Israeli real estate giant continues operational momentum while executing strategic asset disposal plan

G City (TASE: GCT.TA), the global real estate company led by founder and CEO Chaim Katzman, delivered robust second-quarter results showcasing continued operational excellence across its international portfolio of income-producing properties.

The company reported a 32% surge in Funds From Operations (FFO) from its income-producing properties segment, climbing to 194 million shekels ($52 million) in the first half of 2025 compared to 147 million shekels in the same period last year. Same-store net operating income (NOI) growth accelerated to 7.4%, while occupancy rates remained healthy at 95.9%.

“We are concluding another quarter of growth across all operational parameters and strong performance of our shopping centers with increases in occupancy, average rent, tenant sales and visitor numbers,” said Katzman in the earnings release. “We are also witnessing the continued strengthening of commercial real estate in Europe in particular and the growing interest in the sector among international institutional investors and private investment funds.”

Katzman’s Strategic Vision Drives Transformation

Under Katzman’s leadership, G City has successfully navigated a complex transformation strategy while maintaining operational excellence. The veteran real estate executive, who founded the company, has overseen the strategic disposal of over 5.3 billion shekels in assets since October 2022, demonstrating his ability to execute disciplined capital reallocation during challenging market conditions.

Katzman’s focus on “fortress assets” in prime urban locations has proven prescient, with the company’s shopping centers continuing to attract visitors and tenants even as the retail real estate sector faces broader headwinds. His strategy of concentrating on super-urban locations with transportation connectivity has resulted in an average asset value of 400 million shekels, significantly above industry averages.

Strategic Asset Disposal Program Gains Momentum

G City’s strategic transformation continued with several major asset sales completed during the quarter. The company sold its 50% stake in the Horev property in Haifa for 131 million shekels, matching book value, and completed the sale of land in São Paulo for 49 million Brazilian reals.

Since launching its asset disposal program, G City has completed sales totaling approximately 5.3 billion shekels across its global portfolio. The company is now evaluating the potential divestiture of controlling interests in three income-producing assets in Poland, valued at approximately 450 million euros, as part of its continued deleveraging efforts.

Operational Excellence Across Geographic Markets

G City’s diversified portfolio, spanning Israel, Europe, the United States, and Brazil, demonstrated consistent operational improvements. Leasing spreads averaged 11% growth during the first half, while tenant sales increased 1.4% and footfall rose 0.6% compared to the previous year.

The company’s European operations, including subsidiaries G City Europe and Citycon, showed particularly strong momentum. In the second quarter, most of G City’s property portfolio was revalued by external appraisers, resulting in a 350-million-shekel increase in investment property values.

Major Development Milestones

G City achieved several significant development milestones during the period. The company received occupancy permits for 259 additional apartments in its Ostrobramska residential project adjacent to the Promenada shopping center in Warsaw, with approximately 75% of the new units already rented.

In Israel, G City commenced marketing its landmark office tower in Rishon LeZion, successfully securing Leumit Health Services as an anchor tenant for six floors totaling 12,000 square meters in a 155-million-shekel transaction. The company reports that nearly half of the tower’s designated sale areas are now under binding agreements or in advanced negotiations.

Strong Financial Position Despite Market Challenges

The company maintains a solid financial foundation with 1.8 billion shekels in liquidity as of the reporting date. Net debt decreased by approximately 1.2 billion shekels compared to the same quarter last year, while average borrowing costs declined by roughly 0.8%.

G City’s EPRA NRV (Net Reinstatement Value) stood at 25.4 shekels per share as of June 30, 2025, representing a 119% premium to the current share price of 11.6 shekels.

The company benefits from significant inflation-linked revenue exposure, with 81% of revenues tied to consumer price index adjustments, while only 43% of financial liabilities carry similar indexation. Management has been executing currency hedging transactions to optimize this mismatch, generating additional financing revenues.

Forward-Looking Guidance

Looking ahead, G City provided consolidated NOI guidance of 1.59-1.63 billion shekels for 2025, with FFO per share from income-producing properties expected to reach 1.95-2.01 shekels.

Reflecting on the company’s strategic position, Katzman stated: “We see achieving our leverage targets as an important goal in the group’s management strategy and after the balance sheet date we sold our share in the Horev Center in Haifa (50%) for consideration of about NIS 131 million and we also sold land in São Paulo for about 49 million reais (similar to their value in the books).”

The results underscore Katzman’s ability to deliver consistent operational growth while executing a disciplined capital allocation strategy focused on optimizing G City’s global real estate portfolio for long-term value creation.

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G City Reports Strong Q2 2025 Results With 32% FFO Growth and Major Asset Sales