Melisron Ltd (TASE:MLSR)

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Melisron and its subsidiaries (the “Company”) owns and manages high-quality income-producing properties situated in the centers of Israel’s big cities.

The Company focuses on retail properties in central locations at the heart of big cities and on office complexes that are mainly marketed to international and Israeli high-tech companies.

As of  June 30, 2021, the Company owns and manages 28 income-producing properties spanning approx. 871 thousand sqm of leasable space with high occupancy rates of approx. 98%, and 26 thousand parking spaces in addition thereto.

The Company’s shares are listed on the TA-35 Index, the flagship index of the Tel Aviv Stock Exchange (TASE), which includes the 35 companies with the highest market cap on TASE that meet the Index’s threshold conditions, as well as on the Tel Aviv Real Estate Index and the Tel-Dividend Index.

The Company’s Objectives and Goals

The Company operates and manages its business for the betterment of its properties, for maximum income generation from such properties and in order to bring about the development and growth of the Company’s business. In order to reach these objectives, the Company operates in the following manner:

  • Making frequent investments in the upgrading and appearance of the properties, diversification and adjustment of the mix, improvement of the existing properties and exhaustion of the existing rights therein.
  • Continuing to invest in the development of a strong and effective customer club, “My Ofer”, and creating marketing campaigns in collaboration with the Company’s customers.
  • Infusing the malls’ activities with innovation and creativity, with an emphasis on digitization, while creating additional value for tenants and visitors.
  • Maintaining the financial robustness while extending the average duration of the debt, reducing financing costs and maintaining direct access to the capital market.
  •  Continuing the development and construction of projects according to original schedules.
  •  Implementing the Company’s strategic plan to strengthen and maintain its core business through betterment of the malls and promotion of processes supportive of the core business, alongside development of operations in new areas, both by way of betterment of existing properties through multi use and by way of entry into new real estate segments.

From the CEO

Q2/2021 was the first quarter since the March 2020 outbreak of Covid-19 in which the Company’s malls operating fully and with almost no restrictions. In this quarter, Melisron demonstrated its strength and the great appeal of its malls, which drew in millions of visitors per month. This success was reflected in the financial results which returned to, and even surpassed, the pre-Covid-19 level. The NOI (owners’ share) was ILS 279 million compared with ILS 138 million in Q2/2020 and ILS 277 million in Q2/2019, the FFO was ILS 198 million compared with ILS 61 million in Q2/2020 and ILS 180 million in Q2/2019.

In that spirit, starting from the reopening of the malls on February 21, 2021 until the end of Q2, the Company’s returned to presenting impressive results with an increase of approx. 8.5% in the tenants’ store revenues (despite 11 days of military fighting in May of this year), compared with the same period in 2019[1], prior to Covid-19.

The increase in store revenues was especially noticeable in the fashion and footwear area, which recorded an increase of approx. 17%, and in home design stores which recorded an approx. 9% increase. Recently, even the restaurants and fast-food chains, which found it difficult to quickly resume normal operations after the end of the third lockdown, are presenting a nice increase in store revenues, and it seems that the trend of improvement is also evident in this branch and that the public is continuing to frequent and dine in malls. It is important to that that this trend also continued in July 2021.

During H1/2021, the Company signed 409 new contracts with an approx. 5% increase in rent in real terms, and it maintained high occupancy rates in the malls and office complexes.

Concurrently, the Company promoted the realization of its strategic plan and performed a number of operations:

  • The acquisition of Grouper, through which Melisron is working to establish a digital arm which will promote the Company’s strategy and vision: fortifying and improving the core businesses, alongside upgrading the customer experience and strengthening the value offered to tenants.
  • Entry into the data center industry and promotion of programs in preparation therefor
  • Betterment of existing properties through multi-use, including the promotion of the planning of two projects of rental housing – the first adjacent to the Ofer Grand mall Be’er Sheva (which is planned to include approx. 300 apartments) and the second adjacent to the Ofer HaSharon mall in Netanya (which is planned to include approx. 100 apartments)

In projects in the development pipeline, we made significant progress in construction and marketing, especially in the Landmark project in Sarona, Tel Aviv. Since the reopening of the economy, we have been experiencing unprecedented demand for office space in Tel Aviv by large hi-tech companies, which reflects the enormous growth of the Israeli hi-tech market. Concurrently, we increased the annual revenue forecast from the project by approx. ILS 64 million (100%) and the cost by approx. ILS 270 million (for expected leasehold improvements).

In an interim summary of this volatile period, in which we experienced, for the first time in the Company’s history, the closing of malls and their operation for short periods under restrictions, together with the disruption of economic activity general and the changes in work patterns in the office sector, we can proudly say that we succeeded to act correctly in order to maintain our tenants and operations, which is currently presenting approx. 100% occupancy in the malls and approx. 96% occupancy in the offices. We are attentive to the developments regarding the spread of the pandemic and are prepared to manage the business alongside Covid-19 constraints, insofar as may arise in the future.

[1] The increase in store revenues is measured compared with the same period in 2019, net of revenues of movie theaters, which only opened at the end of the current quarter.