August 21, 2012 at 03:37 AM EDT
Gazit-Globe Reports Second Quarter 2012 Financial Results

FFO for the Quarter Grew by 45% Totaling NIS 138 Million

Same Property NOI for the Period Grew by 3.8

TEL-AVIV, Israel, Aug. 21, 2012 (GLOBE NEWSWIRE) -- Gazit-Globe (TASE:GLOB) (NYSE:GZT), one of the world's leading multi-national real estate companies focused on acquisition, development and redevelopment of supermarket-anchored shopping centers announced today its financial results for the three months (the "quarter") and six months (the "period") ended June 30, 2012.

References to the "Group" relate to Gazit-Globe's consolidated statements. References to the "Company" relate to Gazit-Globe's stand-alone financial statements. Unless otherwise stated, financial information included in this press release relates to the "Group".

Highlights:

  • NOI for the quarter increased by 11% to NIS 865 million compared to NIS 780 million for the same quarter last year
  • FFO for the quarter increased by 45% to NIS 138 million (NIS 0.84 per diluted share) as compared to NIS 95 million (NIS 0.61 per diluted share) for the same quarter last year
  • Investments during the quarter totaled NIS 1,836 million, compared to NIS 1,364 million the same quarter last year. Investments during the period totaled NIS 2.85 billion, compared to NIS 4.74 billion the same period last year
  • Net income attributable to the Company's shareholders for the quarter totaled NIS 288 million (NIS 1.70 per diluted share) compared to NIS 281 million (NIS 1.80 per diluted share) for the same quarter last year
  • Total Same-Property NOI for the period grew by 3.8% compared to the same period last year and occupancy rate as of June 30, 2012 increased to 94.5% compared to 94.1% as of June 30, 2011
  • Shareholders' equity as of June 30, 2012 totaled NIS 7,906 million (NIS 48.0 per share), compared to NIS 6,253 million (NIS 40.5 per share) on June 30, 2011 and NIS 7,310 million (NIS 44.4 per share) as of December 31, 2011
  • EPRA NAV per share as of June 30, 2012 was NIS 56.2 compared to NIS 42.5 per share as of June 30, 2011 and NIS 49.4 as of December 31, 2011
  • As of June 30, 2012, the Group had cash on hand and unutilized revolving credit facilities of NIS 8.5 billion, of which NIS 2.1 billion are at the Company's level
  • As of June 30, 2012, net debt to total assets (LTV) was 57.5%, compared to 60.6% on June 30, 2011and 58.0% on December 31, 2011
  • Subsequent to June 30, 2012, the Company announced the completion of the transaction to take Gazit America private. The Company acquired the outstanding common shares of Gazit America not already owned by it and First Capital Realty acquired its medical office and retail properties. As part of the arrangement, FCR allocated approximately 4 million of its shares to Gazit-Globe 
  • Subsequent to June 30, 2012, the Company's private subsidiary Royal Senior Care (60%) completed the transaction to sell the majority of its wholly-owned senior housing properties in the U.S. The properties were sold for a total gross consideration of US$ 230 million of which the Company's portion is US$ 138 million. Royal Senior Care will continue to own its joint venture interest in two senior housing properties, one fully-owned senior housing community and a tract of land held for future development. As result of this transaction, Gazit-Globe will record a gain of approximately US$ 18 million and net proceeds of approximately US$ 70 million, all after transactions costs and before taxes

Roni Soffer, President of Gazit-Globe: "We have concluded another strong quarter in which we see the positive impact that  the substantial investments we have made over the last few years have had, among other things, on the rental income, NOI and FFO, all of which have shown impressive growth. Recently we announced two transactions, taking Gazit America private and selling the majority of our senior housing facilities in the U.S. Both of these transactions will have an immediate positive effect on operations and show the group's ability to acquire, manage and develop properties and operations and successfully recycle capital while creating substantial cash flow. These transactions are part of our strategic plan to direct management's attention to our core business while improving efficiencies and taking advantage of opportunities in the global real estate market."

