After the deal with Abu was cancelled: G City to sell assets for 6.1 billion shekels

In the shadow of efforts to sell control of the company, G City, controlled by businessman Chaim Katzman, has announced a plan to reduce its leverage. The strategy includes selling most of its residential assets in Europe and the USA, alongside an exit from operations in Brazil. The company estimates this will bring approximately 6.1 billion shekels into its coffers by the end of next year.

The announcement comes just weeks after the collapse of the deal to sell control of the company from Norstar, controlled by Katzman, to Ari Real Estate, controlled by businessman Tzahi Abu. The deal fell through after negotiations reached a deadlock, partly due to the inclusion of the Ispro group in the acquisition process.

As part of this move, the company intends to significantly lower its leverage to below 50% by focusing on income-producing assets in Israel and Poland. These measures are being implemented independently by Katzman, who has declared his intention to sell control to another party.

In recent years, Katzman has led an aggressive asset realization program totaling over 7 billion shekels across Europe, Russia, the USA, Brazil, and Israel. However, the company remains burdened by debts exceeding 21 billion shekels.

"We will continue to examine additional moves that will create synergies, reduce administrative expenses, and allow for further leverage reduction," said Chaim Katzman, founder and CEO of G City. "These moves will also allow us to realize the huge development potential existing in the group's assets, such as the additional construction of 400,000 square meters in Rishon LeZion and G Kfar Saba, and the expansion of the Promenade center in Poland by 20,000 square meters."

Keren Khalifa is set to lead this process and is expected to take over as CEO in early October. "I have no doubt that Keren, together with our excellent management team and employees, will take the company forward and bring it to new heights," Katzman said.

Impact of the shekel and asset sales on profits

The asset sale announcement coincided with the publication of second-quarter results, which showed a net operating income (NOI) of approximately 359 million shekels, a 12.9% decrease compared to the same quarter last year. This decline stemmed from asset sales and the strengthening of the shekel. Meanwhile, NOI from identical assets rose by 3.6%.

According to the company, NOI in proportional consolidation (excluding foreign exchange rates) rose by 25.3% to 332 million shekels, compared to 265 million shekels in the same quarter last year. Ultimately, the company's net profit plummeted by 64% to 83 million shekels.

The company's FFO (net profit plus dividends from securities investments) amounted to 96 million shekels, a 10% decrease compared to the previous year. FFO from real estate activity was 97 million shekels, down 16% from 116 million shekels. The company has raised its 2026 FFO forecast per share from income-producing real estate to a range of 2 to 2.1 shekels.

"We are concluding another quarter of strong operational results and see a continuation of positive trends in demand, as well as increased interest in commercial assets from international players. Despite the significant strengthening of the shekel, we managed to mitigate the impact of exchange rates on equity and maintained our solo leverage level," concluded Chaim Katzman.