DLKR) have bought a real estate portfolio from Jelmoli Holding AG (SWX:JEL) for CHF 3.4 billion (NIS 12.2 billion). Jelmoli also granted the consortium an option until the end of this year to acquire the Jelmoli House of Brands, the majority of Jelmoli Bonus Card Ltd. and the Jelmoli Service Ltd.

Delek Real Estate, controlled by Yitzhak Tshuva through Delek Group Ltd. (TASE: DLEKG), is participating in the deal through its subsidiary Delek Belron International Ltd. (TASE:DLKI.B1) and its subsidiary Delek Global Real Estate Ltd. (AIM:DGRE). Blenheim Properties owns 50% of the consortium, Delek Belron owns 16.7% and Delek Global owns 33.3%. Delek Belron and Delek Global will jointly provide CHF 320 million (NIS 1.15 billion) in shareholders’ equity towards the purchase.

This is the largest portfolio ever sold in Switzerland. Jelmoli’s portfolio comprises 88 income-producing properties, including landmark retail buildings in Zurich and Geneva (the Jelmoli Department Store in Zurich, the Grand Passage in Rue Du Rhune and the Place Du Molard in Rue Du Molard, both in Geneva). Two properties under development in Geneva and St. Gallen are also included. 60% of the portfolio comprises retail stores and shopping centers and 19% are office buildings. The portfolio has an aggregate lease area of 530,543 sq.m.

The majority of properties are fully leased in long-term 25-year leases, including the world famous Jelmoli flagship department store in Zurich. The average lease period is 13.5 years. Total annual rent from the portfolio is CHF 155 million (NIS 588 million), and is predicted to increase to CHF 183 million (NIS 659 million) when the two projects under construction are competed in 2009. Most of the space in these two project have already been leased. Delek Global said that there were significant opportunities to increase the value of the portfolio by efficient property management, including lease reorganization and refurbishment.

Delek Global hired Merrill Lynch International as the exclusive financial adviser, broker and underwriter of the debt financing for the transaction. It will finance 85% of the company’s share of purchase by providing CNF 2.85 billion, plus CHF 100 million financing for development, in a long-term fixed interest non-recourse loan. Delek Global also hired Panmure Gordon & Co as a nominated advisor (NOMAD).

Delek Global already owns several properties in Switzerland and added that the latest deal “creates an excellent platform for further expansion of Swiss real estate holdings in particular, and generally in continental Europe.” The company’s Swiss properties include include five WTC office buildings in Lausanne, a building of the University of Zurich in Oerlikon, the Credit Suisse Building in Dübendorf, a building of the Swiss Confederation in the Luna Park in Berne and the Matran Shopping Center in Matran.

As a result of the deal, the geographical breakdown of the company property portfolio will be: UK - 45%; Switzerland - 28%; Canada and Germany - 10% each; and Scandinavia - 7%. The deal boosts the aggregate value of the company’s portfolio by a third to £5.6 billion (NIS 44.8 billion), and the rental revenue will increase by 34% to £240 million a year.

Delek Global CEO Ilik Rosanski said, "We are delighted to lead this important acquisition of a major prime real estate portfolio including a talented management team. This will be one of the largest property acquisitions in Europe this year. The acquisition gives us the prospect of significant further expansion in continental Europe enabling us to meet our ambitious objectives. Delek Global intends to increase its exposure in what continues to be an attractive market."

Published by Globes [online], Israel business news - www.globes.co.il - on July 31, 2007

© Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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