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Mivne Real Estate (K.D.) Ltd.
Quarterly Report • Jul 7, 2020
6930_rns_2020-07-07_cdf0650a-1973-4762-9161-6a9a2281bd41.pdf
Quarterly Report
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Quarterly statements 31 March 2020
Mivne Real Estate (K.D.) Ltd.
)"The company"(
Quarterly financial statements – for the period ended 31st March 2020
Chapter 1 - Report of the Board of Directors on the State of the Corporation's Affairs
Chapter 2 – Financial statements – for the period ended 31st March 2020
Financial data and information from the consolidated statements related to the company
This is an English translation of a Hebrew Immediate report, including its appendices, that was published on May 25, 2020 (reference no.: 2020-01-051966) (hereafter: "the Hebrew Version"). This English version is only for convenience purposes. This is not an official translation and has no binding force. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the Hebrew Version. In the event of any discrepancy between the Hebrew Version and this translation, the Hebrew Version shall prevail.
Chapter 1 Report of the Board of Directors on the State of the Corporation's Affairs
Mivne Real Estate (K.D.) Ltd. Report of the Board of Directors on the State of the Corporation's Affairs For the Three-Month Period Ending March 31 2020
The Board of Directors of Mivne Real Estate (K.D.) Ltd. ("the Company") is honored to submit the Report of the Board of Directors of the Company and its consolidated companies for the period ending March 31 2020 ("The Reported Period"), which reviews key activity for the period. The following review is limited in scope and refers to events and changes occurring in the state of the Company's affairs in the reported period the impact of which is material. The Report of the Board of Directors for the reported period must be studied along with the Company's periodic report (including the Report of the Board of Directors) for 2019 published on March 26 2020 (reference no.: 2020-01-030609 ("the 2019 Periodic Report").
1. The Company's Activity
The Company is a real estate company dealing, by itself and through its investees in varied real estate activity centering on Israel. The Company specializes in initiating, purchasing, building and managing buildings intended for offices, high-tech, industry, logistics and commerce, and is active in the field of residential real estate development in Israel. Furthermore, the Company is active in planning and supervising for implementation development works of infrastructure for residential and industrial areas in Israel for the Israel Land Authority, local authorities and various entities. The geographic and sectoral distribution in Israel, number and variety of tenants constitute a valuable advantage that assists the Company's development and strength.
The Company owns some 1,974,000 m² of cash-generating space, of which 1,583,000 m² is in Israel. The Company has land reserves and unused rights to the scope of 700,000 m².
2. The Business Environment
The Covid-19 Pandemic, the Subsequent Economic Crisis and Implications on the Company's Business Activity
Over the course of the first quarter of 2020, the world started to undergo a crisis with extensive macroeconomic implications originating from the spread of the novel coronavirus (COVID-19) throughout the world, including in Israel, as described in Section 1.6 (General Environment) of Chapter A of the 2019 Periodic Report. The World Health Organization declared the outbreak a global pandemic and there is a great deal of global uncertainty regarding defeating it via medication or vaccination and the amount of time this will require. Actions and directives taken by various countries, including Israel, which included or still include prohibitions or restrictions on busines activity, limiting attendance at workplaces, border closings and/or restricted movement for the general population (international and domestic), shutting down schools and so on, as part of the response to the pandemic, have led to a global financial crisis, which has also reached Israel. This crisis is expressed, among other things, in sharp drops in stock markets around the world (including at the Tel Aviv Stock Exchange), fluctuations in foreign currency rates, and an increase in yields on corporate debentures due to the increase in risk levels.
As of the publication of this report, the economic crisis is still underway and we cannot predict its duration and its full impact on business activity around the world and in Israel in particular. Recently, the Israeli Government has been gradually easing restrictions placed on the economy and on the population, to allow a return to full business activity in the short term. At the same time, the government has emphasized that a
change in infection rates and/or in the number of severe cases may lead to the cancellation of the reopening and to additional restrictions.
In the reported period, the Company collected the rental fees similar to previous quarters. Since the start of the crisis, Company policy has been to continue with its ongoing activities in all of its segments1 while implementing the Emergency Regulations and all government directives, and as such the Company continued in its planning, development, marketing and management activity of the Company's assets and in examining purchase transactions and participation in tenders issued by the Israel Land Authority and local authorities. Concurrently, Company management is examining, on a daily basis, developments in collecting rental and management fees from its tenants and occupancy rates in its properties. Most of the Company's Israeli revenues (some 88% if its total yearly revenues) derive from properties used for industrial and logistical purposes, for offices and businesses defined as vital and located in commercial centers, rented to 2,300 tenants, with a high level of geographic and sectoral distribution. The remainder, at 12% of all yearly rental revenues, derives from cash-generating properties with commercial zoning, with do not include businesses defined as critical. As a result of the crisis created by Covid-19, the Company has received requests from some of its tenants to cancel, reduce and/or spread out rental and management fees for the months in which restrictions were placed and business activity was reduced. Some claimed that the Covid-19 crisis constituted force majeure. In specific cases in which the Company saw fit to accommodate its tenants for April and May, it allowed payments according to a share of redemptions, subject to the fact that the relief would be decreased at the level of the full grant and/or benefit these tenants would be entitled to from the State as a result of the crisis. The Company estimates that the sum of the decrease in rental payments deriving as a result of offering these reliefs to Company tenants in Israel and abroad was estimated at 18 million NIS, of which 12 million NIS was in Israel (without the opening assumption as a result of government assistance provided these tenants). In other specific cases, the Company allows certain tenants to spread out their payments and reached arrangements with them on spreading their payments out over the course of the next few months, and the Company estimates that most of the tenants will uphold their end of these arrangements. As of the publication of this report, the Company is considering giving relief regarding rental fees or allowing payments to be spread out for May in exceptional cases only, with these reliefs expected to amount to non-material sums.
The average occupancy rate remained unchanged at 90.1%, similar to the last 12-month average and according to Company management's estimates, there is not expected to be a significant change in the average occupancy rate in the near future.
In addition, based on the actions taken by Company management including performing valuations for 68 of its properties at a value of 788 million NIS in which the value of the properties was preserved or positive revaluation took place, among other things, due to the increase in appropriate rental fees and a drop in capitalization rates, discussions with independent outside valuators and receipt of letters of update from the appraisers regarding properties worth 1.6 billion NIS, which noted that no data exists indicating material changes in the factors serving to assess the value, including the capitalization rates, and following an examination conducted by the Company – the Company found that as of the Financial Statements date there was no need to revise the fair value of its cash-generating properties. At the same time, in light of the Company's policy regarding relief given tenants, and in accordance with an examination conducted by the Company, the value of the investment property was amortized by a sum of some 25 billion NIS.
As of the publication of this report, there have been no material changes in the Group's development activity, which has continued as usual.
1 Whenever the term segment or any derivation thereof appears in this report it refers to area and not to sector as per the accounting definition.
As of the publication of this report, and taking into account the current uncertainty regarding the amount of time that will be needed to contain the pandemic and the regular and variable changing updates to the policies and decisions of governments and regulatory bodies in Israel and around the world, which have a material impact on the activity of the economy as a whole, the Company cannot estimate the scope of the impact of a continuing Covid-19 and associated crisis on the Company's present and future activity, and this will be influenced in accordance with the degree and scope of realization of relevant risk factors, including the state of the Israeli economy, the global health crisis, economic slowdowns in the foreign countries in which the Group is active, a drop in tenant payment ability, a drop in demand for space, a drop in rental prices, all as detailed in Section 1.35 of Chapter A of the 2019 Periodic Report.
The Company estimates, inasmuch as the distributions and restrictions detailed above impact short-range business activity only, they are not expected to have a material negative impact on the Company's activity and results. At the same time, continuation of the financial crisis or its worsening over time may have a negative impact on the global economy and on the Israeli economy, and the case in question is expected to have a negative impact on the Company's monetary results.
Over the next few months, the Company intends to study whether any changes to its business strategy are needed including all matters pertaining to possible changes in demand and in the needs of the tenants of the Company's cash-generating properties, to the rate of progress in projects under development and construction starts as well as in its business strategy, all in accordance with the situation assessment regarding the expected impact on Company tenants and changes in trends and demands following the implications of the crisis.
Without detracting from the above, the Company estimates at this time that the Company's financial fortitude, as expressed, among other things, in the Company's high cash balances and unused credit framework amounting to 1.2 billion NIS as of the publication of this report, a strong and stable cash flow, 562 cashgenerating properties in a variety of segments and broad geographical distribution in Israel occupied by 2,652 tenants at high occupancy rates, the extended life span of most of its loans, accessibility to the domestic capital market and unpledged real estate properties to the sum of some 3.3 billion NIS, will allow it to limit the potential impact of the crisis on its activity and meet its existing and expected obligations. At the same time, we emphasize that as of the report publication date, the scope of the crisis and its impact on the Company cannot be estimated reliably, and Company management is tracking and will continue to closely track future developments and will consider its steps accordingly. To be clear, the Company's assumptions and estimates presented above constitute forward-looking information, as defined in Section 32a of the Securities Law, 1968, based on information existing at the Company as of the publication of this report. These estimates may not be realized, in whole or in part, or be realized in a materially different manner than projected, among other things, in light of the fact that this is an unusual and ongoing event that is not under the Company's control. The continued spread of the virus, decisions made by countries and regulatory authorities in Israel and around the world in connection with their preparations, changes in interest rates and in discount rates of real estate properties, changes in the scope of tenants' business activities and their payment ability and changes in cash flows from ongoing activity as a result of the development or continuation of the situation, as well as additional changes deriving from the above, may impact the Company's activity and on its monetary results differently than the estimates detailed above.
3. Points of Emphasis for the Reported Period and Subsequently
- • NOI (as this term is defined in Section 12 below) in Israel in the reported period amounted to 148 million NIS compared to a sum of 143 million NIS in the corresponding period last year. The increase derives from the continued increase in SP NOI.
- • Same property NOI in Israel increased by 2.7% in the reported period compared to the corresponding period last year.
- • NOI abroad in the reported period amounted to 24 million NIS, constituting a 10.1% decrease from the corresponding period last year. Most of the decrease derives from the realization of properties in Germany and the end of the safeguard process in France.
- • The FFO from cash-generating properties (as this term is defined in Section 15 below) in the reported period amounted to 103 million NIS, constituting an 11% increase over the corresponding period last year. For further details see 15. below.
- • Net profits in the reported period amounted to 123 million NIS, compared to net profits of 116 million NIS in the corresponding period last year. For further details, see 18.2 below.
- • Equity amounted to a total of 5,681 million NIS, a 125 million NIS increase over equity as of December 31 2019. For further details see 18.1. below.
- • During the reported period, the ratio of debt to CAP dropped by 3.1% to 46.1%, in light of continued debt redemption.
- • During the reported period, the occupancy rate in Israel increased by 0.1%, to 90.1%.
- • Property sales – during the reported period, the Company sold properties in Israel in return for a total of 25 million NIS. The book value of the properties sold amounted to a total of 21 million NIS so that an accumulated profit of 4 million NIS was listed for them. Furthermore, subsequent to the reported period, a Company subsidiary completed the sale of the property in Portugal, in return for a total of 87 million NIS (€22.25).
- • Sale of holdings in associate – over the course of the reported period, Darban sold all of the stock capital it held in Yakum Development in return for a (net) total of 243.5 million NIS.
- • Cash and credit frameworks as of the publication of this report, the Company has cash balances and unused credit frameworks totaling 1.2 billion NIS.
4. Details on the Company's Activity in Israel
As of March 31 2020, the Company's properties in Israel, owned and lease, include:
- • 562 cash-generating properties distributed throughout Israel with a total area of 1.6 million m², not including properties under construction. The properties are rented to 2,652 tenants, in contracts of various durations.
- • 13 projects in advanced stages of construction and planning to a scope of 344,000 m².
- • The rate of occupancy to value of the Company's properties in Israel as of March 31 2020 is 91.2%.
- • The occupancy rate of the Company's properties in Israel as of March 31 2020 is 90.1%.
5. Segmentation of the Value of Company Properties in Israel
Three segments for Company assets (in millions of NIS):
Offices (44 properties) )נכסים 44 )משרדים Commercial centers (17 shopping centers) )קניות מרכזי 17 )מסחריים מרכזים Industrial and logistics (501 properties) )נכסים 501 )ולוגיסטיקה תעשיה
6. At Look at Company Data
| Rate of Change Compared to Corresponding Period Last Year |
1-3/2020 (In Thousands of NIS) |
1-3/2019 (In Thousands of NIS) |
1-12/2019 (In Thousands of NIS) |
|
|---|---|---|---|---|
| NOI in Israel | 3.3% | 148,234 | 143,328 | 588,832 |
| NOI abroad | (10.1%) (*) | 24,306 | 27,038 | 113,980 |
| SP NOI in Israel | 2.7% | 141,908 | 582,550 | |
| Net income for the period |
5.9% | 122,939 | 116,108 | 784,164 |
| FFO from cash generating assets** |
11% | 103,314 | 93,058 | 396,259 |
* Most of the decrease is attributed to the sale of assets in accordance with Company strategy.
** See the definition of FFO in Section 15 below on how FAFO is calculated.
7. Key Data
(*) Debt less deposits, cash and tradable securities.
(**) The Company's optimal debt framework and its compatibility with the business environment in which the Company is active is examined on a regular basis. Reducing the ratio of debt to CAP in recent years has contributed to reducing the Company's risk, while at the same time a leverage level allowing business development and improved yield on capital was preserved.
| Breakdown of Financial Debt | ||||||||
|---|---|---|---|---|---|---|---|---|
| Consolidated, in Thousands of NIS | ||||||||
| Israeli Outstanding Debt | 31.3.2020 | 31.12.2019 | ||||||
| Public and institutional debentures | 5,030 | 5,208 | ||||||
| Banks | 862 | 268 | ||||||
| Less deposits, cash and tradable securities | (1,026) | (255) | ||||||
| Net outstanding debt, in Israel | 4,866 | 5,221 | ||||||
| Outstanding Debt Abroad | ||||||||
| Banks and financial institutions | 299 | 449 | ||||||
| Less cash, deposits and short-term investments | (304) | (296) | ||||||
| Net outstanding debt abroad | (5) | 153 | ||||||
| Total outstanding debt | 4,861 | 5,374 |
8. Facing the Future – Developments in Initiation and Development*
| Project Name | Company's Share |
Use | Built-up area (m²) |
Design Status (*) | Book Value (in Millions of NIS) |
Estimated Cost Balance (in Millions of NIS) (*) |
Expected Range of NOI (in Millions of NIS) (*) |
|
|---|---|---|---|---|---|---|---|---|
| Hasolelim Compound Tel Aviv |
100% | Offices and commercial |
68,300 | The plan was approved for validation, a request for excavation and |
349 | 553 | 80-90, not including |
|
| Hasolelim Compound Tel Aviv |
75% (***) | Residential | 360 housing units |
foundation permits was filed. Estimated completion of stage 1 – 2023 |
884 | development profit for the housing. |
||
| "Mivne" Compound, Holon |
100% | Offices, Stage 1 |
14,800 | Underway, Estimated completion – 2021 |
43 | 71 | 7-8.5 | |
| Sarona, Kfar Saba |
100% | Offices | 26,000 | Underway, Estimated completion – 2023 |
41 | 214 | 22-24 | |
| Hameitav, Tel Aviv |
50% | Residential | 170 units | Underway, Estimated completion – Q4 2020 |
132 | 38 | - | |
| "Structure" Or Yehuda |
100% | Offices | 7,500 | In finishing stages and near issue of Form 4 |
61 | 1 | 4-5 | |
| Logistical Center Kiryat Gat |
100% | Industrial and logistics |
6,000 | Underway, estimated completion – Q3 2020 |
14 | 15 | 2-3 | |
| Short Term |
Life Sciences Park Haifa (2 Buildings) |
50% | Offices | 14,000 | Expected start of implementation – Q3 2020 Request filed for foundation and excavation permits Excavation and foundation tender issued |
10 | 123 | 9-10 |
| Hasivim Petach Tikva |
100% | Offices | 13,000 | The Town Plan is undergoing various stages of approval. Expected start of implementation – 2021 |
14 | 105 | 7-8 | |
| "Structure" Herzliya Pituach |
100% | Commercial, office and residential |
34,000 | The Town Plan has been validated. A request for an information file has been submitted. Submittal of permit request expected over the course of Q2/2020. Expected start of implementation – Q1/2021 |
102 | 350 | - | |
| Hameitav, Tel Aviv |
100% | Residential, occupational and commercial |
220,000 (**) |
Pre-estimate. A City Engineer's forum was conducted, the plan's advancement was approved. Expected discussion of deposit Q4 2020 |
117 | Pre-estimate | - | |
| Life Sciences Park Haifa (2 Buildings) |
50% | Offices | 14,000 | Detailed design. | 10 | Pre-estimate | - | |
| Long Term |
Kiryatech 2 Yokneam |
100% | Offices | 25,000 | Permit request submitted, in detailed planning stages |
2 | Pre-estimate | - |
| Beersheba | 100% | Hotels | 7,000 | Town plan approved for deposit |
- | Pre-estimate | - | |
| Akerstein Towers Stage 2 |
53% | Offices Employment and residential |
20,000 42,000 |
In discussions with local committee. In planning stages for Town Plan. |
- | Pre-estimate | - | |
| Office Tower in Giv'at Shaul |
100% | Offices | 34,750 | The plan was deposited in the District Committee |
- | Pre-estimate | - |
- * Some of the information presented in this table constitutes forward-looking information in accordance with Section 32a of the Securities Law, 1968. Forward-looking information is a forecast, estimate or other information in the Company's position as they were upon the publication of this report referring to a future event or matter, the realization of which is not certain and which is not solely under the Company's control, and among other things is subject, by its nature, to material risks of non-realization. Such information is influenced, among other things, by the business environment in which the Company is active and by the risk factors that characterize the Company's activity, including the state of the Israeli economy, the global health crisis, receipt of permits and approvals from the certified authorities, engagements with third parties, changes in legislation and standards and increased construction costs. For further details on the risk factors that characterize the Company's activity see Section 1.35 of the Report on the Corporation's Business in the 2019 Periodic Report and for details on the business environment see Section 2 above.
