Gazit-Globe Reports Third Quarter 2016 Financial Results

TEL-AVIV, Israel, Nov. 23, 2016 (GLOBE NEWSWIRE) -- Gazit-Globe (NYSE:GZT) (TSX:GZT) (TASE:GZT), a leading global real estate company focused on the ownership, management, acquisition, development and redevelopment of supermarket-anchored shopping centers in major urban markets, today announced its financial results for the Third Quarter ended September 30, 2016.

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 totaled NIS 1,061 million (US$ 282 million) compared to NIS 1,066 million (US$ 284 million) in the same quarter last year.
  • FFO for the quarter totaled NIS 144 million (US$ 38 million), or NIS 0.74 per share (US$ 0.20), compared to NIS 142 million (US$ 38 million), or NIS 0.72 per share (US$ 0.19), in the second quarter of 2016 and NIS 158 million (US$ 42 million), or NIS 0.89 per share (US$ 0.24), in the same quarter last year. The decrease in FFO and FFO per share between the two periods is mainly due to the effects of exchange rate fluctuations, the sale of shares in subsidiaries and the equity offering that was completed at the end of 2015.
  • Shareholders' equity as of September 30, 2016 increased and totaled NIS 7,837 million (US$ 2,085 million), or NIS 40.1 per share (US$ 10.67 per share), compared to NIS 7,512 million (US$ 2,000 million), or NIS 38.4 million (US$ 10.22 per share), as of December 31, 2015 and after a dividend distribution of NIS 1.16 per share (US$ 0.31) in the nine months ended September 30, 2016.
  • Investments in acquisition, development and redevelopment of real-estate during the quarter totaled NIS 1 billion (US$ 276 million).
  • The occupancy rate as of September 30, 2016 decreased to a level of 95.3% compared to 95.8% as of December 31, 2015.
  • Same Property NOI for the nine months ended September 30, 2016, excluding the effect of foreign exchange rate fluctuations, increased by 0.6% compared to the same period last year.
  • As of September 30, 2016, the Group had liquid assets and unutilized revolving credit facilities in the amount of NIS 11.3 billion (US$ 3.0 billion), of which NIS 2.4 billion (US$ 0.64 billion) was at the Company level.
  • As of September 30, 2016, net debt to total assets (LTV) decreased by 60 basis points to 50.7%, compared to 51.3% as of December 31, 2015.
  • The Company will distribute a quarterly cash dividend of NIS 0.35 per share (US$ 0.09 per share), payable on December 13, 2016 to shareholders of record on December 6, 2016.
  • Subsequent to September 30, Midrog re-affirmed Gazit-Globe's local credit rating of Aa3.
  • Subsequent to September 30, the Company extended and increased its credit facility with Citibank by $150 million to $360 million.
  • Subsequent to September 30, Gazit Brasil entered into a binding agreement for the purchase of 33% of Shopping Cidade Jardim in Sao Paulo for R$ 410M (approximately USD 130M).
  • Subsequent to September 30, Gazit Globe's US subsidiary Equity One (NYSE:EQY) announced a merger transaction with Regency Centers Corporation (NYSE:REG). The merger creates the largest high quality shopping center REIT in the US with an enterprise value of approximately US$ 15.6 billion.

Rachel Lavine, CEO of Gazit-Globe: "We are pleased to conclude another quarter in which we see the continued momentum of growth in FFO since the beginning of the year as well as improvements in the financial ratios and the strength of our balance sheet. We recently announced the increase and extension of our credit facility with Citibank to $360 million. This allows us greater flexibility to diversify our sources of credit and funding in international markets. The significant transaction announced last week for the merger of Equity One and Regency will create the highest quality and largest shopping center REIT in the US. The transaction will result in a net gain to Gazit Globe of NIS 1 billion, or NIS 5 per share, as well as savings of its corporate expenses of approximately NIS 6 million per annum. We continue to work towards realizing our strategy and we believe that the unique quality of our portfolio will contribute to our ability to maintain the positive trend in our results, while taking advantage of opportunities to strengthen our portfolio through development and redevelopment and through the making of strategic acquisitions, as we have recently seen in Brazil."

