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Reit 1 Ltd. (RIT1) said a slowdown in Israeli economic growth would give the country’s first real- estate investment trust a chance to invest in more properties at better prices.
The Tel Aviv-based company, which has increased investments 11-fold since 2006 to 1.84 billion shekels ($481 million) at the end of the first quarter, owns 20 office, retail and industrial properties as well as parking lots, Shmuel Sayad, its chief executive officer, said in an interview on May 17.
Reit benefited as Israel’s economy grew more than 4 percent in all but one of the last eight years, achieving occupancy of about 98 percent, according to company data. Israel’s economic growth will slow to 3.1 percent this year from 4.8 percent in 2011, central bank forecasts show.
“At the current growth levels in the country, we don’t foresee a deterioration in our business,” Sayad said from Reit’s headquarters in Tel Aviv. “A slowdown should offer us an opportunity to invest in quality buildings at more attractive prices. We plan to grow in Israel.”
Israeli REITs, which are exempt from corporate tax, are required by law invest at least 95 percent of capital in income- producing properties, as well as distribute at least 90 percent of taxable income as dividends to shareholders. A minimum of 75 percent of assets held by the trust must be located in the country, and the REIT can’t leverage more than 60 percent of the value of its assets.
Reit 1 has spent about 400 million shekels a year investing in new assets, according to its chairman, Dror Gad, who declined to say how much the company planned to spend this year.
Shares of Reit 1 have risen 6.5 percent this year, compared with a 1.2 percent decline in the benchmark TA-25 Index. (TA-25) The company’s shares gained 1.7 percent in Tel Aviv today.
“Because the leveraging of a real-estate investment trust is limited by regulators, in times of uncertainty, when investors want a safe haven, they turn to these kind of companies,” Shay Lipman, an analyst at I.B.I.-Israel Brokerage & Investments Ltd. said by phone on May 16.
Reit 1 would be able to raise money on capital markets even during periods of uncertainty, he said. “We expect the company to grow and buy additional assets in the coming months,” Lipman said.
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