February 16, 2020

Rami Levy investing in hotels and sheltered housing

Globes, Aviv Levy, 16.02.2020

A few months after businessman Rami Levy, controlling shareholder in Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI) Marketing, acquired a controlling interest in BGI Investments (1961) Ltd. (TASE: BGI) Investments, a publicly traded company with little activity, he is expanding its business to sheltered housing facilities and hotels, two of the hottest sectors on the TASE. As far as is known, Levy and his co-controlling shareholder in BGI Investments, Taaman controlling shareholder Shalom Taaman, already have substantial private real estate activity, some of which they hold jointly. BGI Investments is thus likely to benefit from their experience in the sector and their cooperation, as BGI Investments said in its notice to the TASE.

BGI Investments plans to find properties "for the purpose of acquiring them and operating them as a residential center for senior citizens… The company is considering the purchase of a lot zoned for construction of sheltered housing in Jerusalem." BGI Investments adds, "The advantages of being a public company, controlled by concerns with a great deal of capital and real estate experience, will enable us to be a leader in this sector, either by purchases of lots zoned for construction of assisted living facilities or by purchasing existing assisted living facilities, renovating them, and marketing them to the public."

BGI Investments believes that it has "another advantage - the familiarity of controlling shareholder Taaman Food Marketing (controlled by Shalom Haim, A.L.) with the haredi community, which is likely to be an important market for sheltered housing to be developed by the company and aimed at this community." BGI Investments adds that its management, headed by controlling shareholder and CEO Shalom Haim and chairman Mordechai Hazan, CEO of private company Rami Levi Real Estate, has "a reputation in Israel that the company believes will enable it to penetrate and develop the sector quickly, while taking advantage of its vast experience."

According to BGI Investments' description, Rami Levy Real Estate is a group with a great deal of capital and assets, including land that can be used for sheltered housing, while Taaman Food Marketing "has extensive real estate activity in the haredi sector."

In the hotel sector, BGI Investments says that it is planning "to contract with existing hotels or hotels under construction for the provision of management services by the company."

BGI Investments says that providing management services of this type in exchange for a percentage of the hotel's revenue features "long-term agreements for periods of up to 20 years," including a variety of services, such as hiring and managing staff, maintaining the hotel, marketing, pricing the services that it offers, money management, inventory management, and so on.

BGI Investments says, "The hotel sector in Israel has featured growing activity in recent years," and comments that the company's advantage in activity "results from the experience and reputation of its controlling shareholders and management team in the Israeli market as owners of successful brands in its field of business." BGI Investments says that its controlling shareholder, Shay Odem, "already owns hotel properties under construction" and is "likely to contract operating agreements for operating hotels owned by its controlling shareholder."

On the watch list, with a going concern warning

The share price of BGI Investments, which is on the TASE watch list, responded on Thursday to the report with a 50% leap on a miniscule turnover of less than NIS 30,000, and rose a further 30% today, also on a very small turnover, pushing the company's market cap up to NIS 30 million.

The decision to expand BGI Investments' activity was taken after Rami Levy's son, Kobi Levy, signed an agreement last November transferring his holdings in Shay Odem, which owns 68% of BGI Investments' shares, to his father. Rami Levy controls Shay Odem through a private company that he holds in equal shares with Taaman.

Taaman acquired the controlling interest in BGI Investments as part of a compromise agreement given the force of a court ruling in 2018 ending disputes between Taaman and Gregory Gurtovoy, the previous controlling shareholder in BGI Investments. Gurtovoy signed a plea bargain last year admitting to several offenses, following an investigation by the Israel Securities Authority.

BGI Investments' financial statements currently include a going concern warning because of its financial situation. Its main asset is an 8% stake in BSD Crown, which has a 62% controlling interest in Willi-Food Investments. Willi-Food has a NIS 380 million market cap, following a rise of almost 60% in its share price over the past year.

BGI Investments is entering the sheltered housing and hotel sectors during a boom in them on the TASE, with shares prices of the companies in the field gaining ground and being traded at record or near-record levels: Mediterranean Towers in assisted living facilities and Fattal Holdings, Isrotel, and Dan Hotels in the hotel business. Growth in activity and rising share prices also support possible IPOs by competitors in the sector. Two of these on the agenda are Bayit Bakfar in sheltered housing and Talma Tourism.

Published by Globes, Israel business news - en.globes.co.il - on February 16, 2020