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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Optibase Ltd | NASDAQ:OBAS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 12.59 | 12.59 | 12.60 | 0 | 01:00:00 |
UNITED STATES
☐ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report _______________
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OPTIBASE LTD.
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(Exact name of Registrant as specified in its charter)
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N/A
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(Translation of Registrant’s name into English)
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Israel
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(Jurisdiction of incorporation or organization)
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8 Hamenofim Street, Herzliya 4672559, Israel
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(Address of principal executive offices)
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Mr. Amir Philips, Chief Executive Officer and Director
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8 Hamenofim Street, Herzliya 4672559, Israel
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Tel: +972-73-7073700, Fax: +972-73-7946331, Email: amirp@optibase-holdings.com
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(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
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Title of class
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Trading Symbol(s)
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Name of each exchange on which registered
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None
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(Title of Class)
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None
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(Title of Class)
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Large Accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Emerging growth company ☐
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68 |
• |
We may incur losses as a result of unforeseen or catastrophic events, such as the global COVID-19 pandemic that has created significant
business disruptions and affected our business and is likely to continue to create business disruptions and adversely affect our business
in the future. |
• |
We may be affected by instability in the global economy, including the recent European economic and financial turmoil. |
• |
We were and may be the target of securities class action, derivative claim or other litigation, which could be costly and time consuming
to defend. |
• |
Our effective tax rate could be materially affected by several factors including, among others, changes in the amount of income taxed
by or allocated to the various jurisdictions in which we operate that have differing statutory tax rates, changing tax laws, regulations
and interpretations of such tax laws in multiple jurisdictions. |
• |
There is a substantial risk that we are a passive foreign investment company, and holders of our ordinary shares who are United States
residents face income tax risks. |
• |
The real estate sector continues to be cyclical and affected by changes in general economic, or other business conditions that could
materially adversely affect our business or financial results. |
• |
We rely on one large property for a significant portion of our revenue. |
• |
With respect to our commercial properties, we are dependent on the continued tenant demand for our properties. If there is a decrease
in tenant demand and an increase in vacancy of our commercial properties, it would adversely affect our financial condition and results
of operations. |
• |
There are large vacant areas in the CTN complex, our largest property, due to the departure
of large tenants that accounted for approximately 22% of our annualized rental income. |
• |
We may have difficulties leasing real-estate properties. |
• |
We are depended on the solvency of our tenants and may lease properties at below expected rental rates. |
• |
We may experience future unanticipated expenses. |
• |
With respect to our commercial properties, we may be required to invest significant amounts as capital expenditures to bring certain
properties up to code. |
• |
The fair value of our real estate may be harmed by certain factors, which may entail impairment losses not previously recorded which,
in turn, will adversely affect our financial results. |
• |
We may not be able to raise additional financing for our future capital needs on favorable terms, or at all, which could limit our
growth and increase our costs and could adversely affect the price of our ordinary shares. |
• |
In the event we are unable to continuously comply with the covenants, which we undertook with respect to our properties, our results
of operations may be adversely affected. |
• |
Rapid and significant changes in interest rates may adversely affect our profitability. |
• |
An adverse change in the Swiss real estate market will adversely affect our results of operations. |
• |
Because of our small size, we rely on a small number of personnel who possess both executive and financial expertise, and the loss
of any of these individuals would hurt our ability to implement our strategy and may adversely affect our financial results. |
• |
We face risks associated with property acquisitions. |
• |
An adverse change in the U.S. real estate market will adversely affect our results of operations. |
• |
With respect to our residential properties in Miami, Florida, the success of our investment will depend on market conditions.
|
• |
We depend on partners in our partnerships and collaborative arrangements. |
• |
Cause of physical damages and other nature losses may affect our properties. |
• |
Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions.
|
• |
Environmental discoveries may have a significant impact on the value, viability and marketability of our assets. |
• |
Israeli courts might not enforce judgments rendered outside of Israel, which may make it difficult to collect on judgments rendered
against us. |
• |
Additional operating expenses without additional revenues; |
• |
Potential dilutive issuances of equity securities; |
• |
The incurrence of debt and contingent liabilities; |
• |
Amortization of bargain purchase gain and other intangibles; |
• |
Impairment charges; and |
• |
Other acquisition-related expenses. |
• |
The purchase or failure to purchase real-estate assets; |
• |
Changes in rent prices for our properties; |
• |
Changes in presence of tenants and tenants' insolvency; |
• |
Changes in the availability, cost and terms of financing; |
• |
The ongoing need for capital improvements; |
• |
Changes in foreign exchange rates; |
• |
Changes in interest rates; and |
• |
General economic conditions, particularly in those countries or regions in which we operate. |
• |
employment levels; |
• |
availability of financing for homebuyers and for real estate investors/funds; |
• |
interest rates; |
• |
consumer confidence and expenditure; |
• |
levels of new and existing homes for sale; |
• |
demographic trends; |
• |
urban development and changes; |
• |
housing demand; |
• |
local laws and regulations; and |
• |
acts of terror, floods or earthquakes. |
• |
even if we enter into an acquisition agreement for a property, it is usually subject to customary conditions to closing, including
due diligence investigations to our satisfaction; |
• |
we may be unable to finance acquisitions on favorable terms or at all; |
• |
acquired properties may fail to perform as we expected; |
• |
we may not be able to obtain adequate insurance coverage for new properties; and |
• |
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into
our existing operations, and therefore our results of operations and financial condition could be adversely affected. |
• |
liabilities for clean-up of undisclosed environmental contamination; |
• |
claims by tenants, vendors or other persons arising from dealing with the former owners of the properties; |
• |
liabilities incurred in the ordinary course of business; and |
• |
claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.
|
• |
an inability to acquire a desired property because of competition from well-capitalized real estate investors, including publicly
traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, sovereign
wealth funds, pension trusts, partnerships and individual investors; and |
• |
an increase in the purchase price for such acquisition property, in the event we are able to acquire such desired property.
|
• |
The judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;
|
• |
The judgment can no longer be appealed; |
• |
The obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel
and the substance of the judgment is not contrary to public policy; and |
• |
The judgment is executory in the state in which it was given. |
• |
The judgment was obtained by fraud; |
• |
There was no due process; |
• |
The judgment was rendered by a court not competent to render it according to the laws of private international law in Israel;
|
• |
The judgment is at variance with another judgment that was given in the same matter between the same parties and which is still valid;
or |
• |
At the time the action was brought in the foreign court a suit in the same matter and between the same parties was pending before
a court or tribunal in Israel. |
• |
purchase of real estate mainly in Central and Western Europe, North America and Israel; |
• |
developing and improving existing real estate; |
• |
maximize the leasing of existing properties to commercial users; |
• |
increase and develop unused building rights in our existing properties; and |
• |
acquire additional commercial, residential and other real estate assets in light of market conditions, while diversifying our real
estate property base. |
Property |
Location |
Acquisition
Date |
Company Stake
|
Nature of Rights
|
Property Type
|
Net
Rentable Square Meters Excluding Redevelopment Space(1) |
Annualized Rent ($000)(2) |
Rate of Occupancy (3)
|
Annualized
Rent per Occupied Square Meter ($)(4) |
Centre des Technologies Nouvelles (CTN) |
Geneva, Switzerland |
March 2, 2011 |
51% |
Ownership with land lease |
Commercial |
34,800(5)
|
11,276 |
92% |
352 |
Rümlang |
Rümlang, Switzerland |
October 29, 2009 |
100% |
Ownership |
Commercial |
12,500 |
1,666 |
88% |
151 |
Miami, Florida |
Miami, Florida |
2010-2013 |
100% |
Ownership |
Residential - Condominium Units |
4,260 |
1,222 |
74% |
388 |
Portfolio Total/ Weighted Average
|
- |
- |
- |
- |
- |
51,560 |
14,164 |
90% |
306 |
Year Ended December 31 |
||||||||||||
Thousands US$ |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
GAAP Operating income |
5,828 |
14,984 |
4,537 |
|||||||||
Adjustments:
|
||||||||||||
Real estate depreciation, amortization and
impairment |
4,321 |
3,946 |
3,939 |
|||||||||
General and administrative |
3,047 |
2,523 |
3,410 |
|||||||||
Gain on sale of operating properties
|
- |
(9,127 |
) |
(273 |
) | |||||||
Non-GAAP Total Net Operating Income (NOI)
|
13,196 |
12,326 |
11,613 |
Year Ended December 31 |
||||||||||||
Thousands US$ |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
GAAP Net income (loss) attributable to Optibase
Ltd. |
(1,993 |
) |
6,433 |
(894 |
) | |||||||
Adjustments:
|
||||||||||||
Real estate depreciation, amortization and
impairment |
4,321 |
3,946 |
3,939 |
|||||||||
Pro rata share of real estate depreciation
and amortization from unconsolidated associates |
3,085 |
3,087 |
3,282 |
|||||||||
Non-controlling interests share in the above
adjustments |
(1,162 |
) |
(1,234 |
) |
(1,295 |
) | ||||||
Non-GAAP Fund From Operation (FFO) |
4,251 |
12,232 |
5,032 |
|||||||||
Gain on sale of operating properties,
net |
- |
(7,570 |
) |
(273 |
) | |||||||
Non- GAAP Recurring Fund From Operation (Recurring
FFO) |
4,251 |
4,662 |
4,760 |
Property |
Location |
Acquisition
date |
Company Stake
|
Nature of Rights
|
Property Type
|
Net
Rentable Square Feet Excluding Redevelopment Space(1) |
Annualized
Rent ($000)(2) |
Rate of Occupancy (3)
|
Annualized
Rent per Occupied Square Feet ($)(4) |
2 Penn Center Plaza |
Philadelphia, Pennsylvania |
October 12, 2012 |
22.16% |
Beneficial interest in the owner of the
