Gazit Globe's Strategic Rebalancing and Financial Resilience: A Compelling Case for Undervalued REIT Exposure in 2025

In an era of sector-wide volatility, Gazit Globe (GZG) has emerged as a standout example of disciplined capital management and strategic foresight. The Israeli real estate investment trust (REIT) has systematically realigned its portfolio to prioritize core urban markets, secured credit rating upgrades, and demonstrated improving Funds From Operations (FFO) trends—all while reducing debt exposure. For investors seeking undervalued REIT exposure in 2025, Gazit Globe's rebalancing efforts and financial resilience present a high-conviction case.

Strategic Asset Divestitures: Sharpening the Urban Focus

Gazit Globe's recent divestitures underscore its commitment to concentrating capital in high-growth urban centers. Over 2024 and 2025, the company has offloaded non-core assets such as the Atrium Flora shopping center in the Czech Republic, the Targowek complex in Poland, and a Turkish Special Purpose Vehicle (SPV). These moves align with a broader strategy to exit peripheral markets and redirect resources toward necessity-driven retail hubs in cities with strong demographic growth.

The disposal of the Pardubice loan and the repayment of high-yield notes further illustrate Gazit's focus on optimizing debt structure. By shedding non-core liabilities and tendering $500 million in 2025-due bonds, the company has improved liquidity and reduced leverage. This disciplined approach has allowed Gazit to maintain a weighted average debt maturity of four years while prioritizing assets with stable cash flows, such as supermarket-anchored centers in urban corridors.

Credit Rating Upgrades: Validation of Financial Discipline

Gazit Globe's strategic rebalancing has not gone unnoticed by credit rating agencies. In May 2011, Midroog (a Moody's subsidiary) upgraded Gazit's credit rating to Aa3 with a stable outlook, citing its “very strong creditworthiness” and robust liquidity. This upgrade followed years of deleveraging, including a 2018 exit from its Regency investment, which generated $1.84 billion in liquidity.

The Aa3 rating reflects Gazit's ability to hedge interest rate and currency risks effectively, a critical advantage in today's inflationary environment. S&P Maalot's concurrent A+ rating with a stable outlook further reinforces the company's financial resilience. These upgrades are not mere formalities—they signal to investors that Gazit's balance sheet is well-positioned to withstand macroeconomic headwinds, a rare trait in the REIT sector.

FFO Trends: Operational Strength Amid Sector Weakness

Despite a marginal 0.6% decline in FFO per share in Q2 2024, Gazit's underlying operational metrics tell a more compelling story. Same Property Net Operating Income (NOI) grew 3.1% year-over-year, driven by 13.9% growth in Brazil and 4.9% in Israel. Rental income surged 23% to $1.51 billion in the same period, highlighting the durability of Gazit's necessity-driven retail model.

The company's adjusted FFO per share increased 3% to NIS 1.75 in Q2 2024, outpacing net income declines caused by non-recurring items. This divergence underscores Gazit's focus on cash flow generation over accounting-driven earnings. With a dividend yield of ~4.5% and a consistent payout ratio, the REIT offers both income and capital preservation—a rare combination in today's market.

Investment Thesis: A High-Conviction Buy

Gazit Globe's strategic rebalancing has created a compelling risk-reward profile. By exiting non-core markets and focusing on urban retail hubs, the company has insulated itself from sector-wide declines in discretionary retail. Its credit rating upgrades and improved debt metrics further reduce downside risk, while FFO growth in key markets like Brazil and Israel points to long-term value creation.

For investors, the current valuation offers an attractive entry point. At a price-to-FFO multiple of ~12x (compared to the sector average of 15x), Gazit appears undervalued relative to peers. The company's exposure to high-growth urban markets and its disciplined capital structure make it a defensive play in a volatile sector.

Conclusion

Gazit Globe's strategic rebalancing, credit resilience, and operational performance position it as a standout REIT in 2025. While the broader sector grapples with rising interest rates and shifting consumer behavior, Gazit's focus on necessity-driven retail and urban density offers a clear path to sustainable growth. For investors seeking a high-conviction, undervalued REIT with a strong balance sheet and a clear strategic vision, Gazit Globe deserves a prominent place in the portfolio.