The IPO market in Tel Aviv is in a period of decline, certainly in relation to the two years full of IPOs that it experienced until a few months ago. However, the debt issuance market continues to function, and the real estate sector, which is at a crossroads in regards to the changing interest rate conditions, continues to generate fundraising.
The real estate company, Ella R. Construction Engineering and Investments, owned and managed by veteran entrepreneur Reuven Ella (63), which was delisted from trading in Tel Aviv more than 20 years ago, is returning to the stock market, this time by the hour, to raise bonds, to the extent of NIS 200 million. The company is expected to start with the fundraising at the beginning of this September. The bonds are not guaranteed in the underwriting, and the distributor in the fundraising is Barak Capital Underwriting.
Ella founded the real estate company that bears his family name in 1991, and floated it on the stock exchange two years later. He still serves as the controlling owner and as the chairman and CEO of the company, which he deleted from trading on the stock exchange in a takeover bid in 2001. The company mainly operates in the field The yielding real estate – offices (government and private), hotels and commerce – as well as entrepreneurial real estate.
He pledged not to compete with the company
Today Ella R. owns in a series of profitable properties in the fields of hotels in Israel and abroad, as well as in land and diversified start-up activities. Among other things, the company owns part of the Daniel Hotel in Herzliya, office buildings in Jerusalem, the Publica Hotel in Herzliya, the Par Cinema in Tel Aviv, intended for residential construction, and also has holdings in properties Hotels in Cyprus.
Reuven Ella has committed to the company that he will not compete with it, and in any case where he receives an offer to invest in profitable real estate or initiate projects in Israel or abroad – except in the countries of Hungary and Germany, where he operates privately – he will direct the same offer to the company.
Ella R. It was rated by S&P Maalot with an A rating – and there it is noted that the company has a portfolio of yielding real estate assets worth NIS 760 million and land reserves for sale in Israel worth NIS 71 million. The bond funds raised by the company are intended for investments in new assets and the continued development of the company’s existing assets . The ratio of profit before taxes, depreciation and amortization (EBITDA) to the company’s financing expenses will be 2 to 2.3 times, and the debt to equity ratio will be up to 50%.
Dependence on two essential tenants – the State and Israel
Ma’alot noted that the company’s portfolio of yielding assets “gives a relatively high visibility of revenues due to operational stability”. The rating stated that these have 130 different tenants, although most of them are tenants in one property in Tel Aviv (Beit Dan) and the rest are individual tenants. It has dependence on two essential tenants, the State of Israel and Israel.
On the other hand, the rating company noted that the business profile and rating of these are limited, because the dispersion of its asset portfolio is relatively low compared to companies with a higher rating than its own. Also, a significant part of the assets’ value and the net rental income (NOI) are consolidated in its reports in a proportional consolidation, meaning that the company “shares” the assets with partners, therefore it does not have full control over the decision-making regarding the assets.
These revenues in the first quarter of the year amounted to NIS 19.7 million, an increase of 71%, which resulted from the recognition of income from the sale of land in Evan Yehuda. The company’s net profit in the first quarter amounted to NIS 6.7 million, an increase of 18.8% compared to the corresponding quarter.
Last year’s revenues amounted to NIS 45.6 million, an increase of 4.4% compared to the previous year, and on the bottom line a net profit of NIS 68.2 million was recorded, a sharp jump compared to a net profit of NIS 1 million in 2020. The jump in net profit last year was due, among other things, to real estate valuations. in the amount of NIS 38.6 million carried out that year.
Ella’s identity card R. Building engineering and investments
Line of Business: Construction and holding of profitable properties in hotels, offices and commerce,
Lands and real estate development
history: Established in 1991 by Reuven Ella, the controlling owner who serves as chairman
and CEO. Delisted from the Tel Aviv Stock Exchange about 20 years ago after about 8 years of its issuance
data: The company’s asset portfolio as of Q1/2022 stands at NIS 760 million.
2021 revenues: NIS 46 million, profit: NIS 68 million