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Shopping malls are booming, tills are ringing, and the companies behind the centers are counting their takings.

Sales at Africa Israel's four shopping malls grew this year by 8.5 percent, to some NIS 1.03 billion (excluding VAT), and Benny Cohen, manager of Africa Israel's mall division, expects next year to see even faster growth, of 14 percent, with turnover slated to reach NIS 1.175 billion.

The company manages the highly lucrative Ramat Aviv Mall, in the eponymous Tel Aviv suburb, and the Savyonim Mall in Yehud - both of which are considered the most successful centers in the country. It also holds 50 percent of the City Mall in Haifa's German Colony, and 50 percent of the Talpiot Mall in south Jerusalem.

Ramat Aviv Mall alone accounts for sales of NIS 670 million - 10 percent up on 2004 - and rental income of NIS 82 million, an increase of 4 percent on last year. Cohen expects this second figure to jump by some 10 percent next year, primarily due to new rental contracts. Currently, tenants pay rental fees of $110-200 per square meter of retail space, with jewelry stores paying the high end of the scale, or 10 percent of their turnover. Some have slammed this high rate, accusing the mall owners of leaving the tenants with little profit for themselves.

Cohen however is not troubled. A 10-percent fee is "reasonable" in international terms, not just in Israel, and does not affect the store's ability to profit, he says.

As for Ramat Aviv Mall's upper-class image, Cohen notes that actually only a fifth of the stores there are high end, and it is the atmosphere created in the mall that lends it that quality image. In fact, Cohen adds, 70 percent of the brands on sale there are available elsewhere too; "but the clever thing is to give that little bit extra. This allows us to create a mall of exceptional design without scaring away the regular patrons."

The space vacated in the mall by the old Hamashbir Lazarchan has since been taken up by several fashion outlets, and Cohen says that these replacement stores have brought Africa Israel extra annual revenues of NIS 5.3 million.

Way to go, Azrieli

The Azrieli Group, the largest mall operator in the country, reported a similar 8 percent rise in its sales this year. Turnover at its seven malls is expected to reach NIS 3.75 billion in 2005, with the fastest growth seen at its 40,000 sq.m. Malha Mall in Jerusalem. Its Ayalon Mall showed the highest turnover per square meter, Azrieli reported; and in total, some 43 million shoppers walked through the group's doors during the year.

In addition to these two, Azrieli also owns malls in Be'er Sheva, Tel Aviv, Holon, Hod Hasharon and Herzliya.

But valuing a mall is certainly not straightforward. Ofer Nimrodi, major shareholder in Israel Lands Development Corporation, estimates that the group's Seven Stars Mall in Herzliya is worth some NIS 480 million, while its liabilities amount to NIS 285 million. Amir Biram, CEO of Reit Israel, a real estate company, recently said, however, that Seven Stars' realistic value is nearer NIS 400 million, while Clal Insurance recently considered buying the shopping center for NIS 450 million.

ILDC carried out a valuation of the mall prior to taking out a NIS 60 million loan. The mall is owned one-third by ILDC and two-thirds by a subsidiary. The valuation concluded that Seven Stars comes eighth in the country in terms of success, that its sales reach $400-500 per square meter, excluding food, that it is 100-percent occupied, has almost no debts to suppliers, and its sole debt is some NIS 850,000 to Hamashbir Lazarchan. The company got the loan.