property |
Commercial |
516,108 |
10,857 |
86% |
24 |
Texas Shopping Centers Portfolio |
Houston, Dallas, San Antonio, Texas |
December 31, 2012 |
4% |
Beneficial interest in the portfolio
|
Commercial |
2,036,290 |
26,284 |
92% |
14 |
South Riverside Plaza Office Tower |
300 South Riverside Plaza, Chicago |
December 29, 2015 |
30% |
Beneficial interest in the owner of the
property |
Commercial |
1,073,040 |
24,468 |
98% |
23 |
Portfolio Total/ Weighted Average
|
- |
- |
- |
- |
- |
3,325,438 |
61,610 |
93% |
18 |
Number of tenants whose
leases will expire* |
Total area covered
by these leases |
Area covered
by these leases (%) |
Annual rent
at expiration ($000) |
Percent of annual rent at expiration (%) |
||||||||||||||||
2022 |
16 |
11,192 |
33 |
% |
4,252 |
38 |
% | |||||||||||||
2023 |
8 |
3,127 |
9 |
% |
1,084 |
10 |
% | |||||||||||||
2024 |
6 |
5,952 |
18 |
% |
2,179 |
19 |
% | |||||||||||||
2025 |
6 |
1,520 |
4 |
% |
456 |
4 |
% | |||||||||||||
2026 |
12 |
3,851 |
11 |
% |
1,359 |
12 |
% | |||||||||||||
Thereafter |
6 |
5,665 |
17 |
% |
1,916 |
17 |
% | |||||||||||||
Sub-total |
54 |
31,307 |
92 |
% |
11,246 |
100 |
% | |||||||||||||
Vacant |
- |
2,549 |
8 |
% |
- |
- |
||||||||||||||
Total |
54 |
33,856 |
100 |
% |
11,246 |
100 |
% |
Number of tenants whose
leases will expire* |
Total area covered
by these leases |
Area covered
by these leases (%) |
Annual rent
at expiration ($000) |
Percent of annual rent at expiration (%) |
||||||||||||||||
2022 |
5 |
4,530 |
37 |
% |
662 |
40 |
% | |||||||||||||
2023 |
3 |
1,060 |
9 |
% |
174 |
10 |
% | |||||||||||||
2024 |
2 |
314 |
3 |
% |
34 |
2 |
% | |||||||||||||
2025 |
8 |
1,652 |
13 |
% |
331 |
20 |
% | |||||||||||||
2026 |
4 |
3,130 |
25 |
% |
441 |
27 |
% | |||||||||||||
Thereafter |
1 |
121 |
1 |
% |
19 |
1 |
% | |||||||||||||
Sub-total |
23 |
10,807 |
88 |
% |
1,661 |
100 |
% | |||||||||||||
Vacant |
- |
1,471 |
12 |
% |
- |
- |
||||||||||||||
Total |
23 |
12,278 |
100 |
% |
1,661 |
100 |
% |
1. |
A corporate income tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 ("Rate Reduction");
|
2. |
The transition of U.S international taxation from a worldwide tax system to a territorial system by providing a 100 percent deduction
to an eligible U.S. shareholder on foreign sourced dividends received from a foreign subsidiary; |
3. |
A one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017; and
|
4. |
Taxation of GILTI earned by foreign subsidiaries beginning after December 31, 2017. The GILTI tax imposes a tax on foreign income
in excess of a deemed return on tangible assets of foreign corporations. |
Year Ended December 31 |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Fixed income from real estate rent |
100 |
% |
100 |
% |
100 |
% | ||||||
Costs and expenses: |
||||||||||||
Cost of real estate operations |
18.3 |
17.1 |
16.7 |
|||||||||
Real estate depreciation, amortization, and impairment |
26.8 |
26.5 |
28.3 |
|||||||||
General and administrative |
18.9 |
17 |
24.5 |
|||||||||
Total costs and expenses |
63.9 |
60.6 |
69.4 |
|||||||||
Operating income |
36.1 |
100.7 |
32.6 |
|||||||||
Other income, net |
4.5 |
3.1 |
5.6 |
|||||||||
Financial expenses, net |
(16.3 |
) |
(12 |
) |
(11.8 |
) | ||||||
Income before taxes on income |
24.3 |
91.8 |
26.4 |
|||||||||
Taxes on income |
(9.1 |
) |
(14.5 |
) |
(5.2 |
) | ||||||
Equity share in losses of associates, net |
(14.4 |
) |
(14 |
) |
(7.6 |
) | ||||||
Net income |
0.7 |
63.3 |
13.5 |
|||||||||
Net income attributable to non-controlling interest |
13.1 |
20 |
19.9 |
|||||||||
Net income (loss) attributable to Optibase Ltd. |
(12.3 |
) |
43.2 |
(6.4 |
) |
Type of Facility
|
Borrower |
Original Date and Maturity
Date |
Original Amount(1)
|
Outstanding Amount (as
of December 31, 2021) (2) |
Annual Interest
|
Payment Terms
|
Principal Securities
|
Principal Covenants
|
Additional Information
|
Framework agreement for mortgage loan of the CTN complex
|
Eldista GmbH (Senior Borrower) |
Original Date- January 8, 2020;
Maturity Date- 2061 |
CHF 83.5 million
(app. $87.3 million).
The Borrower may choose to utilize the credit facility as follows: (i) mortgage loans
in CHF with terms of 1 to max 10 years; (ii) mortgage-backed fixed advanced in CHF with terms of 3, 6 or 12 months; (iii) mortgage-backed
fixed advanced in USD with terms of max 3 months. (4)
During 2020 and to date, the Borrower has been utilizing the credit facility every
3 months in USD or CHF. |
CHF 79.5 million (app. $87 million). |
Floating interest rate, based on the prevailing conditions in
the money and capital markets, the risk assessments of the bank and the margin determined by the bank + 0.75% for drawings in CHF or 1.05%
for drawings in USD, per annum. |
Interest due quarterly, beginning March 31, 2020.
CHF 2 million to be paid per year on a quarterly basis, beginning March 31, 2020.
|
A senior ranking mortgage over the property + Deed of Assignment
in favor of the bank of any rent payments from the CTN complex and all rent payments will be made directly into an account at the bank.
|
• The framework agreement may be terminated by either party at any time with
immediate effect.
• The Borrower undertakes to refrain from providing new or additional collateral
exceeding CHF 2 million in favor of a third party.
• The bank is authorized to assign all or any part of the lone relationship
to a third party.
• Transfers/sales of property are prohibited. Any sale will result
in the loan being repayable and a prepayment fee of 0.1%, plus difference between interest rate at time of termination and interest rate
that bank can achieve for residual interest term.
• Loans to third parties (excluding shareholders) by the borrower are not permitted.
• Distributions of dividends/shareholder loans are only permitted in line
with available yearly profit after loan payments. | |
Financing agreement of condominium units in Miami
|
Optibase Real Estate Miami, LLC |
Original Date- July 7, 2015;
Maturity Date- March 31, 2023 |
$8.82 million(3)
|
$5.9 million |
Libor (30-day rate) + 2.65%, but no less than 4.65%.
|
Interest – payable monthly commencing on October 1, 2021
Principal – the entire principal balance and all accrued interest shall be due
and payable on March 31, 2023.
|
Following the last sale of the penthouse in Miami Beach, Florida held on March 9, 2022, the loan was repaid
in full, and therefore, the terms of the loan are not described. |
Type of Facility
|
Borrower |
Original Date and Maturity
Date |
Original Amount(1)
|
Outstanding Amount (as
of December 31, 2021) (2) |
Annual Interest
|
Payment Terms
|
Principal Securities
|
Principal Covenants
|
Additional Information
|
Financing agreement of the property in Rumlang |
Optibase RE 1 SARL |
Original Date- October 2009; Maturity Date- 2059
|
CHF 18.8 million ($18.4 million)
|
CHF 14.3 million (app. $15.6 million) |
Libor (for a period determined by borrower per each interest
payment for the next payment) + 0.8% |
Interest - payable in four quarterly payments annually;
The principal amount is payable in four quarterly amortization payments annually,
each in the amount of CHF 94,000 (approximately $92,000 as of the purchase date). |
A senior mortgage over the property +
Pledge over the holdings in borrower. |
Undertaking not to grant any encumbrance or mortgage on the Rümlang property
without the lender's approval.
|
• The lender may adjust the margin at its sole discretion on account
of deterioration in Optibase RE 1's credit standing or the value of the property.
• The principal payments may be adjusted at the lender's sole discretion
if the lease of major tenants is terminated and no replacement tenant is found within 6 months.
• Borrower may repay the mortgage at any time, subject to a prior notice
of three months with no subject penalty.
• The lender holds the right to accelerate future loan payments, upon
occurrence of certain default conditions. |
(1) |
Translation of the amounts into US Dollar was made in accordance with the representative rate of exchange of the relevant currency
into US Dollar as of the date the loan was taken. |
(2) |
Translation of the amounts into US Dollar was made in accordance with the representative rate of exchange of the relevant currency
into US Dollar as of December 31, 2021 |
(3) |
The original amount is the amount received following a second amendment to the loan agreement. |
(4) |
Use of foreign currency (USD) may only occur if the resulting foreign exchange risk is hedged through a separate OTC transaction
in the same currency and with the same term and nominal. |
❖ |
Long-lived assets including intangible assets |
❖ |
Investment in companies |
❖ |
Contingencies; and |
❖ |
Income Taxes. |
Age |
Position |
|
Amir Philips |
54 |
Chief Executive Officer and Director |
Reuwen Schwarz |
45 |
Director |
Avraham Unterman |
45 |
Director |
Shlomo (Tom) Wyler |
70 |
Chief Executive Officer of Optibase Inc. |
Yakir Ben-Naim |
50 |
Chief Financial Officer |
(1) |
“Salary” means yearly gross base salary with respect to our Executive Officers
(Mr. Philips, Mr. Wyler and Ms. Ben-Naim). “Monthly Payment” means the aggregate gross monthly payments with respect to the
members of our board of directors (Mr. Hilman and Mr. Schwarz) for the year 2021. |
(2) |
“Social Benefits” include payments to the National Insurance Institute, advanced
education funds, managers’ insurance and pension funds; vacation pay; and recuperation pay as mandated by Israeli law. |
(3) |
Consists of amounts recognized as share-based compensation (options and restricted shares) expense on our financial statements for
the year ended December 31, 2021. |
(4) |
“All Other Compensation” includes, among other things, car-related expenses (including
tax gross-up), telephone, basic health insurance, and holiday presents. |
(5) |
Mr. Philips’ employment terms as our Chief Executive Officer provide that Mr. Philips is entitled to a monthly base gross salary
of NIS 75,000 (approximately $24,100). Mr. Philips is entitled to 24 vacation days, convalescence pay of 10 days and sick days in accordance
with market practice and applicable law, monthly remuneration for a study fund, contribution by us to an insurance policy and pension
fund, and additional benefits, including communication expenses. In addition, Mr. Philips is entitled to reimbursement of car-related
expenses from us (including tax gross-up). Mr. Philips’ employment terms include an advance notice period of 6 months. During such
advance notice period, Mr. Philips will be entitled to all of the compensation elements, and to the continuation of vesting of any options
or restricted shares granted to him. Mr. Philips is also entitled to bonus payments in accordance with the Compensation Policy. Mr. Philips
does not receive any additional compensation for his service as a director. |
(6) |
For details on Mr. Wyler’s compensation terms as approved by our shareholders on February 14, 2019, see Item 7.B. “Related
Party Transactions”, below. On February 14, 2019, following the approval by our compensation committee, audit committee and board
of directors, our shareholders approved an amendment to Mr. Wyler's compensation terms in a manner that Mr. Wyler's annual gross base
salary shall be $220,000 for a full time position, as of January 1, 2019. |
(7) |
Ms. Ben-Naim’s employment terms as our Chief Financial Officer provide that Ms. Ben-Naim is entitled to a monthly base gross
salary of NIS 37,800 (approximately $12,200). Ms. Ben-Naim is further entitled to vacation days, sick days and convalescence pay in accordance
with market practice and applicable law, monthly remuneration for a study fund, contribution by us to an insurance policy and pension
fund, and additional benefits including communication expenses. In addition, Ms. Ben-Naim is entitled to reimbursement of car-related
expenses from us. Ms. Ben-Naim’s employment terms include an advance notice period of three months. During such advance notice period,
Ms. Ben-Naim may be entitled to all of the compensation elements, and to the continuation of vesting of her options or restricted shares,
if granted. |
(8) |
The compensation terms of Mr. Hilman as the Executive Chairman of our board of directors were approved by our shareholders on October
19, 2009. For details on Mr. Hilman’s compensation terms, including options and restricted shares granted to him, see Item 7.B.
