Gazit-Globe Reports Third Quarter 2012 Financial Results

Strong Growth in FFO and FFO Per Share for the Quarter, Increased by 29% and 21% Respectively

Same Property NOI Grew by 3.9% in the Period, Occupancy Rate Increased to 94.9%

TEL-AVIV, Israel, Nov. 27, 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 nine months (the "period") ended September 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 14% to NIS 928 million compared to NIS 811 million for the same quarter last year
  • FFO for the quarter increased by 29% to NIS 142 million (NIS 0.86 per share) compared to NIS 110 million (NIS 0.71 per share) for the same quarter last year
  • Net income attributable to the Company's shareholders for the quarter totaled NIS 187 million (NIS 1.06 per diluted share) compared to NIS 183 million (NIS 1.17 per diluted share) for the same quarter last year
  • Investments during the quarter totaled NIS 1.5 billion, compared to NIS 1.6 billion for the same quarter last year. Investments during the period totaled NIS 4.4 billion, compared to NIS 6.3 billion for the same period last year
  • Total Same Property NOI for the period grew by 3.9% compared to the same period last year and occupancy rate as of September 30, 2012 increased to 94.9% from 94.3% as of September 30, 2011
  • Shareholders' equity as of September 30, 2012 totaled NIS 8,321 million (NIS 50.4 per share), compared to NIS 6,642 million (NIS 43.0 per share) on September 30, 2011 and NIS 7,310 million (NIS 44.4 per share) as of December 31, 2011
  • EPRA NAV per share as of September 30, 2012 was NIS 59.7 compared to NIS 46.6 per share as of September 30, 2011 and NIS 49.4 as of December 31, 2011
  • As of September 30, 2012, the Group had cash balances and unutilized revolving credit facilities of NIS 8.3 billion, of which NIS 2.4 billion are at the Company's level
  • As of September 30, 2012, net debt to total assets (LTV) was 55.6%, compared to 60.0% on September 30, 2011 and 58.0% on December 31, 2011
  • The Company's Board of Directors declared a dividend policy for 2013 of a minimum quarterly dividend payment of NIS 0.43 per share (NIS 1.72 per share annualized) to be distributed as of the first quarter of 2013, growth of 7.5% from 2012.


Roni Soffer, President of Gazit-Globe: "We are pleased to conclude another strong quarter for the Group. The strong growth in FFO per share and the continued improvement in all operational parameters demonstrate the positive impact of the steps we took over the past few years to improve our operational efficiency, enhance the quality of our portfolio, recycle capital, and to lower our cost of capital. Those steps have enabled us to increase our dividend payments in 2013 as we have consistently done over the past 14 years. We continue to strengthen our balance sheet and to lower our LTV while maintaining strong liquidity and reinforcing our position as a leading global player in our field."

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

  • Rental income increased by 14% to NIS 1,352 million compared to NIS 1,181 million in the third quarter of 2011
  • NOI increased by 14% to NIS 928 million compared to NIS 811 million in the third quarter of 2011
  • Proportionate consolidated NOI increased by 13% to NIS 547 million, compared to NIS 482 million in the third quarter of 2011
  • FFO increased by 29% to NIS 142 million (NIS 0.86 per share) as compared to NIS 110 million (NIS 0.71 per share) in the third quarter of 2011
  • Net income attributable to the Company's shareholders for the quarter totaled NIS 187 million (NIS 1.06 per diluted share) compared to NIS 183 million (NIS 1.17 per diluted share) for the same quarter last year
  • Cash flow from operating activities for the quarter totaled NIS 568 million, compared to cash flow of NIS 602 million in the third quarter of 2011

Financial Highlights for the nine months ended September 30, 2012:

  • Rental income increased by 12% to NIS 3,879 million compared to NIS 3,470 million in the same period last year
  • NOI increased by 12% to NIS 2,633 million compared to NIS 2,345 million in the same period last year
  • FFO increased by 34% to NIS 395 million (NIS 2.40 per share) as compared to NIS 294 million (NIS 1.90 per share) in the same period last year 
  • Net income attributable to the Company's shareholders for the period totaled NIS 733 million (NIS 4.23  per diluted share) compared to NIS 450 million (NIS 2.89 per diluted share) for the same period last year
  • Cash flow from operating activities for the period totaled NIS 963 million, compared to cash flow of NIS 892 million in the same period last year

Acquisition, Disposal, Development and Redevelopment Activities

During the quarter, the Group acquired 23 income-producing properties totaling 173 thousand square meters and adjacent land parcels for future development for the aggregate amount of NIS 3.1 billion. The Group also invested an amount of  NIS 1.3 billion in development and redevelopment projects. In addition, the Group recycled capital and disposed non-core assets in the amount of NIS 1.4 billion.

As of September 30, 2012, the Group had 12 properties under development with a gross leasable area of 285 thousand square meters and 28 properties under redevelopment with a gross leasable area of 184 thousand square meters with a total investment of NIS 4.1 billion. The additional cost to complete the properties under development and redevelopment totals NIS 1.6 billion.