Financial Highlights for the three months ended June 30, 2012:

  • Rental income increased by 11% to NIS 1,268 million compared to NIS 1,146 million in the second quarter of 2011
  • NOI increased by 11% to NIS 865 million compared to NIS 780 million in the second quarter of 2011
  • Proportional consolidated NOI increased by 17% to NIS 539 million, compared to NIS 459 million in the second quarter of 2011
  • FFO increased by 45% to NIS 138 million (NIS 0.84 per diluted share) as compared to NIS 95 million (NIS 0.61 per diluted share) in the second quarter of 2011 
  • Net income attributable to the Company's shareholders for the quarter totaled NIS 288 million (NIS 1.70  per diluted share) compared to NIS 281 million (NIS 1.80 per diluted share) for the same quarter last year
  • Cash flow from operating activities totaled NIS 283 million, compared to a negative cash flow of NIS 20 million in the second quarter of 2011
  • The fair value gain from investment property and investment property under development was NIS 718 million compared to NIS 543 million in the second quarter of 2011

Financial Highlights for the six months ended June 30, 2012:

  • Rental income increased by 10% to NIS 2,527 million compared to NIS 2,289 million in the same period last year
  • NOI increased by 11% to NIS 1,705 million compared to NIS 1,534 million in the same period last year
  • FFO increased by 48% to NIS 272 million (NIS 1.65 per diluted share) as compared to NIS 184 million (NIS 1.19 per diluted share) in the same period last year 
  • Net income attributable to the Company's shareholders for the period totaled NIS 546 million (NIS 3.24  per diluted share) compared to NIS 267 million (NIS 1.71 per diluted share) for the same period last year

Acquisition, Development and Redevelopment Activities

During the quarter, the Group acquired 11 income-producing properties totaling 110 thousand square meters and adjacent land parcels for future development for the aggregate amount of NIS 1,862 million. The Group also invested an amount of NIS 989 million in development and redevelopment projects.

As of June 30, 2012, the Group had 14 properties under development with a gross leasable area of 297 thousand square meters and 29 properties under redevelopment with a gross leasable area of 164 thousand square meters with a total investment value of NIS 3,559  million. The additional cost to complete the properties under development and redevelopment totals NIS 1,611 million.

Subsequent to June 30, 2012, the Company announced the completion of the transaction to take Gazit America private. The Company acquired the outstanding common shares of Gazit America not already owned by it and First Capital Realty acquired its medical office and retail properties. As part of the arrangement, FCR allocated approximately 4 million of its shares to Gazit-Globe.

Subsequent to June 30, 2012, the Company's private subsidiary Royal Senior Care (60%) completed the transaction to sell the majority of its wholly-owned senior housing properties in the U.S. The properties were sold for a total gross consideration of US$ 230 million of which the Company's portion is US$ 138 million. Royal Senior Care will continue to own its joint venture interest in two senior housing properties, one fully-owned senior housing community and a tract of land held for future development. As result of this transaction, Gazit-Globe will record a gain of approximately US$ 18 million and net proceeds of approximately US$ 70 million, all after transactions costs and before taxes.

Financing Activities

  • As of June 30, 2012, the Group had cash on hand and unutilized revolving credit facilities of NIS 8.5 billion, of which NIS 2.1 billion are at the Company's level
  • During the quarter the Company announced a private placement of Debentures (Series J) for immediate consideration of approximately NIS 175 million together with Options to purchase Series K Debentures. Some of the Options were exercised for an additional consideration of approximately NIS 60 million
  • In June 2012, the Company announced the extension of an existing US$200 million line of credit for 5 years with a maturity date of July 15, 2017
  • Subsequent to June 30, 2012, the Company sold all Citycon's convertible debentures it held (Euro 42 million par value) of which Citycon purchased back Euro 20 million par value