“Related Party Transactions”, below. |
(9) |
Mr. Reuwen Schwarz entered into a service agreement with us, for the provision of real estate related consulting services to us,
our subsidiaries and affiliates. Such agreement, including the compensation terms of Mr. Schwarz in consideration for the services under
the agreement, were approved by our shareholders on December 19, 2013, on December 29, 2016 and on December 31, 2019. For further details
see Item 7.B. “Related Party Transactions”, below. |
❖ |
A breach of the duty of care vis-a-vis us or vis-a-vis another person; |
❖ |
A breach of the fiduciary duty vis-a-vis us, provided that the director or officer acted in good faith and had a reasonable basis
to believe that the act would not harm us; |
❖ |
A monetary obligation imposed on him or her in favor of another person; |
❖ |
Financial liability imposed on him or her for payment to persons or entities harmed as a result of violations in Administrative Proceedings,
as detailed in section 52(54)(A)(1)(a) of the Israeli Securities Law; |
❖ |
Expenses incurred by him or her in connection with Administrative Proceedings (as defined above) he was involved in, including reasonable
litigation fees, and including attorney fees; or |
❖ |
Any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of our director
or officer. |
❖ |
Any financial liability he or she incurs or imposed on him or her in favor of another person in accordance with a judgment, including
a judgment given in a settlement or a judgment of an arbitrator, approved by a court. |
❖ |
Reasonable litigation expenses, including legal fees, incurred by the director or officer or which he or she was ordered to pay by
a court, within the framework of proceedings filed against him or her by or on behalf of Optibase, or by a third party, or in a criminal
proceeding in which he or she was acquitted, or in a criminal proceeding in which he or she was convicted of a felony which does not require
a finding of criminal intent. |
❖ |
Reasonable litigation expenses, including legal fees he or she incurs due to an investigation or proceeding conducted against him
or her by an authority authorized to conduct such an investigation or proceeding, and which was ended without filing an indictment against
him or her and without being subject to a financial obligation as a substitute for a criminal proceeding, or that was ended without filing
an indictment against him, but with the imposition of a financial obligation, as a substitute for a criminal proceeding relating to an
offence which does not require criminal intent, within the meaning of the relevant terms in the Companies Law. |
❖ |
Financial liability he or she incurs for payment to persons or entities harmed as a result of violations in Administrative Proceedings,
as detailed in section 52(54)(A)(1)(a) of the Securities Law. For this purpose “Administrative Proceeding” shall mean a proceeding
pursuant to Chapters H3 (Imposition of Monetary Sanction by the Israel Securities Authority), H4 (Imposition of Administrative Enforcement
Means by the Administrative Enforcement Committee) or I1 (Settlement for the Avoidance of Commencing Proceedings or Cessation of Proceedings,
Conditioned upon Conditions) of the Securities Law, as shall be amended from time to time. |
❖ |
Expenses that he or she incurs in connection with Administrative Proceedings (as defined above) he was involved in, including reasonable
litigation fees, and including attorney fees. |
❖ |
Any other obligation or expense in respect of which it is permitted or will be permitted under law to indemnify a director or officer
of Optibase. |
❖ |
a breach of the fiduciary duty, except for a breach of the fiduciary duty vis-à-vis the company with respect to indemnification
and insurance if the director or officer acted in good faith and had a reasonable basis to believe that the act would not harm the company;
|
❖ |
an intentional or reckless breach of the duty of care, except for if such breach was made in negligence; |
❖ |
an act done with the intention of unduly deriving a personal profit; or |
❖ |
Fine, civil penalty, a financial sanction or penalty imposed on the directors or officers. |
Name of Beneficial Owner |
No. of Ordinary Shares
Beneficially Owned(1)
|
Percentage of Ordinary Shares Beneficially Owned |
The Capri Family Foundation (2)
|
5,039,143 |
96.9% |
Shlomo (Tom) Wyler(3)
|
159,218 |
3.1% |
Beneficial Owner |
Date of filing |
No. Of Shares Beneficially Held |
The Capri Family Foundation |
May 29, 2019 |
4,097,201* |
The Capri Family Foundation |
April 8, 2022 |
5,039,143** |
* |
The information is based on Amendment No. 6 to Schedule 13D filed with the SEC on June 19, 2019, by Capri, in connection with the
acquisition of an additional 300,917 ordinary shares by Capri on May 29, 2019, in a private transaction with an unrelated third party
at a price of $10.464 per share. |
(a) |
First, to repay partners who loaned sums to other limited partners who defaulted on their capital contributions; |
(b) |
Second, to partners that have made voluntary loans to the Partnership; |
(c) |
Third, to repay the partners their capital contributions; and |
(d) |
Fourth, to the partners in accordance with their percentage interests in the Partnership. |
❖ |
the avoidance of any conflict of interest between the director’s or officer’s position with the company and any other
position he or she fulfills or with his or her personal affairs; |
❖ |
the avoidance of any act in competition with the company’s business; |
❖ |
the avoidance of exploiting any of the company’s business opportunities in order to gain a personal advantage for himself or
for others; and |
❖ |
the disclosure to the company of any information and documentation relating to the company’s affairs obtained by the director
or officer due to his or her position with the company. |
❖ |
broker-dealers, |
❖ |
financial institutions, |
❖ |
certain insurance companies, |
❖ |
investors liable for alternative minimum tax, |
❖ |
tax-exempt organizations, |
❖ |
non-resident aliens of the U.S. or taxpayers whose functional currency is not the U.S. dollar, |
❖ |
persons who hold the ordinary shares through partnerships or other pass-through entities, |
❖ |
investors that actually or constructively own 10 percent or more of our voting shares, and |
❖ |
investors holding ordinary shares as part of a straddle or a hedging or conversion transaction. |
❖ |
an individual who is a citizen or, a resident of the United States for U.S. federal income tax purposes; |
❖ |
a partnership, corporation or other entity created or organized in or under the laws of the United States or any political subdivision
thereof; |
❖ |
an estate whose income is subject to U.S. federal income tax regardless of its source; |
❖ |
a trust if: (a) a court within the United States is able to exercise primary supervision over administration of the trust, and (b)
one or more United States persons have the authority to control all substantial decisions of the trust; or |
❖ |
a trust, if the trust were in existence and qualified as a “United States person,” within the meaning of the Code, on
August 20, 1996 under the law as then in effect and elected to continue to be so treated. |
• |
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;
|
• |
provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and |
• |
provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets
that could have a material effect on our financial statements. |
2020 |
2021 | |
Audit fees (1) |
109 |
114 |
Audit-related fees (2)
|
5 |
5 |
Tax fees (3) |
34 |
57 |
Total |
148 |
176 |
(1) |
Audit fees consist of fees billed, or expected to be billed, for the annual audit services engagement and other audit services, which
are those services that only the external auditor can reasonably provide, and include the group audit; statutory audits; comfort letters
and consents; attest services; and assistance with and review of documents filed with the SEC. |
(2) |
Audit-related fees consist of fees billed, or expected to be billed, for assurance and related services that are reasonably related
to the performance of the audit or review of our financial statements or that are traditionally performed by the external auditor, and
include consultations concerning financial accounting and reporting standards; internal control reviews of new systems, programs and projects;
review of security controls and operational effectiveness of systems; review of plans and control for shared service centers, due diligence
related to acquisitions; accounting assistance and audits in connection with proposed or completed acquisitions; and employee benefit
plan audits. |
(3) |
Tax fees include fees billed, or expected to be billed, for tax compliance services, including the preparation of original and amended
tax returns and claims for refund; tax consultations, such as assistance and representation in connection with tax audits and appeals,
tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authority;
tax planning services; and expatriate tax planning and services. |
Consolidated Financial Statements |
Page |
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1281)
|
F-2 F-3 |
Consolidated Balance Sheets |
F-4 - F-5 |
Consolidated Statements of Operations
|
F-6 |
Consolidated Statements of Comprehensive Income
|
F-7 |
Statements of Changes in Shareholders’ Equity
|
F-8 |
Consolidated Statements of Cash Flows
|
F-9 - F-10 |
Notes to Consolidated Financial Statements
|
F-11 - F-39 |
Consolidated Financial Statements |
Page |
Consolidated Financial Statements of 300 RIVER HOLDINGS, LLC
|
F-40 –F-53 |
OPTIBASE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
U.S. DOLLARS IN THOUSANDS
INDEX
|
Page |
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1281)
|
F-2 - F-3 |
|
|
F-4 - F-5 |
|
|
|
F-6 |
|
|
|
F-7 |
|
|
|
F-8 |
|
|
|
F-9 - F-10 |
|
|
|
F-11 - F-39 |
- - - - - - - - - - -
OPTIBASE LTD. AND ITS SUBSIDIARIES
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
To the Shareholders and Board of Directors of
OPTIBASE LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Optibase Ltd. and its subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, change sin shareholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements”). In our opinion, based on our audits and the report of the other auditor, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We did not audit the financial statements of 300 RIVER HOLDINGS LLC, a corporation in which the Company has a 30% interest. In the consolidated financial statements, the Company's investment in 300 RIVER HOLDINGS LLC is stated at $ 0 thousand and $ 1,928 thousand as of December 31, 2021 and 2020, respectively, and the Company's equity in the net loss of 300 RIVER HOLDINGS LLC is stated at $ 4,335 thousand in 2021, $ 4,476 thousand in 2020 and $ 4,859 thousand in 2019. These statements were audited by the other auditor, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for 300 RIVER HOLDINGS LLC, is based solely on the report of the other auditor.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
OPTIBASE LTD. AND ITS SUBSIDIARIES
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of real estate assets
Description of the matter |
As discussed in Note 2g to the consolidated financial statement, held real estate assets, net of accumulated depreciation as of December 31, 2021 were $ 176.9 million. The Company assesses held real estate assets for impairment when certain events or changes in circumstances indicate the carrying amount of the asset may not be recoverable through operations. When assessing for impairment, the Company performs a recoverability test by comparing the undiscounted future cash flows of the real estate asset to the net carrying value. If the undiscounted cash flows are less than the net carrying value, the Company will estimate the real estate assets’ fair value. The estimated fair value is compared to the net carrying value to determine whether the asset is impaired.
