The results of the initial issuance of the Acro Group on the Tel Aviv Stock Exchange indicate the strength of the real estate industry in general and the hot residential area in which it would focus in particular. Globes has learned that Acro, which is controlled by Tzachi Arbov, is expected to complete its IPO at a higher value than expected, after promising to raise NIS 600-500 million at a company value of NIS 3.4-3.5 billion “before the money”.
This is a large raising from the preliminary estimates, according to which the company planned to raise NIS 400 million at a value of about NIS 3 billion before the money. The raising of funding, in which demand of NIS 1.6 billion flowed in, is also noticeable in light of the challenging timing of the IPO – at the end of Sunday this week, when sharp price declines were recorded in Tel Aviv and the real estate index plunged 4%.
As far as is known in the issuance of the acro, the most prominent institutions in the capital market, the managers of the public savings, including the insurance companies and the provident bodies, took part. The IPO of Acro, one of the largest known by the stock exchange in recent years (certainly in the real estate industry), is led by the underwriting company of Barak Capital.
A group of young and aggressive real estate entrepreneurs
Acro’s initial capital raising will make it one of the largest real estate development companies on the stock exchange, worth about NIS 4 billion after the money – more than the value at which Azorim is currently traded (NIS 3.8 billion), as well as leading companies such as Praszkowski and Africa Residences. The industry giants Israel Canada and Damari have a market value of about NIS 5.5 billion each.
Their impressive value has been achieved by residential construction entrepreneurs traded in Tel Aviv after hundreds of percent jumps in their shares since the Corona crisis broke out in 2020 – given the unprecedented boom in the real estate sector in Israel, and especially the residential sector, thanks to record prices and demand for residential apartments in Israel.
Tzachi Arbov (47), the controlling owner of Acro, serves as the company’s chairman. Arbov and Acro usually belong to a group of young and aggressive real estate entrepreneurs who in recent years have become the leading players in the industry, a group that includes Israel Canada and Hajjaj Group. .
In the last decade, these same developers have purchased land in and around Tel Aviv for the purpose of building ambitious residential and office projects, at high prices, which reflected an expected tide in the market and maximization of building rights. That of much older real estate companies.
An examination of Acro’s financial data shows, among other things, that the capital multiplier (equity share value) according to which Acro issues is relatively high compared to other companies operating in the entrepreneurial real estate industry, and stands at about 3.5. This is while the capital multipliers according to which regions, Praszkowski and Africa are currently traded are around 2.5. On the other hand, the capital multipliers of Damari and Israel Canada are higher than those of Acro before its issuance and move around 4.
Significant value flooding for shareholders
Acro, managed by Ziv Yaakobi, divides its activities into two main areas – entrepreneurial real estate, in which it deals with land acquisition, planning, improving and developing projects, and in the income field, where it deals with locating, developing and renting properties – all in Tel Aviv and its surroundings.
The company’s financial statements show the flourishing in the field of housing in Israel. In the sum of the first nine months of 2021, Acro’s revenues from the sale of apartments grew by 25% and reached NIS 290 million. This, along with an increase in the volume of revaluations it carried out, and an increase in its share in the profits of investee companies, led to a climb of more than 50% of its total revenues, which reached NIS 452 million during this period. Bottom line, Acro’s net profit between January and September 2021 jumped 190% to NIS 135 million.
In the sum of the whole of 2020, Acro showed a jump of 330% in its revenues from the sale of apartments, which reached NIS 341 million, and its total revenues for that year increased by about 75%, to NIS 490 million. However, in the 2020 summary, Acro’s operating costs also increased, so that its net profit for this period shrank by about 20% and amounted to NIS 109 million.
According to data presented by Acro, it is currently a partner in the initiation, planning and construction of 45 projects (at various stages and together with partners) that include about 7,200 apartments, including 26 projects in the field of urban renewal, and also include office space and commercial space.
The company, together with partners, also has four properties for rent of approximately 55,000 square meters (less than a third of them its own) and 13 projects in the planning and construction of offices, commerce and hotels.
Apart from the controlling shareholder Arbov, who holds 29% of the capital and about 55% of the voting rights in the company thanks to a power of attorney granted to him by other shareholders in the company, other prominent shareholders in Acro before the IPO are the insurance and finance company Phoenix and Raya Strauss Ben Dror (through Shavil Ella) . These are expected to record a significant value overflow in the value of their holdings, having purchased them at a value significantly lower in value at which the offering is expected to close.
For example, Phoenix invested NIS 100 million in Acro in 2018 at a company value of only NIS 355 million, and in 2020 exercised an option to purchase an additional share of Acro shares, this time at a company value of NIS 620 million.
In preparation for the IPO, Acro presents several notable projects in which it is a partner. These include Microsoft’s office building in Herzliya, where it shares a quarter of the rights, along with Tidhar, Israel Canada and Allied, and Da Vinci’s residential and office project in Tel Aviv, where it is an equal partner of Israel Canada.
In addition, in Tel Aviv, Acro owns a golf project, mainly for housing, Neot Afeka, an evacuation-construction project in Neve Sharet and a residential tower between Yitzhak Sadeh, Menachem Begin, Carlebach and Maza streets. The stock exchange in Ramat Gan.
Looking ahead, Acro presents impressive data regarding the future of its operations, with estimates that the volume of sales in which it will be involved between the years 2022-2029 will reach NIS 20 billion – and its effective share will reach NIS 12 billion. The gross profit from those projects will reach NIS 6 billion, and its share will be NIS 3.4 billion.
Acro Real Estate
Line of Business: Real estate in Israel in two main areas – entrepreneurial real estate in which it buys land, plans, develops and improves projects, and income-producing real estate where it locates, develops and rents properties, mainly in Tel Aviv and its surroundings.
history: Started operating in real estate in Israel in 2006. The controlling owner is Tzachi Arbov
data: Notable projects in Tel Aviv (some with partners): Da Vinci (residential and office), Golf in Neot Afeka, YARD evacuation-construction in Neve Sharet, Maza Tower. In Gush Dan: Microsoft Campus in Herzliya, Business Park at Savyon Junction