- ** The Company is acting to push forward a town plan with the authority of a local council by virtue of the TA 5000 outline plan for the addition of rights, as follows: adding residential rights of 31,500 m² constituting 310 housing units, and increasing existing rights for employment and offices from 96,000 m² to 213,000 m² (an addition of 117,000 m²)
- *** The Company has signed an agreement with Tidhar Real Estate Ventures to sell rights to the land, which will reflect, after the a local plan deposited and approved is validated, 25% of the construction rights zoned residential approved within the framework of the plan. See Note 13 to the December 31 2019 Financial Statements (Chapter C of the 2019 Periodic Statement). The above monetary data is presented at 100% and refers to the entire project.
9. Residential
The Company deals, among other things, in the planning and construction of apartments for sale in Israel. The Company has an inventory of land for future construction in Israel as follows:
9.1. Inventory of Land for Short-Term Residential Construction and Residential Apartments under Construction
| Location | No. of Housing Units |
Holdings in Project |
Number of Housing Units for which Sales Agreements were Signed and Not Yet Delivered |
Financial Scope of Sales Agreements (Millions of NIS, Not Yet Delivered) |
Sign-Ups for which the Sales Agreement has Not Yet been Signed |
Number of Housing Units for which Sales Agreements were Signed and Not Yet Delivered |
Financial Scope of Sales Agreements (Millions of NIS, Not Yet Delivered) |
Sign-Ups for which the Sales Agreement has Not Yet been Signed |
Total Investment as of March 3 2020 (Millions of NIS) |
|---|---|---|---|---|---|---|---|---|---|
| % | As of March 31 2020 | As of the publication of the report | |||||||
| Marom Hasharon Stage E |
13 * | 90% | - | - | - | - | - | - | 30 |
| Marom Hasharon Stage B |
61 | 90% | 13 | 28 | - | 13 | 28 | 2 | 61 |
| Hameitav Tel Aviv |
170 | 50% | 141 | 341 | - | 141 | 341 | - | 132 |
| Belarus, Minsk |
5 * | 100% | 5 | 2 | - | 4 | 1 | - | 4 |
| Total | 249 | 159 | 371 | - | 147 | 346 | 2 | 227 |
(*) Balance of finished apartments
9.2. Inventory of Land for Long-Term Residential Construction
| Location | Number of | Construction | Holdings in | Total Investment as of | |
|---|---|---|---|---|---|
| Housing Units | Rights | Project | March 31 2020 | ||
| In Thousands m² | In % | In Millions of NIS | |||
| Marom Hasharon | 213 | 47 | 90% | 30 | |
| Israel – other | 173 | 17 | 100% | 17 | |
| Foreign – other | - | - | - | 11 | |
| Total | 386 | 64 | - | 58 |
| Uses | Number of Properties as of March 31 2020 |
Above Ground Area as of March 31 2020 |
NOI for 1- 3/2020 |
Fair Value of Cash Generating Property as of March 31 2020 |
Occupancy rate as of March 31 2020 |
Fair Value of Real Estate Under Construction as of March 31 2020 |
|---|---|---|---|---|---|---|
| m² | In Thousands of NIS |
In Thousands of NIS |
% | In Thousands of NIS |
||
| Offices | 44 | 341,930 | 54,667 | 3,215,282 | 88.1% | 132,550 |
| Commercial Centers | 17 | 186,520 | 30,168 | 1,919,371 | 93.3% | - |
| Industrial and Logistics | 501 | 1,054,469 | 63,399 | 3,545,933 | 90.3% | 25,367 |
| Total | 562 | 1,582,919 | 148,234 | 8,680,586 | 90.1% | 157,917 |
10.Key information on the Company's properties in Israel, divided by segments:
11.Details of Investment Property Including Investment Property Held for Sale by Country
| Country | Number of Properties |
Above-Ground Area | Number of Tenants |
Occupancy Rate |
Fair Value In Thousands of NIS |
Actual NOI 1-3/2020 In Thousands of NIS |
|||
|---|---|---|---|---|---|---|---|---|---|
| Cash-Generating Properties | |||||||||
| Israel | 562 | 1,582,919 | 2,652 | 90.1% | 8,630,127 | 148,234 | |||
| Switzerland | 2 | 55,739 | 20 | 93.2% | 388,628 | 6,303 | |||
| Ukraine | 1 | 43,989 | 99 | 100% | 234,263 | 7,347 | |||
| France | 6 | 128,825 | 23 | 98.1% | 68,310 | 5,857 | |||
| Canada | 3 | 91,347 | 156 | 77.1% | 156,138 | 1,461 | |||
| U.S.A. | 2 | 18,489 | 33 | 75.1% | 98,751 | 1,310 | |||
| Others | 4 | 52,540 | 39 | 94.9% | 103,505 | 2,028 | |||
| Total Cash Generating Properties |
580 | 1,973,848 | 3,022 | 90.34% | 9,679,722 | 172,540 | |||
| Land | |||||||||
| Israel – land | 39 | - | - | - | 1,169,321 | - | |||
| Overseas | 3 | - | - | - | 122,172 | - | |||
| Total land | 42 | - | - | - | 1,291,493 | - | |||
| Total | 622 | 1,973,848 | 3,022 | 90.34% | 10,971,215 | 172,540 | |||
| Israel – associates |
7 | 23,776 | 60 | 68% | 305,253 | 5,160 |
12.NOI (Net Operating Income) in Israel
The following is information on the Company's NOI (profit from the rental and operation of properties, less depreciation and amortization). The NOI is used to measure the free cash flow available to service financial debt, as current investments and preservation of the current status (CAPE) charged to gain/loss are offset from the NOI. Note that NOI:
- A. Does not present cash flows from regular activities in accordance with generally accepted accounting rules.
- B. Does not reflect cash available for the financing of the Company's entire cash flows, including its ability to distribute monies.
- C. Cannot be considered a replacement for net profit for purposes of evaluating the results of the Company's activities.
12.1.NOI Development (In Thousands of NIS)
| In Thousands of NIS | 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | ||||
| Identical properties for the period in Israel (NOI Same Property)( 1) |
145,735 | 148,506 | 148,111 | 144,025 | 141,908 | |||
| NOI from properties purchased in the period | 2,215 | 1,876 | - | - | - | |||
| NOI from properties sold | 284 | 733 | 845 | 1,246 | 1,583 | |||
| Total NOI in Israel in the period | 148,234 | 151,115 | 148,956 | 145,271 | 143,491 | |||
| Total NOI abroad in the period(2) | 24,306 | 27,238 | 27,461 | 32,483 | 26,798 | |||
| Total NOI in the period | 172,540 | 178,353 | 176,417 | 177,754 | 170,289 |
(1) The increase in the current quarter compared to the corresponding quarter last year derives from improvements in occupancy rates, increased rental fees as well as operational streamlining.
(2) The drop in NOI abroad derives from the realization of Company properties abroad
13.Weighted Cap Rate
The following is a calculation of the weighted cap rate, for real estate properties in Israel, derived from all of the Company's cash-generating properties as of March 2020:
| Consolidated In Millions of NIS |
|
|---|---|
| Investment property in March 31 2020 consolidated statements | 10,636 |
| Less – real estate abroad | (1,085) |
| Less – value of land classified as investment property | (1,134) |
| Plus – value of cash-generating properties intended for realization | 41 |
| Cash-generating investment property in Israel as of March 31 2020 | 8,458 |
| Less value attributed to open spaces | (761) |
| Expected investments | 50 |
| Investment property attributed to rented spaces as of March 31, 2020 | 7,747 |
| NOI in Israel as of March 31 2020 | 148 |
| Expected NOI* in Israel for 2020 | 578 |
| Weighted cap rate deriving from revenue-producing investment real estate in Israel | 7.5% |
* The information in the above table featuring a forecast for all of 2020 constitutes forward-looking information, as defined in Section 32a of the Securities Law, 1968. Forward-looking information is a forecast, estimate or other information in the Company's possession as they were upon the publication of this report referring to a future event or matter, the realization of which is not certain and which is not solely under the Company's control, and among other things is subject, by its nature, to material risks of non-realization. Such information is influenced, among other things, by the business environment in which the Company is active and by the risk factors that characterize the Company's activity, including the state of the Israeli economy, the global health crisis, changes in occupancy rates, in the CPI, in interest rates, and in rental fees. For further details on the risk factors that characterize the Company's activity see Section 1.35 of the Report on the Corporation's Business (Chapter A) in the 2019 Periodic Report and for details on the business environment see Section 2 above.
14. Spreading debt repayments over years – including expanding debenture Series 16 and expected redemption for debenture Series 15 and 22
| Average Life Span |
Weighted Effective |
4-12 /2020 |
2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 Onward |
Balance as of March 31 2020 |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest | In Millions of NIS | |||||||||||
| Banks | 4.60 | 3.16% | 8 | 11 | 11 | 11 | 71 | 93 | 20 | - | - | 225 |
| Institutional | 3.29 | 3.32% | 36 | 47 | 250 | 29 | 162 | 96 | 9 | 199 | - | 828 |
| Debentures 15 | 2.38 | 5.44% | 150 | 4 | 4 | 4 | 4 | - | - | - | - | 156 |
| Debentures 16 | 4.02 | 2.36% | 20 | 39 | 39 | 39 | 39 | 39 | 39 | 39 | 39 | 87 |
| Debentures 17 | 3.55 | 3.21% | 38 | 76 | 76 | 76 | 76 | 76 | 76 | 76 | 76 | 654 |
| Debentures 18 | 5.62 | 2.47% | - | 112 | 77 | 91 | 420 | - | - | - | - | 707 |
| Debentures 19 | 6.10 | 2.73% | - | 20 | 20 | 20 | - | 20 | 20 | 272 | - | 367 |
| Debentures 20 | 2.97 | 2.96% | 53 | 27 | - | 27 | - | 53 | 106 | - | 239 | 500 |
| Debentures 21 | 5.06 | 2.42% | 37 | 37 | 37 | 37 | 37 | 37 | 37 | - | - | 274 |
| Debentures 22 | 1.50 | 2.52% | 396 | - | - | - | - | - | - | - | - | 387 |
| Debentures 23 | 6.05 | 2.74% | 27 | 27 | 27 | 27 | 27 | 27 | 336 | - | - | 492 |
| Debentures 24 | 4.66 | 2.65% | 25 | 25 | 25 | 25 | 25 | 37 | 37 | 37 | 359 | 588 |
| Israel total | 4.28 | 3.14% | 790 | 425 | 566 | 386 | 861 | 478 | 680 | 623 | 713 | 5,264 |
| Weighted interest rate | 2.86% | 2.84% | 2.85% | 2.87% | 2.85% | 2.87% | 2.80% | 2.96% | 2.96% | |||
| Banks abroad | 1.80 | 2.64% | 47 | 178 | 18 | 1 | 1 | 53 | - | - | - | 298 |
| Total redemptions | 837 | 603 | 584 | 387 | 862 | 531 | 680 | 623 | 713 | |||
| Of these, "balloon" guaranteed by lien | (39) | (171) | (223) | - | (628) | (228) | (357) | (177) | (359) | |||
| Redemptions less pledged cash flow | 798 | 432 | 361 | 387 | 234 | 303 | 323 | 446 | 354 | |||
| Value of pledged asset | 95 | 339 | 725 | - | 1,813 | 647 | 798 | 1,216 | 1,204 | |||
| LTC rate of pledged asset | 41.1% | 50.4% | 30.8% | - | 34.6% | 35.2% | 44.8% | 14.5% | 29.81% |
Estimated Life Span and Weighted Interest Rate in Israel
The weighted estimated life span of the Company's debt in Israel as of March 31 2020 amounts to 4.28 and the effective weighted interest rate is 3.14%.
The total weighted interest rate calculated for the Company's loans in Israel amounts to a total of 3.14%, so that the gap between the yield rate calculated in the above table (7.5%) amounts to 4.36%.
Unpledged Assets
The Company has unpledged assets worth 3.3 billion NIS (of which 2.8 billion NIS are in Israel).
15.FFO (Funds From Operation) from Cash-Generating Properties
FFO is a commonly-used global index used to provide additional knowledge on the results of the operations of real estate companies, granting a proper basis for comparisons between revenue-producing real estate companies. FFO from cash-generating properties, as defined, expressed net reported profit, less profits (or losses) from the sale of properties, plus depreciation and amortization (for real estate), after neutralizing deferred taxes, losses from the early redemption of loans, non-cash expenses as well as neutralizing expenses attributed to residential construction and development rights.
We emphasize that the FFO:
- A. Does not present cash flows from regular activities in accordance with generally accepted accounting rules.
- B. Does not reflect cash available for the financing of the Company's entire cash flows, including its ability to distribute monies.
- C. Cannot be considered a replacement for reported net profit for purposes of evaluating the results of the Company's activities.
The 10 million NIS increase in FFO from cash-generating properties in the reported period compared to the corresponding period last year (11%) is largely explained by the drop in interest expenses, against a drop in NOI as a result of the sale of properties.
| FFO for the Year Ending | |||
|---|---|---|---|
| 1-3/2020 | 1-3/2019 | 31.12.2019 | |
| In Thousands of NIS | |||
| Net profit (loss) for the period | 122,939 | 116,107 | 784,164 |
| Changes in value of investment property and investment property under construction |
(28,531) | (48,767) | (494,117) |
| Profits and losses from the sale of real estate, investees, other revenues and the realization of capital reserves from translation differences. |
(49,479) | 1,895 | 30,581 |
| Tax expenses from the sale of properties and other revenues | 18,841 | 3,293 | - |
| Changes in the fair value of financial instruments | 7,391 | - | (6,812) |
| Adjustments due to taxes | 26,609 | 36,627 | 61,171 |
| Adjustments referring to associates | 2,466 | 1,648 | 48,808 |
| Revaluation of assets and liabilities | 1,008 | 1,810 | 14,717 |
| Other expenses/revenues | (18,670) | (38,186) | (78,990) |
| Nominal FFO | 82,574 | 74,427 | 359,522 |
| Added (subtracted) – expenses (revenues) of linkage differences on the debt principal and exchange rate differences |
15,969 | 14,068 | 17,413 |
| Real FFO | 98,543 | 88,495 | 376,935 |
| FFO attributed to land, construction rights and inventory | 4,771 | 4,563 | 19,324 |
| FFO attributed to cash-generating property | 103,314 | 93,058 | 396,259 |
16. Strategy and Vision
The Company has adopted a strategy at the basis of which is the Company's focus on busines activity in Israel while placing an emphasis on the betterment of the Group's assets and improving rental fees deriving from them, establishing new and high-quality properties on Group land and examining the purchasing transaction of a property, a portfolio of properties or a company in the field of cash-generating property – actions the completion of which is intended to lead to the Company's short and long term growth.
As part of this strategy, in recent years the Company has acted to realize most of its properties abroad as well as realize properties in Israel that are not part of the Company's core business, properties with low occupancy rates and properties in locations in which the Company does not have a relative advantage. From time to time, the Company Board of Directors examines the need to adapt its strategy to changes in the business environment, and in particular when there are changes expected in demand for rental properties in the segments and geographic regions in which the Group is active as well as in the demand to purchase housing units in the geographical areas in which the Group is active. In addition, following the Covid-19 pandemic and the resulting economic crisis, over the next few months, the Company intends to study whether any changes are needed in its business strategy including all matters pertaining to possible changes in demand and in the needs of the tenants of the Company's cash-generating properties, to the rate of progress in projects under development and construction starts as well as in its business strategy, in accordance with the situation assessment regarding the expected impact on Company tenants and changes in expected trends. For further details see Section 1.33 of the Report of corporate Business in the 2019 Periodic Report.
17. 2020 Forecast (1)
The following is the Company's forecast for its primary operating results in 2020, based on the following working assumptions:
- • Known CPI as of March 31 2020.
- • Without the purchase of new properties.
- • No material changes will occur in the business environment in which the Company is active in Israel beyond the following detailed estimate attributed to the impact of the Covid-19 pandemic. For further information on the business activity in which the Company is active see Section 2 above.
