Abu Properties Buys 50 Apartments in Netanya for $32 Million Amid Market Slump
Translated & summarized from Bizportal by baba
Abu Properties, controlled by Tsachi Abu, has purchased 50 apartments in Netanya for approximately $32 million, aiming to reduce developer inventory in a city with over 3,500 unsold new apartments. The deal comes as Netanya's apartment sales dropped 20% in recent months, highlighting a market slump. While the acquisition aids developers and expands Abu Properties' portfolio, rising financing costs and a struggling market pose challenges. The company's stock has also seen a 20% decline this year.
The story in 5 lines · by baba
- Abu Properties acquired 50 apartments in Netanya for approximately $32 million.
- Netanya has over 3,500 unsold new apartments, with sales down 20% recently.
- The average price per apartment in the deal is about $640,000, potentially 12% below market.
- The purchase is part of Abu Properties' ongoing expansion strategy.
- Financing costs and market stagnation present challenges for the deal and the company.
Abu Properties, a real estate investment trust controlled by Tsachi Abu, announced the purchase of 50 apartments in a Netanya residential project for approximately NIS 120 million (about $32 million), including VAT. The average price per apartment is around NIS 2.4 million ($640,000), a figure potentially 12% lower than the average apartment price in Netanya according to Central Bureau of Statistics data. The project is in advanced construction stages, with a planned delivery date of May 30, 2027, though a final occupancy permit has not yet been issued.
The acquisition comes as developers in Netanya face a significant inventory of unsold apartments, with over 3,500 new units available at the end of July. Apartment sales in the city saw a 20% decrease in the May-July period compared to the previous three months, indicating a continued struggle to move inventory despite a national market recovery. The purchase of a large block of apartments can help developers by reducing unsold stock, mitigating risks from a stalled market, and potentially aiding in meeting bank loan covenants.
For Abu Properties, this acquisition is part of a broader expansion strategy, following recent purchases of apartment blocks in Jerusalem, Kiryat Ata, and Bnei Brak. The company plans to finance about 70-75% of the Netanya deal with bank credit, leveraging its capital for significant asset growth. However, financing costs are a key factor in profitability, especially as the apartments are not yet occupied or generating rental income.
While such bulk purchases can alleviate individual developer challenges, they do not solve the broader market stagnation. The 50 apartments represent only about 1.4% of Netanya's unsold new housing stock. Abu Properties' stock has fallen about 20% this year, with its market value below its reported equity, reflecting investor caution amidst rising financing expenses and the need to fund projects before they yield revenue.
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