Real Estate CEO Admits Mistake in Failed GCity Takeover Bid
Tzachi Abu, CEO of Ari Real Estate, revealed his miscalculation in attempting to acquire control of GCity from Haim Katzman, stating he "erred in identifying an intention from Katzman to sell control." Abu explained that his strategy was based on the assumption that Katzman wished to sell, and an agreement was made for joint control with an option for Abu to purchase full control later. However, Abu quickly realized Katzman did not intend to sell, leading to the deal's cancellation.
Abu discussed his investment strategy at the Globes and Bank Leumi Israel Real Estate Conference, emphasizing his comfort in pursuing deals involving uncertainty or seller distress. He cited previous acquisitions, including Ari Real Estate and Pi Glilot during the COVID-19 pandemic, as examples of such strategies. Despite the failed GCity deal, Abu does not consider it a disappointment, viewing it instead as a lesson in choosing business partners.
Following the deal's collapse, GCity's stock dropped approximately 25%. Abu attributed this market reaction not to a lack of investor understanding of the deal's potential, but to GCity's perceived negative reputation among institutional investors. He noted that these investors, who constitute most of the trading volume, expressed a lack of confidence in the company, preferring to invest directly if they chose to hold GCity shares.
Abu also shared his perspective on the Israeli housing market, arguing that government programs like "Mechir Matara" (Target Price) and "Mechir LeMishtaken" (Price for the Resident) are hindering market recovery. He believes these programs create a "gas-and-brake" effect, causing stagnation by incentivizing potential buyers to wait for lottery draws rather than engaging in the open market. Abu suggested that the rental market is currently benefiting from this situation, with a significant number of households waiting for government housing lotteries.
Ari Real Estate is expanding its operations beyond its traditional base in Ashdod into areas like rental housing and energy. The company is involved in approximately 1,500 rental units and sees the energy sector as a promising area with potentially higher returns than real estate. Abu also discussed the company's defense sector involvement through Albetek, a joint venture with Israel Aerospace Industries, which has achieved significant revenue and is expected to grow.