- • Signed leases and Company management's projections regarding current lease renewal agreements in 2020.
| Projected FFO from cash-generating properties for Q2/2020, in millions of NIS | |||||
|---|---|---|---|---|---|
| 4-6/2019 FFO | 83 | ||||
| Changes in NOI following 2019 sales and 2020 sales forecast | (10) | ||||
| Changes in FFO following the sale of associates | (6) | ||||
| Decrease in NOI following impact of Covid-19 in Israel and abroad | (18) - (25) | ||||
| Projected improvement in FFO | 37 - 34 | ||||
| Projected FFO for 4-6/2020 (1) | 86 - 76 |
| Projected FFO from cash-generating properties for 2020, in millions of NIS | |||
|---|---|---|---|
| FFO In practice 1-3/2020 | 103 | ||
| 2019 FFO | 396 | ||
| Changes in NOI following 2019 sales and 2020 sales forecast | (40) | ||
| Changes in FFO following the sale of associates | (21) | ||
| Decrease in NOI following impact of Covid-19 in Israel and abroad | (18) - (25) | ||
| Projected improvement in FFO | 84 - 71 | ||
| FFO forecast for 2020 (1) | 401 - 381 |
Projected NOI for Q2/2020, in millions of NIS (2)
| NOI 4-6/2019 | 178 |
|---|---|
| Changes in NOI following 2019 asset sales and 2020 sales forecast | (10) |
| Decrease in NOI following impact of Covid-19 in Israel and abroad | (18) - (25) |
| Operational improvement in NOI | 3 - 2 |
| Projected NOI for 4-6/2020 (1) | 153 - 145 |
| Projected NOI for 2020, in millions of NIS (2) | |||
|---|---|---|---|
| NOI in practice in 1-3/2020 | 173 | ||
| NOI in practice in 2019 | 703 | ||
| After neutralizing NOI from the sale of properties in 2019 and expected sales in 2020 |
(40) | ||
| Decrease in NOI following impact of Covid-19 in Israel and abroad | (18) - (25) | ||
| Operational improvement | 9 - 3 | ||
| NOI forecast for 2020 (1) | 654 - 641 |
(1) The information in the above tables featuring a forecast for all of 2020 constitutes forward-looking information in accordance with Section 32a of the Securities Law, 1968. Forward-looking information is a forecast, estimate or other information in the Company's position as they were upon the publication of this report referring to a future event or matter, the realization of which is not certain and which is not solely under the Company's control, and among other things is subject, by its nature, to material risks of non-realization. Such information is influenced, among other things, by the business environment in which the Company is active and by the risk factors that characterize the Company's activity, including the state of the Israeli economy, the global health crisis, changes in occupancy rates, in the CPI, in interest rates, and in rental fees. For further details on the risk factors that characterize the Company's activity see Section 1.35 of the Report on the Corporation's Business (Chapter A) in the 2019 Periodic Report and for details on the business environment see Section 2 above.
(2) A yearly CPI assumption of 1% was used.
18.Balance sheet summary and operating results
18.1.The following table summarizes the financial situation, liquidity and sources of financed (in millions of NIS):
| As of 31.3.2020 |
As of 31.12.2019 |
Notes and Explanations | |
|---|---|---|---|
| Current Assets* | 1,950 | 1,314 | Mainly increase in cash balances |
| Investments handled using the book value method |
374 | 604 | The decrease derives from the sale of the shares of Yakum Development For further details see Note 23 to the December 31 2019 Financial Statements (Chapter C of the 2019 Periodic Statement). |
| Investment Property | 10,636 | 10,632 | |
| Short-Term Credit, Current Maturities and Liabilities due to Properties Intended for Realization |
1,063 | 747 | The increase primarily derives from the utilization of credit frameworks. |
| Loans from banking institutions and other credit providers |
1,384 | 1,449 | The decrease largely derives from current redemptions. |
| Long-term debentures | 3,872 | 3,911 | |
| Total equity attributed to shareholders |
5,697 | 5,571 | Most of the increase derives from a 123 million NIS profit in the period. |
| Equity | 5,681 | 5,556 |
(*) Working capital as of March 31 2020 amounts to a total of 465 million NIS
| For the Period | Notes and Explanations | ||||
|---|---|---|---|---|---|
| 1-3/2020 | 1-3/2019 | ||||
| Revenues from rental and management fees | 228 | 225 | |||
| Maintenance and management cost | 55 | 55 | |||
| Increase in fair value of real estate | 29 | 49 | The change in the period largely derives from a net increase in the fair value of real estate in Israel. In the first quarter, 68 appraisals were carried out of properties worth 788 million NIS, with the previous appraisal taking place in March 2019. The increase in the value of these properties derives from an increase in real rental fees, from improved occupancy rates, from a decrease in capitalization rates as well as from an increase in land value on the basis of comparison transactions. |
||
| general expenses | Sales, marketing, administrative and | 34 | 29 | Most of the increase derives from share based payment For further details, see Note 6a to the Financial Statements. |
|
| Net interest expenses | 43 | 55 | |||
| Revenues from decrease in CPI | (22) | (12) | |||
| Financing expenses |
Net expenses from foreign currency exchange rate differences and others |
29 | 35 | ||
| Other expenses (revenues), net | 16 | (9) | Most of the expense in the period derives from loss due to the revaluation of securities and income tax interest expenses |
||
| Total | 66 | 69 | |||
| Profit Before Taxes on Income | 172 | 163 | |||
| Taxes on Income | 49 | 47 | |||
| Net Profit | 123 | 116 |
18.2.The following table summarizes business results (in millions of NIS):
19.Cash and Credit Frameworks
19.1.Cash Flows
| Sources | In Millions of NIS |
|---|---|
| Balance of Cash at the Beginning of the Period | 427 |
| Cash deriving from current activities | 118 |
| Investment Activities | |
| Sale of assets | 217 |
| Increase in restricted cash, net | 22 |
| Proceeds from the realization of investment in investee | 205 |
| Investment in investment property real estate under | (53) |
| development and fixed assets | |
| Total investment activity | 391 |
| Financing Activity | |
| Receipt of short-term credit | 598 |
| Repayment of loans and long-term liabilities | (312) |
| Redemption of debentures | (8) |
| Total Financing Activity | 278 |
| Cash from foreign activity | 1 |
| Balance of cash at the end of the period | 1,215 |
19.2.Credit Frameworks
As of the publication of this report, the Company has cash balances and unused credit frameworks totaling 1.2 billion NIS.
As of this report the Company meets all financial criteria it undertook within the framework of the loan agreements and deeds of trust of Company debentures.
20.Credit Rating
On January 23 2020 Standard & Poor's Ma'alot announced that it was increasing its rating for the Company and its debentures. The rating of the Company, the unguaranteed debentures (Series 15, 17, 18, 20, 21 and 22) and the debentures guaranteed by Darban shares (Series 24) increased from ILA+ to ILAA-. The rating of debentures guaranteed by cash-generating real estate properties (Series 18, 19 and 24) increased from ILAAto ILAA, all with a stable outlook.
21.Working Capital
Working capital, including assets held for sale, as of March 31 2020 amounted to a total of 465 million NIS in the Consolidated Financial Statements. Working capital, including assets held for sale, as of March 31 2020 amounted to a total of 39 million NIS in the solo Financial Statements.
22.Linkage Balance
The Company has financial liabilities to the sum of 6.7 billion NIS of which 4.6 billion NIS are CPI-linked. The Company's cash-generating property in Israel, which is worth 8.7 billion NIS, is mostly rented in CPIlinked rental agreements, and the Company considers this long-term inflationary protection.
23.Investment in Associates
The Company has investments vin investees operating in Israel, the United States, Canada and Poland. The Company lists its investments in these companies using the book value method. As of March 31 2020 the investment in these companies amounts to 374 million NIS, of which 210 million NIS is in Israel.
Over the course of the period, Darban sold all of the stock capital held by it in Yakum Development in return for a total of 243.5 million NIS.
24.Equity
Equity as of March 31 2020 amounted to 5.7 billion NIS (equity per share of 7.74 NIS). Equity as of December 31 2019 amounted to 5.6 billion NIS (equity per share of 7.57 NIS).
The Company Board of Directors would like to thank the Company's employees for their dedicated work during the reported period as well as the holders of Company securities for their trust in the Company.
Tal Forer Chair of the Board of Directors
________________
Dudu Zabida Company CEO
________________
Date: May 24 2020
Appendices
- Appendix A – Expanded Financial Statements
- Appendix B – Exposure to Market Risks and their Management
- Appendix C – Disclosure Provisions with Regard to the Corporation's Financial Reporting
- Appendix D – Dedicated Disclosure to Debenture Holders
- Appendix E Linkage Basis Report
Appendix A – Financial Data on Expanded Consolidated Statement
Expanded Consolidated Financial Statements
The Company's expanded reports are the Company's reports presented according to IFRS rules, with the exception of the implementation of IFRS 11 Joint Arrangements, which was implemented retroactively to yearly reporting periods starting January 1 2013. In other words, investments in investees presented on an equity basis that prior to the implementation of the standard were treated using the relative consolidation method (due to the existence of a contractual arrangement for joint control), are neutralized and returned by way of the relative consolidation of the investees. The Company did not include its share of companies that are not material to its activity.
Expanded Consolidated Balance Sheet
| As of March 31 | As of December 31 | ||
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Unaudited | Unaudited | Audited | |
| Current Assets | Thousands of NIS | ||
| Cash and cash equivalents | 1,229,420 | 808,604 | 447,353 |
| Limited cash and money in trust | 18,419 | 69,555 | 25,286 |
| Short-term investments | 69,497 | 90,719 | 78,450 |
| Trade receivables | 42,122 | 59,951 | 38,316 |
| Other receivables | 219,924 | 175,781 | 194,825 |
| Inventory of land, apartments and homes for sale and under construction |
226,795 | 225,740 | 230,620 |
| Total | 1,806,177 | 1,430,350 | 1,014,850 |
| Assets held for sale | 163,314 | 159,858 | 330,105 |
| Total current assets | 1,969,491 | 1,590,208 | 1,344,955 |
| Deposits in banking corporations | 403,123 | 127,712 | 461,330 |
| Other receivables | - | 75,061 | - |
| Investments in companies handled using the book value | |||
| method | 162,959 | 154,960 | 164,684 |
| Inventory of land for construction | 58,115 | 63,805 | 57,885 |
| Investment property | 10,952,579 | 11,039,292 | 11,305,216 |
| Investment property under development | 157,917 | 57,769 | 134,597 |
| Fixed assets, net | 67,295 | 72,993 | 68,433 |
| Intangible assets, net | 27,128 | 27,127 | 27,128 |
| Deferred taxes | 3,172 | 6,353 | 1,372 |
| Total non-current assets | 11,832,288 | 11,625,072 | 12,220,645 |
| Balance sheet total | 13,801,779 | 13,215,280 | 13,565,600 |
| As of March 31 | As of December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||
| Unaudited | Unaudited | Audited | ||
| Thousands of NIS | ||||
| Current Liabilities | ||||
| Credit from banks and other credit providers | 628,910 | 64,025 | 36,558 | |
| Current maturities of debentures | 339,063 | 380,075 | 328,493 | |
| Current maturities of loans and other liabilities | 127,056 | 263,891 | 273,585 | |
| Trade payables | 72,861 | 58,577 | 60,198 | |
| Payables and credit balances | 263,348 | 248,571 | 199,822 | |
| Advance payments from buyers | 40,896 | 42,346 | 41,584 | |
| Taxes payable | 54,365 | 9,908 | 41,098 | |
| Total | 1,526,499 | 1,067,393 | 981,338 | |
| Liabilities referring to assets held for sale | - | 33,678 | 152,752 | |
| Total current liabilities | 1,526,499 | 1,101,071 | 1,134,090 | |
| Loans from banking corporations | 1,301,287 | 1,687,906 | 623,809 | |
| Debentures | 3,872,271 | 4,121,470 | 3,911,176 | |
| Other liabilities | 151,784 | 169,584 | 1,010,228 | |
| Tenant deposits | 41,437 | 37,807 | 43,823 | |
| Financial derivatives | - | 5,440 | 4,869 | |
| Deferred taxes | 1,227,750 | 1,279,612 | 1,281,232 | |
| Total non-current liabilities | 6,594,529 | 7,301,819 | 6,875,137 | |
| Share capital | 1,509,503 | 598,125 | 1,509,503 | |
| Premium on shares | 3,607,405 | 2,585,151 | 3,607,405 | |
| Principal in respect of share-based payment transactions | 8,245 | 2,662 | 2,694 | |
| Treasury shares | (641,127) | - | (641,127) | |
| Retained earnings | 1,366,779 | 634,717 | 1,231,356 | |
| Capital reserve in respect of cash flow hedging transaction | (3,784) | (4,188) | (3,732) | |
| Adjustments from the translation of financial statements of foreign activity | 34,220 | 122,751 | 41,968 | |
| Other capital reserves | 86,747 | - | 86,747 | |
| Capital reserve from transactions with minority shareholders | (270,903) | (74,885) | (263,678) | |
| Total capital attributed to Company shareholders | 5,697,085 | 3,864,333 | 5,571,136 | |
| Non-Controlling Interests | (16,334) | 948,057 | (14,763) | |
| Total equity | 5,680,751 | 4,812,390 | 5,556,373 | |
| Balance sheet total | 13,801,779 | 13,215,280 | 13,565,600 |
Consolidated Expanded Statements of Operations
| As of March 31 2020 |
2019 | As of December 31 2019 |
|
|---|---|---|---|
| Revenues | Unaudited Unaudited Audited Thousands of NIS |
||
| From rental and management fees in Israel | 201,708 | 199,579 | 810,976 |
| From rental and management fees abroad | 37,093 | 41,493 | 169,272 |
| From the sale of apartments | 30,494 | 79,134 | 181,598 |
| From management of buildings and infrastructure | 551 | 735 | 1,699 |
| From the sale of fuel, net | 202 | 534 | 1,050 |
| From solar installations, net | 648 | 512 | 3,716 |
| Total revenues | 270,696 | 321,987 | 1,168,311 |
| Maintenance and administration costs in Israel | 44,612 | 43,331 | 180,097 |
| Maintenance and administration costs abroad | 12,787 | 14,455 | 55,292 |
| Cost of apartments sold | 19,858 | 46,028 | 116,237 |
| Gross Profit | 193,439 | 218,173 | 816,685 |
| Increase in fair value of investment property, net | 28,418 | 48,367 | 464,243 |
| Sales and marketing expenses | 1,654 | 2,547 | 9,653 |
| Administrative and general expenses | 33,008 | 27,998 | 127,032 |
| The Company's share of the profits (losses) of investees | (2,429) | 1,497 | 27,141 |
| Increase (decrease) in value of assets | 326 | 51 | (2,766) |
| Other revenues (expenses), net | 55,057 | (1,895) | (5,237) |
| Realization of capital reserve due to adjustments from the translation of financial statements for foreign activity |
- | - | (55,554) |
| Profit from Regular Activities | 240,149 | 235,546 | 1,107,827 |
| Financing expenses | 72,468 | 108,891 | 244,817 |
| Profit from early redemption | - | - | (10,655) |
| Financing revenues | 6,007 | 38,817 | 34,155 |
| Profit before taxes on income | 173,688 | 165,472 | 886,510 |
| Taxes on Income | 50,751 | 49,364 | 102,346 |
| Net Profit | 122,938 | 116,108 | 784,164 |
Appendix B – Exposure to Market Risks and their Management
- 1. The person responsible for managing market risks is Mr. Dudu Zabida, Chairman of the Board of Directors. For details on Mr. Zabida, see Regulation 26 in Chapter D (Additional Details) in the 2019 Periodic Report.
- 2. During the reported period, no material change occurred in market risks compared to those reported in the 2019 Periodic Report. For details on changes in the global business environment, see Section 2 of the Board of Directors' report.
Appendix C – Disclosure Provisions with Regard to the Corporation's Financial Reporting
1. Material Events During and Subsequent to the Reported Period
For details on material events during and subsequent to the reported period see Note 6 to the Company's March 31 2020 Interim Consolidated Financial Statements ("Financial Statements").
Appendix D – as of March 31 2020, there are 10 outstanding series of tradable debentures issued by the Company, as detailed in the following table. Note that conditions creating grounds for the redemption of debentures or the realization of securities in accordance with the terms of the deeds of trust have not yet been met.
| As of December 31 2019 | Debentures | Debentures | Debentures | Debentures | Debentures | Debentures |
|---|---|---|---|---|---|---|
| (In Thousands of NIS) | 2 (Series 15) |
(Series 163 ) |
(Series 17) | (Series 18) | (Series 19) | (Series 20) |
| Date of Issue | 31.10.2013 | 10.07.2014 | 10.07.2014 | 10.5.2016 | 29.9.2016 | 30.7.2017 |
| Notational value on the date of issue |
437,881 | 103,217 | 757,524 | 683,000 | 423,512 | 523,521 |
| Outstanding notational value | 154,343 | 87,734 | 639,083 | 683,000 | 365,201 | 497,345 |
| Stock Market Rate (in 0.01 NIS) | 107.73 | 114.38 | 108.6 | 107.66 | 103.99 | 102.26 |
| Outstanding notational value, linked |
154,343 | 87,734 | 640,286 | 697,540 | 368,847 | 503,836 |
| Accrued Interest | 4,393 | 1,236 | 5,906 | 8,333 | - | 3,530 |
| Fair Value | 166,273 | 100,351 | 694,044 | 735,318 | 379,773 | 508,585 |
| Interest Type | Fixed interest | Fixed interest | Fixed interest | Fixed interest | Fixed interest | Fixed interest |
| Denoted Yearly Interest Rate | 5.74% | 5.65% | 3.70% | 2.85% | 2.60% | 2.81% |
| Principal Payment Dates | Eight non-equal yearly installments paid on April 1 of each of the years from 2017 to 2024. 4% will be paid in the first installment, 8% in the second installment and 14% of the principal will be paid in each of the fourth through eighth installments. |
Twelve unequal yearly installments, to be paid on June 30 of each of the years from 2017 to 2028, with 5% of the principal paid in each of the first through fourth payments and 10% of the principal paid in each of the fifth to tenth payments. |
Twelve unequal yearly installments, to be paid on June 30 of each of the years from 2017 to 2028, with 5% of the principal paid in each of the first through fourth payments and 10% of the principal paid in each of the fifth to tenth payments. |
4 unequal annual installments on October 30 of each year from 2021 to 2024. 16% of the principal will be paid in the first installment, 11% of the principal will be paid in the second installment, 13% of the principal will be paid in the third installment and 60% of the principal will be paid in the fourth installment. |
10 unequal annual installments on March 31 of each year from 2018 to 2023 and each year from 2025 to 2027. |
Eight unequal yearly payments to be paid on December 31 of each year from 2019 to 2029, with the first, second and third installments being 5%, second and fourth installments 10%, sixth and seventh installments 20% and eight installment 25%. |
| Interest Payment Dates | April 1 and October 1 of each of the years from 2014 to 2024. |
June 30 and December 31 of each of the years from 2014 to 2028. |
On June 30 and December 31 of each of the years from 2014 to 2028. |
On October 30 and April 30of each of the years from 2016 through 2024. |
March 31 and September 30 of each of the years from 2017 to 2026, as well as on March 31 2027. |
December 31 and June 30 of each of the years from 2017 to 2029. |
| Linkage Basis and Terms (Principal and Interest) |
Unlinked | Unlinked | CPI for 7.2014 | CPI for 3.2016 | CPI for 9.2016 | CPI for 6.2017 |
| Does it constitute a material liability? |
No | No | No | Yes | No | No |
| Rating Company | See rating table | |||||
| Rating | See rating table | |||||
| Is there a guarantee to secure liabilities? |
No | No | No | No | No | No |
| Are there any liens? | No | No | No | Yes. Real estate properties. See Appendix A of Part A of the 2019 Periodic Report. |
Yes. Real estate properties. See Appendix A of Part A of the 2019 Periodic Report. |
No |
| Trustee | Mishmeret (1) | Mishmeret (1) | Mishmeret (1) | Reznik Paz Nevo (2) | Reznik Paz Nevo (2) | Reznik Paz Nevo (2) |
2 The Company announced an early redemption of 87.8% of the uncleared balance on June 1 2020. In addition, the Company announced that it intends to publish a full purchase offer for the debenture (Series 15) still outstanding after the partial early redemption at the same redemption rate set in the partial early redemption. For further details, see Note 6i to the Financial Statements.
