Arrow oaks published weak reports this morning and the company’s stock reacted with a 5% drop during trading on the stock exchange. The decline in the stock did not start today: since mid-January, Aloni Hatz has fallen by about 33% (including today’s decline), and the company’s value has shrunk to about NIS 7.3 billion. As a result, other shares in the industry were also sharply cut, such as for example Electra Real Estate , Properties and building , Azrieli .
● Aloni Hatz is cut by more than 8% and pulls down the yielding real estate companies on the stock exchange
● Haim Katzman continues to distribute profits: “There are people who live off the dividend from profitable real estate companies”
IBI’s real estate analyst, Nadav Berkowitz, explains that the sharp declines in yielding real estate stocks are a reaction to the Aloni Hatz and Azrieli reports published today. “In the conference calls of the companies, the managements of the companies stated that they are beginning to see a change for the worse in some sectors and especially in the field of offices abroad. These statements deterred the investors and therefore the companies that are more exposed abroad such as properties and building or Arrow Oaks fall more.”
The Aloni Hatz company reported today revenues of approximately NIS 302 million in the third quarter, an increase of 19% compared to the corresponding quarter last year, but the bottom line indicated a net loss of approximately NIS 102 million in the quarter, compared to a profit of approximately NIS 101 million in the quarter the equivalent This is against the background of a loss of approximately NIS 233 million in the section “The group’s share of the profits of the companies included”, arising from provisions of hundreds of millions of NIS in respect of assets the company owns in the USA, after the interest rate hike that boosted the discount rates.
“The significant revaluation in the US cannot be ignored”
Yoav Burgan, a senior analyst at Psagot Brokerage, says in a conversation with Globes that he “can understand the investors’ reaction to the Eloni Hatz reports. Time will tell if the reaction is exaggerated or not, but I can understand it. There was a very significant downward revision of the assets in the US “b and it cannot be ignored. The concerns about the increase in discount factors are beginning to be reflected in the reports and estimates of the companies. Investors fear that we will see this trend continue in 2023 as well.”
On the other hand, Azrieli presented a growth of 76% in the net profit attributable to shareholders in the quarter to about NIS 330 million, compared to a profit of about NIS 187 million last year. And still Azrieli’s stock is falling by about 6% during trading. Why did Azrieli lose ground? Berkowitz explains This is in the group’s data center activity. “Azrieli published a report showing stagnation in FFO due to the large investments in the field of data centers and the market fears that the traditional field of the company, the offices and trade, will slow down looking a year ahead and at the same time, the data center will continue to cloud the results. The company’s management stated that the field should already yield in the next few quarters, however, it is the company’s growth engine, but the market is still afraid and that’s why we see the decline.”
“The macro data dictates the pace”
Burgan from Psagom also holds the same position regarding Azrieli, and explains that perhaps the layoffs in high-tech are causing some investors to fear the future. “Azrieli’s reports were relatively good, but even there you see an increase in financing expenses that resulted in damage to the current operating flow, FFO, and even though you see an increase in current income, there is damage to the flow. This can be combined with concerns that the waves of layoffs in high-tech will start to damage the yielding real estate companies they have High activity in Israel. There are also investors’ concerns about damage to the growth of the data centers sector, even though there is still no indication of damage to activity there. So all together, in addition to the investor sentiment which is not good this year, affects the market in general and the yielding real estate stocks in particular, today.”
Despite this, the reports published today are among the last of the companies in the industry in the third quarter. Bottom line, most companies showed very good results with high occupancy rates that are close to all-time highs. So why are stocks being cut today?
“There are two vectors that influence the market today,” says Berkowitz of IBI, “on the one hand, the results of the companies are in good shape and close to an all-time high. On the other hand, the macro data, interest and inflation, cloud the market. Currently, the macro is the one that dictates the pace and the fear of a decrease in the value of the properties, occupancy and prices is stronger than the results of the companies.”