The high demand for the purchase of new apartments in Israel continues to be reflected in the business results of the residential construction developer, Africa Israel Residence. In the fourth quarter of 2021, the company sold 350 apartments – almost double the 176 apartments it sold in the corresponding quarter in 2020.
The jump in the financial volume of quarterly sales was greater, which was NIS 904 million (before VAT) – almost three times as much as in the corresponding quarter in 2020, when the monetary value was NIS 344 million. The average price per apartment was NIS 2.58 million in the quarter. Compared with NIS 1.95 million in the corresponding quarter.
In 2021 as a whole, Africa Residential sold 908 housing units, for an amount of NIS 2.63 billion (before VAT), which reflects an average price per apartment of NIS 2.9 million. For comparison, in 2020 Africa Residential sold 427 apartments, for an amount of NIS 808 million, Reflecting an average price per apartment of NIS 1.89 million, which also includes the share of Africa Residential’s partners in the various projects.
The increase in the average price per unit in 2021 was mainly due to the high sales of the DUO luxury towers project in the Semel complex in the center of Tel Aviv. The project includes two towers of 668 housing units, of which 510 housing units for marketing and the rest for rights holders. Of the housing units available for marketing, the company sold 277 housing units (54%) by the end of 2021 at an average price of NIS 5.6 million per apartment (including VAT) and for a total consideration of NIS 1.34 billion. In total, the project is expected to generate revenues of NIS 2.2 billion, with an expected gross profit of NIS 688 million (30% of revenues), and will be completed in 2027. Africa Residential’s share in the project is about 75%.
During the current year, Africa Residential will begin the construction and marketing of another project in the Semel complex, which will include a third residential tower, and next to it another 8-story apartment building. A total of 189 units will be marketed at this stage, which are expected to generate revenues of NIS 1.18 billion and a gross profit of NIS 351 million (29% of revenues), and the company’s share in it stands at 88%.
Quarterly profit of NIS 83 million from value adjustment
Africa Residence Sale of income from the sale of residential apartments and commercial areas in Israel in accordance with the completion rate at each reporting date of the apartments and commercial areas, instead of the possibility of recognizing the entire income only when the apartment or commercial area is delivered to the customer. Thus, the revenues that the company reports on a quarterly basis are affected by the pace of progress of the various projects and the volume of sales in each project.
In the fourth quarter, the company recorded revenues of NIS 250 million and a net profit of NIS 156 million. The net profit in the fourth quarter contributed a profit from the adjustment of the fair value of investment real estate, in the amount of NIS 83 million. In 2021 as a whole, the company reported an increase in the fair value of investment real estate of NIS 111 million (before tax) Sea, property tax slopes and onyx.
In addition, following the designation of the commercial areas in the Savyonim Boulevard project in Modi’in for rent, the company changed the classification of property costs from the inventory of buildings for sale to the investment real estate section, and recorded a revaluation gain of NIS 35 million (before tax).
In 2021 as a whole, the company recorded revenues of NIS 1.11 billion, which reflects a decrease of 17% compared to 2020. The annual net profit jumped by 114% to NIS 220 million, thanks to an increase in the profits of affiliated companies and revaluation gains recorded in the fourth quarter.
“A total of 13,000 housing units in future projects”
Micha Klein, CEO of Africa Israel Residential, stated that “We conclude a strong year with continued growth in apartment sales, improved profitability and a significant increase, of thousands of housing units, to a total of more than 13,000 housing units in the company’s future projects. . Along with dedicated activities to increase our future backlog in significant transactions, the company is promoting plans for the development of over 5,000 housing units in the field of urban renewal.
Klein added that “the company intends to continue to expand its activities in the field of rental housing and in the field of commerce and offices, which will constitute a significant arm of income-producing real estate as well as the company’s growth engines for the coming years.
Projects amounting to 800 apartments in the field of rent
Africa Residence, which is controlled by the Lapidot Capital Group of Yaakov Luxenburg, is traded on the Tel Aviv Stock Exchange at a value of NIS 2.7 billion, after its share has yielded a return of 260% in the last three years. Partners), of which 1,734 housing units are under construction and another 959 housing units are planned for construction in the coming year.
The company also has four projects with a total volume of 800 units in the field of rental housing (two of which are already populated), as well as activities in the field of commerce and employment. This activity includes commercial areas and offices in an area of 177,000 square meters, combined with residential projects.
According to CEO Klein, “one does not have to be such a great prophet to see what happens two years from now, because the prices of apartments are in many places an outgrowth of land prices. And when you look at the prices of land purchased in Israel today, you can understand that in order for all the contractors to be able to earn the minimum rate, we will see apartment prices continue to rise.
“It has been a very challenging year for new acquisitions, but at the same time we have managed to improve and bring in a lot of housing units. Our gross profit forecast for five years ahead speaks of almost NIS 2.6 billion and we were very conservative here. This means that if we do not buy more new land and improve it, and it is clear that we will buy and improve, then it is a gross profit that we have not yet recognized, and a significant part of it is already under construction and another part will open in the coming year.
“There is an unprecedented gross profit forecast for the company here. The company’s leverage rate also fell by 10%, to an unprecedented low of 47.5%, after we improved liquidity in the past year by collecting NIS 2 billion,” Klein added.
Regarding the development of commercial and employment assets, Klein emphasized that this is another strong and productive leg creation. “I recognize that the market has not had its say. Prices will continue to rise and we want to be in those places as apartments for rent, commerce and employment continue to yield and enjoy an increase in value.”