3 On May 14 2020 the Company issued, by way of a series expansion, 244,000 NIS NV debentures in return for a sum of 284.4 million NIS.
| In Thousands of NIS | Debentures Series 21 (Formerly Series 12 in Economic) |
Debentures Series 224 (Formerly Series 13 in Economic) |
Debentures Series 23 (Formerly Series 14 in Economic) |
Debentures Series 24 (Formerly Series 15 in Economic) |
|---|---|---|---|---|
| Date of Issue | 11.2.2014 | 4.9.2014 | 18.9.2016 | 21.6.2017 |
| Notational value on the date of issue | 170,630 | 311,648 | 607,923 | 612,810 |
| Outstanding notational value | 259,402 | 381,309 | 491,050 | 588,298 |
| Stock Market Rate (in 0.01 NIS) | 109.08 | 104.96 | 103.3 | 103.54 |
| Outstanding notational value, linked | 259,402 | 381,309 | 494,448 | 591,820 |
| Accrued Interest | 3,784 | 7,146 | 33 | 3,836 |
| Fair Value | 282,956 | 400,222 | 507,255 | 609,123 |
| Interest Type | Fixed interest | Fixed interest | Fixed interest | Fixed interest |
| Fair Value | 282,956 | 400,222 | 507,255 | 609,123 | ||
|---|---|---|---|---|---|---|
| Interest Type | Fixed interest | Fixed interest | Fixed interest | Fixed interest | ||
| Denoted Yearly Interest Rate | 4.4% | 4.5% | 2.4% | 2.6% | ||
| Principal Payment Dates | 2 installments at a rate of 5% of the principal each on June 1 of 2016 and 2017, 9 installments at a rate of 10% of the principal on June 1 of each year from 2018 to 2026. |
3 installments at a rate of 3% of the principal each on April 30 of 2016 through 2018, 20% of the principal on April 30 2019, 3 installments at a rate of 18% of the principal on April 30 of each year from 2020 through 2022, the remaining 17% of the principal on April 30 2023. |
2% of the principal on September 30 2018, 7 installments at a rate of 5% of the principal each on September 30 of 2019 through 2025, the remaining 63% of the principal on September 30 2026. |
6 installments at a rate of 4% of the principal each on June 30 of 2019 through 2024, 3 installments at a rate of 6% of the principal each on June 30 of each year from 2025 through 2027, the remaining 58% of the principal on June 30 2028. |
||
| Interest Payment Dates | June 1 and December 1 of each year from June 1 2014 to June 1 2026. |
April 30 and October 31 of each year from April 30 2015 to April 30 2023. |
June 30 and September 30 of each year from March 30 2017 to September 30 2026. |
June 30 and December 31 of each year from December 31 2017 to June 30 2028 |
||
| Linkage Basis and Terms (Principal and Interest) |
Actual CPI 12.2013 | Unlinked | Actual CPI 7.2016 | Actual CPI 5.2017 | ||
| Does it constitute a material liability? | No | No | No | No | ||
| Rating Company | See rating table | |||||
| Rating | See rating table | |||||
| Is there a guarantee to secure liabilities? | No | No | No | No | ||
| Are there any liens? | No | No | Yes. Real estate properties. See Appendix A of Part A of the 2019 Periodic Report. |
Yes. Darban shares. See Note 25.c.1 to the Consolidated Financial Statements in the 2019 Periodic Report. |
||
| Trustee | Mishmeret (1) | Strauss Lazar (3) | Reznik Paz Nevo (2) | Reznik Paz Nevo (2) | ||
| Right to Early Repayment | (4) |
4 The Company announced a full early redemption on June 1 2020. For further details, see Note 6j to the Consolidated Interim Financial Statements.
Additional Details on Company Debentures
- (1) Mishmeret Trust Services Ltd., details of the engagement with which to the best of the Company's knowledge are as follows: contact: Mr. Rami Sabati, address: 46-48 Menachem begin Rd., Tel Aviv, telephone no: 03-6386894, Fax: 03-6374344, email address: [email protected].
- (2) Resnick Paz Nevo Trusts Ltd., the details of which, to the best of the Company's knowledge, are as follows: contact: Yossi Resnick; address: 14 Yad Harutzim, Tel Aviv; telephone number: 03-6389200; fax: 03-6389222; email address: [email protected].
- (3) Strauss Lazar Trust Company (1992) Ltd., details of the engagement with which to the best of the Company's knowledge are as follows: contact: Mr. Uri Lazar, address: 17 Yitzhak Sadeh, NIP Towers, Tel Aviv, telephone no: 03-6237777, Fax: 03-5613824, email address: [email protected].
- (4) The terms of the debentures (Series 15-24) state that the Company has a right to early redemption that will be carried out in accordance with the provisions and guidelines of the Stock Exchange bylaws. The Company shall be entitled to perform an early redemption starting from the registration of the debentures for trade so long as the minimum redemption sum is no less than 1 million NIS.
| Rating Table | |||||||
|---|---|---|---|---|---|---|---|
| Rating Company | S&P Maalot | ||||||
| Series | 15 | 16 | 17 | 18 | 19 | 20 | |
| 21.10.2013 | A Stable | N/A | N/A | N/A | N/A | N/A | |
| 22.6.2014 | N/A | A Stable | A Stable | N/A | N/A | N/A | |
| 9.9.2014 | A Positive | A Positive | A Positive | N/A | N/A | N/A | |
| 21.12.2014 | A Negative | A Negative | A Negative | N/A | N/A | N/A | |
| 28.4.2015 | A- Negative |
A- Negative |
A- Negative |
N/A | N/A | N/A | |
| 29.10.2015 | BBB+ Negative | BBB+ Negative | BBB+ Negative | N/A | N/A | N/A | |
| 7.1.2016 | BBB Negative | BBB Negative | BBB Negative | N/A | N/A | N/A | |
| 7.4.2016 | N/A | N/A | N/A | BBB+ Stable | N/A | N/A | |
| 14.7.2016 | BBB+ Stable | BBB+ Stable | BBB+ Stable | A- Stable |
N/A | N/A | |
| 15.9.2016 | N/A | N/A | N/A | N/A | BBB+ Stable | N/A | |
| 29.11.2016 | A- Stable |
A- Stable |
A- Stable |
N/A | A- Stable |
N/A | |
| 3.7.2017 | A- Positive |
A- Positive |
A- Positive |
A- Positive |
A- Positive |
N/A | |
| 9.7.2017 | N/A | N/A | N/A | N/A | N/A | A- positive |
|
| 24.7.2017 | A Stable | A Stable | A Stable | A Stable | A Stable | A Stable | |
| 22.3.2018 | N/A | N/A | N/A | A+ Stable | A+ Stable | N/A | |
| 20.6.2018 | A+ Stable | A+ Stable | A+ Stable | AA- stable |
AA- Stable |
A+ Stable | |
| 23.1.2020 | A+ stable | A+ Stable | A+ Stable | AA Stable | AA Stable | A+ Stable |
| Rating Table | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Rating Company | Midroog | S&P Maalot | |||||||
| Series | 21 | 22 | 23 | 24 | 21 | 22 | 23 | 24 | |
| 27.1.2014 | N/A | N/A | N/A | N/A | A- positive N/A |
||||
| 17.12.2014 | N/A | N/A | N/A | N/A | A- negative N/A |
||||
| 21.5.2014 | N/A | N/A | N/A | N/A | N/A | ||||
| 17.8.2014 | A2 stable | N/A | N/A | N/A | |||||
| 18.12.2014 | A2 negative | N/A | N/A | N/A | |||||
| 31.12.2014 | Baa1 negative | N/A | N/A | BBB negative N/A |
|||||
| 26.1.2015 | N/A | N/A | N/A | N/A | Rating stop | N/A | |||
| 26.10.2015 | Baa2 negative | N/A | N/A | N/A | |||||
| 3.3.2016 | Baa2 negative | N/A | N/A | N/A | |||||
| 30.6.2016 | Baa2 negative | N/A | N/A | N/A | |||||
| 14.9.2016 | Unchanged | Baa1 positive | N/A | N/A | |||||
| 4.6.2017 | A3 stable | N/A | |||||||
| 31.5.2018 | A2 stable | N/A | |||||||
| 13.9.2018 | N/A | A+ stable | AA- stable |
A+ stable | |||||
| 3.4.2019 | A1 stable | N/A | |||||||
| 4.7.2019 | N/A | A+ stable AA- stable |
A+ stable | ||||||
| 22.7.2019 | A1 stable | N/A | A+ stable N/A |
||||||
| 6.11.2019 | N/A | A+ stable AA- stable A+ stable |
|||||||
| 7.11.2019 | Rating stop following the merger with Industrial Buildings | N/A | |||||||
| 23.1.2020 | N/A | A+ stable AA stable |
A+ stable |
Reportable Credit
Company Debentures (Series 18) constitute reportable credit. As of March 31 2020 and as of the publication of this report, the Company has been in compliance with all financial covenants required in accordance with the debentures' deeds of trust.
Appendix E – Linkage Basis Report
| Thousands of NIS | US Dollar |
Swiss | EUR | Canadian Dollar |
Hryvnia | Index | Unlinked | Non Financial |
Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | 9,017 | 41,858 | 228,671 | 23,074 | 1,266 | - | 911,500 | - | 1,215,386 | |
| Short-term investments | - | - | - | 23,425 | - | 45,516 | 17,504 | 426 | 86,871 | |
| Trade receivables | 64 | 40 | 11,842 | 1,105 | 225 | - | 27,622 | - | 40,898 | |
| Other receivables | 1,384 | 549 | 15,898 | 4,840 | 310 | 61,575 | 87,478 | 17,744 | 189,778 | |
| Taxes receivable | - | 1,780 | 3,742 | 358 | 171 | 20,508 | - | - | 26,559 | |
| Deposits and long-term debit balances | 2,442 | - | - | 1,020 | 756 | 389,404 | - | - | 393,622 | |
| Investments in investees | - | - | 21,108 | (314) | - | 10,963 | 11,865 | 330,328 | 373,950 | |
| Assets held for sale | - | - | - | - | - | - | - | 163,314 | 163,314 | |
| Assets | Inventory of land for residential construction and apartments under construction |
- | - | - | - | - | - | - | 284,910 | 284,910 |
| Residential Investment property |
- | - | - | - | - | - | - | 10,635,575 | 10,635,575 | |
| Investment property under construction | - | - | - | - | - | - | - | 157,917 | 157,917 | |
| Fixed assets | - | - | - | - | - | - | - | 67,198 | 67,198 | |
| Intangible assets | - | - | - | - | - | - | - | 27,128 | 27,128 | |
| Deferred taxes | - | - | - | - | - | - | - | 3,172 | 3,172 | |
| Total assets |
12,907 | 44,227 | 281,260 | 53,509 | 2,728 | 527,966 | 1,055,969 | 11,687,712 | 13,666,278 | |
| Credit from banks and other credit providers | - | - | - | 935 | - | - | 600,278 | - | 601,213 | |
| Trade payables | 13 | 2,071 | 11,805 | 2,479 | - | - | 55,262 | - | 71,630 | |
| Payables and credit balances | 2,036 | 2,896 | 20,270 | 2,151 | 446 | 55,462 | 142,447 | 67,009 | 292,717 | |
| Taxes payable | 1,868 | - | 37,872 | 214 | - | - | 14,263 | - | 54,217 | |
| Provisions | - | - | - | - | - | - | 3,496 | - | 3,496 | |
| Liabilities | Loans from banking corporations including current maturities |
57,913 | 201,438 | 80,111 | 39,313 | - | 941,369 | 61,430 | 424 | 1,381,998 |
| Other liabilities | - | - | 60,750 | - | - | 15,000 | 48,424 | - | 124,174 | |
| Debentures | - | - | - | - | - | 3,581,691 | 629,643 | - | 4,211,334 | |
| Tenant deposits | 888 | - | 11,346 | - | - | 26,705 | 2,118 | - | 41,057 | |
| Employee benefit liabilities, net | - | - | - | - | - | - | - | 7,908 | 7,908 | |
| Deferred taxes | - | - | - | - | - | - | - | 1,195,783 | 1,195,783 | |
| Total liabilities |
62,718 | 206,405 | 222,154 | 45,092 | 446 | 4,620,227 | 1,557,361 | 1,271,124 | 7,985,527 |
Chapter 2 Financial statements for the period ended 31st March 2020
Financial data and information from the consolidated statements related to the company
Mivne Real Estate (K.D.) Ltd.
Consolidated Interim Financial Statements as of March 31 2020
Unaudited
Table of Contents
| Page | |
|---|---|
| Review of Consolidated Interim Financial Statements | 2 |
| Consolidated Balance Sheets | 3-4 |
| Consolidated Statements of Operations | 5 |
| Consolidated Statements of Comprehensive Income | 6 |
| Consolidated Reports on Changes in Equity | 7-9 |
| Consolidated Cash Flow Reports | 10-12 |
| Notes to the Interim Consolidated Financial Statements | 13-21 |
1
Kost Forrer Gabbay & Kassirer 144a Menachem Begin Road, Tel Aviv 6492102 Phone no. +972-3-6232525 Fax +972-3-5622555 ey.com
Review Report of the Independent Auditor to Shareholders of Mivne Real Estate (K.D.) Ltd
Introduction
We have reviewed the attached financial information on Mivne Real Estate (K.D.) Ltd. and its subsidiaries (hereinafter – the Group), which includes its Concise Consolidated Balance Sheet as of March 31 2020 and its Concise Consolidated Statements of Operations, Reports on Comprehensive Profit and Loss, Reports on Changes in Equity and Cash Flow Reports for the three-month period ending that date. The Board of Directors and Management are responsible for preparing and presenting financial information for this interim period in accordance with IAS 34, Interim Financial Reporting, and are responsible for preparing financial information for this interim period in accordance with Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970. Our responsibility is to express our conclusions with regard to the financial information for this interim period, based on our review.
We have not reviewed the concise interim financial information of subsidiaries the assets of which included in the consolidation constitute 18% of all consolidated assets as of March 31 2020, and revenues of which included in the consolidation constitute 14.6% of all consolidated revenues for the three-month period ending that date. Furthermore, we did not review the concise interim financial information of companies presented according to the book value method, the investment in which amounted to a total of 197.6 million NIS as of March 31 2020, with the Group's share of the losses of the companies in question amounting to 2.7 million NIS for the three-month period ending that date. The interim financial information of said companies have been reviewed by other accountants, the reports of whom have been provided us and our conclusion, inasmuch as it refers to financial information for these companies, is based on the reviews conducted by these other accountants.
Scope of the Review
We have prepared our review in accordance with Reviewing Standard 1 of the Israeli Institute of Certified Public Accountants – "Reviews of Interim Financial Information Conducted by the Entity's Auditing Accountant." A review of financial information for interim periods consists of inquiries, mainly from people responsible for finances and accounting, and from the application of analytical and other reviewing procedures. A review is significantly limited in scope relative to an audit conducted according to generally accepted Israeli auditing standards, and therefore does not allow us to achieve assurance that we have been made aware of all material issues that might have been identified in an audit. Accordingly, we are not expressing an audit-level opinion.
Conclusion
Based on our review and on those of other accountants, nothing has come to our attention to make us believe that the financial information in question has not been prepared, in all material aspects, in accordance with IAS 34.
In addition to the previous paragraph, based on our review and on those of other accountants, nothing has come to our attention to make us believe that the financial information in question does not comply, in all material aspects, with disclosure regulations as per Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.
