Yohananof separates real estate: transfers ₪1.1 billion in assets to subsidiary

Food retail chain Yohananof is executing a strategic move, reorganizing its real estate assets. The move, which could unlock value and increase transparency in the company's assets, includes the transfer of 14 properties to a dedicated subsidiary.

M. Yohananof and Sons announced a reorganization of its assets, under which it will transfer 14 real estate properties with a total value of approximately ₪1.1 billion to a wholly-owned subsidiary. The transaction is structured as a tax-exempt corporate restructuring, with Yohananof becoming a tenant in the properties it utilizes, aiming to separate real estate activity from retail operations.

Food retail chain M. Yohananof and Sons is embarking on a strategic reorganization of its real estate portfolio. The company reported that it has signed an agreement to transfer most of its owned real estate assets to a new, wholly-owned subsidiary, M.G.L. Kochav Modiin Ltd. As part of the move, 14 properties, comprising fixed assets and investment property with a total book value of approximately ₪1.1 billion, will be transferred. The move, which follows an initial report from August 2026, is designed to separate Yohananof's core retail activity from the ownership and management of its real estate assets.

The transfer of assets will be carried out as a corporate restructuring exempt from income tax and betterment tax, with a reduced purchase tax, in accordance with the Income Tax Ordinance. In consideration for the assets, the subsidiary will issue shares to the parent company, Yohananof. This type of move is common in companies holding significant real estate alongside their primary operations, typically aimed at unlocking value, creating investor transparency regarding the value of the asset portfolio, and enabling separate, dedicated management and financing for each activity.

Upon completion of the transfer, the subsidiary will become the group's real estate arm, while the parent company will focus on operating the supermarket chain. As part of the agreement, the two companies entered into long-term lease agreements, under which Yohananof will lease the properties where it operates branches from the subsidiary. According to the report, these include, inter alia, four "Centro" stores in Rehovot (where Yohananof holds a 25% ownership stake), Kiryat Ekron, Modiin, and Mishor Adumim. Rent will be determined based on market conditions, thereby generating a stable and predictable revenue stream for the new subsidiary.

In addition, the companies signed a services agreement under which the parent company will provide the subsidiary with management, legal counseling, bookkeeping, project management, and other services for a monthly fee that is immaterial to Yohananof. The company estimates that the move is not expected to create a material change in its consolidated financial results for the third quarter of 2026, as the assets remain within the group on a consolidated basis. The main expense associated with the move is a reduced purchase tax, defined as an immaterial amount.

However, not all of the company's assets were included in the agreement at this stage. According to the report, Yohananof's rights in the land in Dimona (50%) will not be transferred to the subsidiary at the current time. The entire agreement remains subject to several conditions precedent, primarily technical, including obtaining consents from partners in some of the properties and registering the transfer of rights in the relevant registries. The move positions Yohananof with a clearer holding structure, separating two activities with different characteristics, and may allow for greater financial and strategic flexibility in the future.