Auditing management’s evaluation of held real estate assets for impairment was complex due to the high degree of subjectivity in determining the future undiscounted cash flows and estimated fair values of the assets.
In particular, the undiscounted cash flows and fair value estimates were sensitive to the assumptions made by management regarding future rental revenues and operating expenses, capitalization rates, and anticipated hold period, which are affected by expectations about future market and economic conditions.
|
How we addressed the matter in our audit |
To test the Company’s impairment assessment over held real estate assets, our audit procedures included, among others, assessing the methodologies used by management, evaluating the significant assumptions discussed above, testing the completeness and accuracy of the underlying data used by the Company in its analysis and evaluated the related disclosures.
In addition, we evaluated the historical accuracy of the Company’s estimates and performed sensitivity analyses of the significant assumptions to evaluate the changes in the undiscounted future cash flows and estimated fair values of the property that would result from changes in the significant assumptions. We involved our real estate valuation specialists to assist in evaluating certain market rent assumptions used by management.
We also evaluated the related disclosures included in Note 3 to the consolidated financial statements. |
/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company's auditor since at least 1997, but we are unable to determine the specific year.
Tel-Aviv, Israel
April 27, 2022
December 31,
|
||||||||
2021
|
2020
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
31,119 |
$
|
28,820 | ||||
Restricted cash
|
528 | 835 | ||||||
Trade receivables (net of allowance for credit losses of $155 and $178 at December 31, 2021 and 2020, respectively)
|
401 | 216 | ||||||
Other accounts receivable and prepaid expenses
|
1,342 | 569 | ||||||
Bonds related deposits
|
509 | 2,564 | ||||||
Property held for sale
|
5,893 | - | ||||||
Total current assets
|
39,792 | 33,004 | ||||||
LONG-TERM INVESTMENTS:
|
||||||||
Long-term deposits
|
99 | 98 | ||||||
Right-of-use assets
|
131 | 272 | ||||||
Investments in companies and associates
|
5,998 | 9,269 | ||||||
Total long-term investments
|
6,228 | 9,639 | ||||||
Real estate property, net
|
176,922 | 192,054 | ||||||
Total assets
|
$
|
222,942 |
$
|
234,697 |
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Fixed income from real estate rent
|
$
|
13,937 |
$
|
14,874 |
$
|
16,144 | ||||||
Costs and expenses:
|
||||||||||||
Cost of real estate operations
|
2,324 | 2,548 | 2,948 | |||||||||
Real estate depreciation, amortization and impairment
|
3,939 | 3,946 | 4,321 | |||||||||
General and administrative
|
3,410 | 2,523 | 3,047 | |||||||||
Total costs and expenses
|
9,673 | 9,017 | 10,316 | |||||||||
Gain on sale of operating properties
|
273 | 9,127 | - | |||||||||
Operating income
|
4,537 | 14,984 | 5,828 | |||||||||
Other income
|
783 | 454 | 722 | |||||||||
Financial expenses, net
|
(1,641 |
)
|
(1,781 |
)
|
(2,630 |
)
|
||||||
Income before taxes on income
|
3,679 | 13,657 | 3,920 | |||||||||
Taxes on income
|
(731 |
)
|
(2,162 |
)
|
(1,472 |
)
|
||||||
Equity share in losses of associates, net
|
(1,059 |
)
|
(2,079 |
)
|
(2,321 |
)
|
||||||
Net income
|
1,889 | 9,416 | 127 | |||||||||
Net income attributable to non-controlling interest
|
2,783 | 2,983 | 2,120 | |||||||||
Net income (loss) attributable to Optibase Ltd.
|
$
|
(894 |
)
|
$
|
6,433 |
$
|
(1,993 |
)
|
||||
Net earnings per share:
|
||||||||||||
Basic and diluted net earnings (loss) per share
|
$
|
(0.17 |
)
|
$
|
1.24 |
$
|
(0.38 |
)
|
||||
Weighted average number of shares used in computing basic net earnings per share:
|
5,198,361 | 5,198,361 | 5,198,361 | |||||||||
Weighted average number of shares used in computing diluted net earnings per share
|
5,198,361 | 5,198,361 | 5,198,361 |
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Net income
|
$
|
1,889 |
$
|
9,416 |
$
|
127 | ||||||
Foreign currency translation adjustments
|
(2,340 |
)
|
5,323 | 393 | ||||||||
Financial liability related to hedging
|
- | 68 | 137 | |||||||||
Total comprehensive income (loss)
|
(451 |
)
|
14,807 | 657 | ||||||||
Net loss attributable to non-controlling interests
|
(2,783 |
)
|
(2,983 |
)
|
(2,120 |
)
|
||||||
Other comprehensive loss (income) attributable to non-controlling interests
|
836 | (2,204 |
)
|
(283 |
)
|
|||||||
Comprehensive income (loss) attributable to Optibase Ltd.
|
$
|
(2,398 |
)
|
$
|
9,620 |
$
|
(1,746 |
)
|
Ordinary
shares
|
Additional
paid-in
capital
|
Treasury
shares
|
Other
reserves
|
Accumulated
deficit
|
Total
shareholders'
equity of Optibase Ltd.
|
Non-controlling interests
|
Total
shareholders'
equity
|
|||||||||||||||||||||||||
Balance as of January 1, 2019
|
$
|
994 |
$
|
138,187 |
$
|
(87 |
)
|
$
|
(706 |
)
|
$
|
(84,829 |
)
|
$
|
53,559 |
$
|
19,834 |
$
|
73,393 | |||||||||||||
Dividend to non-controlling interests
|
- | - | - | - | - | - | (2,227 |
)
|
(2,227 |
)
|
||||||||||||||||||||||
Other comprehensive income
|
- | - | - | 247 | - | 247 | 283 | 530 | ||||||||||||||||||||||||
Equity component of transaction with controlling shareholder
|
- | - | - | 31 | - | 31 | - | 31 | ||||||||||||||||||||||||
Net income (loss)
|
- | - | - | - | (1,993 |
)
|
(1,993 |
)
|
2,120 | 127 | ||||||||||||||||||||||
Balance as of December 31, 2019
|
994 | 138,187 | (87 |
)
|
(428 |
)
|
(86,822 |
)
|
51,844 | 20,010 | 71,854 | |||||||||||||||||||||
Other comprehensive income
|
- | - | - | 3,187 | - | 3,187 | 2,204 | 5,391 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | 6,433 | 6,433 | 2,983 | 9,416 | ||||||||||||||||||||||||
Balance as of December 31, 2020
|
994 | 138,187 | (87 |
)
|
2,759 | (80,389 |
)
|
61,464 | 25,197 | 86,661 | ||||||||||||||||||||||
Other comprehensive loss
|
- | - | - | (1,504 |
)
|
- | (1,504 |
)
|
(836 |
)
|
(2,340 |
)
|
||||||||||||||||||||
Net income (loss)
|
- | - | - | - | (894 |
)
|
(894 |
)
|
2,783 | 1,889 | ||||||||||||||||||||||
Balance as of December 31, 2021
|
$
|
994 |
$
|
138,187 |
$
|
(87 |
)
|
$
|
1,255 |
$
|
(81,283 |
)
|
$
|
59,066 |
$
|
27,144 |
$
|
86,210 |
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$
|
1,889 |
$
|
9,416 |
$
|
127 | ||||||
Adjustments required to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation, amortization and impairment
|
3,939 | 3,946 | 4,321 | |||||||||
Gain on sale of operating properties
|
(273 |
)
|
(9,127 |
)
|
- | |||||||
Decrease (increase) in trade receivables
|
(190 |
)
|
353 | (105 |
)
|
|||||||
Equity share in losses of associates, net
|
1,059 | 2,079 | 2,321 | |||||||||
Decrease in deferred tax liabilities
|
(402 |
)
|
(22 |
)
|
(140 |
)
|
||||||
Increase (decrease) in land lease liabilities
|
(34 |
)
|
319 | (106 |
)
|
|||||||
Increase (decrease) in lease liabilities
|
(155 |
)
|
(43 |
)
|
257 | |||||||
Decrease (increase) in right-of-use assets
|
141 | 104 | (376 |
)
|
||||||||
Decrease (increase) in other accounts receivable and prepaid expenses
|
(411 |
)
|
79 | (665 |
)
|
|||||||
Increase (decrease) in accrued expenses, other accounts payable and other liabilities
|
92 | (1,986 |
)
|
1,763 | ||||||||
Net cash provided by operating activities
|
5,655 | 5,118 | 7,397 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Investment in real estate property
|
(913 |
)
|
(989 |
)
|
(1,109 |
)
|
||||||
Proceeds from associates, net
|
2,212 | 309 | 398 | |||||||||
Decrease (increase) in other long-term deposits
|
1,669 | (9 |
)
|
116 | ||||||||
Proceeds from sale of real estate property
|
631 | 41,483 | - | |||||||||
Net cash provided by (used in) investing activities
|
3,599 | 40,794 | (595 |
)
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Repayment of long-term bank loans and bonds
|
(6,344 |
)
|
(28,221 |
)
|
(5,958 |
)
|
||||||
Dividend paid to non-controlling interests
|
- | - | (2,227 |
)
|
||||||||
Repayment of controlling shareholders' loan
|
- | (2,618 |
)
|
- | ||||||||
Net cash used in financing activities
|
(6,344 |
)
|
(30,839 |
)
|
(8,185 |
)
|
||||||
Exchange differences on balances of cash and cash equivalents
|
(918 |
)
|
1,986 | 112 | ||||||||
Increase (decrease) in cash and cash equivalents and restricted cash
|
1,992 | 17,059 | (1,271 |
)
|
||||||||
Cash and cash equivalents and restricted cash at the beginning of the year
|
29,655 | 12,596 | 13,867 | |||||||||
Cash and cash equivalents and restricted cash at the end of the year
|
$
|
31,647 |
$
|
29,655 |
$
|
12,596 | ||||||
(a) Supplemental disclosures of cash flows information:
|
|||||||||||||
Cash and cash equivalents
|
$
|
31,119
|
$
|
28,820
|
$
|
12,564
|
|||||||
Restricted cash
|
528
|
835
|
32
|
||||||||||
Total cash and cash equivalents and restricted cash
|
$
|
31,647
|
$
|
29,655
|
$
|
12,596
|
|||||||
(b) Supplemental cash flows activities:
|
|||||||||||||
Cash paid during the year for:
|
|||||||||||||
Taxes
|
$
|
2,141
|
$
|
3,040
|
$
|
1,433
|
|||||||
Interest
|
$
|
920
|
$
|
1,492
|
$
|
2,320
|
|||||||
(c) Significant non-cash transactions:
|
|||||||||||||
Net lease liabilities arising from obtaining right of use assets
|
$
|
-
|
$
|
39
|
$
|
22
|
NOTE 1:- |
GENERAL
|
a. |
Optibase Ltd. (the "Company") was incorporated and commenced operations in 1990.
