Diversification, a comeback in real estate development, or a platform that existing business can be poured into? Energy tycoon Yitzhak Tshuva continues to carry out acquisitions in the local capital market. This time, he has bought Cielo Blu (TASE: CILO) (formerly Hanan More), which recently completed a debt settlement. Tshuva, together with Cielo Blu’s current business manager David Zvida, has signed an agreement transferring control of the real estate company to them.
Tshuva, who controls Delek Group (TASE: DLEKG), and Zvida will together initially invest NIS 55 million in return for an allocation of 31.6% of the shares in Cielo Blu, with an option for a further investment in the same amount that if exercised will give them 47% of the company. The allocation to Tshuva (who will invest through a company owned by his wife Haya) and to Zvida will take place at a price of nearly NIS 2.4 per share, representing a 12% premium on the stock market price. Following the report of the deal, Cielo Blu’s share price shot up by 25%, giving the company a market cap of NIS 144 million.
The deal with Tshuva and Zvida requires the approval of the company’s shareholders, as does the appointment of Zvida to the post of executive chairperson. Completion of the deal will significantly dilute the shareholdings of the financial institutions invested in Cielo Blu – The Phoenix Holdings, Bank Leumi, Discount Bank, Harel, and the Reality Investment Fund – which received over 60% of the shares in the company in the debt settlement completed last month.
What do Tshuva and Zvida seek in Hanan More?
Hanan More collapsed because of a deal that was too big for it: the purchase of land on the site of the evacuated Sde Dov Airport in north Tel Aviv for NIS 1.5 billion in 2021. Rising interest rates caused the company to default on the NIS 1.3 billion loan it took to finance the land purchase. The land was recently sold to construction company YH Dimri for NIS 1.1 billion.
So what do Tshuva and Zvida see in Hanan More, now Cielo Blu? Not much remains in the company, after the sell-off of most of its income producing assets and residential real estate projects led by the company’s founder and former controlling shareholder Hanan More in an attempt to stave off a debt settlement and retain the land at Sde Dov. According to the company’s latest financials, it has 869 apartments at the planning and construction stage at Harish and Or Akiva, of which 135 are unsold. It also has three income producing assets: two malls in Harish and a shopping center in Modi’in.
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Cielo Blu expects a further gross profit of NIS 68 million on the residential real estate projects. The income producing assets generate NOI of NIS 35 million annually.
A market source familiar with the details said, “The debt settlement has been completed, and the company is now ‘clean’. Tshuva and Zvida are basically buying a platform capable of dealing in development of residential properties and income producing properties. They will have to find the projects and assets that they will inject into the company in order to enhance it.”
The current deal marks a further stage in Tshuva’s return to real estate in Israel, the sector from which he grew. In the crisis in which he found himself after the outbreak of the Covid pandemic and the drop in world oil prices, he realized assets right and left, among them two plots of land in Tel Aviv’s Bavli neighborhood and control of residential real estate company Elad Israel New Residence, for hundreds of millions of shekels.
Since then, however, the wheel of fortune has turned again, oil prices have shot up to peaks last seen in 2008, and the world smiles on Tshuva once more. The value of Delek Group has jumped, and he has gone back to making acquisitions in a private capacity, including in the real estate sector, as well as the controlling interest in citrus and other produce grower Mehadrin, which he sold during the hard times.
Before the current investment in Cielo Blu, Tshuva and his son Elad made a private investment in 12% of the shares in real estate development company Ybox, which is mainly active in Tel Aviv, for over NIS 20 million, and there are probably more deals to come.
Published by Globes, Israel business news – en.globes.co.il – on October 22, 2024.
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