Avissaror Real Estate Firm Cuts Valuation by 25% in Tel Aviv IPO

Avissaror, an Israeli real estate development company, has lowered its valuation to approximately 2 billion shekels ahead of its initial public offering (IPO), down from an initial target of 2.6 billion shekels. The company raised about 530 million shekels from the public by allocating roughly 21% of its shares, with additional stock options granted to investors exercisable at a 12% premium over the IPO price, effectively reducing the company's valuation further.

The decision to reduce the valuation by about 23% reflects a cooling local IPO market and broader market declines, which have forced many companies to either lower their valuations or postpone public listings. Despite the lower valuation, the controlling shareholders, four sons of the late founder Moshe Avissaror, stand to benefit significantly. Eli Avissaror, chairman and CEO, is expected to hold about 31% of the company, with directors Yitzhak and Yoram holding 20% and 17%, respectively, and Mordechai Avissaror holding 10%. The company plans to distribute 30% of the IPO proceeds as dividends, potentially paying nearly 160 million shekels to the family shareholders, who did not sell shares in the offering.

Founded in 1978, Avissaror primarily develops residential projects, expanding recently from southern Israel into central regions, including Tel Aviv. It currently holds nearly 1,800 housing units under construction, expected to generate an estimated gross profit of 1.3 billion shekels. However, the company faces challenges selling its completed inventory, currently holding 33 unsold units valued at about 77 million shekels in revenue and 21.5 million shekels in gross profit.

In Q1 2024, Avissaror reported revenues of approximately 265 million shekels, an 86% increase year-over-year, driven by sales in Bnei Brak and the "Ashira" project in Tel Aviv’s Sde Dov area, which includes 406 housing units. Notably, 13 of the 127 units sold in the Ashira project were purchased by Avissaror family members for 115 million shekels, about 15% of the project's sales to date. The company stated these transactions were conducted at market prices based on external appraisals.

Despite revenue growth, Avissaror’s net profit plunged about 75% to 15.7 million shekels in the quarter, mainly due to lower gross margins in the Sde Dov project and unusual recognition of financing expenses. For 2023, the company recorded a 37% revenue decline to 423.5 million shekels and a 68% drop in net profit to 44 million shekels.