Europe Israel controlling shareholder Motti Zisser will inject $10 million into the company in an unsecured loan, the real estate and hotel company announced yesterday. The company needs the loan to finish renovating the former IBM building, Europe Israel House, on Tel Aviv's Shaul Hamelech Boulevard.
Controlling shareholders rarely use personal funds to shore up companies. The relatively unusual step became necessary after Europe Israel failed to meet the 60 percent minimum rental occupancy rates it undertook in the financing agreement. Financer Bank Leumi - also a 10 percent shareholder - granted the developer $5 million of the total $17 million needed to refurbish the building.
Europe Israel has an equity deficit of NIS 196 million and its cumulative losses since 1999 amount to NIS 350 million. Three Zisser-controlled companies - Europe Israel, Elbit Imaging and Elscint - reported heavy losses in the first half of 2003, as well as a substantial deterioration of their financial situations.
Europe Israel yesterday announced NIS 112 million in losses for the first half of the year. In its announcement to the Tel Aviv Stock Exchange, the company states the financing for the renovations was not immediately available from other sources, leading it to seek a loan from Zisser's privately held parent company Control Centers.
The Zisser group sees the loan in a positive light. Senior executives in the group say the slowdown in the Tel Aviv office space sector has led to the rental of just a third of the office space and the entire commercial space.
"As the company believes in the quality and uniqueness of the asset, it was unwilling to lower rents as the owners of other buildings did, leading to the relatively low rental rate. We preferred to finance the renovations with shareholders equity and after the entire building is reopened, we will rent out additional spaces and recoup the investment," the company said.
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