Balance Sheet Highlights

  • As of June 30, 2012, net debt to total assets (LTV) was 57.5%, compared to 60.6% on June 30, 2011and 58.0% on December 31, 2011
  • Shareholders' equity as of June 30, 2012 totaled NIS 7,906 million (NIS 48.0 per share), compared to NIS 6,253 million (NIS 40.5 per share) on June 30, 2011 and NIS 7,310 million (NIS 44.4 per share) as of December 31, 2011
  • EPRA NAV per share as of June 30, 2012 was NIS 56.2 compared to NIS 42.5 per share as of June 30, 2011 and NIS 49.4 as of December 31, 2011

Dividend

  • The Company's Board of Directors declared a quarterly cash dividend of NIS 0.40 per share payable on October 11, 2012 to shareholders of record as of September 24, 2012. The quarterly cash dividend of NIS 0.40 per share represents an annualized amount of NIS 1.60

ACCOUNTING AND OTHER DISCLOSURES

The Company believes that publication of FFO, which is calculated according to EPRA best-practice recommendations, better reflects the operating results of the Company, since the Company's financial statements are prepared in conformity with IFRS. In addition, publication of FFO provides a better basis for the comparison of the Company's operating results between different reporting periods and strengthens the uniformity and the comparability of this financial measure to that published by European property companies.

As clarified in the EPRA and NAREIT position papers, the FFO measures do not represent cash flows from current operations according to accepted accounting principles, nor do they reflect the cash held by a company or its ability to distribute that cash, and they are not a substitute for the reported net income (loss). Furthermore, it is also clarified that these measures are not part of the data audited by the Company's independent auditors.

CONFERENCE CALL/WEB CAST INFORMATION

Gazit-Globe will host a conference call and webcast in English on Tuesday, August 21, 2012 at 17:00 Israel Time, 15:00 United Kingdom/ 16:00  Central European Time/ 10:00 a.m. Eastern Time to review the second quarter financial results. Shareholders, analysts and other interested parties can access the conference call by dialing 1 866 966 9439 (U.S./Canada) or 0800 694 0257 (U.K.) or +44 (0) 1452 555 566 (International) or 1 809 216 057(Israel) or on the Company's website www.gazit-globe.com

For those unable to participate during the call, a replay will be available for future review on Gazit-Globe's website under Investor Relations.

FOR ADDITIONAL INFORMATION

A comprehensive copy of the Company's annual report is available on Gazit-Globe website at www.gazit-globe.com. To be included in the Company's e-mail distributions for press releases and other Company notices, please send e-mail addresses to Ms. Avishag Kichel, International Investor Relations, at akichel@gazitgroup.com.

ABOUT GAZIT-GLOBE

Gazit-Globe is one of the largest owners and operators of supermarket-anchored shopping centers in the world. In addition, the Company is active in North America in the healthcare real estate sector. Gazit-Globe is listed on the Tel Aviv Stock Exchange (TASE:GLOB) and is included in the TA-25 and the Real-Estate 15 indices in Israel. The Company is also listed on the New York Stock Exchange (NYSE:GZT). The Group operates properties with a total value of approximately $18.5 billion in more than 20 countries and owns and operates over 600 properties with a gross leasable area of approximately 6.7 million square meters. www.gazit-globe.com.

FORWARD LOOKING STATEMENTS

This release may contain forward-looking statements within the meaning of the U.S. federal securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside our control, that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks detailed in our public filings with the SEC. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events or otherwise.

