Financial Management
Melisron and its subsidiaries (the “Company”) owns and manages high-quality income-producing properties situated in the centers of Israel’s big cities.
The Company focuses on retail properties in central locations at the heart of big cities and on office complexes that are mainly marketed to international and Israeli high-tech companies.
As of September 30, 2023, the Company owns and manages 28 income-producing properties spanning approx. 907 thousand sqm of leasable space with high occupancy rates of approx. 98.8%, and 26 thousand parking spaces in addition thereto.
The Company’s shares are listed on the TA-35 Index, the flagship index of the Tel Aviv Stock Exchange (TASE), which includes the 35 companies with the highest market cap on TASE that meet the Index’s threshold conditions, as well as on the Tel Aviv Real Estate Index and the Tel-Dividend Index.
The Company’s Objectives and Goals
The Company operates and manages its business with the aim of creating value for the investing public by maximizing the cash flow from its income-producing properties and selling apartments, property appreciation and new business development. To achieve these goals, the Company acts as follows:
- Frequent investment in the refurbishment and appearance of the properties, diversification and fine-tuning of the mix, betterment of the existing properties and exhaustion of existing rights.
- Development and construction of projects.
- Creation of digital and technological innovation to reinforce the connection with customers, improve the shopping experience and increase store revenues.
- Maintaining and improving financial strength while extending debt duration and maintaining direct access to the capital market.
- Development of activities in new fields in the real estate industry.
The Company implements its strategic plan to strengthen and maintain the core business through betterment of the malls and the office parks and promotion of initiatives to support the core business, and at the same time develops activities in new fields, both by the betterment of existing properties by applying a mixed-use approach and by activity in new fields in the real estate industry, and mainly, as of the report date, residential development and construction.
From the CEO
The State of Israel is currently in the midst of the “Iron Swords” war which began on October 7 with the deadly terrorist attack on innocent civilians. We support the IDF soldiers and the security forces who are currently fighting to restore peace and security for Israel’s citizens, send our heartfelt condolences to the families of the victims and fallen soldiers, wish the injured a swift recovery, and hope for the speedy return of the hostages.
During the initial days of the war, and according to the instructions of the Home Front Command, the Company’s malls that are located in the Dan Metropolitan Area and in the south were closed, while restrictions were imposed on the Company’s malls in the north regarding visitor numbers. From the second week of the war, all of the malls opened up, and shopper traffic increased, corresponding with the gradual resumption of civilian routine. As of the report date, shopper traffic in the Company’s malls has returned to around 90%, on average, compared with pre-war figures.
We deem the stabilization and return to normal of the economy and the business world to be of considerable importance. In order to encourage resumption of normal operations, we announced a relief plan for tenants in the Company’s malls, adopting an approach of balanced sharing of the burden of the impact between the State, lessors and tenants. In these difficult times, we give our tenants encouragement and support with the aim of resuming full normal operations.
In Q3, the growth trend in the operating parameters continued. NOI was up 11% year-over-year to ILS 1,008 million, FFO was up 14% year-over-year to ILS 753 million, and tenants’ store revenues rose by 5% on average in the period. The occupancy rates in the malls and offices remained extremely high, at around 99%. The average rent in new contracts, contract renewals and option exercises that were signed from the beginning of the year also increased by some 10%.
During the period, the Company continued implementing its strategic plan for the growth and diversification of its income sources. As part of this plan, the Company continued promoting the planning for projects owned thereby, marketing of the projects under construction, improvement of the appearance and mix of the stores in the malls, and upgrading digital innovation capabilities to complement the mall business.
In terms of financing, since the beginning of the year the Company has issued bonds in the sum of approx. ILS 1.23 billion, such that as of the balance sheet date, the Company maintains high cash and cash equivalents reserves of approx. ILS 1.4 billion alongside binding and undrawn credit facilities in the sum of ILS 500 million. These balances allow the Company financial flexibility in this challenging period, in view of the impact of the war, the macroeconomic environment and the uncertainty in the economy.
We believe that we will emerge from this brutal war that has been forced upon us, stronger, both as a nation and as a country. We hope for safer, quieter and better days ahead.
It is emphasized that the CEO’s statements regarding estimates, forecasts and predictions which pertain to the Company’s future operations, development of properties and exploration of activities in new sectors of the real estate industry, as well as the Company’s goals and targets specified above, are forward-looking information, as defined in the Securities Law, 5728-1968, which is based on subjective estimates of the Company as of the report date, and there is no certainty that they will materialize, in whole or in part, or they may materialize in a different manner (including materially), inter alia due to factors which are beyond the Company’s control, including changes in market conditions, the period of time required for approval of the building plans, and in the construction input prices, as well as materialization of risk factors described in Section 31 of Chapter A of the Company’s periodic report as of 31 December 2022 and/or Section 6 of the update to the Description of the Corporation’s Business in the Company’s Q2/2023 report.