During the quarter, the Company announced the completion of the arrangement with Gazit America and FCR. The Company acquired the outstanding common shares of Gazit America not already owned by it and First Capital Realty acquired Gazit America's medical office and retail properties.

During the quarter, the Company's privately held subsidiary Royal Senior Care (60%) completed a transaction to sell 12 of its 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 was US$ 138 million.

Since the beginning of the year the Company purchased 11 million shares of Atrium for a total of Euro 39.6 million and 1.5 million shares of Citycon for a total of Euro 3.5 million. Subsequent to the reporting period, the Company purchased approximately 23.5 million additional shares of Citycon in rights issuances for a total of Euro 43.5 million.

Financing Activities

  • As of September 30, 2012, the Group had cash balances and unutilized revolving credit facilities of NIS 8.3 billion, of which NIS 2.4 billion are at the Company's level
  • During the quarter the company has entered into an agreement with a leading international bank for a $ 50 million credit facility for a period of two years
  • During the quarter, the company has entered into an agreement with an Israeli institution for a $US dominated loan of NIS 300 million ($ 76.6 million) to mature on December 2022. The loan bears fixed annual interest at a rate of 5.5%
  • During and subsequent to the reporting period the credit rating of Atrium was upgraded by S&P and by Fitch to investment grade level of (BBB-) with a stable outlook  and the credit rating of First Capital Realty was upgraded by DBRS to BBB (High) and by Moody's to Baa2 with a stable outlook
  • Year-to-date the Group has raised approximately NIS 1.9 billion in equity

Balance Sheet Highlights

  • As of September 30, 2012, net debt to total assets (LTV) was 55.6%, compared to 60.0% on September 30, 2011and 58.0% on December 31, 2011
  • Shareholders' equity as of September 30, 2012 totaled NIS 8,321 million (NIS 50.4 per share), compared to NIS 6,642 million (NIS 43.0 per share) on September 30, 2011 and NIS 7,310 million (NIS 44.4 per share) as of December 31, 2011
  • EPRA NAV per share as of September 30, 2012 was NIS 59.7 compared to NIS 46.6 per share as of September 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 December 31, 2012 to shareholders of record as of December 17, 2012. The Company's Board of Directors declared a dividend policy for 2013 of a minimum quarterly dividend payment of NIS 0.43 per share (NIS 1.72 per share annualized) to be distributed as of the first quarter of 2013, growth of 7.5% from 2012.   

ACCOUNTING AND OTHER DISCLOSURES

The Company believes that publication of FFO, which is computed according to EPRA guidance, more correctly reflects the operating results of the Company, since the Company's financial statements are prepared in line with IFRS. In addition, publication of FFO provides a better basis for the comparison of the Company's operating results in a particular period with those of previous periods and also provides a uniform financial measure for comparing the Company's operating results with those published by other European property companies.

In addition, pursuant to the investment property guideline issued by the Israel Securities Authority in January 2011, FFO is to be presented in the "Description of the Company's Business" section of the annual report of investment property companies on the basis of the EPRA criteria.