Financial highlights for third quarter 2016:
  • Rental income for the quarter totaled NIS 1,512 million compared to NIS 1,547 million in the same quarter last year. Excluding the effect of foreign exchange rate fluctuations, the rental income decreased by 1.6% compared to the same quarter last year.
  • NOI for the quarter remained stable and totaled NIS 1,061 million compared to NIS 1,066 million in the same quarter last year. Excluding the effect of exchange rate fluctuations NOI increased by 0.3% compared to the same quarter last year.
  • FFO for the quarter totaled NIS 144 million, or NIS 0.74 per share, compared to NIS 142 million or NIS 0.72 per share in the second quarter of 2016 and NIS 158 million or NIS 0.89 per share in the same quarter last year. The decrease in FFO and FFO per share between the two periods is mainly due to the effects of exchange rates, the sale of shares in subsidiaries and the equity offering that was completed at the end of 2015.
  • The occupancy rate as of September 30, 2016 was 95.3% compared to 95.8% as of December 31, 2015. By region, occupancy rates as of September 30, 2016 were: 95.4% in the US; 95.0% in Canada; 96.0% in North Europe; and 95.7% in Central and Eastern Europe.
  • EPRA NAV per share as of September 30, 2016 was NIS 54.5 per share compared to NIS 52.9 per share as of December 31, 2015.
  • Net income attributable to the Company's shareholders totaled NIS 381 million, or NIS 1.98 per share, compared to a loss of NIS 92 million, or NIS 0.52 per share, in the same quarter last year.
  • The net fair value gain of investment property and investment property under development was NIS 291 million, compared to stability in the value of investment property and investment property under development in the same quarter last year.
  • Cash flow from operating activities totaled NIS 564 million, compared to NIS 673 million in the same quarter last year.

  Financial highlights for the first 9 months of 2016:
  • Rental income for the period totaled NIS 4,574 million compared to NIS 4,588 million in the same period last year. Excluding the effect of foreign exchange rate fluctuations, the rental income increased by 2.6% compared to the same period last year.
  • NOI for the period totaled NIS 3,187 million compared to NIS 3,137 million in the same period last year an increase of 1.6%. Excluding the effect of foreign exchange rate fluctuations, NOI increased by 4.4% compared to the same period last year.
  • FFO for the period totaled NIS 421 million, or NIS 2.15 per share, compared to NIS 481 million, or NIS 2.69 per share, in the same period last year. The decrease in FFO and FFO per share between the two periods is mainly due to the effects of foreign exchange rates, the sale of shares of subsidiaries and the equity offering that was completed at the end of 2015.
  • Net Income attributable to the Company's shareholders totaled NIS 200 million, or NIS 0.94 per share, compared to net income of NIS 414 million, or NIS 2.30 per share, in the same period last year. The decrease is mainly due to the revaluation of financial derivatives and the loss from the sale of shares of Luzon Group (previously: Dori Group) recognized in the first quarter of 2016.
  • Cash flow from operating activities totaled NIS 1,167 million, compared to NIS 1,170 million in the same period last year.

Acquisition, Development, Redevelopment and Capital Recycling Activities:
  • During the period, the Group invested NIS 3,161 million. Total investment included NIS 1,371 million invested in 9 income-producing properties totaling 76 thousand square meters, as well as NIS 1,790 million in development and redevelopment projects.
  • As of September 30, 2016, the Group had five properties under development with a gross leasable area (GLA) of 107 thousand square meters with a total investment of NIS 1.3 billion, and 21 properties under redevelopment with a GLA of 298 thousand square meters with a total investment of NIS 4.5 billion. The additional cost to complete the properties under development and redevelopment totaled NIS 1.6 billion.
  • Subsequent to September 30, Gazit Brasil entered into a binding agreement to purchase 33% of Shopping Cidade Jardim in Sao Paulo, Brazil for R$ 410M (approximately USD 130M).
  • Subsequent to September 30, Gazit Globe's US subsidiary Equity One (NYSE:EQY) announced a merger transaction with Regency Centers Corporation (NYSE:REG). The merger will create the largest high quality shopping center REIT in the US with an enterprise value of approximately US$ 15.6 billion.

Financing Activities:
  • The average nominal annual cost of debt during the period was 4.0%, compared to 4.3% in the same period last year.
  • The Company will distribute a quarterly cash dividend of NIS 0.35 per share, payable on December 13, 2016 to shareholders record as of December 6, 2016.
  • Subsequent to September 30, the Company extended and increased its credit facility with Citibank by $150 million to $360 million.

