Courtesy (Agaton Strom / Courtesy)
G City (TASE: GCT), a leading company in the global real estate sector, has announced another significant step in its strategic plan to strengthen its capital structure and lower its leverage. The company plans to raise NIS 150 million in a private equity offering, with several leading institutional bodies participating in the placement. The offering was priced at NIS 12.6 per share, which was 2.5% above the average price from that previous thirty-day period. In addition, leading institutional bodies such as Migdal, Phoenix, Mor, and Menorah participated in the private allocation, with the offering expected to lower G City’s leverage by about 0.75%. This positive response from investors is a testament to the public’s endorsement of Chaim Katzman’s leadership and current strategies.
This move comes as part of the first phase of the plan to improve the company’s financial strength and capital structure, with the parent company Norstar, controlled by Chaim Katzman, also raising funds through a successful share issuance. Norstar increased approximately NIS 306 million through the issuance of shares, accepting orders at a price of NIS 15 per share, representing about 14% above the minimum cost in the offering. Investors received this move well, with hundreds of millions of shekels in oversubscription to the round.
Norstar will also purchase shares in the G City offering, amounting to approximately NIS 34 million, subject to approval at the company’s general meeting. The proceeds will be used, among other things, for the early repayment of the 11th bond and to reduce the overall leverage at Norstar. As the controlling shareholder with a 51.53% stake in G City, the easing of pressure on Norstar is expected to, in turn, help G City as well. This was reflected in G City’s stock price, which jumped 5% on the day of the announcement as investors embraced this strategic move.
Additionally, this move effectively ends any takeover attempts by Barak Rosen and Assi Tuchmayer of Israel Canada, which is now likely completely off the table – another win for Katzman. The two did not participate in the recent funding round, and their holdings have now been diluted to approximately 14% of Norstar.
G City is traded on the Tel Aviv Stock Exchange (TASE) with a market value of NIS 2.34 billion. This strategic move by Chaim Katzman has received an overwhelmingly positive response from investors. The move serves to quell investor concerns regarding debt and provides reassurance to the market. It also represents a major win for Katzman, who has successfully navigated the company through these challenging times.
For months, Katzman received a cold shoulder from the market following claims that G City’s assets were overvalued. However, investors have changed their tune over the past few months. Katzman has successfully sold off a number of non-core assets at their book value or close to it, which is quite an achievement in this market, proving that G City’s asset value is sound and positioning the company as potentially undervalued. The most recent example of this is the sale of an asset in Poland for NIS 175 million announced recently. While Katzman could have chosen to give the critics what they wanted (I.e.: a quick an easy sell-off of core assets without a strategic plan), he chose to fight for his shareholders and implemented a strategic plan for long-term success. And now, it is paying off, with G City’s stock up approximately 30%. Since the beginning of January, despite the TASE experiencing a number of negative days and what seems like an overall trend reversal since early November.
In conclusion, G City’s recent private equity offering and Norstar’s successful share issuance under the leadership of Chaim Katzman have improved the company’s financial stability and capital structure. This serves as a further mitigating factor to concerns investors may have previously had. The market has responded positively to the moves, with a large amount of demand in the heavily oversubscribed issuance and a jump in G City’s stock price. Despite the global real estate industry facing a number of challenges, the company is making the right moves to weather the current economic storm and is creating a growth platform from which it can launch in the next phase of the business cycle.
