G City Reports Improved Operating Income Amid High Leverage
Translated & summarized from Calcalist by baba
G City reported preliminary 2025 results showing improved operating income and reduced expenses, though leverage remains high. The company's stock has experienced significant volatility due to a canceled takeover bid, a failed control sale, and concerns over Brazilian election results. Preliminary third-quarter results indicate a 21% rise in proportionally consolidated NOI, but consolidated NOI fell 9%. G City plans to reduce its high leverage through asset sales and aims to complete its Brazilian divestment by the end of 2025, despite market concerns.
The story in 6 lines · by baba
- G City's preliminary 2025 results show improved operating income and reduced expenses.
- The company's stock experienced significant volatility due to a canceled takeover bid and a failed control sale.
- Preliminary third-quarter NOI rose 21% proportionally, but consolidated NOI decreased by 9%.
- G City aims to reduce its high leverage, targeting less than 50% by 2028.
- The company plans to complete its Brazilian asset divestment by the end of next year.
- The current deputy CEO will replace Chaim Katzman as CEO in early December.
Real estate company G City has released preliminary results for 2025, showing improved operating income and reduced administrative expenses, despite persistent high leverage. The company expects leverage to decrease going forward. The announcement comes after a period of significant stock volatility, including a sharp decline in February following concerns over a takeover bid for its subsidiary, Citicon. The preliminary report, along with plans for a share buyback and a dividend from Citicon, helped stabilize G City's stock, which had fallen 33% since November.
In the summer, the company faced renewed turmoil when a deal for founder Chaim Katzman to sell control to Zachi Abu was ultimately canceled. This cancellation, following an announcement in July about the inclusion of Kidan Dahari and Yaron Adib, co-owners of Yishpro, in Abu's bid, led to a 28% stock drop within three weeks.
Further challenges arose after the October election results in Brazil, where incumbent President Luiz Inácio Lula da Silva secured a fourth term. Market fears that Brazil's negative reaction to the election outcome would temporarily hinder G City's asset monetization plans in the country contributed to another 22% stock decline.
In an apparent effort to calm markets and possibly prepare for another buyback program, G City released preliminary third-quarter results. The company reported a 21% increase in Net Operating Income (NOI) on a proportional consolidation basis, excluding currency fluctuations, reaching 355 million shekels, primarily due to an increased stake in Citicon. However, consolidated NOI, including the strong shekel and asset sales, decreased by 9% to 365 million shekels. Funds From Operations (FFO) from its real estate operations remained stable at 100 million shekels. Administrative and general expenses were reduced by 20% to 59 million shekels, with plans for further reductions in the coming year.
G City aims to reduce its high leverage, targeting less than 50% by 2028, through a 6.1 billion shekel asset monetization program initiated in the previous quarter. However, leverage ratios remain high, with the consolidated debt-to-equity ratio at 66.8% at the end of the third quarter. The company expects slight improvements from ongoing sales of office spaces in its Rishon LeZion project. Despite market jitters following Lula's re-election, G City intends to complete the divestment of its Brazilian operations, comprising seven shopping centers, by the end of next year.
Although G City's stock has risen 16% year-to-date, outperforming the TA-125 index, it has declined 5% over the past three years, while the index grew 131%. In early December, the current deputy CEO is set to become CEO, replacing Katzman, who will transition to chairman.