Israeli Real Estate Stocks Plunge Amid Market Volatility and G-City Slump
Israeli real estate stocks suffered heavy losses this week, led by a 22% drop in G-City and steep declines in smaller developers. High financing costs, market volatility, and concerns over overseas assets drove the sell-off.
The Israeli real estate stock market experienced a turbulent week, led by a sharp downturn in commercial real estate giant G-City. Chaim Katzman's flagship company saw its stock plummet by 12% in a single day, extending a broader correction to a 22% drop within several days. This downward spiral wiped out hundreds of millions of shekels in market capitalization, leaving the firm valued at approximately 1.5 billion shekels, which represents just 35% of its equity.
The broader Tel Aviv Real Estate Index dropped 2.66% over the week, bringing its year-to-date losses to roughly 14%. The market turmoil was exacerbated by steep declines across benchmark indices, including a 2% drop in the Tel Aviv 35 Index following the US midterm elections, followed by a 3.7% plunge driven by a sharp sell-off in artificial intelligence stocks on Wall Street that pulled the Nasdaq down by more than 5%. Index rebalancing and the liquidation of dropped stocks further amplified the downward pressure before a modest rebound late in the week.
Levinsky Ofer, an urban renewal developer co-owned by billionaire Yitzhak Tshuva, led the losses on the real estate index, shedding over 25.3% of its value during the week. The company's stock dropped 22% on Thursday alone, nearing a 30% intraday loss. Market analysts attribute the decline to sustained pressures facing smaller construction firms, including high financing costs, uncertainty surrounding apartment sales paces, and project delays. Levinsky Ofer currently holds a market cap of under 100 million shekels and reports ongoing losses.
Other notable decliners included Iron, a veteran income-producing real estate firm that fell 18.9% amid thin trading volumes, and Norstar, the parent company holding a 54% stake in G-City. Norstar dropped 16.9%, with its valuation closely tied to its subsidiary. G-City itself, formerly known as Gazit Globe, declined by 14.9%, pressured by investor concerns over its international shopping center portfolio—particularly in Brazil, where government bond yields have surged past 15% annually following unexpected political developments.
In contrast to smaller, highly leveraged firms, major real estate powerhouses such as Azrieli Group, Melisron, and Big Shopping Centers weathered the storm with mild losses of up to 1%, or even modest gains. Analysts note that until high interest rates subside and foreign risk pricing normalizes, smaller developers dependent on external financing will continue to face an uphill battle.