**Some historical numbers were retroactively adjusted due new IFRS standards

Below please find excerpts from our second quarter report. For the full report in English, please go to  http://www.gazitglobe.com/financial-reports.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 
June 30,December 31,
2012*) 2011*) 2011
UnauditedAudited
NIS in millions
ASSETS 
CURRENT ASSETS:
Cash and cash equivalents 1,442 982 1,539
Short-term deposits and loans  385 251 770
Marketable securities at fair value through profit or loss 62 85 97
Available-for-sale financial assets 18 46 67
Financial derivatives 78 114 84
Trade receivables 730 579 656
Other accounts receivable 284 362 291
Inventory of buildings and apartments for sale 645 514 697
Current tax receivable 21 26 14
3,665 2,959 4,215
Assets classified as held for sale 636 260 714
4,301 3,219 4,929
NON-CURRENT ASSETS:
Investments in associates and jointly controlled entities 4,808 4,324 4,390
Other investments, loans and receivables 442 151 308
Available-for-sale financial assets 357 239 314
Financial derivatives  883 1,036 937
Investment property 54,080 46,148 51,014
Investment property under development 3,063 1,814 2,198
Non-current inventory  23 23 23
 Fixed assets, net 163 153 157
Goodwill 103 132 101
Other intangible assets, net 43 97 68
Deferred taxes 199 123 160
64,164 54,240 59,670
68,465 57,459 64,599
*) Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 of the financial statements.
The accompanying notes are an integral part of these interim consolidated financial statements.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
June 30,December 31,
2012*) 2011*) 2011
UnauditedAudited
NIS in millions
LIABILITIES AND EQUITY 
CURRENT LIABILITIES
Credit from banks and others 289 491 453
Current maturities of non-current liabilities 2,906 2,137 3,525
Financial derivatives 25 16 25
Trade payables 785 625 819
Other accounts payable 1,236 1,051 1,218
Advances from customers and buyers of apartments 225 175 277
Current tax payable 30 27 53
5,496 4,522 6,370
Liabilities attributable to assets held for sale 83 187 103
5,579 4,709 6,473
NON-CURRENT LIABILITIES
Debentures 17,258 14,694 15,379
Convertible debentures  1,602 886 1,121
Interest-bearing loans from financial institutions and others 19,487 17,706 18,973
Financial derivatives  385 110 339
Other financial liabilities 312 175 277
Employee benefit liability, net 7 5 8
Deferred taxes  2,805 2,079 2,401
41,856 35,655 38,498
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
THE COMPANY
Share capital 218 208 218
Share premium 3,791 3,482 3,787
Retained earnings 4,318 3,569 3,904
Foreign currency translation reserve (557) (1,225) (728)
Other reserves 157 244 150
Loans granted to purchase shares of the Company **) -- (4) **) --
Treasury shares (21) (21) (21)
7,906 6,253 7,310
 Non-controlling interests  13,124 10,842 12,318
Total equity  21,030 17,095 19,628
68,465 57,459 64,599
*) Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 of the financial statements.
**) Represents an amount of less than NIS 1 million.
The accompanying notes are an integral part of these interim consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
Six months endedThree months endedYear ended
June 30,June 30,December 31,
2012*) 20112012*) 2011*) 2011
UnauditedAudited
NIS in millions (except per share amounts)
Rental income 2,527 2,289 1,268 1,146 4,718
Revenues from sale of buildings, land and contractual works performed 932 279 456 279 1,001
Total revenues 3,459 2,568 1,724 1,425 5,719
Property operating expenses 822 755 403 366 1,522
Cost of buildings sold, land and contractual works performed 885 264 430 264 967
Total cost of revenues 1,707 1,019 833 630 2,489
Gross profit 1,752 1,549 891 795 3,230
Fair value gain from investment property and investment property under development, net 1,031 614 718 543 1,670
General and administrative expenses (327) (318) (165) (178) (733)
Other income 125 45 35 29 119
Other expenses (17) (11) (12) (11) (114)
Group's share in earnings of associates and jointly controlled entities, net 154 197 74 128 334
Operating income  2,718 2,076 1,541 1,306 4,506
Finance expenses (1,097) (1,060) (591) (490) (2,197)
Finance income 45 29 19 13 72
Profit before taxes on income 1,666 1,045 969 829 2,381
Taxes on income  343 201 211 157 328
Net income  1,323 844 758 672 2,053
Attributable to:
Equity holders of the Company 546 267 288 281 719
Non-controlling interests 777 577 470 391 1,334
1,323 844 758 672 2,053
Net earnings per share attributable to equity holders of the Company (NIS): 
Basic net earnings  3.31 1.73 1.74 1.82 4.65
Diluted net earnings  3.24 1.71 1.70 1.80 4.30
*)  Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 of the financial statements.
The accompanying notes are an integral part of these interim consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
Six months endedThree months ended Year ended
June 30,June 30,December 31,
2012*) 20112012*) 2011*) 2011
UnauditedAudited
NIS in millions
Net income  1,323 844 758 672 2,053
Other comprehensive income (loss) (net of tax effect):
Exchange differences on translation of foreign operations 428 47 657 (183) 1,139
Realization of exchange differences on translation of foreign operations 3 12 -- 12 12
Net gains (losses) on cash flow hedges (37) 40 (63) (31) (139)
Net gains (losses) on available-for-sale financial assets 34 (20) 33 (6) (39)
Gain on revaluation of fixed assets in jointly controlled entity 16 9 19 10 28
Total other comprehensive income (loss) 444 88 646 (198) 1,001
Total comprehensive income  1,767 932 1,404 474 3,054
Attributable to:
Equity holders of the Company **) 752 368 575 186 1,231
Non-controlling interests 1,015 564 829 288 1,823
1,767 932 1,404 474 3,054
**) Composition of comprehensive income attributable to equity holders of the Company:
Net income  546 267 288 281 719
Exchange differences on translation of foreign operations 171 76 263 (96) 573
Realization of exchange differences on translation of foreign operations 2 12 -- 12 12
Net gains (losses) on cash flow hedges (17) 22 (28) (13) (66)
Net gains (losses) on available-for-sale financial assets 34 (18) 33 (8) (35)
Gain on revaluation of fixed assets in jointly controlled entity 16 9 19 10 28
752 368 575 186 1,231
*) Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 of the financial statements.
The accompanying notes are an integral part of these interim consolidated financial statements.
The table below presents the calculation of the Company's FFO, computed according to the directives of EPRA, and its FFO per share for the stated periods:



