Businessman Tzachi Abu Plans to Acquire Control of G City Real Estate Company

Businessman Tzachi Abu surprised the Israeli capital market by announcing his intention to acquire control of the real estate company G City from Norstar, owned by Haim Katzman. In a recent investor call following the deal outline, Abu detailed his strategic vision for steering the company in the coming years. His plan focuses on reducing leverage levels by concentrating on the local market and cutting management expenses.

Abu described the next one to two years as a critical period to lower the company's leverage below 50 percent, shifting the company’s mindset from financial to real estate-focused. He revealed an agreement with Katzman, who will remain with the company temporarily to manage overseas assets in the U.S., Brazil, and Nordic countries, with the goal of selling these assets to significantly reduce debt. Abu emphasized that assets not aligned with their core focus or that cannot be regularly supervised will be sold, highlighting the strength of G City’s properties in Israel and Poland.

A key part of Abu’s strategy is drastically cutting management expenses, currently estimated at over 280 million shekels annually, aiming for at least a 50 percent reduction. Katzman has already agreed to reduce his salary and will initially serve as co-chairman alongside Abu. Abu also stressed the importance of a capital raise as a condition for the deal, with a planned equity injection of one billion shekels to strengthen G City’s capital structure. Ari Real Estate is investing over 800 million shekels in G City shares as part of this process.

Regarding financing, Abu said the first phase will be funded from Ari’s own resources, with a potential second phase involving a capital raise led by Abu, who may sell part of his stake in Ari Real Estate to facilitate this. He also mentioned interest from a financial institution to participate in the acquisition, which could reduce the amount Ari needs to raise. Abu expressed optimism that with improved capital structure, asset sales, and expense reductions, G City will quickly return to significant profitability.

The announcement has become a major topic in the real estate market, reflecting a strategic shift for G City under new leadership.