San Francisco, and Bay Area in particular, continues to be one of America’s strongest commercial property markets.Andrew Zarivny/Getty Images/iStockphoto
North American real estate is "fully priced" and there are "no more big opportunities," says Chaim Katzman, the chairman of Gazit-Globe Ltd.
Gazit-Globe, Israel's largest real estate investment trust, has been trading on the Toronto Stock Exchange since October. The 32-year-old company bills itself as one of the largest owners and operators of supermarket-anchored shopping centres in the world.
Canada has long been a key market, and still is.
"We've been overweighted Canada because we really believe firmly in the strength of the Canadian economy," Mr. Katzman says. At the end of 2012, about 13.1 per cent of the company's gross leasable area was in the Greater Toronto Area and 6.9 per cent in and around Montreal. Canada accounts for about a third of its rental income, assuming full consolidation of its jointly-controlled entities.
Gazit owns 45.3 per cent of Canadian shopping centre owner First Capital Realty. Its CEO, Dori Segal, was working for Gazit in Canada back when the company took over Centrefund Realty Corp. and created what is now First Capital. Mr. Segal is now the second-largest shareholder in Gazit, after Mr. Katzman. (Mr. Katzman and Mr. Segal both own chunks of Norstar, Gazit's controlling shareholder).
Gazit also owns about 45 per cent of Equity One in the U.S., has a subsidiary in Brazil, and a variety of businesses in Europe. It and the entities in which it has major stakes collectively own about 600 properties in more than 20 countries.
"It behooves Gazit as a global capital allocator to look more to other places, mainly Europe, where we believe you can still find opportunities in both the real estate market as well as in the capital markets," Mr. Katzman says.
In North America the company will be focusing on developing and improving properties that it already owns, and will be less aggressive about buying new assets.
For Mr. Katzman, the key to the business goes back to that old real estate adage about location, which executives say they the company is fanatical about. Gazit is a seller of properties in secondary markets, and a buyer in highly-populated urban markets.
"We urbanize our portfolios from the Bay Area to Prague," Mr. Katzman says. He points to Equity One's shift away from the southern U.S. toward places like New York, Boston, Washington, and the San Francisco Bay Area ("I think it's the hottest market in the country").
"We're in Miami, we're in Fort Lauderdale – we like Canadians," he quips. "But we're definitely getting out of secondary markets in the southeast and pushing our focus to the northeast and Bay Area."
Gazit began trading on the TSX last fall after real estate investment trust initial public offerings essentially dried up, but it hasn't received much attention here. (Gazit has been trading on the Tel Aviv Stock Exchange since the early 80s and listed on the NYSE at the end of 2011).
"We want the Canadian market to get to know us better," Mr. Katzman says. "We believe that Canada is a very important and very deep market, and we believe that with the beachhead we have here already it would be easier for us, more doable for us, to hopefully win the confidence of Canadian investors with the Gazit story."
So far no Canadian REIT analysts are covering Gazit. One analyst said that investors here are warming up to the firm slowly, but noted that there are barriers, including the fact that there's a controlling shareholder and that it reports in shekels.