Developer Sells 80 Apartments at Discount Amid Housing Market Slump
Translated & summarized from Bizportal by baba
The real estate company Tzarafi has sold 80 apartments for NIS 198 million to Azorim Living REIT, a discount from their estimated NIS 231 million value. CEO Moshe Tzarafi stated this strategic sale aims to generate cash flow for new projects amidst a housing market slowdown. He anticipates a market recovery will take at least another year due to high inventory and economic instability. Tzarafi hopes the deal will boost shareholder value.
The story in 6 lines · by baba
- Tzarafi sold 80 apartments for NIS 198 million, a discount from their NIS 231 million valuation.
- CEO Moshe Tzarafi cited market slowdown and need for cash flow as reasons for the discounted sale.
- The company expects a NIS 47 million profit before tax from the transaction.
- Tzarafi predicts a housing market recovery will take at least one year.
- The sale is intended to provide capital for new development projects.
- The company hopes the deal will increase shareholder value.
The real estate company Tzarafi is selling 80 apartments in its Kaplan project for approximately NIS 198 million to the Azorim Living REIT fund. This sale comes at a discount, as an external valuation by the buyer estimated the apartments' worth at NIS 231 million, a difference of about NIS 33 million or 14%. Despite the discount, the company expects to profit NIS 47 million before taxes from the deal, with a net cash flow of NIS 155 million.
Moshe Tzarafi, CEO of Tzarafi, explained that the decision to sell at a reduced price is a strategic move to navigate the current housing market slowdown. He stated that it is preferable to secure funds now for new ventures rather than waiting years to maximize profits on existing inventory, especially with a large surplus of unsold apartments nationwide. Tzarafi emphasized that even with the discount, the company still achieves a significant profit of approximately NIS 600,000 per unit, a margin he believes many other developers are not reaching.
Tzarafi clarified that this was the only project with a substantial remaining inventory, as other completed projects had only a few units left. He noted that the sale to the REIT fund was a negotiated process, and while a discount was given, it allowed both parties to achieve their objectives. He also addressed why similar discounts are not offered to private buyers, explaining that such bulk negotiations with individual buyers are not feasible, and the company prioritizes securing large capital infusions for future projects.
Regarding the broader market, Tzarafi expressed a pessimistic outlook, predicting that a significant market recovery is at least a year away. He cited the large inventory of unsold apartments, ongoing economic instability, high property prices even after recent drops, and negative net migration as factors contributing to the prolonged downturn. He believes that a substantial increase in immigration and a moderation in new construction starts are necessary for the market to rebound, a process he expects to take through 2027.
Tzarafi also touched upon the company's stock performance, acknowledging it has been hit hard like others in the sector. He expressed hope that this transaction will add value for shareholders, highlighting the company's strong operational performance and positive business results.
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