Tel Aviv, Kost, Forer, Gabbay & Kassirer May 24 2020 Certified Public Accountants
Consolidated Balance Sheets
| As of March 31 | As of December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 *) | 2019 | ||
| Unaudited Thousands of NIS |
Audited | |||
| Current Assets | ||||
| Cash and cash equivalents | 1,215,386 | 783,195 | 426,790 | |
| Short-term investments | 69,367 | 90,719 | 78,450 | |
| Limited cash and money in trust | 17,504 | 69,320 | 24,438 | |
| Trade receivables | 40,898 | 56,873 | 36,913 | |
| Other receivables | 189,778 | 172,100 | 178,018 | |
| Taxes receivable | 26,559 | - | 9,028 | |
| Inventory of land, apartments and buildings | ||||
| for sale and under construction | 226,795 | 225,741 | 230,620 | |
| 1,786,287 | 1,397,948 | 984,257 | ||
| Assets held for sale | 163,314 | 159,858 | 330,105 | |
| 1,949,601 | 1,557,806 | 1,314,362 | ||
| Non-Current Assets | ||||
| Deposits in banking corporations | 45,467 | 90,711 | 45,634 | |
| Other receivables | 348,155 | 74,651 | 353,487 | |
| Investments in companies handled using the book value method | 373,950 | 674,870 | 604,014 | |
| Investment property | 10,635,575 | 10,202,050 | 10,632,076 | |
| Investment property under development | 157,917 | 57,769 | 134,597 | |
| Inventory of land for construction | 58,115 | 63,805 | 57,885 | |
| Fixed assets, net | 67,198 | 72,354 | 68,197 | |
| Intangible assets, net | 27,128 | 27,128 | 27,128 | |
| Deferred taxes | 3,172 | 6,353 | 1,372 | |
| 11,716,677 | 11,269,691 | 11,924,390 | ||
| 13,666,278 | 12,827,497 | 13,238,752 |
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
3
Consolidated Balance Sheets
| As of March 31 | As of December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 *) | 2019 | ||
| Unaudited | Audited | |||
| Thousands of NIS | ||||
| Current Liabilities | ||||
| Credit from banks and credit providers | 601,213 | 32,000 | 3,016 | |
| Current maturities of debentures | 339,063 | 380,075 | 328,493 | |
| Current maturities of loans and other liabilities | 122,501 | 250,910 | 262,603 | |
| Trade payables | 71,630 | 56,358 | 58,551 | |
| Payables and credit balances | 255,317 | 224,380 | 197,004 | |
| Advance payments from buyers | 40,896 | 57,567 | 41,584 | |
| Taxes payable | 54,217 | 9,504 | 40,289 | |
| 1,484,837 | 1,010,794 | 931,540 | ||
| Liabilities referring to assets held for sale | - | 33,678 | 152,752 | |
| 1,484,837 | 1,044,472 | 1,084,292 | ||
| Non-Current Liabilities | ||||
| Loans from banking corporations and financial institutions | 1,259,497 | 1,465,410 | 1,271,483 | |
| Debentures | 3,872,271 | 4,121,470 | 3,911,176 | |
| Other liabilities | 124,174 | 189,061 | 182,379 | |
| Tenant deposits | 41,057 | 38,946 | 43,443 | |
| Employee benefit liabilities | 7,908 | - | 7,460 | |
| Deferred taxes | 1,195,783 | 1,155,748 | 1,182,146 | |
| 6,500,690 | 6,970,635 | 6,598,087 | ||
| Equity Attributable to Company Shareholders | ||||
| Share capital | 1,509,503 | 1,143,690 | 1,509,503 | |
| Premium on shares | 3,607,405 | 2,039,586 | 3,607,405 | |
| Principal in respect of share-based payment transactions | 8,245 | 2,662 | 2,694 | |
| Treasury shares | (641,127) | - | (641,127) | |
| Retained earnings | 1,366,779 | 634,720 | 1,231,356 | |
| Capital reserve in respect of cash flow hedging transaction | (3,784) | (4,188) | (3,732) | |
| Adjustments from the translation of financial statements of foreign | ||||
| activities | 120,967 | 122,748 | 128,715 | |
| Capital reserve from transactions with minority shareholders | (270,903) | (74,885) | (263,678) | |
| 5,697,085 | 3,864,333 | 5,571,136 | ||
| Non-Controlling Interests | (16,334) | 948,057 | (14,763) | |
| Total equity | 5,680,751 | 4,812,390 | 5,556,373 | |
| 13,666,278 | 12,827,497 | 13,238,752 |
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company. The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
May 24 2020 Financial Statements Approval Date
Tal Forer Chair of the Board of Directors
Dudu Zabida Chief Executive Officer
Yossi Filiba VP of Finance, Accounting and Reporting
Consolidated Statements of Operations
| For the 3 Months Ending March 31 |
For the Year Ending on December 31 2019 |
||
|---|---|---|---|
| 2020 | |||
| Unaudited | 2019 *) | Audited | |
| Thousands of NIS | |||
| (Except for Net Profit per Share Data) | |||
| Revenues | |||
| Rental and management fee income – Israel | 190,494 | 183,587 | 757,495 |
| Rental and management fee income – abroad | 37,093 | 41,493 | 169,272 |
| Sale of apartments and land | 30,494 | 79,134 | 181,598 |
| From management of buildings and infrastructure | 551 | 735 | 1,699 |
| From solar installations, net | 648 | 512 | 3,716 |
| From the sale of fuel, net | 202 | 277 | 1,050 |
| Total revenues | 259,482 | 305,738 | 1,114,830 |
| Expenses | |||
| Maintenance expenses – Israel | 42,260 | 40,259 | 168,663 |
| Maintenance expenses – abroad | 12,787 | 14,455 | 55,292 |
| Cost of apartments and land sold | 19,858 | 46,028 | 116,237 |
| Total cost of sales and services | 74,905 | 100,742 | 340,192 |
| Gross profit | 184,577 | 204,996 | 774,638 |
| Increase in value of investment property and investment property under | |||
| development, net | 28,531 | 48,767 | 494,117 |
| Sales and marketing expenses | 1,492 | 2,273 | 9,372 |
| Administrative and general expenses | 32,426 | 26,881 | 124,723 |
| Increase (decrease) in value of inventory of land for construction | 326 | (51) | (2,766) |
| Other expenses (revenues), net | (55,030) | 1,895 | 5,237 |
| Realization of capital reserve due to adjustments from the translation of | |||
| financial statements for foreign activity | - | - | (55,554) |
| The Company's share of the profits (losses) of companies handled | |||
| using the book value method, net | 3,888 | 9,548 | 24,973 |
| Operating profit | 238,434 | 232,211 | 1,096,076 |
| Financing expenses | 71,560 | 107,830 | 237,312 |
| Loss from early redemption of debentures and loans | - | - | 10,655 |
| Financing revenues | 5,480 | 38,661 | 32,479 |
| Profit before taxes on income | 172,354 | 163,042 | 880,588 |
| Taxes on income | 49,415 | 46,934 | 96,424 |
| Net profit | 122,939 | 116,108 | 784,164 |
| Attributed to: | |||
| Company shareholders | 135,423 | 81,196 | 677,832 |
| Non-controlling interests | (12,484) | 34,912 | 106,332 |
| 122,939 | 116,108 | 784,164 | |
| Profit per share attributed to company shareholders (in NIS) | |||
| Basic profit | 0.18 | 0.28 **) |
1.14 |
| Diluted profit | 0.18 | 0.28 **) |
1.14 |
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
**) See Note 32b to the December 31 2019 Consolidated Financial Statements on the conversion ratio used in the calculation.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Consolidated Reports on Comprehensive Income
| For the 3 Months Ending March 31 |
For the Year Ending on December 31 |
|||
|---|---|---|---|---|
| 2020 | 2019 *) | 2019 | ||
| Unaudited | ||||
| Thousands of NIS | ||||
| Net profit | 122,939 | 116,108 | 784,164 | |
| Other comprehensive income (loss) (after tax influence): | ||||
| Sums classified or reclassified to gain or loss under specific conditions: | ||||
| Profit (loss) with respect to cash flow hedging transactions | (52) | (381) | 75 | |
| Adjustments from the translation of financial statements of foreign activities |
(4,060) | 17,202 | (18,993) | |
| Realization of capital reserve to Statement of Operations due to the realization of foreign activity |
- | - | 55,554 | |
| Total other comprehensive income (loss) | (4,112) | 16,821 | 36,636 | |
| Total comprehensive income | 118,827 | 132,929 | 820,800 | |
| Attributed to: | ||||
| Company shareholders | 127,623 | 96,830 | 699,889 | |
| Non-controlling interests | (8,796) | 36,099 | 120,911 | |
| 118,827 | 132,929 | 820,800 |
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Consolidated Reports on Changes in Equity
| Attributable to Company shareholders | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Stock Capital |
Premium on Shares |
Treasury Shares |
Retained Earnings |
Hedge Capital Fund |
Principal in respect of share-based payment transactions |
Adjustments from the Translation of Financial Statements of Foreign Activity and Other Funds |
Capital Reserve from Transactions with Non Controlling Interests |
Total | Non-controlling interests |
Total Stock |
|
| Unaudited Thousands of NIS |
|||||||||||
| Balance as of January 1 2020 (audited) |
1,509,503 | 3,607,405 | (641,127) | 1,231,356 | (3,732) | 2,694 | 128,715 | (263,678) | 5,571,136 | (14,763) | 5,556,373 |
| Net income (loss) | - | - | - | 135,423 | - | - | - | - | 135,423 | (12,484) | 122,939 |
| Other comprehensive income (loss) | - | - | - | - | (52) | - | (7,748) | - | (7,800) | 3,688 | (4,112) |
| Total comprehensive income (loss) Allocation of capital deficit attributed |
- | - | - | 135,423 | (52) | - | (7,748) | - | 127,623 | (8,796) | 118,827 |
| to non-controlling interests Share-based payment |
- - |
- - |
- - |
- - |
- - |
- 5,551 |
- - |
(7,225) - |
(7,225) 5,551 |
7,225 - |
- 5,551 |
| Balance as of March 31 2020 | 1,509,503 | 3,607,405 | (641,127) | 1,366,779 | (3,784) | 8,245 | 120,967 | (270,903) | 5,697,085 | (16,334) | 5,680,751 |
The attached notes constitute an inseparable part of the Consolidated Interim Financial Statements.
Consolidated Reports on Changes in Equity
| Attributable to Company shareholders | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Stock Capital |
Premium on Shares |
Retained Earnings |
Hedge Capital Fund |
Principal in respect of share-based payment transactions |
Adjustments from the Translation of Financial Statements of Foreign Activity and Other Funds |
Capital Reserve from Transactions with Non-Controlling Interests |
Total | Non-controlling interests |
Total Stock |
|
| Unaudited Thousands of NIS |
||||||||||
| Balance As of January 1 2019 (Audited) (*) | 1,143,690 | 2,039,586 | 553,524 | (3,807) | 2,614 | 114,059 | (86,703) | 3,762,963 | 800,852 | 4,563,815 |
| Net profit Other comprehensive income (loss) |
- - |
- - |
81,196 - |
- (381) |
- - |
- 16,015 |
- - |
81,196 15,634 |
34,912 1,187 |
116,108 16,821 |
| Total comprehensive income (loss) | - | - | 81,196 | (381) | - | 16,015 | - | 96,830 | 36,099 | 132,929 |
| Departure from consolidation by consolidated company Allocation of capital deficit attributed to non |
- | - | - | - | - | - | - | - | (2,249) | (2,249) |
| controlling interests to Company shareholders Repayment of perpetual loans |
- | - | - | - | - | - (7,326) |
11,818 - |
11,818 (7,326) |
(11,818) (3,399) |
- (10,725) |
| Capital benefit from transaction with non controlling interests Dividend paid to holders of non-controlling |
- | - | - | - | - | - | - | - | 128,602 | 128,602 |
| interests Share-based payment |
- - |
- - |
- - |
- - |
- 48 |
- - |
- - |
- 48 |
(30) - |
(30) 48 |
| Balance as of March 31 2019 | 1,143,690 | 2,039,586 | 634,720 | (4,188) | 2,662 | 122,748 | (74,885) | 3,864,333 | 948,057 | 4,812,390 |
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Consolidated Reports on Changes in Equity
| Attributable to Company shareholders | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Stock Capital |
Premium on Shares |
Capital Shares |
Retained Earnings |
Hedge Capital Fund |
Principal in respect of share-based payment transactions |
Adjustments from the Translation of Financial Statements of Foreign Activity and Other Funds Audited |
Capital Reserve from Transactions with Non-Controlling Interests |
Total | Non-controlling interests |
Total Capital |
|
| Thousands of NIS | |||||||||||
| Balance as of January 1 2019 *) | 1,143,690 | 2,039,586 | - | 553,524 | (3,807) | 2,614 | 114,059 | (86,703) | 3,762,963 | 800,852 | 4,563,815 |
| Net profit Realization of capital reserve to |
- | - | - | 677,832 | - | - | - | - | 677,832 | 106,332 | 784,164 |
| Statement of Operations Other comprehensive income (loss) |
- - |
- - |
- - |
- - |
- 75 |
- | 37,949 (15,967) |
- - |
37,949 (15,892) |
17,605 (3,026) |
55,554 (18,918) |
| Total comprehensive income Capital benefit from transaction with |
- | - | - | 677,832 | 75 | - | 21,982 | - | 699,889 | 120,911 | 820,800 |
| non-controlling interests Issue of shares due to merger |
- 365,813 |
- 1,567,819 |
- (641,127) |
- - |
- - |
- - |
- - |
- (197,158) |
- 1,095,347 |
128,602 (1,041,755) |
128,602 53,592 |
| Allocation of capital deficit attributed to non-controlling interests Repayment of perpetual loans |
- - |
- - |
- - |
- - |
- - |
- - |
- (7,326) |
20,183 - |
20,183 (7,326) |
(20,183) (3,399) |
- (10,725) |
| Departure from consolidation by consolidated company Sale of shares to minority |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
- - |
(2,249) 4,148 |
(2,249) 4,148 |
| Dividend paid to holders of non controlling interests Share-based payment |
- - |
- - |
- - |
- - |
- - |
- 80 |
- - |
- - |
- 80 |
(1,690) - |
(1,690) 80 |
| Balance as of December 31 2019 | 1,509,503 | 3,607,405 | (641,127) | 1,231,356 | (3,732) | 2,694 | 128,715 | (263,678) | 5,571,136 | (14,763) | 5,556,373 |
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Consolidated Cash Flow Reports
| For the 3 Months Ending March 31 |
For the Year Ending on December 31 |
||
|---|---|---|---|
| 2020 | 2019 **) | 2019 | |
| Unaudited | Thousands of NIS | Audited | |
| Cash Flow from Current Activity | |||
| Net profit | 122,939 | 116,108 | 784,164 |
| Adjustments required to present cash flows from current activities | |||
| Adjustments to profit or loss items: | |||
| Depreciation and amortization | 1,548 | 1,730 | 6,567 |
| Loss (profit) from short-term investments, net Increase in fair value of investment property and investment property |
7,596 | (7,624) | (17,467) |
| under development, net | (28,531) | (48,767) | (494,117) |
| The Company's share of the profits (losses) of companies handled using | |||
| the book value method, net | (3,888) | (9,548) | (24,973) |
| Interest and revaluation of debentures and loans | 22,349 | 70,267 | 205,470 |
| Change in employee benefit liabilities, net | 448 | - | 2,268 |
| Interest and revaluation of deposits and debit balances | 36,135 | 14,547 | 16,820 |
| Impairment of fixed assets (capital gains), net | (3,039) | 3 | - |
| Tax expense on income | 49,415 | 46,934 *) |
96,424 |
| Loss (profit) from the impairment of inventory of land for construction | |||
| and inventory of buildings and apartments for sale | (326) | 51 | 2,766 |
| Realization of capital reserve from translation differences to the Statement of Operations |
- | - | 55,554 |
| Loss from merger of company merged for the first time | - | - | 18,619 |
| Capital (gain) from realization of investment in subsidiary (a) | - | (582) | (582) |
| Profit from the realization of investment in associate | (71,662) | - | - |
| Loss from early redemption of debentures and loans | - | - | 10,665 |
| Increase in share-based payment | 5,551 | 48 | 80 |
| 15,596 | 67,059 | (121,906) | |
| Changes in asset and liability items: | |||
| Increase in trade receivables | (5,153) | (7,810) | (1,102) |
| Decrease (increase) in other receivables | (26,764) | 4,639 | (90,857) |
| Increase in trade liabilities | 13,163 | 19,657 | 21,165 |
| Increase (decrease) in accounts payable, credit balances and contractual | |||
| obligations | 81,316 | (9,700) *) |
(17,317) |
| Increase (decrease) in tenant deposits | (2,489) | 2,290 | 6,074 |
| 60,073 | 9,076 | (82,037) | |
| Cash paid and received during the reported period for: | |||
| Interest paid | (23,324) | (29,845) | (224,370) |
| Interest received | 3,655 | 2,946 | 10,922 |
| Taxes paid | (64,835) | (10,533) | (37,139) |
| Taxes received | 39 | 1,277 | 10,718 |
| Dividends received | - | 2,279 | 18,565 |
| (84,465) | (33,876) | (221,304) | |
| Net cash deriving from current activity before a decrease in inventory of | |||
| apartments and houses for sale under construction, land for sale and | |||
| inventory of land for construction. | 114,143 | 158,367 | 358,917 |
| Decrease in inventory of apartments and houses for sale under | |||
| construction, land for sale and inventory of land for construction. | 3,998 | 26,413 | 39,567 |
| Net cash from current activity | 118,141 | 184,780 | 398,484 |
*) Reclassified.
**) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company. The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Consolidated Cash Flow Reports
| For the 3 Months Ending March 31 |
For the Year Ending on December 31 |
|||
|---|---|---|---|---|
| 2020 | 2019 **) | 2019 | ||
| Audited | ||||
| Unaudited Thousands of NIS |
||||
| Cash Flows from Investment Activities | ||||
| Acquisitions and investments in investment property | (28,265) | (25,412) | (137,602) | |
| Investment in investment property under development | (23,320) | (5,667) | (25,162) | |
| Investment in fixed assets | (1,262) | (349) | (1,555) | |
| Decrease (increase) in long-term debit balances, net | - | 199 | (320,053) | |
| Investment in investees, net | - | 71,340 | 45 | |
| Proceeds from the realization of short-term investments, net | 21,507 | 524 *) |
51,024 | |
| Proceeds from the realization of investment property and real estate | ||||
| held for sale | 212,752 | 73,640 | 270,165 | |
| Proceeds from the realization of fixed assets | 3,599 | - | 340 | |
| Proceeds from the sale of shares and redemption of shareholder loans | ||||
| of investee sold | 205,221 | - | 95,917 | |
| Repayment of long-term loans granted, net | 968 | - | 5,099 | |
| Repayment of long-term deposits | - | - | 48,923 | |
| Proceeds from the realization of investment in subsidiary consolidated | ||||
| in the past, net (a) | - | 40,148 | 40,148 | |
| Cash received from company merged for the first time (b) | - | - | 8,451 | |
| Net cash deriving from investment activity | 391,200 | 154,423 | 35,740 | |
| Cash Flow from Financing Activity | ||||
| Issue of debentures | - | - | 332,139 | |
| Repayment of perpetual loan | - | (11,500) | (11,500) | |
| Repayment of debentures | (7,848) | (62,522) | (678,443) | |
| Short-term credit from banking corporations and others, net | 597,935 | (188) | 828 | |
| Receipt of loans and other long-term liabilities | 120 | 715 | 2,535 | |
| Repayment of loans and other long-term liabilities | (311,538) | (74,892) | (239,034) | |
| Proceeds from the sale of shares to non-controlling interests | - | - | 4,148 | |
| Dividend paid to holders of non-controlling interests | - | - | (1,690) | |
| Net cash from (used in) financing activity | 278,669 | (148,387) | (591,017) | |
| Increase (decrease) in cash and cash equivalents | 788,010 | 190,816 | (156,793) | |
| Exchange rate differentials due to cash and cash equivalent balances | 586 | (12,918) | (21,714) | |
| Balance of cash and cash equivalents at the beginning of the period | 426,790 | 605,297 | 605,297 | |
| Balance of cash and cash equivalents at the end of the period | 1,215,386 | 783,195 | 426,790 |
*) Reclassified.
**) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Consolidated Cash Flow Reports
| For the 3 Months Ending March 31 |
For the Year Ending on December 31 |
||||
|---|---|---|---|---|---|
| 2020 | 2019 *) | 2019 | |||
| Unaudited | Audited | ||||
| Thousands of NIS | |||||
| (a) | Proceeds from the Realization of Investments in Subsidiaries | ||||
| Consolidated in the Past, Net | |||||
| Assets and liabilities of subsidiaries as of the date of sale: | |||||
| Working capital | - | (16,381) | (16,381) | ||
| Investment property and investment property under development | - | 58,331 | 58,331 | ||
| Other long-term assets and fixed assets | - | - | - | ||
| Land inventory | - | - | - | ||
| Long-term loans from financial institutions | - | (135) | (135) | ||
| Deferred taxes | - | - | - | ||
| Non-controlling interests | - | (2,249) | (2,249) | ||
| Loss from the sale of investment | - | 582 | 582 | ||
| - | 40,148 | 40,148 | |||
| (b) | Newly Merged Company | ||||
| Cash received from merged company | - | - | 8,451 | ||
| Investment property | - | - | 282,257 | ||
| Fixed assets | - | - | 87 | ||
| Other receivables | - | - | 2,188 | ||
| Investments in associates | - | - | (66,371) | ||
| Payables and credit balances | - | - | (17,688) | ||
| Trade payables | - | - | (1,234) | ||
| Loans from banking corporations | - | - | (116,586) | ||
| Deferred taxes | - | - | (40,428) | ||
| Capital issued | - | - | (69,295) | ||
| Loss from company merger | - | - | 18,619 | ||
| - | - | - | |||
| (b) | Additional information on material actions not involving cash flows: | ||||
| Realization of assets held for sale against other accounts receivable | (8,451) | 20,182 | 17,499 | ||
*) See Note 1c to the December 31 2019 Consolidated Financial Statements on the economic merger with and into the Company.
The attached Notes constitute an inseparable part of the Interim Consolidated Financial Statements.
Note 1: - General
A. These financial statements have been prepared in a concise format as of march 31 2020 and for the three-month period ending that date (hereinafter – the consolidated interim financial statements). These statements must be studied within the context of the company's yearly financial statements as of December 31 2019 and for the year ending that date and associated notes (hereinafter – the consolidated yearly financial statements).
B. Impact of covid-19
Over the course of the first quarter of 2020, the world started to undergo a crisis with extensive macroeconomic implications originating from the spread of the novel coronavirus (covid-19) throughout the world, including in Israel. The world health organization declared the outbreak a global pandemic and there is a great deal of global uncertainty regarding defeating it via medication or vaccination and the amount of time this will require. Actions and directives taken by various countries, including Israel, which included or still include prohibitions or restrictions on busines activity, limiting attendance at workplaces, border closings and/or restricted movement for the general population (international and domestic), shutting down schools and so on, as part of the response to the pandemic, have led to a global financial crisis, which has also reached Israel. This crisis is expressed, among other things, in sharp drops in stock markets around the world (including at the Tel Aviv stock exchange), fluctuations in foreign currency rates, and an increase in yields on corporate debentures due to the increase in risk levels.
As of the publication of this report, the economic crisis is still underway and we cannot predict its duration and its full impact on business activity around the world and in Israel in particular. Recently, the Israeli government has been gradually easing restrictions placed on the economy and on the population, to allow a return to full business activity in the short term. At the same time, the government has emphasized that a change in infection rates and/or in the number of severe cases may lead to the cancellation of the reopening and to additional restrictions.
In the reported period, the company collected the rental fees similar to previous quarters. Since the start of the crisis, company policy has been to continue with its ongoing activities in all of its segments while implementing the emergency regulations and all government directives, and as such the company continued in its planning, development, marketing and management activity of the company's assets and in examining purchase transactions and participation in tenders issued by the Israel land authority and local authorities. Concurrently, company management is examining, on a daily basis, developments in collecting rental and management fees from its tenants and occupancy rates in its properties. Most of the company's Israeli revenues (some 88% if its total yearly revenues) derive from properties used for industrial and logistical purposes, for offices and businesses defined as vital and located in commercial centers, rented to 2,300 tenants, with a high level of geographic and sectoral distribution. The remainder, at 12% of all yearly rental revenues, derives from cashgenerating properties with commercial zoning, with do not include businesses defined as critical. As a result of the crisis created by covid-19, the company has received requests from some of its tenants to cancel, reduce and/or spread out rental and management fees for the months in which restrictions were placed and business activity was reduced. Some claimed that the covid-19 crisis constituted force majeure. In specific cases in which the company saw fit to accommodate its tenants for April and May, it allowed payments according to a share of redemptions, subject to the fact that the relief would be decreased at the level of the full grant and/or benefit these tenants would be entitled to from the state as a result of the crisis. The company estimates that as of the publication of this report, the sum of the decrease in rental payments deriving as a result of offering these reliefs to company tenants in Israel and abroad was estimated at 18 million NIS, of which 12 million NIS was in Israel (without the opening assumption as a result of government assistance provided these tenants). In other specific cases, the company allows certain tenants to spread out their payments and reached arrangements with them on spreading their payments out over the course of the next few months, and the company estimates that most of the tenants will uphold their end of these arrangements.
Notes to the Interim Consolidated Balance Sheets
Note 1: - General (Continued)
~
As of the publication of this report, the company is considering giving relief regarding rental fees or allowing payments to be spread out for may in exceptional cases only, with these reliefs expected to amount to non-material sums.
The average occupancy rate remained unchanged at 90.1% similar to the last 12-month average And according to company management's estimates, there is not expected to be a significant change in the average occupancy rate in the near future.
In addition, based on the actions taken by company management including performing valuations for 68 of its properties at a value of 788 million NIS in which the value of the properties was preserved or positive revaluation took place, among other things, due to the increase in appropriate rental fees and a drop in capitalization rates, discussions with independent outside valuators and receipt of letters of update from the appraisers regarding properties worth 1.6 billion NIS, which noted that no data exists indicating material changes in the factors serving to assess the value, including the capitalization rates, and following an examination conducted by the company – the company found that as of the financial statements date there was no need to revise the fair value of its cash-generating properties. At the same time, in light of the company's policy regarding relief given tenants, and in accordance with an examination conducted by the company, the value of the investment property was amortized by a sum of some 25 million NIS.
As of the publication of this report, there have been no material changes in the group's development activity, which has continued as usual.
As of the publication of this report, and taking into account the current uncertainty regarding the amount of time that will be needed to contain the pandemic and the regular and variable changing updates to the policies and decisions of governments and regulatory bodies in Israel and around the world, which have a material impact on the activity of the economy as a whole, the company cannot estimate the scope of the impact of a continuing covid-19 and related crisis on the company's present and future activity, and this will be influenced in accordance with the degree and scope of realization of relevant risk factors, including the state of the Israeli economy, the global health crisis, economic slowdowns in the foreign countries in which the group is active, a drop in tenant payment ability, a drop in demand for space, and a drop in rental prices.
The company estimates, inasmuch as the distributions and restrictions detailed above impact shortrange business activity only, they are not expected to have a material negative impact on the company's activity and results. At the same time, continuation of the financial crisis or its worsening over time may have a negative impact on the global economy and on the Israeli economy, and the case in question is expected to have a negative impact on the company's monetary results.
C. COMPLETION OF STRUCTURAL CHANGE PROCESS
On November 4 2019 a structural change process the company was a party to was completed as follows: (a) Jerusalem economy was merged with and into the company by way of a statutory merger according to chapter 1 of part 8 of the companies law (hereinafter – statutory merger), so that upon completion of the merger, Jerusalem economy was eliminated with no liquidation, in return for the issue of company shares to entitled Jerusalem economy shareholders on the basis of a replacement rate of 1.935 regular company shares worth 1 NIS NV for each regular share worth 1 NIS NV of Jerusalem economy. (b) Shmei Bar companies and B.R.A.P . (Both Shmei bar companies and B.R.A.P shall hereby be referred to as the target companies) were merged with and into the company by way of a statutory merger, so that upon completion of the merger both of the target companies was eliminated with no liquidation, in return for the allocation of company shares to the shareholders of the target companies by way of a private offering. In addition, the company made a commitment toward the shareholders in the target companies to receive a guaranteed share price for the allocated shares, if these are sold by them, in whole or in part, over the course of a period defined in the merger agreements.
In addition, Jerusalem economy construction and supervision Ltd., a Jerusalem economy subsidiary, was merged with and into Jerusalem economy in a statutory merger, for no compensation.
Notes to the Interim Consolidated Balance Sheets
Note 1: - General (Continued)
The companies participating in the structural change contacted the Israel tax authority and received taxation rulings on the tax implications that will apply to them, to their shareholders and to the holders of Jerusalem economy debentures following the structural change described above.
The company treated the above mergers with the exception of the B.R.A.P merger in a manner similar to the pooling of interests method. The company prepared consolidated financial statements in order to reflect the merger as if it had taken place at the beginning of the earliest period presented in the statements (January 1 2017). In addition, the consolidated financial statements include the balance sheet on a consolidated basis, the operating results and consolidated cash flows of the merged companies as if they had always been owned by the company. Consolidated reports on changes in equity were also presented using the as pooling method while making requisite adjustments to various sections absorbed in the share premium item in order to reflect the legal rights of the company's majority shareholders and of non-controlling interests until the merger date and subsequent to it, respectively. The impact of the merger on the rights of majority
Shareholders and of non-controlling interests was charged on the merger date to the premium of shares items and to the principle from transactions with holders of non-controlling interests, respectively. Until the merger completion date, B.R.A.P was measured using the book value method. The merger of B.R.A.P was treated as an acquisition achieved in stages, capital rights held by the group prior to achieving control are measured at fair value as of the date of purchase while being charged to gain/loss from the revaluation of the previous investment on the date control was achieved.
For further details, see note 1c to the December 31 2019 consolidated financial statements
Note 2: – Principal Accounting Policies
A. PREPARATION FORMAT OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
These Consolidated Interim Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as well as in accordance with disclosure requirements as per Chapter D of the Securities Regulations (Periodic and Immediate Reports) 1970.
The accounting policy applied in the preparation of the Consolidated Interim Financial Statements is consistent with that used in the preparation of the Consolidated Yearly Financial Statements, except for:
First-Time Application of New Financial Reporting Standards
IFRS 3, Business Combinations:
In October 2018, the IASB published a revision to the definition of "business" in IFRS 3 Business Combinations (hereinafter – the Revision). The purpose of the Revision is to assist companies in determining whether a purchase transaction will be treated as a business combination or as a property purchase transaction.
The Revision includes:
- (a) A clarification to the fact that in order to be considered a "business", a system of activities and assets purchased will include at a minimum inputs and material process that together significantly contribute to the ability to generate outputs.
- (b) Omission of reference to the assessment whether a market participant can continue operating an acquired business by replacing inputs and processes.
- (c) Additional guidelines and examples help the companies assess whether the processes acquired are material.
- (d) Changing the definition of "output" and "business" to make the definitions more focused and limited.
- (e) An optional test according to which a company can determine that this is not the acquisition of a business, with no need for additional tests.
The Revision shall be applied to business combinations and asset purchase transactions the acquisition date of which starts from the yearly period starting January 1, 2020 or subsequently.
The Company estimates, after examining the implications of the amendments, that their application is not expected to have a material effect on the Company's Financial Statements.
Notes to the Interim Consolidated Balance Sheets
Note 2: – Principal Accounting Policies (Continued)
B. The following is data pertaining to the exchange rates of principal currencies in the countries in which the group operates and the consumer price index:
| Rate of Change during the Period | Consumer Price Index |
||||||
|---|---|---|---|---|---|---|---|
| Israel (*) | |||||||
| Actual | Known | US Dollar |
Euro | Canadian Dollar |
Swiss franc |
Hryvnia | |
| % | % | % | % | % | % | % | |
| For the three-month period ending March 31 2020 |
(0.1) | (0.5) | 3.2 | 0.6 | (5.8) | 3.1 | (12.5) |
| For the three-month period ending March 31 2019 For the Year Ending December 31 |
0.5 | (0.3) | (3.1) | (5.0) | (1.7) | (4.1) | (1.9) |
| 2019 | 0.6 | 0.3 | (7.8) | (9.6) | (3.6) | (6.1) | 7.7 |
| CPI (in points) | Representative rate of exchange (in NIS) | ||||||
| 31.3.2020 | 133.43 | 132.9 | 3.565 | 3.900 | 2.500 | 3.685 | 0.126 |
| 31.3.2019 31.12.2019 |
133.43 133.56 |
132.77 133.56 |
3.632 3.456 |
4.078 3.878 |
2.705 2.6535 |
3.649 3.575 |
0.132 0.145 |
(*) CPI according to average base of 2000 = 100.
Note 3: – Compliance with Financial Covenants
As of March 31 2020 and as of the publication of this report, the Company has been in compliance with all financial covenants required in accordance with the debentures' deeds of trust.
Note 4: – Assets And Liabilities Held For Sale
Transactions for the sale of assets that Company management estimates at a high level of certainty will be completed within a year and meet the other rules of IFRS 5 were presented in the Financial Statements under the following items:
Assets held for sale and liabilities referring to assets held for sale.
