G City Acquisition Deal Faces New Challenges

A significant acquisition in Israel's commercial real estate sector is encountering unexpected headwinds, casting doubt on the future of a deal that would see Tzachi Abu's Ari Real Estate acquire a substantial stake in G City. The transaction, initially valued at approximately 661 million shekels for a 26% stake in G City, has been complicated by the introduction of new partners, prompting a strong reaction from the seller, Haim Katzman, the controlling shareholder of G City via Norstar.

Sources close to the situation indicate that Katzman's legal team has formally requested details regarding a separate agreement inked between Ari Real Estate and the consortium of Kidran Dahari and Yaron Adib, principals of Yishpro. This move by Abu to bring in Dahari and Adib as co-investors appears to have fundamentally altered Katzman's perspective on the original arrangement, raising concerns about control and the ultimate structure of the deal. The initial agreement envisioned a gradual transition towards joint control, with Abu holding an option to become the majority owner, a scenario Katzman may have believed would not be fully exercised due to potential consolidation of financial reporting.

The market was taken by surprise roughly a month ago when Ari Real Estate announced its intention to purchase the stake from Norstar. This deal represented a significant premium, valuing G City at approximately 2.55 billion shekels, a more than 30% uplift compared to its stock market valuation at the time. G City, a prominent player in income-generating properties, holds a portfolio of shopping centers in Israel and significant assets in Poland, making it an attractive target.

Insiders suggest that Katzman may have underestimated Abu's resolve and strategic maneuvering. One source commented, "If Katzman thought Abu was Barak Rosen, he was profoundly mistaken. There's someone here who has cracked the code." This sentiment alludes to past complex real estate transactions, drawing parallels to situations where strategic partnerships evolved in unexpected ways. The entry of Yishpro, led by Dahari and Adib, reportedly allows for a shift in control dynamics without the immediate need to merge G City's financial statements with those of Ari Real Estate, a key factor that seems to have prompted Katzman's intensified efforts to scrutinize and potentially disrupt the deal.

In response to the evolving situation, G City's management has reportedly accelerated the appointment of Keren Khalifa, a long-time associate of Katzman, to the CEO position. This move, bringing her into the role sooner than initially planned, is seen as a strategic step by Katzman. Furthermore, Katzman has reportedly initiated other independent actions, including the issuance of a new series of bonds, signaling a proactive defense against the perceived shift in control.

Ari Real Estate issued a statement asserting its commitment to all agreements. "The group does not conduct its business in the press," the company stated. "For the avoidance of doubt, Ari Real Estate abides by every agreement signed with it, past, present, and future. The decision to bring Yishpro in as a partner was made subject to the terms of the agreement, and together they intend to achieve control in the future to implement all necessary measures for the company's enhancement and value maximization for all its shareholders – precisely in accordance with their statements made upon signing the agreement."