Africa Israel Residential today reported revenues of NIS 1.11 billion in 2021 – a decrease of 17% compared to 2020. However, net profit jumped by 113% last year to a peak of NIS 220 million; In the last quarter of the year, it amounted to NIS 156 million, compared with NIS 63 million in the corresponding quarter in 2020.
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The increase in net profit is due to revaluations of properties owned by the company, including rental housing projects in Herzliya, Shoham and Jerusalem, and commercial areas in Modi’in. In total, the net profit from revaluations after tax is NIS 126 million, so that the net profit without revaluations was NIS 94 million.
Revaluation profits of Africa Residential from rental projects: in Galil Yam (273 apartments) – profit of NIS 21.5 million; Basham (271 apartments) – NIS 31.5 million; Jerusalem property tax project (170 apartments) – NIS 5 million; And commercial space in Modiin – NIS 35 million.
The company enjoys its decision to enter into long-term rental housing projects, the increase in the value of these properties, among other things due to a jump in housing prices and the demand for rental housing.
The company’s CEO, Micha Klein, told Calcalist: “The contribution of these projects is the improvement of the real estate that remains with us. We benefit from the rate of increase in profit from the revaluations of these assets. We are constantly receiving offers to buy these assets from financial sources. ”
In total, the company and its partners have 800 apartments for rent in projects under construction or populated. “We enjoy a constant flow of cash all the time. The waiting list for apartments in these projects is very long,” says Klein. “In the end, the tenants buy an apartment for 10 years. During this period, no one will evict them, no one will increase the price by more than the index. In the Shoham project, many seniors prefer to rent instead of go to sheltered housing. Because they want peace. That’s why you see the onslaught on rental housing auctions. “
The decrease in revenue this year is due to the accounting method that allows revenue to be recognized according to the rate of project progress. In 2020, the company completed the construction and occupancy of more than 1,000 apartments, and thus managed to recognize a large share of the revenues in those projects. On the other hand, the company began in 2021 to build projects with more than 1,300 apartments, and because the implementation rate was low, it can only recognize a small part of the revenue. In the year reviewed in the report, the company sold 1,400 apartments that generated an income of NIS 2.5 billion with a gross profit of 23%, which it will be able to recognize in the future as the construction of these projects progresses.
In this context, the company’s DUO project in the Semel complex in Tel Aviv on Ibn Gvirol Street between Arlozorov and Jabotinsky stands out. Where the company builds with partners close to 1,000 apartments, 677 of which are its own. By the end of 2021, the company has sold 202 apartments, the gross profit is 30% and the price per square meter is NIS 63,000 – reflecting a price of NIS 5.6 million for an average apartment.
The company also reports an increase in gross profit from apartment sales to 18% compared to 15% in 2020. and an improvement in liquidity thanks to a collection of NIS 2 billion. “People made payments early to save the rise in the index. This generated a very high cash flow of NIS 900 million, and the leverage rate was reduced by 10%,” says Klein.
In total, in 2021 the company sold 908 apartments that brought in NIS 3.1 billion, 112% more than in 2020, when the company sold 427 apartments that brought in about NIS 945 million. As stated, in part of the said amount it is not possible to recognize the report.