|
b. |
Investments in associates:
|
NOTE 1:- |
GENERAL (Cont.)
|
c. |
The Company has one major tenant, 22% and 20% of the Company revenues for the years ended 2021 and 2020, respectively, and two major tenants: 18% and 16% of the Company revenues of the year ended December 31, 2019. No other tenants accounted for more than 10% of the Company revenues.
|
Year ended
December 31,
|
||||||||
2021
|
2020
|
|||||||
Liabilities:
|
||||||||
Total liabilities attributed to discontinued operations
|
$
|
2,061 |
$
|
2,061 |
a. |
Basis of presentation of the financial statements:
|
b. |
Functional currency, presentation currency and foreign currency:
|
c. |
Principles of consolidation:
|
d. |
Non-controlling interests:
|
e. |
Cash equivalents:
|
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f. |
Property:
|
Years
|
||||
Building
|
25 - 63
|
|||
Buildings' improvements
|
5 - 20
|
|||
Condominium units
|
30
|
g. |
Impairment of long-lived assets, right-of-use assets and intangible assets:
|
h. |
Investments in companies:
|
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i. |
Investments in associates:
|
k. |
Derivative instruments:
|
l. |
Revenue recognition:
|
m. |
Contingencies:
|
n. |
Income taxes:
|
o. |
Concentrations of credit risk:
|
p. |
Earnings (loss) per share:
|
Level 1 - |
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
Level 2 - |
Include other inputs that are directly or indirectly observable in the marketplace.
|
Level 3 - |
Unobservable inputs which are supported by little or no market activity.
|
s. |
Comprehensive income:
|
t. |
Recently adopted accounting pronouncements:
|
NOTE 3:- |
REAL ESTATE PROPERTY, NET
|
Land
|
Building
|
Condominium units
|
Currency translation adjustment
|
Total
|
||||||||||||||||
Cost:
|
||||||||||||||||||||
At January 1, 2020
|
$
|
26,315 |
$
|
165,586 |
$
|
21,586 |
$
|
(4,637 |
)
|
$
|
208,850 | |||||||||
Additions
|
- | 615 | 374 | 19,692 | 20,681 | |||||||||||||||
Disposals
|
- | - | (2,238 |
)
|
- | (2,238 |
)
|
|||||||||||||
At December 31, 2020
|
26,315 | 166,201 | 19,722 | 15,055 | 227,293 | |||||||||||||||
Additions
|
- | 996 | (83 |
)
|
(7,186 |
)
|
(6,273 |
)
|
||||||||||||
Disposals
|
(61 |
)
|
- | (432 |
)
|
- | (493 |
)
|
||||||||||||
Reclassification – property held for sale*)
|
(697 |
)
|
- | (6,074 |
)
|
- | (6,771 |
)
|
||||||||||||
At December 31, 2021
|
25,557 | 167,197 | 13,133 | 7,869 | 213,756 | |||||||||||||||
Accumulated depreciation and impairment:
|
||||||||||||||||||||
At January 1, 2020
|
- | 24,918 | 2,898 | (75 |
)
|
27,741 | ||||||||||||||
Depreciation and impairment charge for the year
|
- | 3,221 | 725 | 3,552 | 7,498 | |||||||||||||||
At December 31, 2020
|
- | 28,139 | 3,623 | 3,477 | 35,239 | |||||||||||||||
Depreciation and impairment charge for the year
|
- | 3,365 | 574 | (1,331 |
)
|
2,608 | ||||||||||||||
Disposals
|
- | - | (135 |
)
|
- | (135 |
)
|
|||||||||||||
Reclassification - property held for sale*)
|
- | - | (878 |
)
|
- | (878 |
)
|
|||||||||||||
At December 31, 2021
|
- | 31,504 | 3,184 | 2,146 | 36,834 | |||||||||||||||
Real estate property, net:
|
||||||||||||||||||||
At December 31, 2020
|
$
|
26,315 |
$
|
138,062 |
$
|
16,099 |
$
|
11,578 |
$
|
192,054 | ||||||||||
At December 31, 2021
|
$
|
25,557 |
$
|
135,693 |
$
|
9,978 |
$
|
5,723 |
$
|
176,922 |
Year
|
Estimated depreciation expenses
|
|||
2022
|
3,728 | |||
2023
|
3,728 | |||
2024
|
3,728 | |||
2025
|
3,728 | |||
2026 and thereafter
|
136,453 | |||
151,365 |
NOTE 4:- |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Prepaid expenses
|
$
|
63 |
$
|
38 | ||||
Income receivable
|
367 | 442 | ||||||
Government (mainly tax advances)
|
899 | - | ||||||
Others
|
13 | 89 | ||||||
$
|
1,342 |
$
|
569 |
NOTE 5:- |
DEPOSITS
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Bonds deposit and other (1)
|
$
|
444 |
$
|
2,045 | ||||
Restricted account (2)
|
65 | 187 | ||||||
SWAP (3)
|
- | 332 | ||||||
$
|
509 |
$
|
2,564 |
(1) |
Bonds deposit of one payment of principal and interest reserves. See Note 10.
|
(2) |
Restricted amount related to the hedging transaction, see details (3) below.
|
(3) |
Hedging of cross currency interest rate swap transaction for the total amount of approximately NIS 34,200,000 at fixed interest rate of 6.7% in exchange for approximately $ 8,700 at fixed interest rate of 7.95% with semi-annually payments commencing on June 2016 through December 2021. As of December 31, 2020, the hedged amount was $ 1,455. As of December 31, 2021, the Company had no hedging instruments.
|
NOTE 6:- |
LEASES
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Operating right-of-use assets
|
$
|
131 |
$
|
272 | ||||
Operating lease liabilities, current
|
130 | 166 | ||||||
Operating lease liabilities long-term
|
27 | 146 | ||||||
Total operating lease liabilities
|
$
|
157 |
$
|
312 |
Year ended December 31,
|
||||
2022
|
$
|
133 | ||
2023
|
29 | |||
Total undiscounted lease payments
|
162 | |||
Less - interest
|
(5 |
)
|
||
Present value of lease liabilities
|
$
|
157 |
Weighted average remaining lease term (years)
|
0.75 | |||
Weighted average discount rate
|
4.02 |
%
|
NOTE 6:- |
LEASES (Cont.)
|
Year ended December 31,
|
||||
2022
|
$
|
1,841 | ||
2023
|
4,331 | |||
2024
|
2,213 | |||
2025
|
787 | |||
2026 and thereafter
|
3,734 | |||
Total future minimum rentals
|
$
|
12,906 |
NOTE 7:- |
INVESTMENTS IN COMPANIES AND ASSOCIATES
|
a. |
On October 12, 2012, the Company acquired through its subsidiary beneficial interests in Two Penn Center Plaza in Philadelphia, Pennsylvania. This investment is accounted for using the equity method of accounting as the Company's indirect beneficial interest in Two Penn Center Plaza is 22.16% and therefore is considered to be more than minor.
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Invested in equity
|
$
|
4,025 |
$
|
4,025 | ||||
Distributions
|
(4,006 |
)
|
(1,794 |
)
|
||||
Accumulated net income
|
1,979 | 1,110 | ||||||
Total investment
|
$
|
1,998 |
$
|
3,341 |
b. |
On December 31, 2012 the Company acquired through its subsidiary Optibase Inc. approximately 4% indirect beneficial interest in a portfolio of shopping centers located in Texas, USA in consideration for $ 4,000 which accounted at cost minus impairment if any. The Company believes that its beneficial interests in Texas portfolio are considered to be so minor that they create virtually no influence over the operating and financial policies of the Real Estate Asset and therefore this investment accounted at cost minus impairment if any.
|
NOTE 7:- |
INVESTMENTS IN COMPANIES AND ASSOCIATES (Cont.)
|
c. |
On December 29, 2015, the Company through its subsidiary, Optibase Inc., completed an investment in 300 River Holdings, LLC, (the "Joint Venture Company") which beneficially owns the rights to a 23-story Class A office building located at 300 South Riverside Plaza in Chicago under a 99 year ground lease expiring in 2114. The Company invested $ 12,900 in exchange for a thirty percent (30%) interest in the Joint Venture Company. In addition to the Purchase Price, the Company capitalized acquisition costs of approximately $ 242. On June 17, 2016, and in accordance with the Company's initial investment agreement, the Company had invested an additional amount of $ 3,000 which accrued interest of 12% per annum, and was distributed back to the Company on November 21, 2017.
