Yohananof Prepares to Spin Off Real Estate Operations Ahead of Potential IPO

Yohananof, a leading Israeli retail chain, is planning a strategic move to separate its real estate assets into a distinct subsidiary company. This decision follows three significant real estate acquisitions made in the first quarter of the year, which have increased the group's investment property value to approximately one billion shekels. The matter has been under discussion among the company's management in recent weeks and may soon be presented for board approval. Once approved, the company expects to initiate a lengthy process that could take months or years, aiming to expand its real estate portfolio before a potential public offering of the new subsidiary.

In January, Yohananof purchased 19 dunams of land in Dimona for 30 million shekels, intended for a commercial center including office space. The following month, it acquired a 30% stake in 17 dunams of land in Binyamina alongside Shai Hai company, to develop a 14,000 square meter commercial and parking center. Additionally, the company jointly acquired 50% of a 10-dunam plot in Beersheba with the JTLV fund. Earlier, Yohananof entered a large combination deal in Or Yehuda with a private partner to build a 69,000 square meter commercial and logistics center on 31.5 dunams, with the partner covering the 280 million shekel construction costs. This property is the largest in Yohananof's real estate portfolio, valued at 411 million shekels.

Yohananof also owns 107 dunams of agricultural land used to grow produce sold in its supermarkets, reducing supply costs. The company currently operates 46 branches nationwide, covering 193,000 square meters, including 98,000 square meters of sales area, and plans to open 19 more stores, six within the next year. Unlike competitors such as Rami Levy and Shufersal, which already operate separate real estate subsidiaries, Yohananof's real estate is currently integrated within its retail operations. The planned spin-off aims to emulate Shufersal's 2013 model, centralizing real estate assets to enhance property management and development.

The company may also explore rezoning and upgrading its land assets in the future. Only five of Yohananof's branches are currently owned by the company, which may complicate related-party leasing arrangements if the spin-off proceeds. It remains unclear whether a separate CEO will be appointed for the real estate subsidiary or if it will remain under the retail company's management. Yohananof's CEO, Eitan Yohananof, has previously not ruled out an IPO for the real estate business once it is consolidated. The new subsidiary would hold the five owned branches, various land plots for commercial centers, existing buildings, the company’s logistics center, and headquarters in Rehovot. The company has also entered residential development, participating in the Residence Tech Valley project in Afula, which includes three residential towers with 730 apartments, three office towers, and three commercial buildings.