Azrieli Group Reports 9% Mall Growth in Q2 as Data Center Expansion Accelerates
The Israeli real estate giant posted solid operating results across segments despite foreign exchange headwinds, while securing major new data center contracts in London and Norway.
Strong Quarter Across Core Segments
Azrieli Group Ltd. reported solid second-quarter results with growth across its key business segments, though foreign exchange fluctuations obscured some of the underlying momentum. CEO Danna Azrieli described the quarter as "strong" with "real growth across all key business segments" (earnings call, 2026-08-19).
Net operating income (NOI) totaled ILS 651 million, up ILS 3 million year-over-year. However, excluding the impact of exchange rate changes, NOI increased by approximately 4%, reflecting stronger operational performance than headline figures suggested.
Mall Segment Leads Growth
The retail segment delivered particularly robust results, with NOI increasing by approximately 9% compared to the prior-year quarter. Tenant sales showed strong growth of approximately 8%, according to Azrieli (earnings call, 2026-08-19).
This growth came despite removing approximately 3,000 square meters of leasable area from the Azrieli Tel Aviv mall for construction work connecting it to the adjacent Spiral Tower. The company expects the connection to ultimately add approximately 16,000 square meters of retail space, representing a "long-term investment that is expected to significantly upgrade the mall" (earnings call, 2026-08-19).
Office Segment Stabilizes Post-Meta
The office segment recorded a 4% NOI increase when excluding a one-time lease termination payment of approximately ILS 90 million received in the prior-year quarter from Meta following its departure from Azrieli Sarona Tower. The space vacated by Meta has been fully leased at improved rates, Azrieli noted.
Construction continues on the landmark Spiral Tower, expected to open in approximately two years. The core has reached the eighth floor of the planned 91 stories, with main floor plans reaching the sixth floor and aluminum installation already at the 55th floor (earnings call, 2026-08-19).
Data Center Momentum Builds
Azrieli announced two significant data center agreements during the quarter. The company signed a 13.6-megawatt contract in London at its Romford campus over an 8-year term, expected to contribute annual NOI of approximately ILS 95 million with recognition beginning in Q1 2027.
Additionally, the company secured a 5-megawatt agreement at its Nava campus in Norway with a large international technology company over a 15-year term, with a customer option to extend for an additional 15 years. This deal is expected to generate average annual NOI of approximately ILS 24 million (earnings call, 2026-08-19).
With these agreements, Azrieli's contracted NOI in the data center segment now exceeds ILS 1 billion, or approximately EUR 350 million. The company is also advancing construction at facilities in Germany and at its Ontime Norway campus, which will offer 80 megawatts of capacity.
Financial Position and Outlook
Funds from operations (FFO) including senior housing totaled ILS 426 million, up ILS 1 million year-over-year. Excluding foreign exchange impacts, FFO would have totaled approximately ILS 430 million, representing a 1% increase.
During the period, the company invested approximately ILS 969 million in data centers and ILS 645 million in income-producing properties under construction. Since the beginning of the year, total investments have exceeded ILS 1.7 billion (earnings call, 2026-08-19).
The company completed a new bond issuance during the quarter, maintaining what Azrieli characterized as "high financial strength" with "conservative and responsible financial management" (earnings call, 2026-08-19).
This article was generated by MarginX from the earnings call on 2026-08-19. It is not investment advice.