Azrieli Group Q2 2025 slides reveal data centers as key growth driver amid solid results

Introduction & Market Context

Azrieli Group (TASE:AZRG), Israel’s largest real estate company, presented its Q2 2025 investor presentation on August 18, 2025, showcasing solid growth despite ongoing regional challenges. The company’s stock closed down 2.18% at 33,630 NIS following the presentation, suggesting investors may have expected even stronger results or were concerned about specific aspects of the company’s outlook.

With approximately 1.4 million square meters of gross leasable area across diverse property types, Azrieli continues to maintain its dominant position in the Israeli real estate market while expanding its international footprint, particularly in the data center segment.

As shown in the following business overview, Azrieli Group maintains strong fundamentals with high occupancy rates and a solid credit rating:

Quarterly Performance Highlights

Azrieli Group reported strong financial results for Q2 2025, with NOI (Net Operating Income) reaching 648 million NIS, representing a 17% increase compared to Q2 2024. Same-property NOI grew by 4% to 576 million NIS, while FFO (Funds From Operations) increased by 1% to 425 million NIS. When excluding senior housing, FFO growth was more robust at 7%, reaching 417 million NIS.

The company’s financial highlights demonstrate continued growth across key metrics despite the impact of regional security challenges from Operation Rising Lion:

The company’s property portfolio is well-diversified across multiple segments, with offices and retail centers in Israel comprising the largest portions at 30% and 27% of total value, respectively. Data centers now represent 17% of the portfolio value, highlighting the growing importance of this segment:

Strategic Growth Initiatives

The most notable growth story in Azrieli’s portfolio is the rapid expansion of its data center operations through Green Mountain Global. This segment has seen remarkable growth since acquisition in July 2021, with contracted capacity increasing from 24 MW to 170 MW and NOI growing from 84 million NIS to 587 million NIS.

The following chart illustrates the dramatic expansion of Green Mountain Global’s operations since acquisition:

In Q2 2025, data centers generated 115 million NIS in NOI, compared to just 43 million NIS in Q2 2024, representing a 167% year-over-year increase. The company’s data centers are powered by 100% renewable energy and are strategically located across Norway, the UK, and Germany.

Beyond data centers, Azrieli Group continues to develop a robust pipeline of projects that will drive future growth. The company has 10 projects under construction with a total estimated cost of 7,525-7,925 million NIS. These projects span various segments including senior housing, office space, retail, and hospitality.

The development pipeline is expected to contribute significantly to future NOI and FFO, as illustrated in this forward-looking projection:

Segment Performance

Azrieli’s mall and retail centers segment reported NOI of 239 million NIS in Q2 2025, compared to 249 million NIS in Q2 2024, with the decline attributed to the impact of Operation Rising Lion. Despite these challenges, the segment maintains an impressive 99% occupancy rate across approximately 379,000 sqm of GLA (Gross Leasable Area).

The office segment performed well, with NOI reaching 240 million NIS in Q2 2025 (including 14 million NIS of non-recurring compensation), up from 211 million NIS in Q2 2024. This segment maintains a 94% occupancy rate across approximately 655,000 sqm of GLA.

The senior housing segment, operating under the Palace brand, reported NOI of 25 million NIS in Q2 2025. With a 98% occupancy rate across 1,141 apartments, this segment continues to provide stable income:

Financial Position & Dividend

Azrieli Group maintains a strong financial position with a leverage ratio of 37% and an equity to assets ratio of 41%. The company announced a dividend of 800 million NIS (6.60 NIS per share), continuing its trend of consistent dividend growth:

The company has effectively managed its debt profile, with 78% of its 26.8 billion NIS debt in bonds. Azrieli has extended the average duration of its debt while maintaining a competitive average effective interest rate:

Forward-Looking Statements

Azrieli Group’s development pipeline includes several high-profile projects that are expected to drive future growth. The flagship Spiral Tower in Tel Aviv, with 150,000 sqm of GLA and an estimated construction cost of 3.0-3.2 billion NIS, is scheduled for completion in 2028:

Other notable projects include the Modi’in Lot 10 development (37,000 sqm, due in 2026), the SolarEdge (NASDAQ:SEDG) Campus in Ramat HaSharon (43,000 sqm, due in 2027), and the Mount Zion Hotel in Jerusalem (34,000 sqm, due in 2028).

The company is also expanding its presence in the senior housing segment with the Palace Rishon Lezion project (37,300 sqm, due in 2025) and the Sde Dov Senior Home in Tel Aviv (42,000 sqm, due in 2030).

Conclusion

Azrieli Group’s Q2 2025 results demonstrate the company’s ability to generate solid growth despite regional challenges, with data centers emerging as a key driver of future expansion. The company’s diversified portfolio, strong financial position, and robust development pipeline position it well for continued growth in the coming years.

However, the market’s reaction suggests investors may have concerns about specific aspects of the company’s performance or outlook, potentially related to the impact of regional security challenges on certain segments or the substantial capital expenditures required for the ambitious development pipeline.

Full presentation:

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