As clarified in the EPRA and NAREIT position papers, the EPRA Earnings and the FFO measures do not represent cash flows from operating activities 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. Furthermore, it is clarified that these measures are not 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, November 27, 2012 at 17:00 Israel Time, 15:00 United Kingdom/ 16:00  Central European Time/ 10:00 a.m. Eastern Time to review the third 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 $20.0 billion in more than 20 countries and owns and operates over 600 properties with a gross leasable area of approximately 6.6 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 to new accounting standards
Numbers presented in USD are based on the exchange rate as of September 30, 2012 of 1 USD = 3.912 NIS
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 
September 30,December 31,
2012*) 2011*) 2011
UnauditedAudited
NIS in millions
ASSETS 
CURRENT ASSETS:
Cash and cash equivalents 1,421 842 1,539
Short-term deposits and loans  466 363 770
Marketable securities at fair value through profit or loss 110 106 97
Available-for-sale financial assets 22 42 67
Financial derivatives 78 96 84
Trade receivables 731 628 656
Other accounts receivable 359 373 291
Inventory of buildings and apartments for sale 686 627 697
Current tax receivable 14 24 14
3,887 3,101 4,215
Assets classified as held for sale 1,301 2,026 714
5,188 5,127 4,929
NON-CURRENT ASSETS:
Equity-accounted investees 4,829 4,358 4,390
Other investments, loans and receivables 607 515 308
Available-for-sale financial assets 358 335 314
Financial derivatives  826 1,018 937
Investment property 55,941 48,144 51,014
Investment property under development 3,623 1,637 2,198
Non-current inventory  23 23 23
Fixed assets, net 187 155 157
Goodwill 106 136 101
Other intangible assets, net 18 81 68
Deferred taxes 221 170 160
66,739  56,572  59,670 
71,927 61,699 64,599
*)Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 in the financial statements.
The accompanying notes are an integral part of these interim consolidated financial statements.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
September 30,December 31,
2012*) 2011*) 2011
UnauditedAudited
NIS in millions
LIABILITIES AND EQUITY 
CURRENT LIABILITIES
Credit from banks and others 429 286 453
Current maturities of non-current liabilities 4,565 2,401 3,525
Financial derivatives 12 29 25
Trade payables 822 657 819
Other accounts payable 1,318 1,329 1,218
Advances from customers and buyers of apartments 263 238 277
Current tax payable 59 43 53
7,468 4,983 6,370
Liabilities attributable to assets held for sale 176 722 103
7,644 5,705 6,473
NON-CURRENT LIABILITIES
Debentures 17,764 15,501 15,379
Convertible debentures  1,281 1,078 1,121
Interest-bearing loans from financial institutions and others 17,899 18,474 18,973
Financial derivatives  483 293 339
Other financial liabilities 339 181 277
Employee benefit liability, net 9 6 8
Deferred taxes  2,995 2,168 2,401
40,770 37,701 38,498
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Share capital 218 208 218
Share premium 3,799 3,486 3,787
Retained earnings 4,541 3,694 3,904
Foreign currency translation reserve (282) (878) (728)
Other reserves 66 157 150
Loans granted to purchase shares of the Company **) - (4) **) -
Treasury shares (21) (21) (21)
8,321 6,642 7,310
Non-controlling interests  15,192 11,651 12,318
Total equity  23,513 18,293 19,628
71,927 61,699 64,599
*)Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 in 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
Nine months endedThree months endedYear ended
September 30,September 30,December 31,
2012*) 20112012*) 2011*) 2011
UnauditedAudited
NIS in millions (except per share amounts)
Rental income 3,879 3,470 1,352 1,181 4,718
Revenues from sale of buildings, land and contractual works performed 1,335 679 403 400 1,001
Total revenues 5,214 4,149 1,755 1,581 5,719
Property operating expenses 1,246 1,125 424 370 1,522
Cost of buildings sold, land and contractual works performed 1,267 656 382 392 967
Total cost of revenues 2,513 1,781 806 762 2,489
Gross profit 2,701 2,368 949 819 3,230
Fair value gain from investment property and investment property under development, net 1,472 827 441 213 1,670
General and administrative expenses (476) (479) (149) (161) (733)
Other income 168 102 43 57 119
Other expenses (40) (53) (23) (42) (114)
Group's share in earnings of equity-accounted investees, net 279 277 125 80 334
Operating income  4,104 3,042 1,386 966 4,506
Finance expenses (1,763) (1,640) (666) (580) (2,197)
Finance income 86 44 41 15 72
Profit before taxes on income 2,427 1,446 761 401 2,381
Taxes on income  458 170 115 (31) 328
Net income  1,969 1,276 646 432 2,053
Attributable to:
Equity holders of the Company 733 450 187 183 719
Non-controlling interests 1,236 826 459 249 1,334
1,969 1,276 646 432 2,053
Net earnings per share attributable to equity holders of the Company (NIS): 
Basic net earnings  4.44 2.91 1.13 1.18 4.65
Diluted net earnings  4.23 2.89 1.06 1.17 4.3
*)Retroactively adjusted due to implementation of new IFRS standards, see Notes 2b, 2c and 6 in 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 9
months ended
For the 3
months ended
For the
year ended
September 30 September 30December 31
20122011(*)20122011(*)2011(*)
NIS in millions (other than per share data)
Net income attributable to equity holders of the Company for the period733 450 187 183 719 
Adjustments:
Fair value gain from investment property and investment property under development, net (1,472) (827) (441) (213) (1,670)
Capital loss (gain) on sale of investment property and investment property under development (3) 41  (16) 30  63 
Impairment of goodwill --  --  --  --  38 
Changes in the fair value of derivatives measured at fair value through profit and loss 111  105  76  73  179 
Adjustments with respect to equity-accounted investees (107) (124) (60) (39) (131)
Loss from decrease in holding rate of investees -- 
Deferred taxes, current taxes with respect to disposal of properties 440  175  106  (21) 324 
Gain from bargain purchase (134) (84) (15) (58) (102)
Acquisition costs recognized in profit and loss 20  24  14  21
Loss (gain) from early redemption of interest-bearing liabilities (15) (16)
Non-controlling interests' share in above adjustments 611  317  229  83  654 
Nominal FFO  208  63  86  23  102 
Additional adjustments:
CPI and exchange rate linkage differences 134  148  52  28  133 
Depreciation and amortization 12  11  15 
Adjustments with respect to companies accounted for using the equity method 37  (13) 34  67 
Other adjustments 1 39  35  13  22  88 
FFO according to the management approach 395294 142 110 405 
FFO according to the management approach per share (in NIS)2.40 1.90 0.86 0.71 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.
1 Income and expenses adjusted against the net income for the purpose of calculating FFO, which include the adjustment of expenses and income from extra ordinary legal proceedings not related to the reporting periods, expenses arising from one-time payments relating to the termination of the engagement of senior Group employees and also income and expenses from operations not related to income-producing property, also, with regard to the periods that are presented in 2011 above, the data 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. 
CONTACT: Gazit-Globe Ltd.
         1 HaShalom Rd.
         Tel Aviv, Israel 67892
         +972 3 694 8000
         
         For additional information:
         Gil Kotler,
         Senior Executive VP and CFO
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