Tel Aviv-based Gazit-Globe (NYSE: GZT) (TSX: GZT) (TASE: GZT), the largest Israeli global real estate development company with a market capitalization of $1.78 billion, said it has sold part of its stake in Brazil’s BR Malls for close to $53 million, decreasing its stake to below 5%.
The value of the shares of BR Malls as of June 30, 2016, reflects a realized gain of 40 million shekels, and an unrealized gain of approximately 90 million shekels on the remaining unsold shares, the company said, representing an overall profit of $34 million.
The company’s subsidiary Gazit Brasil used the sale proceeds to acquire an office building and parking garage at Top Center Shopping in Sao Paulo, Brazil for 153 million Brazilian Reals ($47 million).
Top Center Shopping is an urban mixed use property, which includes a shopping center, an office building and a 370 car parking garage on Paulista Avenue, a landmark avenue in the heart of Sao Paulo, Brazil’s main business and financial center. More than 1.5 million Sao Paulo residents commute daily to Paulista Avenue, home to a large number of financial institutions.
Paulista Avenue, which was inaugurated in 1891, is generally regarded as one of the most expensive real estate locations in South America. The 2.8 km thoroughfare is notable for headquartering a large number of financial and cultural institutions, as well as being home to an extensive shopping area and to South America’s most comprehensive fine-art museum, MASP.
The office building comprises 17 stories and has a gross leasable area (GLA) of approximately 13,450 square meters. The building is occupied by major tenants, including the Consulate of Japan, Dow Jones, Procter & Gamble, Goodyear and others.
“The NOI of the shopping center, which currently enjoys 100% occupancy, increased by 30% since it was acquired by Gazit Brasil in September 2014, as a result of pro-active management of its wholly owned subsidiary, Gazit Brasil, managed by Mia Stark, its CEO,” the company said in a statement.
With the closing of this transaction Gazit Brasil will own and operate 9 assets with a total GLA of approximately 125,000 square meters and a total value of R$ 1.4 billion ($440 million), it said.
“We are pleased to show an impressive profit from our investment in BR Malls, and will continue to explore the possibilities for the sale or purchase of additional shares based on market conditions and the alternatives for direct investment in real estate,” said Rachel Lavine, CEO of Gazit-Globe.
“The acquisition of the office building and the underground garage provides us with an opportunity to expand the shopping center space and create operational synergies, converting some office space into retail units, improving the shopping center area and utilizing to greater efficiency,” she added.
Gazit-Globe is one of the largest owners, developers and operators of predominantly supermarket-anchored shopping centers in major urban markets around the world.
As of March 31, 2016, Gazit-Globe owns and operates 439 properties in more than 20 countries, with a gross leasable area of approximately 6.5 million square meters and a total value of more 80 billion shekels.
Gazit-Globe operates in the United States through a stake in Equity One (NYSE: EQY) and in Canada through First Capital Realty Inc (TSX: FCR). It is the largest shareholder in Finland’s Citycon Oyj (HEX: CTY1S) (OMX: CTY) and controls European shopping mall developer Atrium European Real Estate (VSX: ATRS).
Gazit-Globe was founded in 1982. Since May 1991, the company has been controlled by Chaim Katzman, a graduate of Tel Aviv University Law School, who trained as a lawyer and in 1979 moved to South Florida, where he became involved in the development and management of commercial and residential real estate. He is a well-known philanthropist and supporter of education and the arts in the United States and abroad.
Katzman is the chairman of Gazit-Globe and its parent Norstar, formerly Gazit Inc. In June 2010, he was appointed chairman of Citycon Oyj. He also serves as chairman of Equity One and as a director of First Capital Realty. In 2008, he became chairman of Atrium European Real Estate.
During the 1980s he started developing his real estate business in Israel, and was able to consolidate his holding in Gazit-Globe, at the time a corporate shell with no business operations.
The holding in Gazit-Globe enabled Katzman to draw investors to help him acquire additional retail centers, and it became a vehicle to raise capital for further property and business acquisitions.
In 1992, Katzman formed Equity One as a partially owned subsidiary of Gazit, operating as a real estate investment trust (REIT). In 1998 Equity One went public through an IPO on the New York Stock Exchange, with Gazit-Globe retaining a large ownership stake.
In 2004 Gazit acquired 33% of Citycon, a Finnish public company focused on commercial real estate in the Nordic region. Gazit subsequently increased its stake in Citycon to 47%.
In August 2008 Gazit-Globe acquired troubled European property developer Meinl European Land (VSX: MELV), and invested 800 million euros into the company, through a joint venture with Citigroup’s (NYSE: C) real estate investment arm, Citi Property Investors (CPI). Following the takeover, Meinl’s name was changed to Atrium European Real Estate Ltd and a new board of directors and management were appointed. The move strengthened Gazit’s foothold in the Eastern European and Russian markets.
In 2010, New York private equity firm Apollo Global Management (NYSE: APO) acquired Citigroup’s CPI, including its joint venture stake in Atrium. In January 2015, Apollo sold its 13.9% Atrium stake to Gazit-Globe for 229 million euros, increasing Gazit-Globe’s controlling stake in Atrium to 55%.
In December 2011, Gazit-Globe made an initial public offering on the New York Stock Exchange, raising $81 million. In October 2013, Gazit-Globe listed its shares on the Toronto Stock Exchange.
Photo: Chaim Katzman, Chairman of Gazit-Globe, Equity One, First Capital Realty (2000-2015), Atrium European Real Estate, and Citycon Oyj.