Yielding real estate company Gav Yam  reported continued growth in Q3/2020, despite the effects of Corona on the global economy. Revenues derived of structure rental increased by 3.1% in Q3 to 134M NIS and revenues increased by 6.6% to 401M NIS in the first 9 months of the year.

According to the company, the revenue growth is derived of additional income for space that began yielding in projects completed in 2019 and from a real increase in rental fees for existing properties. According to the company, in the first 9 months of the year it forgave a total of ~7M NIS in rental fees (of which ~2M NIS in Q3) due to Corona’s impact on the decline in its commercial real estate operations.

The company further noted that it spread the decline in revenues derived of these lost rental fees over the relevant rental contract period. Deducting property operation expenses, Gav Yam reported a 4% increase in net operating income (NOI) in Q3, reporting a total of 130M NIS and 7.5% in the first nine months of the year, to 388M NIS.

The FFO (net cash flow from yielding properties) related to the shareholders declined by 3.3% to 59M NIS in Q3 due to an increase in the financing expenses. However, upon concluding the first three quarters of the year, the FFO related to shareholders increased by 8.4% to 181M NIS.

The net profit related to company shareholders declined by 53% in Q3 to 47M NIS and by 40% in the first nine months of 2020 to 172M NIS, due to a decline in revenues derived of an increase in the fair value of investment real estate, compared to the respective period last year.

In Q3/2020 totaled ~47M NIS compared to 109M NIS in the respective quarter last year. The decline is derived mainly of a decline in revenues for the increased fair value of investment real estate compared to the respective period last year. Gav Yam ended Q3 with equity of 2.69B NIS, where the company’s stock market value is currently ~4.82B NIS, after a 12% decline in the company’s share since the beginning of 2020.

In the board report, the company notes that although it is impossible to predict the duration of the crisis and its full impact on the business activity in Israel, it is continuing with its ongoing operations, including further entrepreneurship, construction, marketing and holdings. Most of the company’s revenues, totaling ~47% of its annual income, is derived of properties used for hi-tech and offices, rented to giant and established international companies.

This field has not yet been hurt by the economic crisis brought on by Corona and that is evident in Gav Yam’s results. ~19% of the company’s revenues are derived of yielding assets intended for logistics and commerce, and the rest (7%) is derived of commercial space in open areas, not malls.

As of late September, Gav Yam holds 1.034M m² of yielding space in various locations nationwide. The occupancy rate at the company’s yielding assets, as of the end of Q3/2020, is ~96%.

According to the company, it signed 110 rental agreements in existing properties in the first nine months of the year, relating to an area of ~90,000m², yielding ~67M NIS per year and reflecting an average real increase of ~6.4% in rental fees. Gav Yam takes pride in the fact that most of its customers are large, quality and established international and Israeli companies at the forefront of technology, which continued to expand their operations and office space even during the Corona crisis.

In recent months, the company completed construction of 3 projects covering ~45,000m² (~39,000m² company share) including the fourth building at Gav Yam Park Negev, the second building at Gav Yam Park Holon and a second logistics center at Gav Yam Park Haifa Bay.

In all, Gav Yam invested 330M NIS in projects under planning, licensing and construction in the first nine months of 2020 as well as in projects completed last year. The list of projects currently under development includes Matam Towers East in Haifa, Gav Yam Hebrew Park in Jerusalem, Gav Yam Park Ra’anana, ToHa2 parking lot in Tel Aviv, Gav Yam Park Gderot and Gav Yam Park Haifa Bay.

Addressing the Corona crisis, Gav Yam CEO Avi Jacobovitz said, “We are in the midst of a continuous event that, i light of the uncertainty, is expected to continue through the next 1-2 years, which will be challenging”. According to him, “there will be a gradual shift from working under Corona to working alongside Corona.

According to Jacobovitz “The current situation in which some of the employees work from home is not permanent and it will not nullify the need for the real thing – work at the office. Even if, when we come out of the crisis, gradually, 10-20% of the employees work from home, the change to yielding real estate will probably be insignificant.

“Israel hi-tech is demonstrating continued growth and it acts as a growth engine for offices, accelerating the trends in the yielding real estate market. It is important to note that the leading hi-tech parks and metropolitan operations remain at the core of large technology companies’ operation and they provide the necessary quantity and quality of human capital”.

Gav Yam CEO, Avi Jacobovitz, says that “The company is conducting advanced negotiations with large international and Israeli companies toward renting tens of thousands of new m². Collections are continuing at a regular rate, identical to that of the respective period last year. All contracts with company customers are upheld. The occupancy rates are still high and we do not see a trend shift. There is no waiver of rental fees, excluding specific alleviations for commerce.

“The company has a substantial project backlog, applying a long-term vision and relating to ~265,000m² (company share 210,000m²) at an investment of ~1.6B NIS (company share), including 6 projects, including Matam East Towers, Gav Yam Park Ra’anana, Gav Yam Hebrew Park, another logistics center at Gav Yam Park Haifa Bay, a logistics center at Gav Yam Park Gderot and a partial parking lot at ToHa 2. After completing and occupying these projects, the company’s property portfolio will consist of ~1.244M m², yielding annual revenues of ~705M NIS (starting in 2024)”.