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 Wednesday, November 23, 2016 at 5:00 pm Israel Time / 4:00 pm Central European Time / 10:00 am Eastern Time, to review the third quarter 2016 financial results. Shareholders, analysts and other interested parties can access the conference call by dialing: United States 1888 668 9141, Canada 1866 485 2399, United Kingdom 0800 917 5108, International / Israel +972 3 9180687

A presentation will be available on the company's website under Investor Relations/Conference Calls & Webcast at: www.gazit-globe.com

Webcast link: http://www.veidan-stream.com/?con=Gazit_Globe_Q3_2016_Results_Conference_Call

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

About Gazit-Globe

Gazit-Globe is one of the largest owners, developers and operators of predominantly supermarket-anchored shopping centers in major urban markets around the world. Gazit-Globe is listed on the New York Stock Exchange (NYSE:GZT), the Toronto Stock Exchange (TSX:GZT) and the Tel Aviv Stock Exchange (TASE:GZT) and is included in the TA-25 and Real-Estate 15 indices in Israel. As of September 30, 2016 Gazit-Globe owns and operates 427 properties in more than 20 countries, with a gross leasable area of approximately 6.5 million square meters and a total value of approximately US$ 22 billion.

FOR ADDITIONAL INFORMATION

A comprehensive copy of the Company's financial report is available on Gazit-Globe website at www.gazit-globe.com

Investors Contact: IR@gazitgroup.com, Media Contact: press@gazitgroup.com

Gazit-Globe Headquarters, Tel-Aviv, Israel, Tel: +972 3 6948000

FORWARD LOOKING STATEMENTS

This release may contain forward-looking statements within the meaning of applicable securities laws. In the United States, 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 and the Canadian Securities Administrators. Except as required by applicable 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.

Below please find excerpts from our Q3 2016 financial report. For our full Q3 2016 report in English, please go to http://www.gazitglobe.com/financial-reports.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
  September 30, December 31,
  2016 2015 2015
  Unaudited Audited
  NIS in millions
ASSETS        
       
CURRENT ASSETS      
       
Cash and cash equivalents   1,398   1,717   2,125
Short-term investments and loans    51   234   203
Marketable securities    106   35   38
Financial derivatives   95   159   77
Trade receivables   190   534   467
Other accounts receivable   524   501   363
Inventory of buildings and apartments for sale   -    520   522
Current taxes receivable   30   24   24
       
    2,394   3,724   3,819
       
Assets classified as held for sale   542   596   826
       
    2,936   4,320   4,645
NON-CURRENT ASSETS      
       
Equity-accounted investees   2,316   2,962   2,996
Other investments, loans and receivables   1,329   742   754
Available-for-sale financial assets   634   596   771
Financial derivatives    481   669   702
Investment property   73,678   71,399   70,606
Investment property under development   2,642   3,055   2,587
Fixed assets, net   141   262   170
Intangible assets, net   921   904   900
Deferred taxes   32   127   105
       
    82,174   80,716   79,591
       
    85,110   85,036   84,236

  September 30,   December 31,
    2016       2015       2015  
  Unaudited   Audited
  NIS in millions
LIABILITIES AND EQUITY          
           
CURRENT LIABILITIES          
           
Credit from banks and others    605        888        1,062  
Current maturities of non-current liabilities    2,216        2,501        2,279  
Financial derivatives    58        87        45  
Trade payables    528        816        833  
Other accounts payable    1,304        1,735        1,521  
Advances from customers and buyers of apartments    -        294        326  
Current taxes payable    79        152        111  
           
     4,790        6,473        6,177  
Liabilities attributable to assets held for sale    49        3        50  
           
     4,839        6,476        6,227  
NON-CURRENT LIABILITIES          
           
Debentures    30,299        30,949        29,480  
Convertible debentures    592        959        921  
Interest-bearing loans from banks and others    10,723        10,533        11,457  
Financial derivatives    108        186        93  
Other liabilities    382        437        402  
Deferred taxes    4,901        4,885        4,661  
           
     47,005        47,949        47,014  
           
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY        
           
Share capital    249        232        249  
Share premium    4,991        4,413        4,983  
Retained earnings    5,180        5,083        5,207  
Foreign currency translation reserve   (3,016 )     (2,663 )     (3,103 )
Other reserves    454        79        197  
Treasury shares   (21 )     (21 )     (21 )
           
     7,837        7,123        7,512  
Non-controlling interests    25,429        23,488        23,483  
           
