Bayside buying Tel Aviv land for ToHa3 tower

Despite war and economic uncertainty, the income-generating real estate company Bayside Land Co., Ltd. (Jav Yam) (level:BYSD 1Office Space Development and Leasing Company (SAOG), which focuses on developing and leasing office space, has achieved real growth in rental income and management fees in its latest results for Q2 2024.

In June, Bayside secured a massive leasing deal to lease 20 floors of its ToHa2 high-rise project in Tel Aviv to Google, while Bayside CEO Jacobovitz told Globes that the company is also buying land for ToHa 3. The company’s flagship project in Tel Aviv, just across the Ayalon from the Azrieli Towers, which it is developing in partnership with Amot Investments (TASE: AMOT), includes the 30-story ToHa1 tower, which has been built and occupied for years. The 77-story ToHa2 tower, of which Google has leased 20 floors, is under construction and is scheduled for completion in late 2026.

“We are buying land in a rectangle that we call ‘Hol Toha.’ The complex will become the main commercial center (urban master plan) of Tel Aviv. The first two towers will be about 300,000 square meters and will employ more than 20,000 people. We need to prepare for the next product, which will be Toha 3. When we complete the purchase of the land, we will be able to build another 120,000 square meters there, and it will be possible to build 300 housing units there as well,” Jacobovitz said.

In the second quarter of 2024, Bayside reported revenues of NIS 197 million, up 5.3% from the corresponding quarter of 2023. In the second quarter, net operating income increased by 5% to NIS 171 million. In the first half of 2024, net operating income increased by 7% from the corresponding period of 2023 to NIS 340 million, and net operating income for the full year is expected to be NIS 685-705 million. In the second quarter, Bayside reported net profit of NIS 263 million, up 6% from the corresponding quarter of 2023, and net profit of NIS 331 million in the first half of the year, slightly down from the first half of 2023.

Bayside has 1.2 million square feet of income-producing real estate at 96% occupancy and is developing another 360,000 square feet. The company has 400 tenants, including Google, Amazon, Apple, Microsoft and Nvidia – five of the Big Seven. Only Facebook and Tesla are non-tenants. “There’s room for everyone,” jokes Jacobowitz.

Regarding the Google deal, worth NIS 155 million a year, Jakubowicz says: “I was always optimistic during the negotiations. It took two years, when no one around us had patience, neither the capital market nor the journalists. But we fought and reached our goal.”

Why did it take so long?

“Today, this is the case with negotiations with major companies that take longer than before. The global companies themselves are leading the talks, and there is more intransigence on their part. But ultimately, these companies are not giving up their corporate grip on the development centers they operate in Israel, a large part of which are located in Bayside parks throughout the country, which constitute a strategic focal point in the development efforts of these companies.

“The deal with Google makes national news a national event in every sense of the word because it is a vote of confidence in Israel and in its human capital, which is among the best in the world. That is one of the powerful things that has not changed here.”

Bayside is trading on the Tel Aviv Stock Exchange (TASE) with a market cap of about NIS 6 billion, up 11% this year, but up only 3% over the past three years. Real Estate & Construction Company Limited (level:PTBL), which is controlled by Discount Investment Company Limited (level:completely), owns an 82.2% stake in the company.

This article was published in Globes, Israeli Business News – en.globes.co.il – on July 30, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.