Gazit Polishes the Brass as Profits Fall

The real estate company paid five top executives a total of NIS 50 million for the year despite net profits being 28% below its 2009 figures.

Real Estate company Gazit-Globe released its financial report for 2010 yesterday, showing net profits were way down - 28% below its 2009 figures. But that did not stop Gazit from paying its five top executives a total of NIS 50 million for the year.

To be fair, Gazit had a good year in 2010. Net profit was still NIS 790 million, and the 28% drop was mostly due to a big accounting profit in 2009 from the exchange of convertible bonds of Austrian firm Atrium into shares in December 2009.

Moti Kimche

Despite the slide in profits, analysts have been fulsome in their praise for the company and its management, and a one-year dip did little to change these opinions.

Chairman Chaim Katzman and vice chairman Dori Segal are Gazit's controlling shareholders.

Over the past decade, Katzman's salary and benefits cost Gazit more than NIS 150 million. Katzman owns about 20% of the company, worth NIS 1.25 billion. Shareholders did not fare too badly either, as they saw average annualized returns of 21% over the past 10 years.

In 2009, Katzman was the second-highest earner among managers at publicly-traded Israeli companies, with a total wage cost of NIS 18.8 million. Only David Avner, then CEO of cellular firm Partner, made more. In 2010, Katzman made due with only NIS 11.5 million, after passing up a NIS 60 million bonus.

Segal's salary cost Gazit NIS 10.5 million last year.

Gazit operates in more than 20 countries, and owns and manages approximately 650 properties with a leasable area of approximately 6.3 million square meters. It has total assets valued at approximately $15 billion and gross annual revenues of about $1.4 billion.

Gazit has NIS 4.6 million in revenues from leasing and renting out its properties, a 12% increase from 2009. Its net operating income rose 12% last year to NIS 3.1 billion. Cash flow from operations shrunk by 14.5% to NIS 359 million. For the fourth quarter of 2010, net profit fell by 72% compared to the same quarter of 2009, to NIS 226 million. The company also showed a 3.6% increase in net cash flow from equivalent assets compared to 2009, and it kept its 93.9% occupancy level. NIS 231 million of the profits came from an upward adjustment in the value of Gazit's properties.

"It was another year of continued growth in revenues and net operating income, generating significant cash flows while demonstrating the strong momentum of our multinational platform," said Roni Soffer, president of Gazit.

"Development, redevelopment and property acquisition continued at full steam this year as we invested approximately $1 billion in these activities. We strengthened our financial position, raised equity and brought down our leverage.

"Once again, our unique business model allowed us to simultaneously deploy capital in multiple markets around the world and still stay very focused on our core business and the quality of our properties. During the year we made important progress upgrading our portfolio, diversifying and enhancing our presence mainly in North America and expanding our footprint in Europe and Brazil," said Soffer.