Total equity    33,266        30,611        30,995  
           
     85,110        85,036        84,236  
 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
  Nine months ended   Three months ended   Year ended
    September 30,   September 30, December 31,
    2016     2015     2016     2015     2015  
  Unaudited Audited
  NIS in millions (except for per share data)
           
Rental income     4,574       4,588       1,512       1,547       6,150  
Property operating expenses     1,387       1,451       451       481       1,966  
           
Net operating rental income      3,187       3,137       1,061       1,066       4,184  
           
Fair value gain from investment property and investment property under development, net     1,112       480       291       -        711  
General and administrative expenses     (515 )     (558 )     (161 )     (213 )     (726 )
Other income     40       22       -        15       31  
Other expenses     (79 )     (628 )     (25 )     (125 )     (795 )
Company's share in earnings of equity-accounted investees, net     98       121       12       36       234  
           
Operating income      3,843       2,574       1,178       779       3,639  
           
Finance expenses     (1,586 )     (1,410 )     (503 )     (548 )     (1,831 )
Finance income     187       718       311       29       852  
           
Income before taxes on income     2,444       1,882       986       260       2,660  
Taxes on income (tax benefit)     406       106       117       (13 )     166  
           
Net income from continuing operations     2,038       1,776       869       273       2,494  
Loss from discontinued operation, net     (230 )     (150 )     -        (71 )     (188 )
Net income     1,808       1,626       869       202       2,306  
           
Attributable to:          
           
Equity holders of the Company     200       414       381       (92 )     620  
Non-controlling interests     1,608       1,212       488       294       1,686  
           
      1,808       1,626       869       202       2,306  
           
Net earnings (loss) per share attributable to equity holders of the Company (NIS):          
Basic net earnings (loss) from continuing operations     2.00       2.71       1.99       (0.27 )     4.05  
Basic loss from discontinued operation     (1.00 )     (0.39 )     -        (0.25 )     (0.58 )
Total basic net earnings (loss)     1.00       2.32       1.99       (0.52 )     3.47  
Diluted net earnings (loss) from continuing operations     1.94       2.69       1.98       (0.27 )     4.02  
Diluted loss from discontinued operation     (1.00 )     (0.39 )     -        (0.25 )     (0.57 )
Total diluted net earnings (loss)     0.94       2.30       1.98       (0.52 )     3.45  
 

FFO (EPRA Earnings)
The table below presents the calculation of the Company's FFO, calculated according to the EPRA recommendations  and the guidelines of the Israel Securities Authority, 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 30,   December 31,
      2016       2015       2016       2015       2015  
    NIS in millions (other than per share data)
                     
Net income (loss) attributable to equity holders of the Company for the period       200         414         381         (92 )       620  
                     
Adjustments:                    
Fair value gain from investment property and investment property under development, net       (1,112 )       (480 )       (291 )      -          (711 )
Capital loss (gain) on sale of investment property       (5 )       91         8         86         106  
Changes in the fair value of financial instruments, including derivatives, measured at fair value through profit or loss       347         (597 )       (263 )       32         (693 )
Adjustments with respect to equity-accounted investees       (6 )       (13 )       10         (5 )       (50 )
Loss on disposal of investees      -          1,531        -         -          1,533  
Deferred taxes and current taxes with respect to disposal of properties       358         74         93         (18 )       138  
Gain from bargain purchase, net of goodwill amortization      -          (1,065 )      -         -          (1,026 )
Acquisition costs recognized in profit or loss       3         35         1         31         41  
Loss from early redemption of interest-bearing liabilities       75         67         36         38         78  
Non-controlling interests' share in above adjustments       462         264         113         (25 )       395  
                     
Nominal FFO (EPRA Earnings)       322         321         88         47         431  
                     
Additional adjustments:                    
CPI linkage differences       (2 )       (20 )       29         25         (77 )
Depreciation and amortization       12         16         4         6         21  
Other adjustments       89         164         23         80         252  
                     
FFO according to the management approach (Adjusted EPRA Earnings)       421         481         144         158         627  
Basic and diluted FFO according to the management approach per share (in NIS)       2.15         2.69         0.74         0.89         3.51  
Number of shares used in the basic FFO per share calculation (in thousands)       195,485         178,422         195,494         178,427         178,426  
Number of shares used in the diluted FFO per share calculation (in thousands)       195,567         178,579         195,567         178,549         178,601  

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