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Invested in equity
|
$
|
13,142 |
$
|
13,142 | ||||
Accumulated net loss
|
(13,142 |
)
|
(11,214 |
)
|
||||
Total investment
|
$
|
- |
$
|
1,928 |
d. |
Investments in associates accounted for using the equity method of accounting:
|
NOTE 8:- |
OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Employees and payroll accruals
|
$
|
291 |
$
|
308 | ||||
Accrued expenses
|
2,182 | 2,640 | ||||||
Government (mainly tax provision)
|
301 | 264 | ||||||
Advance tenants payments
|
805 | 397 | ||||||
Tenant security deposits
|
142 | 116 | ||||||
Trade payables
|
340 | 397 | ||||||
Others
|
23 | 22 | ||||||
Total
|
$
|
4,084 |
$
|
4,144 |
a. |
On October 29, 2009, Optibase RE1 SARL received a mortgage loan (the "Loan") from a financial institution in Switzerland, in the amount of CHF 18,800,000 for the purpose of purchasing the real estate property located in Rümlang, Switzerland (the "Property"). The loan bears a variable interest rate based on current money and capital markets in Switzerland plus the bank's customary margins 0.8%. The financial institution may increase the margin at any time if creditworthiness of the borrower or quality of the property is impaired. Principal and interest of the loan are payable quarterly. The loans are repaid at a rate of CHF 376,000 per year. The mortgage loan may be repaid at any time with a three months prior written notice by the Company. The mortgage loan is governed by the laws of Switzerland and bears other terms and conditions customary for that type of mortgage loans. The Company pledged to the bank the property and all accounts and assets of the Company's subsidiary which are deposited with the bank against the loan received. The Company is required to meet certain covenants under this mortgage loan. As of December 31, 2021, the Company met the required covenants.
|
Year ended December 31,
|
||||
2022 (current maturity)
|
412 | |||
Long-term portion:
|
||||
2023
|
412 | |||
2024
|
412 | |||
2025
|
412 | |||
2026
|
412 | |||
Thereafter
|
13,592 | |||
Total
|
15,240 |
b. |
On October 2011, OPCTN and Eldista entered into a CHF 100,000,000 bank loan refinancing with Credit Suisse for the above mentioned loan. Under the new financing agreement, Credit Suisse provided a new loan to OPCTN and Eldista which replaced the mortgage loan that Credit Suisse provided to Eldista. The loan bears a variable interest rate based on current money and capital markets in Switzerland plus the bank's customary margins, the combined interest margins rate was 0.83%. The loans are repaid at a rate of CHF 2,000,000 per year and are secured by a first mortgage over the property and by a pledge of Eldista's shares. On January 8, 2020 Eldista has signed a new framework agreement for a mortgage loan at an amount of credit facility of CHF 83,500,000, the amount of the credit facility was reduced by the sum amortization and other loan repayment made. According to the new framework agreement, the credit facility may be utilized as follows: (i) mortgage loans in CHF with terms of 1 to max 10 years; (ii) mortgage-backed fixed advanced in CHF with terms of 3, 6 or 12 months; (iii) mortgage-backed fixed advanced in USD with terms of max 3 months. When use in USD may only occur if the resulting foreign exchange risk is hedged through a separate OTC transaction in the same currency and with the same term and amount. The loan bears a variable interest rate based on current money and capital markets in Switzerland plus the bank's customary margins. The annual interest margin rate is 0.75% for drawings in CHF or 1.05% for drawings in USD. The loan is repaid at a rate of CHF 2,000,000 per year on a quarterly basis and secured by a pledge of Eldista's shares. The Company is required to meet certain covenants under this mortgage loan. As of December 31, 2021, the Company met these covenants.
|
Year ended December 31,
|
||||
2022 (current maturity)
|
2,191 | |||
Long-term portion:
|
||||
2023
|
2,191 | |||
2024
|
2,191 | |||
2025
|
2,191 | |||
2026
|
2,191 | |||
Thereafter
|
76,946 | |||
Total
|
85,710 |
c. |
Optibase Bavaria negotiated a loan agreement with a Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft ("DG HYP"), for the provision of a senior mortgage loan in the amount of up to EUR 21,000,000 of which the Company utilized EUR 20,474,000. The effective interest rate was closed at 2.15%. The loan is repaid in quarterly installments of EUR 105,000 each, up until April 30, 2020. The terms of the loan includes certain covenants, a debt service cover ratio requirement of between 130% and 110%, and a loan to value requirement of 70% in the first three years and 65% in the fourth and fifth years. During May and June 2020, as part of the Company portfolio sale transaction, the Company repaid the loan.
|
d. |
On July 8, 2015, the Company subsidiary, Optibase Inc., entered into a loan agreement with City National Bank of Florida (“CNB”) for a gross amount of $ 15,000 for the financing of 25 condominium units the Company owns in Miami and Miami Beach, Florida. The loan is secured by a senior mortgage over the condominium units. The loan was originally taken for a term of three (3) years, with an interest rate of Libor 30-day-rate plus 2.65%.
|
e. |
For information regarding a loan received from the controlling shareholder, see Note 17b(4).
|
NOTE 10:- |
BONDS
|
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES
|
a. |
Assets pledged as collateral:
|
b. |
Israel Innovation Authority commitments:
|
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
c. |
In June 2017, Aberdeen Associates LLC, a Delaware limited liability company, extended a $ 7,000, 5-year fixed-rate loan facility (the “Loan Facility”) to the Company’s subsidiary, Optibase Inc. secured by a pledge of 100% of its membership interest in Optibase Chicago 300, LLC. The Loan Facility will bear interest at an annual rate of 5% of the amount drawn, and is compounded and to be paid quarterly until the maturity on June 1, 2022. As of December 31, 2021, the Company has not drawn down any funds under the Loan Facility.
|
d. |
Legal claims and contingent liabilities:
|
1. |
On October 26, 2014, the Company received a letter on behalf of two purported shareholders (the "Shareholders") demanding the Company to file a derivative claim against its controlling shareholder and directors and officers, according to procedures of the Companies Law and requesting discovery of internal documents. The demand alleges, among other things, breach of fiduciary duties by directors and officers with respect to the approval of the transaction to acquire condominium units in Miami Beach, Florida, (the "Transaction"), in accordance with the Companies Law. The Company presented the Shareholders, at their request, with certain materials in connection with the Transaction for their review.
|
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
2. |
On March 6, 2019, the Company has notified that Swiss Pro Capital Limited, a company organized under the laws of Switzerland, has filed a legal claim against the Company's subsidiaries, Optibase RE 1 SARL and Optibase Real Estate Europe SARL.
|
NOTE 11:- |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
a. |
Recurring fair value measurements:
|
b. |
Valuation methods:
|
a. |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the Code. The changes include, but are not limited to:
|
1. |
A corporate income federal tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 ("Rate Reduction");
|
2. |
The transition of U.S. international taxation from a worldwide tax system to a territorial system by providing a 100 percent deduction to an eligible U.S. shareholder on foreign sourced dividends received from a foreign subsidiary;
|
3. |
A one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017; and
|
4. |
Taxation of GILTI earned by foreign subsidiaries beginning after December 31, 2017. The Global Intangible Low-Taxed Income GILTI tax imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.
|
|
b. |
Corporate tax rates:
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Luxemburg
|
29 |
%
|
29 |
%
|
29 |
%
|
||||||
Zurich, Switzerland
|
21 |
%
|
21 |
%
|
21 |
%
|
||||||
Geneva, Switzerland
|
14 |
%
|
14 |
%
|
24 |
%
|
||||||
United States
|
21 |
%
|
21 |
%
|
21 |
%
|
||||||
Germany
|
16 |
%
|
16 |
%
|
16 |
%
|
c. |
Tax assessments:
|
d. |
Deferred tax assets and liabilities:
|
December 31,
|
||||||||
2021
|
2020
|
|||||||
Deferred tax assets:
|
||||||||
Net operating losses and other temporary differences
|
$
|
34,146 |
$
|
31,271 | ||||
Lease provision
|
1,560 | 1,622 | ||||||
Other
|
186 | 199 | ||||||
Deferred tax assets
|
35,892
|
33,092
|
||||||
Deferred tax liabilities:
|
||||||||
Land
|
(5,543 |
)
|
(5,734 |
)
|
||||
Building
|
(9,837 |
)
|
(10,373 |
)
|
||||
Other
|
(3,877 |
)
|
(3,553 |
)
|
||||
Distributable proceeds
|
(583 |
)
|
(809 |
)
|
||||
Deferred tax liabilities
|
(19,840
|
)
|
(20,469
|
)
|
||||
Valuation allowance
|
(30,269 |
)
|
(27,718 |
)
|
||||
Deferred tax liabilities, net
|
$
|
(14,217 |
)
|
$
|
(15,095 |
)
|
e. |
Net operating losses carry-forward:
|
f. |
Reconciliation of the theoretical tax expenses to the actual tax expenses:
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Income before taxes as reported
|
$
|
3,679 |
$
|
13,657 |
$
|
3,920 | ||||||
Theoretical tax benefit computed at the statutory rate 23%
|
846 | 3,141 | 902 | |||||||||
Foreign tax rates differences
|
(576 |
)
|
(1,150 |
)
|
101 | |||||||
Tax adjustments in respect of currency translation
|
- | - | 7 | |||||||||
Adjustment of deferred tax balances following a decrease in statutory tax rates
|
- | (572 |
)
|
- | ||||||||
Deferred taxes on losses and other temporary differences for which valuation allowance was provided
|
280 | 842 | 465 | |||||||||
Taxes for previous years
|
- | (23 |
)
|
(40 |
)
|
|||||||
Other non-deductible expenses
|
181 | (76 |
)
|
37 | ||||||||
Taxes on income
|
$
|
731 |
$
|
2,162 |
$
|
1,472 |
g. |
Income before taxes on income consists of the following:
|
Domestic
|
$
|
(2,296 |
)
|
$
|
594 |
$
|
(179 |
)
|
||||
Foreign
|
5,975 | 13,063 | 4,099 | |||||||||
$
|
3,679 |
$
|
13,657 |
$
|
3,920 |
h. |
Income tax expenses (benefit) are comprised as follows:
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Current
|
$
|
1,133 |
$
|
2,184 |
$
|
1,612 | ||||||
Deferred
|
(402 |
)
|
(22 |
)
|
(140 |
)
|
||||||
$
|
731 |
$
|
2,162 |
$
|
1,472 | |||||||
Domestic
|
$
|
(226 |
)
|
$
|
809 |
$
|
- | |||||
Foreign
|
957 | 1,353 | 1,472 | |||||||||
$
|
731 |
$
|
2,162 |
$
|
1,472 |
i. |
As of December 31, 2021 the Company has an unrecognized tax benefit liability with respect to uncertain tax provision in the amount of $ 711, which was fully offset against tax advances. The Company did not accrue penalties during the years ended December 31, 2021 and 2020.
|
NOTE 14:- |
SHAREHOLDERS' EQUITY
|
1. |
The Ordinary shares of the Company are traded on the NASDAQ Global Market since April 1999 and on the Tel Aviv Stock Exchange Ltd. since April 2015.
