Our Debt

Company Profile

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 September 30, 2020, the Company owns and manages 24 income-producing properties spanning approx. 830 thousand sqm of leasable space with high occupancy rates of approx. 97%, 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 to generate value over time by producing a stable cash flow and increasing the value of its properties. To accomplish such goals, the Company acts as follows:

  • Active management of all properties to generate high store sales for the tenants, which will serve as a driver of continued growth in rent levels.
  • Enhancement of the properties’ operational efficiency.
  • A proactive approach on the improvement of the malls’ store mix, according to consumer preferences and their changing needs.
  • Expansion of the property portfolio by way of mergers, acquisitions, development and construction of new properties.
  • Frequent investments in the renovation and appearance of the properties, improvement of existing properties and exhaustion of existing rights therein.
  • Focus on offices and commercial income-producing real estate.
  • Preservation of financial soundness and direct capital market accessibility.

From the CEO

From May 2020, when the malls reopened, until mid-September 2020, when the malls reclosed, the Company’s malls saw a gradual and constant improvement in footfall. During such period, despite the coronavirus pandemic, the public resumed shopping in the Company’s malls, such that store sales in the Company’s malls recorded an increase of approx. 3.3% compared with the same period last year[1].

Due to the resurgence of COVID-19 and in accordance with government regulations, retail operations have been closed in Israel since September 18, 2020, including the Company’s malls (with the exception of business establishments the operations of which are defined as essential).

The Company has been working, also throughout the period of the second lockdown, on promoting the resumption of retail operations and the reopening of malls. In this context, the Company has acted, inter alia, vis-à-vis governmental functions for the reopening and resumption of normal operations in malls, including assurance of their compliance with the required standards for responsible, safe and supervised reopening of the malls and for protection of the health of visitors and employees (the “Purple Badge”). The Company is also constantly working to preserve the proper function and maintenance of the malls in order to ensure their readiness and preparedness for immediate opening of the stores as soon as made possible.

Based, inter alia, on the period of resumed retail operations between the first and second lockdowns, in which the Company’s malls registered an increase in footfall and store sales, the Company estimates that upon reopening of the malls under the “Purple Badge” standards, it will be able to return to regular operations under a COVID-19 routine.

In the financial sphere, the Company continued to lead extensive capital market activity in the first three quarters of 2020, and, inter alia, closed significant debt raising rounds while decreasing financing costs and extending debt duration. The Company has prepared for the crisis in order to ensure that its preexisting cash balance, along with the portfolio of high-quality unmortgaged properties it holds, will allow it, in its estimation, to weather the COVID-19 crisis in an optimal manner.

By diversifying financing sources and maintaining high liquidity, the Company is proceeding with its development momentum even in these times of crisis.

We stand together with our tenants in this difficult time and hope that for the sake of all those involved, the malls will reopen soon, in order for us to be able to provide our customers with a pleasant and safe shopping experience.

[1] The increase in store sales was measured from the date of reopening of the malls, May 7, 2020, compared with the same period last year, excluding the sales of the movie theatres – which remained closed – and excluding the coffee shops and restaurants, which operated only partially in accordance with strict government regulations and which suffered a significant impact due to the COVID-19 crisis and their sales decreased by approx. 25% compared with the same period last year.


Financial Management

From the beginning of 2019 to the date of release of this report, the Company has raised approx. ILS 2.3 billion. In the Company’s estimation, it has financial flexibility in raising debt on good terms and with long duration, which assists the Company in its continued initiation, betterment and development of additional projects and seizing of business opportunities.

The guiding principles in the management of the financial debt are:

  1. Preservation of adequate liquid balances, particularly in view of this challenging time.
  2. Reduction of financing costs.
  3. Extension of debt duration.
  4. Preservation of strong and stable balance sheet figures.
  5. Preservation of high rating.

The Company’s debt includes: Marketable public bond series, private loans from institutional bodies, loans and credit facilities from banking sources and commercial paper.

Financial Challenges

The leveraging reduction in recent years has contributed to the reduction of the Company’s risks along with the preservation of a leverage ratio that allows for business development and improvement of the return on equity, and has also improved the Company’s position on entering the COVID-19 crisis.

As specified in the chapter on the effects of the outbreak of COVID-19, the Company has taken several measures to increase liquidity with the aim of allowing for greater flexibility in addressing the crisis.

The Company continues to consider its steps, inter alia in view of the continuation of the crisis, and continues to examine options for raising debt on the capital market, in order to reduce financing costs while extending the duration of the debt, as it has done over the first nine months of the year when raising debt by the R, J,  N and S Bond Series.

As noted in the chapter on the effects of the outbreak of COVID-19, as of the date of this report, the Company has prepared with cash and cash equivalents and with approved credit facilities in the amount of approx. ILS 1.9 billion against a debt service of ILS 1.3 billion in the coming year.

Financing abilities are one of the key parameters in the Company’s success. By diversifying financing sources and maintaining high liquidity, the Company is able to continue its development momentum and weather crises like the one presently experienced globally.

Rate of Current Payments of Principal Net of Secured Bullet Components

The cash flow stability afforded by the Company’s properties, coupled with the long-term installment plan and the implementation of the financial strategy, enable the Company to finance its operations on competitive financing terms from a variety of available sources.

Total Blended Cost of Debt

The following specifies the weighted effective cost of debt (real interest recorded in profit and loss) and the nominal cost of debt (cash flow interest paid on the debt) as of the date of the statements and over the period of repayment of the group’s financial liabilities.

Breakdown of Mortgaged Property Value (Owner’s Share)

The Company has unmortgaged properties in the value of approx. ILS 6.2 billion, as well as mortgaged properties in the value of ILS 0.7 billion, with respect to which credit facilities have been provided that are completely unused as of the balance sheet date, and which are available for immediate release from the mortgage.
The mortgaged properties harbor the potential for debt expansion, as the ratio of the value of the collateral to the secured debt is approx. 61%.