Bottom Shekel / The Azrieli Mystique: Can It Be Bequeathed?

When the security guard at the Azrieli Mall parking lot asked me for the third time, "Who are you meeting?" I grasped that he simply didn't know there was a man named Azrieli. David Azrieli, actually. When my insistence merely led him to crack down and open every bag I had in the car, I grasped that the only thing he'd concluded was that I was dangerous.

That little anecdote just goes to show Azrieli's greatest success: He turned his name into a brand so powerful that even the workers at one of his malls don't realize there is a human being behind it.

Azrieli Group shares began trading on the Tel Aviv Stock Exchange on Monday, marking a milestone in the remarkable career of Azrieli the man. Arriving in Canada from Poland as a penniless young man, he built a worldwide real estate empire the true scope of which he jealously refuses to disclose. The one thing we can definitively state is that his $4 million investment in a neighborhood of grimy garages in Ramat Gan 27 years ago was a stepping-stone to an Israeli empire worth NIS 10 billion today.

How did he create that tremendous value? Mainly, through vision, patience, conservatism, a tight business focus and a thorough grasp of the details. Azrieli did not quail as detractors sneered when he built Israel's first mall - the Ayalon. He still remembers the headline "The rise and fall of the Ayalon Mall".

Nor did he pay heed when told that Jerusalemites simply have a different shopping culture and would never ply a mall there. Today the Malha Mall is one of the most successful in the land. He also shrugged off the argument that building a mall in Be'er Sheva was a bad idea because the people there didn't have the disposable income to spend in it.

But it could be that Azrieli's greatest success also hints at the weak point of his company, Azrieli Group.

An investor deliberating whether to buy shares in the company looks at the company's story. Investors want good stories, about growth drivers, the sector's potential, opportunities overseas or whatever - the platform on which the company's future will be built. They want a persuasive dream. Azrieli tells a dreamy story, but it's mainly about the past.

More of the same

That may explain why Azrieli had to settle for floating his company at the value of its shareholders equity, no more. Investors were paying for the assets the company had (and hoping for returns greater than 7% ) - but they wouldn't give a premium, though nobody has any doubt about the man's ability to create value.

Asked about it, Azrieli replied "More of the same," meaning, this is what I know how to do and I'll keep doing it. It's a good answer, going by the fact that the group has been showing impressive growth over years. But perhaps Israel has become saturated with malls and office space and doesn't need any more? Where does that leave "More of the same"?

Azrieli argues that there's plenty of room for more malls and offices. He's currently building two new malls, in Acre and Kiryat Ata, and a large high-tech park in Holon. He's also building an office/shopping complex at the train station in east Rishon Letzion.

But we also question certain properties in his company's portfolio that are hard to understand, for which he has no good answers. Azrieli posted capital gains amounting to hundreds of millions of shekels on buying 5% of Bank Leumi's stock at the height of the financial crisis. But why keep those shares, weighing as they do on the company's balance sheet? Investors don't need to buy Azrieli stock to invest in Bank Leumi, shares of which are also listed on the Tel Aviv Stock Exchange.

Azrieli also owns 20% of Leumi Card and owns the controlling interest in Granite Hacarmel, which his company bought from the Borovich family in 2006. Granite Hacarmel owns a bunch of companies including the Sonol gas-station chain, paint company Tambour, Supergas and a host of small companies. Yet again, it isn't clear why a person seeking investment in the real estate market would want a stake in a chain of completely unassociated companies.

And then there's the issue of management. It is excellent, led by Azrieli himself, a dominating controlling shareholder, and CEO Menahem Einan. Together they climbed to dizzying heights. But what of the future? Neither is young anymore. They can't stay at the helm forever. Will Azrieli's children - and which of them - assume the reins, and will they be able to continue their father's legacy of success?

Since the company's establishment, each of his four children has owned 11% of Azrieli Group's shares, while Azrieli himself owned 40%. He claims that 40% will remain a single block of shares, averting any possible control battles. Okay - but where will it go? Who will control this massive company? Who will lay out its path in a changing world? Who will assure investors that after Azrieli puts up his feet to rest a bit, the company won't sink into mediocrity?

Would we be buying Delek Group shares if Yitzhak Tshuva were 90 years old? What about Nochi Dankner's IDB group stocks, or Moti Zisser's Elbit Imaging?

Born on May 10, 1922, Azrieli is the newest controlling shareholder in Tel Aviv, but he's also the oldest. Investors wish him a long and healthy life but they'd also like answers to all the above.