Ordinary shares confer on their holders the right to receive notice to participate and vote in general meetings of the Company, the right to a share in excess assets upon liquidation of the Company and the right to receive dividends, if declared.
|
|
2. |
On December 31, 2013 following the approval of the Company board of directors and the approval of the Company shareholders, the Company issued a net sum of 1,300,580 ordinary shares in consideration for the purchase of twelve luxury condominium units in Miami Beach, Florida from private companies indirectly controlled by Capri, the Company's controlling shareholder.
|
|
3. |
On March 22, 2022, the Company's controlling shareholder and its affiliates, have successfully completed a full tender offer for the Company's ordinary shares (see Note 18a). |
NOTE 15:- |
FINANCIAL EXPENSES, NET
|
Year ended December 31,
|
||||||||||||
2021
|
2020
|
2019
|
||||||||||
Interest
|
$
|
(1,329 |
)
|
$
|
(2,472 |
)
|
$
|
(2,546 |
)
|
|||
Re-measurement of derivatives
|
(322 |
)
|
(73 |
)
|
188 | |||||||
Foreign currency translation adjustments
|
10 | 764 | (272 |
)
|
||||||||
$
|
(1,641 |
)
|
$
|
(1,781 |
)
|
$
|
(2,630 |
)
|
NOTE 16:- |
GEOGRAPHIC INFORMATION
|
2021
|
2020
|
2019
|
||||||||||||||||||||||
Total revenues
|
long-lived assets **)
|
Total revenues
|
long-lived assets **)
|
Total revenues
|
long-lived assets **)
|
|||||||||||||||||||
Switzerland
|
$
|
12,738 |
$
|
167,733 |
$
|
12,499 |
$
|
175,956 |
$
|
11,975 |
$
|
162,422 | ||||||||||||
Germany (*)
|
- | - | 1,380 | - | 3,180 | - | ||||||||||||||||||
United States
|
1,199 | 9,189 | 995 | 16,098 | 989 | 18,687 | ||||||||||||||||||
Israel
|
- | 131 | - | 240 | - | 312 | ||||||||||||||||||
Luxemburg
|
- | - | - | 32 | - | 64 | ||||||||||||||||||
$
|
13,937 |
$
|
177,053 |
$
|
14,874 |
$
|
192,326 |
$
|
16,144 |
$
|
181,485 |
*) |
For details regarding the portfolio sale agreement, see Note 1b.
|
**) |
Long-lived assets are comprised of real estate property, net and operating lease right of use assets.
|
NOTE 17:- |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
a. |
Controlling shareholders:
|
b. |
Related party transactions:
|
1. |
On December 19, 2013, and following the approval of the Company's audit committee, compensation committee and board of directors, and the Company's shareholders approved the compensation terms of Mr. Shlomo (Tom) Wyler, for his service as Chief Executive Officer of the Company's subsidiary Optibase Inc. The yearly gross base salary will be $ 170 as well as reimbursement of health insurance expenses of up to $ 24 per year, and including reimbursement of reasonable work-related expenses incurred up to $ 50 per year. On May 16, 2016, following the approval by the Company's compensation committee, audit committee and board of directors, the Company's shareholders approved an amendment to Mr. Wyler's compensation terms in a manner that Mr. Wyler's annual gross base salary shall be $ 200 for a full time position, as of January 1, 2016, as well as reimbursement of health insurance expenses of up to $ 24 per year, and including reimbursement of reasonable work-related expenses incurred as part of his activities as Chief Executive Officer of Optibase Inc., of up to $ 50 per year. On February 14, 2019, following the approval by the Company's compensation committee, audit committee and board of directors, the Company's shareholders approved an extension for a 3 year term, of the engagement with Mr. Wyler's, including an adjustment to his compensation terms, in a manner that Mr. Wyler's annual gross base salary was set at $ 220 for a full time position, as of January 1, 2019.
|
2. |
On December 19, 2013, and following the approval of the Company's audit committee and board of directors, and the Company's shareholders approved the a service agreement between the Company and Mr. Reuwen Schwarz, currently serves also as a member of the Company's board of directors, who is a relative of the beneficiaries of Capri, the Company's controlling shareholder, for the provision of real estate related consulting services in consideration for a monthly fee of EUR 4,000 plus applicable value added tax (if applicable) and reimbursement for expenses incurred up to EUR 12,000 per year. On December 29, 2016, and following the approval by the Company's audit committee and board of directors, the Company's shareholders approved the extension of Mr. Schwarz' service agreement, which will be in effect retroactively from November 1, 2016 for a period of three years. On December 31, 2019, following the approval by the Company's audit committee and board of directors, the Company's shareholders approved the extension of Mr. Schwarz' service agreement, which will be in effect retroactively from November 1, 2019 for a period of three years. Each of Mr. Schwarz and the Company may terminate the service agreement by giving a prior written notice of 30 days.
|
NOTE 17:- |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS (Cont.)
|
3. |
On December 29, 2016, the Company's shareholders approved, following the approval by the Company's audit committee and board of directors, a new lease agreement to be entered into with an affiliate of Capri, or the Tenant. The new lease will be in effect for a one-year term commencing on January 2, 2017, which will be automatically extended by a one-year term and up to a total of three years. On December 31, 2019, the Company's shareholders approved, following the approval by the Company's audit committee and board of directors, the extension of the lease agreement. The new lease is effective for a one-year term commencing on January 2, 2020, which will be automatically extended by a one-year term and up to a total of three years. As of December 31, 2021, there is an outstanding debt from the affiliated tenant related to the lease in the amount of $ 253 included in trade receivables.
|
4. |
In March 2017, the Company's audit committee and board of directors approved, in accordance with the Israeli Companies Regulations (Relieves for Transactions with Interested Parties) of 2000, the receipt of a $ 5,118 loan, (the "Loan"), from the Company's controlling shareholder. The Loan was granted to the Company on March 28, 2017 for the purpose of strengthening the Company's liquidity. The Loan does not bear any interest or linkage differentials and is unsecured. In May 2018, the parties entered into an amendment to the Loan's agreement, under which the Company repaid the Company's controlling shareholder $ 2,500 on account of the Loan's account. The repayment by the Company of the remaining Loan's amount of approximately $ 2,618 has been postponed from April 1, 2019 to April 1, 2020, however, the Company may prepay the Loan prior to such date at its sole discretion without any penalty. On September 30, 2019 the parties entered into an amendment no.2 to the Loan's agreement, under which the remaining loan amount of approximately $ 2,618 shall be postponed to October 1, 2020. The remaining terms of the original agreement shall remain unchanged. The loan was recognized at fair value to reflect its interest beneficiary terms at the date of the transaction.
|
NOTE 17:- |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS (Cont.)
|
5. |
In December 2017, following the approval of the Company’s board of directors and compensation committee, the Company's shareholders approved an amendment to the Company’s undertaking to indemnify Mr. Shlomo (Tom) Wyler, the Chief Executive Officer of the Company’s subsidiary Optibase Inc. who is affiliated with the controlling shareholder of the Company; and Mr. Reuwen Schwarz, a member of the Company’s Board of Directors, who is affiliated with the controlling shareholder of the Company, to the fullest extent permitted by the Companies Law and our articles of association. The aggregate indemnification amount shall not exceed the higher of: (i) 25% of the Company shareholders’ equity, as set forth in the Company’s financial statements prior to such payment; or (ii) $ 20,000.
|
NOTE 18:- |
SUBSEQUENT EVENTS
|
a. |
On March 22, 2022, the Company's controlling shareholder and its affiliates, successfully completed a full tender offer for the Company's ordinary shares and purchased all of the Company's ordinary shares held by the Company's other shareholders. As a result, the Company's ordinary shares were delisted from NASDAQ on March 25, 2022.
|
b. |
During the first quarter of 2022, the Company sold three apartment units in total consideration of approximately $ 2,400, and two penthouses units in total consideration for approximately $ 5,700. Following the last sale of the penthouse in March, 2022, the Company fully repaid the loan.
|
300 RIVER HOLDINGS, LLC |
|
(a Delaware limited liability company) |
|
Contents |
|
Page
| |
Consolidated Financial Statements |
|
F - 42 | |
|
|
F - 43 | |
|
|
F - 44 | |
|
|
F - 45 | |
|
|
F - 46 | |
|
|
F - 47 |
300 River Holdings, LLC |
|||
(a Delaware limited liability company) |
|||
Consolidated Balance
Sheets |
December 31, 2021
|
December 31, 2020
|
|||||||
ASSETS |
||||||||
Real estate, net of accumulated depreciation
|
$ |
206,757,566 |
$ |
216,166,292 |
||||
Cash |
512,221 |
1,917,162 |
||||||
Segregated cash and other escrows |
9,142,469 |
10,644,343 |
||||||
Tenant account receivable |
||||||||
Current |
392,060 |
447,818 |
||||||
Unbilled straight-line rent |
22,231,510 |
19,618,007 |
||||||
Prepaid expenses and other assets |
1,009,054 |
996,760 |
||||||
Deferred leasing costs, net of accumulated
amortization of $13,641,028 |
||||||||
and $11,279,299, respectively. |
15,155,766 |
17,035,105 |
||||||
$ |
255,200,646 |
$ |
266,825,487 |
|||||
LIABILITIES AND MEMBERS' DEFICIT |
||||||||
Lease financing obligation, including accrued
interest of $5,403,056 |
|
|
||||||
and $4,519,883, less unamortized value of
deferred lease financing |
||||||||
costs of $8,594,785 and $8,688,137, respectively.
