Bullish about Bezeq
David Azrieli is more than 80 years old, but he still has plenty a lively rabbit under his hat. His latest move is a drive to buy the controlling interest in Bezeq, Israel's national phone company.
David Azrieli is more than 80 years old, but he still has plenty a lively rabbit under his hat. His latest move is a drive to buy the controlling interest in Bezeq (TASE: BZEQ), Israel's national phone company, together with partners. But he doesn't mean to run the phone company: He told TheMarker that his intention is to be a passive investor, leaving the headaches of management to somebody else.
Usually he's a hands-on management man; he personally plans and designs the shopping malls he builds, and wants to know all the details. Not here. "I am involved in things I understand," he explains; regarding other things, silence can be of the essence.
Until now, the only connection between the Canadian businessman and Bezeq has been that the phone company leases several floors of the Azrieli Towers, a two-building complex in central Tel Aviv. Now Azrieli is joining a bidding consortium via his privately held company for operations in Israel, Kanit. His partners in the consortium are Polar Investments (TASE: PLR), the businessman Dan David, and the Pegasus investment fund of the United States.
Azrieli has a rule for interviews: no names, no numbers. He won't even list the people with whom he shares the management of his giant charity fund. But otherwise, he will talk.
"I believe we'll reach the finish line," he says, "but I can't say everything is ready for the tender. I can't say everything has been consolidated until we see the money on the table." He can't even say who the dominant partner in his consortium will be at this stage.
So why the phone company?
Azrieli explains that the group has long wanted to diversify. It had negotiated to buy part of Eliezer Fishman's Visa CAL business, but the talks fell through over price issues, he says with regret. The group considered bidding for Israel Discount Bank (TASE: DSCT), but decided not to enter Matthew Bronfman's partnership and no other group formed.
"Bezeq is a good company and we can exploit its potential in the best possible way," he declares, intimating that he doesn't understand the requirement to have Israeli partners in the consortium. But the law is the law.
Nor is he worried about Bezeq's notorious union: It's factored into the price, Azrieli explains.
Moving on from Bezeq to business in general, it is the market that will dictate whether Azrieli builds more malls, not him. Once he'd talked about building a mega-mall in the greater Tel Aviv region, an idea he hasn't abandoned: "The main problem is finding an area big enough. We need 200 or 300 dunams of land and haven't found the right place yet." There's no reason why Israel shouldn't have a "national shopping center": other countries do, he says.
Yes, he does visit rival malls and learns things from the competition with each visit, he says. "But I believe we understand more about malls than any other group in Israel." For one thing, it knows what a mall is: Not every arbitrary group of stores can boast that title.
Azrieli's malls are typically named after their location, with the glaring exception of the skyscraper complex in the heart of Tel Aviv. Why? Because it's his biggest project ever, Azrieli explains, simply enough. His biggest mall has 100,000 square meters, while the Azrieli center has 350,000 square meters.
But it is not finished: The blue and white circular and triangular skyscrapers are in place. What about the last one, the square? "I am happy to say that the troubles holding back its establishment have been solved and we can start construction soon," Azrieli says. "I don't know what it will have: apartments, offices or a hotel. The city plan says we can do what we want with it."
A rare belief in Be'er Sheva
One of his better-known malls in Israel is the Ayalon, now in its 20th year. Azrieli is planning to add a 16-cinema complex as a second floor to the Ramat Gan mall, he says, while the cinemas on its first floor will be turned into shops. The Malcha mall in Jerusalem is also very successful, he says.
Azrieli also went against the trend and built a mall in Be'er Sheva, not a city in which builders generally delight. "Nobody back then looked at Be'er Sheva as a place where one stood the slightest chance of success," he says
with satisfaction. "I decided to go there five years after establishing the Ayalon mall. The message was, you don't have to go to Tel Aviv to buy nice clothing. Over time we expanded the mall, adding public spaces." Fifteen years later his mall is still the most successful in the Negev capital, he says.
He has none of the usual complaints about Israeli red tape: "When you have a good project and they really want you, there's no difference between bureaucracy here or abroad. They lay out the red carpet."
Might he float Kanit on the stock exchange? He might; the issue was held up by tax difficulties, which are being addressed. Kanit is an Israeli company controlled by a Canadian one, which is complicated, and it doesn't need the money anyway. Why float it then? To preserve the company after his death, says Azrieli frankly. His sons and daughter don't want to manage it: Once he's gone, if Kanit is publicly traded, his kids can sell out and move on.