G City Control Sale Deal Collapses: Chaim Katzman Explains Why

A month after it was signed, the deal to sell control of the income-producing real estate company G City to Ari Nadlan and Ispro has fallen through.

In his first response, Chaim Katzman said this morning: "Someone said that I married Rachel and got Leah. But for the biased publications, the verse about those who call light darkness and darkness light is more appropriate. Let's start with the facts: two months ago, Norstar announced it was examining the sale of some of its shares in order to reduce leverage and continue holding G City shares. A month ago, we signed a good agreement with a worthy and respected partner who would eventually become the controlling shareholder. A fundamental condition was that Ari Nadlan would be the one buying the shares, after we checked the company's resilience."

Katzman added: "Two weeks ago, we read a report that they had added a partner. I will say gently that the financial profile of the new partner is dramatically lower than that of Ari Nadlan. Yesterday we received the agreement, and it turned out that it included agreements with the partners to conduct business with us in a way that constitutes a deviation from the agreements between us. Such as the possibility of changing controlling shareholders, including the complete exit of Ari Nadlan from the agreement."

"This morning I already received offers from two other interested parties," said Katzman. "We decided to reopen the process and we assume that other buyers will be found. We are carrying out additional realization deals in Europe until we reach the desired target of 50%. We understand that there is a need to reduce administrative and general expenses."

The drama of control and leverage at G City and Norstar

Chaim Katzman's income-producing real estate group G City, which operates mainly in Northern and Eastern Europe, is currently on the shelf. This follows Katzman's announcement last June that his holding company Norstar, which controls G City, is interested in selling most of its holdings and stepping down from control. Norstar holds 54.5% of G City's shares, and the latter is traded at a market value of 1.9 billion shekels, after jumping recently following the possibility of a change in control. However, the company recently lost its place in the major stock exchange indices, TA-125 and TA-90, after its market value was too low compared to other companies and the stock has been stagnant for three years.

A few days after Norstar's announcement, a new buyer was found when Tzahi Abu was expected to enter into a partnership with Katzman, with Abu having an option to increase to control later. However, Abu decided to add the owners of Tanaport-Ispro, Kidan Dahari and Yaron Adiv, as partners, a move that Katzman did not view favorably, and this morning the companies announced the cancellation of the deal.

Katzman's partial sale attempt comes after he was forced to embark on a massive asset realization campaign of more than 7 billion shekels, with the aim of reducing its high leverage levels. As recalled, in 2022, G City and Norstar's shares and bonds plummeted when the capital market feared the company's ability to service the debt, in parallel with the rise in interest rates in the economy.

Previously, the owners of Israel Canada, Barak Rosen and Asi Tuchmair, tried to take over Norstar and through it control G City—a move that Katzman eventually managed to block. In those days, Kidan Dahari and Yaron Adiv, the controlling owners of Tanaport-Ispro, also submitted an offer to purchase control, an offer that did not materialize.

Even today, G City has very large debts of more than 20 billion shekels. The rating company Maalot recently estimated the company's leverage level at 75%, and it aims to reach 50% in 2028.