G City Plans Asset Sales Worth 6.1 Billion Shekels to Reduce Leverage by 2027

Following the cancellation of a control sale deal to Tzachi Abu and the need to reduce leverage, G City has launched a new strategic plan to sell assets totaling 6.1 billion shekels by the end of 2027. This move builds on a 2022 divestment plan under which the company sold assets worth 7.2 billion shekels, and a September 2024 strategy targeting 10 billion shekels in asset sales. G City, managed by controlling shareholder Haim Katzman through Norstar (which will shift from CEO to chairman in October), owns 76 income-generating properties valued at 26 billion shekels across Israel, Poland, Northern Europe, the US, and Brazil.

The company aims to focus its operations on fewer territories and commercial properties anchored by supermarkets. It plans to fully divest its seven Brazilian properties valued at 1.8 billion shekels, a process already underway through a fund listing in 2024, where G City now holds 83%. It also intends to sell its three rental housing assets in Poland (about 1,100 units) and one in the US (300 units), retaining eight commercial properties in Warsaw and focusing on commercial assets in Florida, except for one rental housing property retained for tax reasons.

Additionally, G City plans to sell 2.9 billion shekels worth of assets in Northern Europe through its subsidiary Citicon, nearing 90% ownership. As of June, eight properties worth 2.7 billion shekels are classified for sale, including three valued at approximately 1.4 billion shekels targeted for sale to sister company Noga. Shares in Noga will be distributed as an in-kind dividend to G City shareholders, financed by bond issuance.

The company expects these steps to improve operational efficiency, reduce general expenses, enhance performance, and lower leverage. Despite efforts, G City's debt-to-asset ratio remains high at 66.3% solo and 65% consolidated as of June. The company also launched a share buyback offer of up to 5.8% at 11.5 shekels per share, 11% above the last trading price, potentially costing 115 million shekels.

G City’s stock dropped 26% last month after a prior 22% surge following the aborted deal with Abu. The company was impacted in Q2 by a strong shekel and loss of net operating income (NOI) from sold assets, resulting in a 13% quarterly NOI decline to 359 million shekels, despite a 3.6% NOI increase in identical assets due to high occupancy rates and rent hikes in Central Europe, the US, Brazil, and Israel. Adjusted for currency effects, NOI rose 2.5% to 332 million shekels. Funds from operations (FFO) fell 16% to 97 million shekels, while administrative expenses dropped 12% to 59 million shekels. Hedge gains reduced financing costs, but lower asset revaluation profits caused net income to fall 65% to 83 million shekels.

G City raised its FFO per share forecast to 2-2.1 shekels for 2025, with a 6% NOI growth outlook for identical assets. The company is valued at 1.8 billion shekels and plans a 34 million shekel dividend payout in September.