First Supermarkets, Then Cell Phones, Now Rami Levy Is Developing Malls

Rami Levy has quietly become a major developer of shopping centers, most of them anchored by his eponymous supermarket

He’s already won himself a leading place in Israel’s food retailing industry and made a splash in the cellular and insurance markets. Now, Rami Levy is quietly expanding his activities into shopping center development.

Over the past five years Levy’s closely held company, often in partnership with Zahi Nahmias’ publicly traded Mega Or Holdings, has been buying up land for malls and shopping centers, with branches of the Rami Levy Hashikma Marketing supermarkets serving as anchor stores. Over the next two years, Levy plans to develop shopping centers in northern Jerusalem, Ariel, Modi’in, Netivot, Kfar Sava, Gush Etzion, Sha’ar Binyamin and Mishor Adumim.

“I’m conducting my real estate operations through my private company because I want to have a Chinese Wall,” Levy explains. “The public company specializes in supermarkets and the private one in real estate, although in principle I’m building in places where I want a supermarket.”

About half the chain’s branches are located on properties owned by Levy. “Most of the activity is financed with the private company’s equity,” he says. “The only places where there is leverage are partnerships, and there the level of [debt] financing is also relatively low.”

Along Route 1, opposite Melisron’s Harel Mall at the entrance to the Jerusalem suburb of Mevasseret Zion, Levy is building a NIS 250 million mall together with Adi Sudai’s Horizon Gold Investments. The two-story building, featuring 12,000 square meters of commercial space and 600 parking spots on three underground levels, is slated to open within two years. The timing for Melisron isn’t propitious: Israel’s antitrust commissioner has decreed that Harel Mall must be sold in the next few months.

Space going fast

According to Osnat Zagrun of Moria YLY Properties & Investments, the mall’s leasing agency, about half the commercial space in the new mall is already leased out even though marketing isn’t yet officially underway. While rates at Harel Mall average NIS 260 to NIS 280 a square meter, tenants at the new mall are being charged about NIS 160 a square meter on the upper floor and NIS 230 on the entrance level.

Along with the Rami Levy supermarket chain, Super-Pharm, Greg Cafe, Olam Hamamtakim and Top Mobile have already signed on as tenants. The Fox retail group is reportedly in talks on opening a branch of its Fox Home housewares chain in the new mall, as well as a Billabong fashion store. The group already operates a Fox clothing store in Harel Mall.

“Generally we don’t aim to duplicate the stores and chains at Harel,” says Zagrun. “We are confident that there’s room for another mall in the area, and the proportion of retail space and residents remains far from the norm.” Mevasseret Zion and surrounding towns provide a target population of nearly 60,000. The location is also a convenient stopping point for traffic headed to and from Jerusalem.

Perhaps Levy’s most fascinating venture is on Route 60, where the northern neighborhoods of Jerusalem connect to Route 443. As the only shopping center in an area encompassing over 200,000 people, including 120,000 in Arab neighborhoods such as Shuafat and Beit Hanina, as well as 80,000 in Pisgat Ze’ev and Neveh Yaakov, it was planned as a power center. But the developers are now weighing whether to build an enclosed mall due to high demand. The dilemma has brought marketing of the commercial space to a standstill until the fate of the project, wholly owned by Levy, is decided.

“We were at the site with more than 60 chains and not one didn’t say ‘I’m in,’ because everyone wants to get into the Arab sector,” explains Zagrun. Household appliance chain A. Sbitany & Sons, with an 85% market share in the Palestinian Authority, is expected to open a 1,500 square meter outlet in the center.

“The center will be well appointed,” continues Zagrun, adding that Levy sees it as important to provide the Arab center with a high quality and well-constructed shopping center.

90% occupancy

Last year, Levy − along with Shimshon brothers Koby and Naftali − opened the 12,500 square meter Mall7 shopping plaza near the southern entrance to Be’er Sheva at a cost of NIS 80 million and anchored by a huge 3,100 square meter Rami Levy supermarket. The site currently enjoys 90% occupancy.

In November 2011 the partners bought an adjoining 5.3-dunam property to expand the mall. Market sources say the plaza is operating nicely considering the short time it’s been open, thanks mainly to the supermarket, which has generated heavy traffic to the other shops as well.

Levy teamed up with Mega Or in a 50-50 joint venture that won an Israel Land Administration tender in November 2008 for a 7.3-dunam parcel of land for building the first mall in the West Bank settlement of Ariel. The NIS 100 million complex, slated for completion in two years, will include 11,000 square meters of retail space, 5,000 square meters of office space and parking for 600 cars. A Rami Levy supermarket will take up 3,000 square meters, over a quarter of the retail area, and rent will run at NIS 85 a square meter for stores and NIS 50 a square meter for offices.

The joint venture is also putting up a nine-dunam, NIS 30 million power center in Netivot’s industrial zone featuring 4,000 square meters of retail floor space. According to the company, the center will be opening in the third quarter of this year.

Levy, together with Mega Or, also owns 10 dunams of land intended for commercial, industrial and office use. At a cost of NIS 100 million, the partners are planning to build 7,000 square meters of retail space and 4,000 square meters of offices.

In addition, Levy and Mega Or jointly own a 5,000-square-meter shopping plaza in Afula where a Rami Levy store takes up 3,500 square meters, and a 4,000-square-meter compound in Netanya’s industrial zone where another Rami Levy supermarket will soon open.

“We are constantly looking to expand into areas where Levy hasn’t gained a foothold,” says Nahmias. “Customers are calling us from many places, and we intend to build more centers based around Rami Levy branches.”

Levy also seems pleased with his partnership with Mega Or, but meanwhile is independently and quietly building more and more small centers to house branches of his chain: 5,000 square meters in Gush Etzion, 6,500 square meters in Mishor Adumim and 6,000 square meters in Sha’ar Binyamin.

Rami Levy
Ofer Vaknin
Design 55
Eliyahu Hershkovitz