|
$ |
216,808,271 |
$ |
215,831,746 |
||||
Notes payable |
17,000,000 |
17,000,000 |
||||||
Mortgage payable, net of unamortized deferred
financing costs of |
|
|
||||||
$560,311 and $1,171,575, respectively
|
174,439,689 |
173,828,425 |
||||||
Accounts payable, accrued expenses and other
liabilities |
8,591,850 |
7,356,089 |
||||||
|
416,839,810 |
414,016,260 |
||||||
Members' deficit |
(161,639,164 |
) |
(147,190,773 |
) | ||||
$ |
255,200,646 |
$ |
266,825,487 |
300 River Holdings, LLC |
|||
(a Delaware limited liability company) |
|||
Consolidated Statements
of Operations |
|||
For The Years Ended December 31, |
2021
|
2020
|
2019
|
||||||||||
Revenue: |
||||||||||||
Base rent |
$ |
25,782,568 |
$ |
25,362,370 |
$ |
25,091,596 |
||||||
Escalation and other income |
20,259,896 |
20,534,157 |
17,333,020 |
|||||||||
Amortization of acquired below market leases
|
- |
838,107 |
495,931 |
|||||||||
46,042,464 |
46,734,634 |
42,920,547 |
||||||||||
Expenses: |
||||||||||||
Depreciation and amortization |
14,097,504 |
14,989,215 |
14,174,470 |
|||||||||
Operating expenses |
12,601,202 |
14,354,171 |
13,158,869 |
|||||||||
Real estate taxes |
7,903,669 |
6,769,280 |
7,901,058 |
|||||||||
Management fees |
1,552,363 |
1,481,895 |
1,221,311 |
|||||||||
36,154,738 |
37,594,561 |
36,455,708 |
||||||||||
Operating income |
9,887,726 |
9,140,073 |
6,464,839 |
|||||||||
Interest including amortization of deferred
financing costs of $704,616, $704,616, and $704,616, respectively, and related party interest of $2,028,000, $1,870,373, and $766,151,
respectively. |
(24,336,117 |
) |
(24,059,995 |
) |
(22,660,043 |
) | ||||||
Net loss |
$ |
(14,448,391 |
) |
$ |
(14,919,922 |
) |
$ |
(16,195,204 |
) |
300 River Holdings, LLC |
|
(a Delaware limited liability company)
|
|
Consolidated Statements of Members'
Deficit |
Balance - December 31, 2018 |
$ |
(116,075,647 |
) | |
Net loss |
(16,195,204 |
) | ||
Balance - December 31, 2019 |
$ |
(132,270,851 |
) | |
Net loss |
(14,919,922 |
) | ||
Balance - December 31, 2020 |
$ |
(147,190,773 |
) | |
Net loss |
(14,448,391 |
) | ||
Balance - December 31, 2021 |
$ |
(161,639,164 |
) |
300 River Holdings, LLC |
|||
(a Delaware limited liability company)
|
|||
Consolidated Statements of Cash
Flows |
|||
Years Ended December 31, |
2021
|
2020
|
2019
|
||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ |
(14,448,391 |
) |
$ |
(14,919,922 |
) |
$ |
(16,195,204 |
) | |||
Adjustments to reconcile net loss |
||||||||||||
to net cash used in operating activities: |
||||||||||||
Depreciation and amortization |
14,802,120 |
15,693,831 |
14,879,085 |
|||||||||
Amortization of below market leases |
- |
(838,107 |
) |
(495,931 |
) | |||||||
Accrued interest on notes payable |
- |
- |
(14,729 |
) | ||||||||
Unbilled straight-line rental income |
(2,613,503 |
) |
(2,992,403 |
) |
(5,967,786 |
) | ||||||
Lease financing obligation |
883,173 |
843,594 |
809,910 |
|||||||||
Changes in assets and liabilities: |
||||||||||||
Tenant accounts receivable |
55,758 |
59,649 |
(197,772 |
) | ||||||||
Prepaid expenses and other assets |
(12,294 |
) |
(540,611 |
) |
(339,527 |
) | ||||||
Accounts payable, accrued expenses and other liabilities
|
989,579 |
(1,501,038 |
) |
3,980,206 |
||||||||
Net cash used in operating activities |
(343,558 |
) |
(4,195,007 |
) |
(3,541,748 |
) | ||||||
Cash flows from investing activities: |
||||||||||||
Additions to leasing costs |
(482,390 |
) |
(245,930 |
) |
(1,753,551 |
) | ||||||
Additions to real estate |
(2,080,867 |
) |
(5,341,446 |
) |
21,947,030 |
) | ||||||
Net cash used in investing activities |
(2,563,257 |
) |
(5,587,376 |
) |
(23,700,581 |
) | ||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from notes payable |
- |
11,530,000 |
7,498,891 |
|||||||||
Repayment of notes payable |
- |
(5,228,891 |
) |
- |
||||||||
Net cash provided by financing activities |
- |
6,301,109 |
7,498,891 |
|||||||||
Decrease in cash, cash equivalents, and escrows |
(2,906,815 |
) |
(3,481,274 |
) |
(19,743,438 |
) | ||||||
Cash, cash equivalents and escrows at beginning of year
|
12,561,505 |
16,042,779 |
35,786,217 |
|||||||||
Cash, cash equivalents and escrows at end of year |
$ |
9,654,690 |
$ |
12,561,505 |
$ |
16,042,779 |
||||||
Supplemental disclosures of cash flow information: |
||||||||||||
Interest paid |
$ |
22,768,328 |
$ |
22,538,552 |
$ |
21,158,942 |
||||||
Supplemental disclosures of noncash investing activities:
|
||||||||||||
Accrued additions to real estate |
$ |
330,522 |
$ |
84,340 |
$ |
1,185,419 |
||||||
Accrued additions to leasing costs |
$ |
- |
$ |
- |
$ |
245,930 |
The following table provides a reconciliation of cash, cash equivalents and escrows reported
within the balance sheet: |
December 31, 2021 |
December 31, 2020 |
December 31, 2019 |
||||||||||
Cash and cash equivalents |
$ |
512,221 |
$ |
1,917,162 |
$ |
3,006,645 |
||||||
Segregated cash and other escrows |
9,142,469 |
10,644,343 |
13,036,134 |
|||||||||
Total cash, cash equivalents and escrows shown in the statement
of cash flows |
$ |
9,654,690 |
$ |
12,561,505 |
$ |
16,042,779 |
Amounts included in segregated cash and other escrows as of December 31, 2021, 2020,
and 2019 represent tenant security deposits, cash received through the Company's lockbox account and monies required to be set aside by
the lender in connection with the Mortgage note payable. |
• |
South Riverside Building LLC (the "Building LLC") |
• |
South Riverside Mezz LLC (the “Mezz LLC”) |
• |
300 Riverside Master Lease LLC (the “Master Lease LLC”) |
[1] |
Basis of presentation: |
[2] |
Use of estimates: |
[3] |
Concentration of credit risk: |
[4] |
Deferred costs: |
Year Ending
December 31,
|
Deferred
Leasing Costs |
|||
2022 |
$ |
2,430,000 |
||
2023 |
2,324,000 |
|||
2024 |
2,141,000 |
|||
2025 |
2,082,000 |
|||
2026 |
1,576,000 |
[5] |
Real estate: |
[6] |
Purchase accounting for acquisition of real estate: |
[7] |
Revenue recognition: |
[8] |
Income taxes: |
[9] |
Debt issuance costs: |
[10] |
Subsequent events: |
December 31, |
||||||||
2021 |
2020 |
|||||||
Leasehold interest |
$ |
25,310,232 |
$ |
25,310,232 |
||||
Building and improvements |
177,320,972 |
177,320,972 |
||||||
Tenant improvements |
104,498,559 |
102,171,510 |
||||||
Equipment |
1,729,420 |
1,729,420 |
||||||
308,859,183 |
306,532,134 |
|||||||
Less: accumulated depreciation |
(102,101,617 |
) |
(90,365,842 |
) | ||||
$ |
206,757,566 |
$ |
216,166,292 |
December 31, |
||||||||
2021 |
2020 |
|||||||
In-place and other lease values |
$ |
39,462,415 |
$ |
39,462,415 |
||||
Less: accumulated amortization |
(39,462,415 |
) |
(39,462,415 |
) | ||||
$ |
- |
$ |
- |
December 31, |
||||||||
2021 |
2020 |
|||||||
Below market lease values |
$ |
(48,377,197 |
) |
$ |
(48,377,197 |
) | ||
Less: accumulated amortization |
48,377,197 |
48,377,197 |
||||||
$ |
- |
$ |
- |
December 31, |
||||||||||||
Rate |
2021 |
2020 |
||||||||||
A-Note |
4.61 |
%* |
$ |
100,000,000 |
$ |
100,000,000 |
||||||
B-Note |
5.80 |
%* |
50,000,000 |
50,000,000 |
||||||||
Mezz Note |
8.46 |
%* |
25,000,000 |
25,000,000 |
||||||||
175,000,000 |
175,000,000 |
|||||||||||
Less: unamortized debt issuance costs |
(560,311 |
) |
(1,171,575 |
) | ||||||||
$ |
174,439,689 |
$ |
173,828,425 |
|||||||||
*The weighted average interest rate for the notes is 5.50% per
annum |
[1] |
Senior notes: |
[2] |
Mezz-Note: |
[1] |
Space in the Property is leased to various tenants under operating leases which
generally provide for renewal options and additional rentals based on increases in real estate taxes and certain operating expenses.
|
[2] |
Base rent from the three largest tenants in the Property (who collectively occupy
approximately 34% of the building's rentable square footage during 2021) accounted for approximately 41% of the building's base rental
income for the year ended December 31, 2021. The leases with such tenants expire from April of 2026 through June of 2031. For the year
ended December 31, 2020, base rent from the two largest tenants in the Property (who collectively occupy approximately 17% of the building's
rentable square footage during 2020) accounted for approximately 25% of the building's base rental income. For the year ended December
31, 2019, base rent from the two largest tenants in the Property (who collectively occupied approximately 25% of the building's rentable
square footage during 2019) accounted for approximately 30% of the building's base rental income. |
[3] |
As of December 31, 2021, future minimum rentals under the Company's operating leases
with its tenants, for the next five years and thereafter are approximately as follows: |
Total |
||||
2022 |
$ |
26,007,000 |
||
2023 |
25,380,000 |
|||
2024 |
23,577,000 |
|||
2025 |
23,504,000 |
|||
2026 |
21,215,000 |
|||
Thereafter |
72,082,000 |
|||
$ |
191,765,000 |
Date: April 27, 2022 |
OPTIBASE LTD. | |
By: /s/ Amir Philips | ||
Name: Amir Philips | ||
Title: Director and Chief Executive Officer |
1 Year Optibase Chart |
1 Month Optibase Chart |
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