For the 6




For the 3




For the year
months endedmonths endedended
June 30June 30December 31
20122011(*)20122011(*)2011(*)
NIS in millions (other than per share data)
Net income attributable to equity holders of the Company for the period546 267 288 281 719 
Adjustments:
Fair value gain from investment property and investment property under development, net (1,031) (614) (718) (543) (1,670)
Capital loss on sale of investment property and investment property under development 13  11  10  12  63 
Impairment of goodwill --  --  --  --  38 
Changes in the fair value of derivatives measured at fair value through profit and loss 35  32  13  (51) 179 
Adjustments with respect to companies accounted for using the Equity method (47) (85) (48) (88) (131)
Loss from decrease in holding rate of investees(**)--
Deferred taxes, current taxes with respect to disposal of properties 333  195  206  155  324 
Gain from bargain purchase (119) (26) (37) (26) (102)
Acquisition costs recognized in profit and loss 21  15  21
Non-controlling interests' share in above adjustments 401  236  287  213  654
Nominal FFO 138  38  (31) 96
Additional adjustments:
CPI and exchange rate linkage differences 83  120  81  72  133 
Loss from early redemption of interest-bearing liabilities -- 
Depreciation and amortization 15 
Adjustments with respect to companies accounted for using the Equity method  14  34  67 
Other adjustments 1 27  15  14  43  88 
FFO according to the management approach272 184 138 95 405 
Basic and diluted FFO according to the management approach per share (in NIS)1.65 1.19 0.84 0.61 2.62 
(*) Retroactively adjusted due to the implementation of new IFRSs; for details refer to notes 2.b, 2.c and 6 of the financial statements. 
(**) Represents an amount of less than NIS 1 million. 
1 Income and expenses adjusted against the net income for the purpose of calculating FFO, which include the adjustment of income from the waiver of the bonus and the compensation with respect to the expiration of the employment agreement of the Chairman of the Board of Directors, expenses and income from exceptional legal proceedings not related to the reporting periods, expenses arising from termination of the engagement of senior Group employees and also income and expenses from operations not related to income-producing property. 
CONTACT:  Gazit-Globe Ltd.
          1 HaShalom Rd.
          Tel Aviv, Israel 67892
          +972 3 694 8000
         
          For additional information:
          Gadi Cunia, 
          Senior Executive VP and CFO
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