The following is data on assets and liabilities held for sale by geographical distribution:
| March 31 2020 | ||||
|---|---|---|---|---|
| Assets | Liabilities | Assets, net | ||
| Thousands of NIS | ||||
| Israel | 76,439 | - | 76,439 | |
| Overseas | 86,875 | - | 86,875 | |
| 163,314 | - | 163,314 | ||
| March 31 2019 | ||||
| Assets | Liabilities | Assets, net | ||
| Unaudited | ||||
| Thousands of NIS | ||||
| Israel | 67,348 | - | 67,348 | |
| Overseas | 92,510 | 33,678 | 58,832 | |
| 159,858 | 33,678 | 126,180 | ||
| December 31 2019 | ||||
| Assets | Liabilities | Assets, net | ||
| Thousands of NIS | ||||
| Israel | 78,899 | - | 78,899 | |
| Overseas | 251,206 | 152,752 | 98,454 | |
| 330,105 | 152,752 | 177,353 |
Note 5: – Concise Darban Data
The following is a summary of the financial data of Darban, the shares of which are pledged to the holders of company debentures (series 24):
A. Consolidated balance sheets
| As of March 31 | As of December 31 | ||
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Unaudited | Audited | ||
| Thousands of NIS | |||
| Current Assets | |||
| Cash and cash equivalents | 467,729 | 93,852 | 61,387 |
| Restricted cash | - | 17,020 | - |
| Investments in financial assets | 23,738 | 31,129 | 30,940 |
| Inventory of land for residential construction | - | 137,963 | - |
| Current maturities of long-term deposits | 45,467 | 45,181 | 45,634 |
| Others | 38,231 | 27,253 | 17,902 |
| 575,165 | 352,398 | 155,863 | |
| Non-Current Assets | |||
| Investment in shares of parent company | 741,570 | - | 798,494 |
| Long-term deposits | 45,467 | 90,362 | 45,634 |
| Investments in investees handled using the book value | |||
| method | 177,725 | 505,173 | 414,738 |
| Investment property | 955,014 | 2,034,105 | 954,717 |
| Others | 5,356 | 19,629 | 5,703 |
| 1,925,132 | 2,649,269 | 2,219,286 | |
| 2,500,297 | 3,001,667 | 2,375,149 | |
| Current Liabilities | |||
| Credit from financial institutions | 160,935 | 32,000 | - |
| Payables and credit balances | 63,058 | 63,849 | 44,000 |
| Current maturities of debentures | - | 118,005 | - |
| Current maturities of long-term loans | 24,455 | 162,023 | 10,517 |
| Current maturities of loan from parent company | 267,400 | 200,500 | 203,000 |
| Others | 15,124 | 19,165 | 7,810 |
| 530,972 | 595,542 | 265,327 | |
| Non-Current Liabilities | |||
| Long-term loans from financial institutions | 185,649 | 421,115 | 203,834 |
| Loan from parent company | 185,837 | - | 249,156 |
| Debentures | - | 232,962 | - |
| Other long-term liabilities | 15,000 | 80,041 | 71,341 |
| Deferred taxes | 153,606 | 268,756 | 165,466 |
| 540,092 | 1,002,874 | 689,797 | |
| Total equity | 1,429,233 | 1,403,251 | 1,420,025 |
| 2,500,297 | 3,001,667 | 2,375,149 |
Notes to the Interim Consolidated Balance Sheets
Note 5: – Concise Darban Data (Continued)
B. Consolidated statements of operations
| For the Three-Month Period Ending March 31 |
For the Year Ending December 31 |
|||
|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||
| Unaudited | Audited Thousands of NIS |
|||
| Revenues | ||||
| From renting, managing and maintaining buildings in Israel |
18,228 | 38,015 | 136,173 | |
| Revenues from apartment sales | - | 16,486 | 55,401 | |
| From renting, managing and maintaining buildings abroad and others |
1,736 | 2,108 | 8,860 | |
| Total revenues | 19,964 | 56,609 | 200,434 | |
| Costs | ||||
| Cost of building management and maintenance | 2,111 | 6,458 | 22,941 | |
| Cost of apartments sold | - | 10,868 | 36,737 | |
| Gross profit | 17,853 | 39,283 | 140,756 | |
| Net increase (decrease) in fair value of | ||||
| investment property | (109) | (4,116) | 91,491 | |
| Administrative and general, and sales and | ||||
| marketing expenses | 3,271 | 4,736 | 20,867 | |
| Group's share of losses of associates handled | ||||
| using the book value method | 742 | 6,099 | (1,012) | |
| Other expenses (revenues) | 63 | (217) | 924 | |
| Profit from regular activities | 15,278 | 36,313 | 211,292 | |
| Loss from early redemption of debentures Profit from the realization of consolidated companies and investee using the book value |
- | - | 10,665 | |
| method | 71,625 | - | 13,343 | |
| Financing revenues (expenses), net | (11,010) | 2,090 | (20,656) | |
| Profit after financing | 75,893 | 38,403 | 193,314 | |
| Tax expenses | 20,203 | 7,415 | 60,730 | |
| Net profit | 55,690 | 30,988 | 132,584 | |
| Attributed to: | ||||
| Company shareholders | 55,377 | 29,070 | 118,523 | |
| Non-controlling interests | 313 | 1,918 | 14,061 | |
| 55,690 | 30,988 | 132,584 |
Notes to the Interim Consolidated Balance Sheets
Note 5: – Concise Darban Data (Continued)
C. Consolidated cash flow reports
| For the Three Months Ending March 31 2020 2019 Unaudited |
For the Year Ending December 31 2019 |
|||
|---|---|---|---|---|
| Audited | ||||
| Thousands of NIS | ||||
| Net cash from current activity | 8,028 | 29,255 | 92,394 | |
| Net cash deriving from investment activity | 252,406 | (7,287) | 75,317 | |
| Net cash used in financing activities | 146,154 | (26,035) | (199,599) | |
| Translation differences due to cash balances held | ||||
| in foreign currency | (246) | (2,055) | (6,699) | |
| 406,342 | (6,122) | (38,587) | ||
| Balance of cash and cash equivalents at the | ||||
| beginning of the year | 61,387 | 99,974 | 99,974 | |
| Balance of cash and cash equivalents at the end of the year |
467,729 | 93,852 | 61,387 |
Note 6: - Material Events During And Subsequent To The Reported Period
- A. On January 2 2020 the company issued 18,231,293 non-tradable options to purchase 18,231,293 regular shares worth 1 NIS (hereinafter – the options) NV each for company employees and officers including the company CEO. Out of the total sum of options issued, 9,523,819 options were issued to the CEO. For details regarding the terms of the options and the parameters that served in calculating the economic value of each of the options see note 30.a.(4) to the yearly financial statements.
- B. On January 23 2020 Standard & Poor's Maalot announced that it was raising the company's rating to Ilaa-, and that it was raising the rating of its guaranteed debentures to Ilaa and raising the rating of its non-guaranteed debentures including the series guaranteed by Darban shares to Ilaa-.
- C. On December 26 2018 the company received tax assessments from the tax authority in accordance with their best judgement for 2013-2016, to the total sum of 74 million NIS (including interest and linkage). On February 27 2020 the company signed an assessment agreement for the years in question in which the company paid a sum of 56 million NIS on that date. Signing the assessment agreement had no material impact on the company's financial results.
- D. On February 27 2020 the company announced that it had completed the transaction to sell its rights to three industrial properties in France in return for a total sum of €42.5 million (159.8 million NIS), and the balance of the proceeds of the sale was paid after the terms set in the sales agreement were met.
- E. On march 3 2020 the company announced that it was changing its name of Mivne Real Estate (K.D.) Ltd.
- F. On March 22 2020, Darban entered into an agreement to sell all of the stock capital held by it in Yakum development to an unrelated third party (hereinafter – the buyer) in return for a (net) total of 243.5 million NIS plus vat (hereinafter – the sales agreement and the proceeds, as the case may be). The transaction covered by the sales agreement was completed upon signing the sales agreement (hereinafter – the completion date) and Darban received the full proceeds. The proceeds are subject to non-material adjustments following the preparation of an audited balance sheet for Yakum development as of the completion date. In addition, on the completion date guarantees provided by Darban to financial institutions in order to guarantee Yakum development's obligations to these bodies expired. On the completion date, Darban listed a profit (before tax) from the sale to the amount of 71 million NIS. The cash flow available to Darban from the sale (before taxes and after transaction costs) amounts to 229 million NIS.
Note 6: - Material Events During And Subsequent To The Reported Period (Continued)
- G. On April 20 2020 the company's general meeting ratified the an amendment to the company's bylaws, which stated that the number of directors on the company board of directors shall be no less than three and no more than seven (including outside directors).
- H. On August 5 2019 a company subsidiary sold a property in Portugal, in return for a total of 87 million NIS (€22.25 million). The company recognized evaluation profits to the sum of 9 million NIS. On April 30 2020 the transaction was completed and all of the proceeds plus €436,000 in interest was paid.
- I. On May 13 2020 the company announced that it was performing a partial early redemption of the company's debentures (series 15), at the company's initiative, to be carried out on June 1 2020. The company will perform a partial early redemption of the debentures to the sum of 108,474,034 NIS NV and at a total sum of 118,763,066 NIS for principal and interest.3 the sum of the principal that will be redeemed in the partial early redemption amounts to 108,474,034 NIS. The accrued interest sum, including the added interest for the partial early redemption to the partial redemption date, is 10,289,032 NIS. The partial early redemption rate in terms of uncleared balance amounts to 87.8517% (the partial early redemption rate in terms of the original services including expansions amounts to 24.77249%). The interest rate that will be paid in the partial early redemption, including the added interest for the partial early redemption is 9.48525%. The interest rate that will be paid in the partial early redemption, including the added interest for the partial early redemption, calculated according to the uncleared balance, is 8.33295%. The remaining partial redemption rates in original series terms are 3.42559%. In accordance with the provisions of the deeds of trust of series 15 the redemption rate is 1.0948525 NIS for each 1 NIS NV debenture (series 15) redeemed and 1.00 NIS for each 1 NIS NV debenture (series 15) redeemed after neutralizing interest. The company announced that it intends to publish a full purchase offer for the debenture (series 15) still outstanding after the partial early redemption at the same redemption rate set in the partial early redemption.
Due to the partial early redemption, the company will list a non-recurring expense of 8.2 million NIS.
- J. On May 13 2020 the company announced that it was performing a full early redemption of the company's debentures (series 22), at the company's initiative, to be carried out on June 1 2020. The company will perform a full early redemption of the debentures to the sum of 284,639,172 NIS NV and at a total sum of 299,337,848 NIS for principal and interest. The accrued interest sum, including the added interest for the full early redemption to the redemption date is 14,698,676 NIS. The interest rate that will be paid in the partial early redemption, including the added interest for the early redemption is 5.16397%. In accordance with the provisions of the deeds of trust of series 22, on the early redemption date, the company will pay the holders of the debentures (series 22) according to a redemption rate of 1.0516397 NIS per for each 1 NIS NV debenture (series 22) redeemed and 1.00 NIS for each 1 NIS NV debenture (series 22) redeemed after neutralizing interest. Due to the early redemption, the company will list a non-recurring expense of 8.6 million NIS.
- K. On May 14 2020 the company issued 243,913,000 NIS NV debentures (series 15), in return for a sum of 284.4 million NIS, by way of a series expansion.
Mivne Real Estate (K.D.) Ltd.
Presentation of Financial Data from the Consolidated Interim Financial Statements Attributed to the Company
As of March 31, 2020
Unaudited
Kost Forrer Gabbay & Kassirer 144a Menachem Begin Road, Tel Aviv 6492102
Phone no. +972-3-6232525 Fax +972-3-5622555 ey.com
Special Review of Separate Financial Information as per Regulation 38d of the Securities Regulations (Periodic and Immediate Reports), 1970
Introduction
We have reviewed the interim financial information presented according to Regulation 38d of the Securities Regulations (Periodical and Immediate Reports), 1970 of Mivne Real Estate (K.D.) Ltd. (hereinafter – The Company), as of March 31 2020 and for the three-month period ending that date. The Company's Board of Directors and Management are responsible for separate financial information. Our responsibility is to express our opinion on this interim separate financial information based on our review.
We have not reviewed the separate interim financial information from the financial statements of investees the net assets less liabilities attributed to which amounted to a total of 1,724 million NIS as of March 31 2020 and the profits from these investees amounted to 63 million NIS for the threemonth period ending that date. The financial statements of said companies have been reviewed by other accountants, the reports of whom have been provided us and our conclusion, inasmuch as it refers to financial statements for those companies, is based on the reviews conducted by these other accountants.
Scope of the Review
We have prepared our review in accordance with Reviewing Standard 1 of the Israeli Institute of Certified Public Accountants – "Reviews of Interim Financial Information Conducted by the Entity's Auditing Accountant." A review of financial information for interim periods consists of inquiries, mainly from people responsible for finances and accounting, and from the application of analytical and other reviewing procedures. A review is significantly limited in scope relative to an audit conducted according to generally accepted Israeli auditing standards, and therefore does not allow us to achieve assurance that we have been made aware of all material issues that might have been identified in an audit. Accordingly, we are not expressing an audit-level opinion.
Conclusion
Based on our review and on those of other accountants, nothing has come to our attention that would make us believe that the separate interim financial information in question has not been prepared, in all material aspects, in accordance with Regulation 38d of the Securities Regulations (Periodic and Immediate Reports), 1970.
Tel-Aviv, Kost, Forer, Gabbay & Kassirer May 24 2020 Certified Public Accountants
Special Report as per Regulation 38d
Financial Information and Financial Information from Consolidated Interim Financial Statements
Attributed to the Company
Below is separate financial information and financial data from the Group's Interim Consolidated Financial Statements as of March 31 2020, published as part of the periodic reports (hereinafter - "Consolidated Financial Statements") presented in accordance with Regulation 38d of the Securities Regulations (Periodic and Immediate Reports), 1970.
Mivne Real Estate (K.D.) Ltd. Financial Data from the Consolidated Balance Sheets Attributed to the Company
| As of March 31 | As of December 31 |
|||
|---|---|---|---|---|
| 2020 | 2019 * | 2019 | ||
| Unaudited | Audited | |||
| Thousands of NIS | ||||
| Current Assets | ||||
| Cash and cash equivalents | 481,771 | 214,611 | 112,877 | |
| Short-term investments | 163 | 2,663 | 1,876 | |
| Restricted cash | 13,388 | 13,667 | 18,485 | |
| Trade receivables | 23,472 | 23,237 | 21,036 | |
| Other receivables | 101,269 | 37,083 | 110,457 | |
| Current C/D balances with investees | 20,113 | 34,236 | 40,322 | |
| Taxes receivable | 18,899 | 18,660 | - | |
| Current maturities of loans to investees | 295,920 | - | 295,048 | |
| Inventory of apartments for sale | 131,769 | - | 137,321 | |
| 1,086,764 | 344,157 | 737,422 | ||
| Assets held for sale | 76,439 | 61,635 | 78,899 | |
| Total current assets | 1,163,203 | 405,792 | 816,321 | |
| Non-Current Assets | ||||
| Loans to investees | 1,847,249 | 753,873 | 1,824,713 | |
| Investments in investees | 575,555 | 696,365 | 571,544 | |
| Deposits and other receivables | 341,435 | - | 344,426 | |
| Inventory of land for residential construction | 16,654 | 16,654 | 16,654 | |
| Investment property | 8,296,619 | 4,669,704 | 8,266,179 | |
| Investment property under construction | 157,917 | 57,769 | 134,597 | |
| Fixed assets | 59,443 | 34,447 | 60,093 | |
| Intangible asset | 19,630 | - | 19,630 | |
| Total non-current assets | 11,314,502 | 6,228,812 | 11,237,836 | |
| Total | 12,477,705 | 6,634,604 | 12,054,157 |
*) See Section 1 of the Solo Financial Statements as of December 31 2019 on the accounting treatment of the economic merger with and into the Company.
Mivne Real Estate (K.D.) Ltd. Financial Data from the Consolidated Balance Sheets Attributed to the Company
| As of March 31 2020 2019 *) |
As of December 31 2019 |
|||
|---|---|---|---|---|
| Audited | ||||
| Unaudited Thousands of NIS |
||||
| Current Liabilities | ||||
| Credit from banks and other credit providers Current maturities of loans, other liabilities and |
440,278 | - | 3,016 | |
| debentures | 379,429 | 172,638 | 505,615 | |
| Trade payables | 48,515 | 20,211 | 39,927 | |
| Payables and credit balances | 249,274 | 87,620 | 211,640 | |
| Current C/D balances with investees | 6,570 | 4,006 | 7,058 | |
| Taxes payable | - | - | 36,105 | |
| Total current liabilities | 1,124,066 | 284,475 | 803,361 | |
| Non-Current Liabilities | ||||
| Loans from banking corporations | 184,754 | - | 187,106 | |
| Other non-current liabilities | 538,691 | 367,740 | 547,708 | |
| Non-current loans from investees | 104,940 | 90,808 | 110,010 | |
| Tenant deposits | 26,704 | 19,622 | 25,464 | |
| Debentures | 3,872,271 | 2,471,425 | 3,911,176 | |
| Employee benefit liabilities, net | 7,433 | 3,642 | 6,985 | |
| Deferred taxes | 921,761 | 702,746 | 891,211 | |
| Total non-current liabilities | 5,656,554 | 3,655,983 | 5,679,660 | |
| Equity Attributable to Company Shareholders | ||||
| Share capital | 1,509,503 | 1,143,690 | 1,509,503 | |
| Premium on shares | 3,607,405 | 330,864 | 3,607,405 | |
| Treasury shares | (641,127) | - | (641,127) | |
| Retained earnings | 1,366,779 | 1,152,895 | 1,231,356 | |
| Hedge Capital Fund | (3,784) | - | (3,732) | |
| Capital reserve of share-based payment | 8,245 | - | 2,694 | |
| Capital reserve from transactions with minority | ||||
| shareholders in associate | (270,903) | (15,958) | (263,678) | |
| Other reserves | 86,747 | 126,990 | 86,747 | |
| Adjustments from the translation of financial | ||||
| statements | 34,220 | (44,335) | 41,968 | |
| Total equity | 5,697,085 | 2,694,146 | 5,571,136 | |
| 12,477,705 | 6,634,604 | 12,054,157 |
*) See Section 1 of the Solo Financial Statements as of December 31 2019 on the accounting treatment of the economic merger with and into the Company.
The attached additional information constitutes an inseparable part of the financial data and separate financial information.
