Shikun & Binui Holdings Ltd. (TASE: SKBN) seeks to sell to investment institutions most of its holdings in the companies holding the concessions for the Carmel Tunnels project ("Carmelton") and the project for repaving, operating and maintaining roads in northern Israel ("Northern Routes"). Further projects may be sold later.
Real estate and infrastructure group Shikun & Binui, controlled by Shari Arison, reported at the end of last week that it intended to transfer most of its holdings in the Carmelton and Northern Routes projects to a limited partnership, while itself retaining around 10% of the partnership and managing it as the general partner.
Shikun & Binui holds 50% of Carmelton, the concessionaire for the Carmel Tunnels toll road. The concession period will end in 2040, when it will be transferred to the state without consideration.
Carmelton is a loss-making company with negative shareholders' equity of NIS 127 million. It is financed by owners' loans of NIS 173 million. Shikun & Binui's 2016 financial statements reveal that Carmelton, which began recording revenue in 2011, posted a loss of NIS 13.4 million last year, following a loss of NIS 17.6 million in 2015, and higher losses in previous years.
Shikun & Binui holds 60% of Shikun & Binui Northern Routes Ltd., which has a concession from Netivei Israel National Transport Infrastructure Company until 2030. Shikun & Binui recently sold 40% of the project at an estimated profit of NIS 60-70 million. Shikun & Binui Northern Routes posted a net profit of NIS 2 million in 2016, and a similar profit in 2015.
Among other holdings of Shikun & Binui, which will not become part of the new platform at this stage, are 21.6% of a project for constructing express toll roads in Houston, Texas, which will produce revenue from 2019 until 2068; and 50% of a project for constructing an express highway in Colombia, which will produce revenue from 2019 to 2044.
Talking to "Globes', newly appointed Shikun & Binui Concessions Division CEO Allon Raveh said, "In principle, this move is no different from other realizations by Shikun & Binui. The only difference is that we are creating a platform that enables entities looking for long-term investments with returns and capital gains to be partners in this kind of project, while we ourselves continue to be partners in the projects, to manage them and keep Shikun & Binui's capabilities in the management. This is an innovative structure that has not been tried in Israel. At present, we are talking about two projects, but further projects may be introduced in the future."
What holding will you retain in the partnership that is set up?
"We haven't yet decided exactly. This is part of our discussions with the investors. It looks as though we will retain something like 5-15% and continue to manage the assets. If the move succeeds, we will extend it to more of our projects. All in all, we are a company that gets involved in a great many projects, and if this succeeds, we will introduce more projects to this platform."
So you're already in talks with investment institutions? What about management fees payable to the general partner?
""Yes. As is well known, there is a great hunger for returns on the capital market these days, and we can generate good long-term returns with upside potential. The institutions are often reluctant to manage projects, and are only interested in the return, and so we have created a solution for them. We aren't looking to make a profit from the management fees, so they will be reasonable, just to cover expenses."
Published by Globes [online], Israel business news - www.globes-online.com - on July 3, 2017
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