May 24 2020 Financial Statements Approval Date Tal Forer Chair of the Board of Directors David Zabida CEO Yossi Filiba VP of Finance, Accounting and Reporting
Mivne Real Estate (K.D.) Ltd. Financial Data from the Consolidated Statements of Operations Attributed to the Company
| For the 3 Months Ending March 31 |
For the Year Ending December 31 |
|||
|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||
| Unaudited | Audited | |||
| Thousands of NIS | ||||
| Revenues | ||||
| From rental fees From the sale of apartments From management of buildings, infrastructure and |
133,755 22,300 |
84,037 - |
472,462 16,185 |
|
| others | 22,340 | 9,174 | 74,537 | |
| Total revenues | 178,395 | 93,211 | 563,184 | |
| Maintenance and administration costs Cost of apartments sold Building, infrastructure and other management costs |
27,395 13,930 300 |
11,768 - 263 |
89,225 11,166 1,611 |
|
| Gross profit Increase in fair value of investment property |
136,770 | 81,180 | 461,182 | |
| and investment property under construction, net | 30,115 | 53,745 | 340,070 | |
| The Company's share of the profits of investees | 35,745 | 19,519 | 160,287 | |
| Sales and marketing expenses | (1,123) | (346) | (4,521) | |
| Administrative and general expenses | (18,787) | (9,448) | (78,617) | |
| Other revenues (expenses), net | (18,482) | 63 | (18,416) | |
| Profit from regular activities | 164,238 | 144,713 | 859,985 | |
| Financing expenses | (26,145) | (16,407) | (153,830) | |
| Financing revenues Financing revenues (expenses) from tradable |
1,147 | 162 | 7,265 | |
| securities Financing revenues (expenses), net, in respect |
(298) | - | 7,802 | |
| of investees | 22,677 | (8,349) | (51,234) | |
| Profit before taxes on income | 161,619 | 120,119 | 669,988 | |
| Taxes on income (tax benefit) | 26,196 | 35,973 | (7,844) | |
| Net profit | 135,423 | 84,146 | 677,832 |
Mivne Real Estate (K.D.) Ltd. Financial Data from the Statements of Comprehensive Income Attributed to the Company
| For the 3 Months Ending March 31 |
For the Year Ending December 31 |
|||
|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||
| Unaudited | Audited | |||
| Thousands of NIS | ||||
| Net profit attributable to the Company | 135,423 | 84,146 | 677,832 | |
| Other comprehensive income (loss) attributed to the Company (after tax influence): |
||||
| Amounts classified or re-classified to profit or loss under specific conditions: |
||||
| Profit (loss) with respect to cash flow hedging transactions |
(52) | - | 75 | |
| Adjustments from the translation of financial statements of foreign activity |
(7,748) | (14,207) | (15,967) | |
| Adjustments arising from the translation of financial statements of associates |
- | (2,040) | - | |
| Realization of capital reserve to Statement of Operations due to the realization of foreign activity |
- | - | 37,949 | |
| Total other comprehensive income (loss) attributed to the Company |
(7,800) | (16,247) | 22,057 | |
| Total comprehensive income attributed to the company | 127,623 | 67,899 | 699,889 |
Mivne Real Estate (K.D.) Ltd. Financial Data from the Consolidated Cash Flow Reports Attributed to the Company
| 2020 2019 2019 Unaudited Audited Thousands of NIS Cash Flows from Current Company Activities Net profit attributed to the Company 135,423 84,146 677,832 Adjustments required to present cash flows from current Company activities: Adjustments to Company gain/loss items: The Company's share of the profits of investees (35,745) (19,519) (160,287) Taxes on income (tax benefit) 26,196 35,973 (7,844) Loss (profit) from short-term investments, net 298 461 (5,851) Change in employee benefit liabilities, net 448 27 2,067 Increase in fair value of investment property and investment property under construction, net (30,115) (53,745) (294,241) Depreciation and amortization 1,174 861 3,592 Interest and revaluation of long-term loans and debentures 19,338 (23,928) 128,078 Interest and revaluation of long-term deposits and debit balances (17,017) 48,061 67,770 Profit from the sale of fixed assets (3,039) - - Loss from merger of companies - - 18,755 (38,462) (11,809) (247,961) Changes in asset and liabilities items of the Company: Decrease (increase) in trade receivables (3,622) (7,265) 28,272 Decrease (increase) in other accounts receivable and long term receivables 8,592 (39,862) (43,421) Increase in trade liabilities 8,588 9,511 19,208 Increase (decrease) in other accounts payable 18,247 45,556 (92,925) Increase in tenant deposits 1,240 552 4,751 33,045 8,492 (84,115) Cash paid and received during the period at the Company for: Interest paid (19,362) (8,544) (163,242) Interest received 25 80 5,617 Taxes paid (58,977) (23) (3,595) (78,314) (8,487) (161,220) Net cash deriving from current activity before a decrease (increase) in inventory of land for residential construction 51,692 72,342 184,536 Decrease (increase) in inventory of land for residential construction 5,552 (5) (5,136) |
For the 3 Months Ending March 31 |
For the Year Ending December 31 |
||
|---|---|---|---|---|
| Net cash deriving from current Company activity 57,244 72,337 179,400 |
Mivne Real Estate (K.D.) Ltd. Financial Data from the Consolidated Cash Flow Reports Attributed to the Company
| For the 3 Months Ending March 31 2020 2019 Unaudited Thousands of NIS |
For the Year Ending December 31 |
||||
|---|---|---|---|---|---|
| 2019 | |||||
| Audited | |||||
| Cash flows from the Company's investment activities |
|||||
| Acquisitions and investments in investment property Investment in investment property under construction Investment in fixed assets Proceeds from the realization of fixed assets |
(25,805) (23,320) (1,084) 3,599 |
(14,594) (5,667) (247) - |
(65,308) (25,162) (672) - |
||
| Proceeds from the realization of short-term investments Proceeds from the realization of investment property Loans repaid (granted) to investees, net |
21,090 39,368 10,896 |
10,897 (*) 45,007 64,710 |
28,916 121,499 (106,205) |
||
| Cash received in merger Proceeds from investment in investees Dividend received from investees, net |
- - 2,878 |
- (4,000) - |
112,936 (4,000) 11,516 |
||
| Net cash derived from Company investment activities |
27,622 | 85,466 | 73,520 | ||
| Cash flows from Company financing activity | |||||
| Short-term credit, net Repayment of long-term loans from financial |
437,317 | - | - | ||
| institutions Receipt of other long-term liabilities |
(3,839) 120 |
(5,600) 370 |
(48,067) 1,235 |
||
| Repayment of other long-term liabilities Redemption of debentures Repayment of perpetual loan |
(141,722) (7,848) - |
(33,494) (7,840) (11,500) |
(53,865) (135,477) (8,101) |
||
| Net cash deriving from (used in) Company financing | |||||
| activity | 284,028 | (47,424) | (244,275) | ||
| Increase in cash and cash equivalents | 368,894 | 110,379 | 8,645 | ||
| Balance of cash and cash equivalents at the beginning of the period |
112,877 | 104,232 | 104,232 | ||
| Balance of cash and cash equivalents at the end of the period |
481,771 | 214,611 | 112,877 | ||
| (a) | Material Company non-cash activities | ||||
| Sale of investment property against long-term receivables |
(8,415) | 20,182 | (635) |
(*) Reclassified
Additional Information
1. GENERAL
A. This separate financial information has been compiled in a concise format as of march 31 2020 and for the three-month period ending that date in accordance with the regulation 38d of the securities regulations (periodic and immediate reports), 1970. This separate financial information must be seen in context of the company's yearly financial statements for December 31 2019 and the year ending that date and the accompanying additional information.
B. IMPACT OF COVID-19
Over the course of the first quarter of 2020, the world started to undergo a crisis with extensive macroeconomic implications originating from the spread of the novel coronavirus (covid-19) throughout the world, including in Israel. The world health organization declared the outbreak a global pandemic and there is a great deal of global uncertainty regarding defeating it via medication or vaccination and the amount of time this will require. Actions and directives taken by various countries, including Israel, which included or still include prohibitions or restrictions on busines activity, limiting attendance at workplaces, border closings and/or restricted movement for the general population (international and domestic), shutting down schools and so on, as part of the response to the pandemic, have led to a global financial crisis, which has also reached Israel. This crisis is expressed, among other things, in sharp drops in stock markets around the world (including at the Tel Aviv stock exchange), fluctuations in foreign currency rates, and an increase in yields on corporate debentures due to the increase in risk levels.
As of the publication of this report, the economic crisis is still underway and we cannot predict its duration and its full impact on business activity around the world and in Israel in particular. Recently, the Israeli government has been gradually easing restrictions placed on the economy and on the population, to allow a return to full business activity in the short term. At the same time, the government has emphasized that a change in infection rates and/or in the number of severe cases may lead to the cancellation of the reopening and to additional restrictions.
As of the publication of this report, and taking into account the current uncertainty regarding the amount of time that will be needed to contain the pandemic and the regular and variable changing revisions to the policies and decisions of governments and regulatory bodies in Israel and around the world, which have a material impact on the activity of the economy as a whole, the company cannot estimate the scope of the impact of a continuing covid-19 and related crisis on the company's present and future activity, and this will be influenced in accordance with the degree and scope of realization of relevant risk factors, including the state of the Israeli economy, the global health crisis, economic slowdowns in the foreign countries in which the group is active, a drop in tenant payment ability, a drop in demand for space, a drop in rental prices.
The company estimates, inasmuch as the distributions and restrictions detailed above impact shortrange business activity only, they are not expected to have a material negative impact on the company's activity and results. At the same time, continuation of the financial crisis or its worsening over time may have a negative impact on the global economy and on the Israeli economy, and the case in question is expected to have a negative impact on the company's monetary results.
1. general (continued)
In the reported period, the company collected the rental fees similar to previous quarters. From the start of the crisis, company policy has been to continue with its regular activities in all of its segments while implementing the emergency regulations and all government guidelines, and the company has continued planning, developing, marketing and managing the company's assets as well as examining purchasing transactions and participation in tenders from the Israel land authority and local authorities. Concurrently, company management is examining, on a daily basis, developments in collecting rental and management fees from its tenants and occupancy rates in its properties. Most of the company's Israeli revenues (some 88% if its total yearly revenues) derive from properties used for industrial and logistical purposes, for offices and businesses defined as vital and located in commercial centers, rented to 2,300 tenants, with a high level of geographic and sectoral distribution. The remainder, at 12% of all yearly rental revenues, derives from cash-generating properties with commercial zoning, with do not include businesses defined as critical. As a result of the crisis created by covid-19, the company has received requests from some of its tenants to cancel, reduce and/or spread out rental and management fees for the months in which restrictions were placed and business activity was reduced. Some claimed that the covid-19 crisis constituted force majeure. In specific cases in which the company saw fit to accommodate its tenants for April and May, it allowed payments according to a share of redemptions, subject to the fact that the relief would be decreased at the level of the full grant and/or benefit these tenants would be entitled to from the state as a result of the crisis. The company estimates that as of the financial statements date, the total amortization in rental payments deriving as a result of offering these reliefs to company tenants in Israel and abroad was estimated at 18 million NIS, of which 12 million NIS was in Israel (without the opening assumption as a result of government assistance provided these tenants). In other specific cases, the company allows certain tenants to spread out their payments and reached arrangements with them on spreading their payments out over the course of the next few months, and the company estimates that most of the tenants will uphold their end of these arrangements.
As of the publication of this report, the company is considering giving relief regarding rental fees or allowing payments to be spread out for may in exceptional cases only, with these reliefs expected to amount to non-material sums. The average occupancy rate remained unchanged at 90.1%, similar to the last 12-month average and according to company management's estimates, there is not expected to be a significant change in the average occupancy rate in the near future. following the crisis, the company contacted independent outside appraisers in order to test whether a material change had occurred in the discount rates used to determine the fair value of company assets, and the appraisers' examinations indicate that as of the report date there has been no change in capitalization rates. at the same time, in light of the company's policy
Regarding the issue of tenant relief, and in accordance with the examination conducted by the company, the value of investment property was amortized by a sum of some 25 million NIS.
C. COMPLETION OF STRUCTURAL CHANGE PROCESS
On November 4 2019 a structural change process the company was a party to was completed, as follows: (a) Jerusalem Economy was merged with and into the company by way of a statutory merger according to chapter 1 of part 8 of the companies law (hereinafter – statutory merger), so that upon completion of the merger, Jerusalem economy was eliminated with no liquidation, in return for the issue of company shares to entitled Jerusalem economy shareholders on the basis of a replacement rate of 1.935 regular company shares worth 1 NIS NV for each regular share worth 1 NIS NV of Jerusalem economy. (b) Shmei Bar companies and B.R.A.P. (both Shmei Bar companies and B.R.A.P shall hereby be referred to as the target companies) were merged with and
Additional Information
into the company
By way of a statutory merger, so that upon completion of the merger each of the target companies was eliminated with no liquidation, in return for the allocation of company shares to the shareholders of the target companies by way of a private offering. in addition, the company made a commitment toward the shareholders in the target companies to receive a guaranteed share price for the allocated shares, if these are sold by them, in whole or in part, over the course of a period defined in the merger agreements.
In addition, Jerusalem Economy Construction and Supervision ltd., a Jerusalem Economy subsidiary, was merged with and into Jerusalem Economy in a statutory merger, for no compensation.
The companies participating in the structural change contacted the Israel tax authority and received taxation rulings on the tax implications that will apply to them, to their shareholders and to the holders of Jerusalem economy debentures following the structural change described above.
The company treated the above mergers with the exception of the B.R.A.P merger in a manner similar to the pooling of interests method. the company prepared consolidated financial statements in order to reflect the merger as if it had taken place at the beginning of the earliest period presented in the statements (January 1 2017). in addition, the consolidated financial statements include the balance sheet on a consolidated basis, the operating results and consolidated cash flows of the merged companies as if they had always been owned by the company. consolidated reports on changes in equity were also presented using the as pooling method while making requisite adjustments to various sections absorbed in the share premium item in order to reflect the legal rights of the company's majority shareholders and of non-controlling interests until the merger date and subsequent to it, respectively. the impact of the merger on the rights of majority shareholders and of non-controlling interests was charged on the merger date to the premium of shares items and to the principle from transactions with holders of non-controlling interests, respectively. until the merger completion date, B.R.A.P was measured using the book value method. the merger of B.R.A.P was treated as an acquisition achieved in stages, capital rights held by the group prior to achieving control are measured at fair value as of the date of purchase while being charged to gain/loss from the revaluation of the previous investment on the date control was achieved. For further details, see note 1c to the December 31 2019 consolidated financial statements
2. Principal accounting policies
The accounting policy implemented in the preparation of this separate financial information is consistent with that implemented in preparing the separate financial information as of December 31 2019.
3. Material events during and after the reported period
- A. On January 2 2020 the company issued 18,231,293 non-tradable options to purchase 18,231,293 regular shares worth 1 NIS (hereinafter – the options) NV each for company employees and officers including the company CEO. Out of the total sum of options issued, 9,523,819 options were issued to the CEO. For details regarding the terms of the options and the parameters that served in calculating the economic value of each of the options see note 30.a.(4) of the yearly financial statements.
- B. On January 23 2020 Standard & Poor's Maalot announced that it was raising the company's rating to Ilaa-, and that it was raising the rating of its guaranteed debentures to Ilaa and raising the rating of its non-guaranteed debentures including the series guaranteed by Darban shares to Ilaa-.
- C. On December 26 2018 the company received tax assessments from the tax authority in accordance with their best judgement for 2013-2016, to the total sum of 74 million NIS (including interest and
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linkage). on February 27 2020 the company signed an assessment agreement for the years in question in which the company paid a sum of 56 million NIS on that date, which was recognized as an expense.
For tax purposes for the company and which will be spread out over three to five tax years starting from the 2018 tax year. implementation of the assessment agreement had no material impact on the company's financial statements.
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- Material events during and after the reported period (continued)
- D. On march 3 2020 the company announced that it was changing its name of Mivne Real Estate (K.D.) ltd.
- E. On April 20 2020 the company's general meeting ratified the 81st amendment to the company's bylaws, which stated that the number of company directors on the company board of directors shall be no less than three and no more than seven (including outside directors).
- F. On May 13 2020 the company announced that it was performing a partial early redemption of the company's debentures (series 15), at the company's initiative, to be carried out on June 1 2020. the company will perform a full early redemption of the debentures to the sum of 108,474,034 NIS NV and at a total sum of 118,763,066 NIS for principal and interest. the sum of the principal that will be redeemed in the partial early redemption amounts to 108,474,034 NIS. The accrued interest sum, including the added interest for the partial early redemption to the partial redemption date is 10,289,032 NIS. The partial early redemption rate in terms of uncleared balance amounts to 87.8517% (the partial early redemption rate in terms of the original services including expansions amounts to 24.77249%).
The interest rate that will be paid in the partial early redemption, including the added interest for the partial early redemption, calculated according to the uncleared balance, is 9.48525%. the interest rate that will be paid in the partial early redemption, including the added interest for the partial early redemption, calculated according to the uncleared balance, is 8.33295% the remaining partial redemption rates in original series terms are 3.42559%. in accordance with the provisions of the deeds of trust of series 15 the redemption rate is 1.0948525 NIS for each 1 NIS NV debenture (series 15) redeemed and 1.00 NIS for each 1 NIS NV debenture (series 15) redeemed after neutralizing interest. due to the partial early redemption, the company will list a non-recurring expense of 8.2 million NIS.
- G. On May 13 2020 the company announced that it was performing a full early redemption of the company's debentures (series 22), at the company's initiative, to be carried out on June 1 2020. the company will perform a full early redemption of the debentures to the sum of 284,639,172 NIS NV and at a total sum of 299,337,848 NIS for principal and interest. the accrued interest sum, including the added interest for the full early redemption to the redemption date is 14,698,676 NIS. The interest rate that will be paid in the early redemption, including the added interest for the early redemption is 5.16397%. in accordance with the provisions of the deeds of trust of series 22, on the early redemption date, the company will pay the holders of the debentures (series 22) according to a redemption rate of 1.0516397 NIS per for each 1 NIS NV debenture (series 22) redeemed and 1.00 NIS for each 1 NIS NV debenture (series 22) redeemed after neutralizing interest. Due to the early redemption, the company will list a non-recurring expense of 8.6 million NIS.
- H. On May 14 2020 the company issued 243,913,000 NIS NV debentures (series 15), in return for a sum of 284.4 million NIS.
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