UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

GAZIT-GLOBE LTD.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Gazit-Globe Ltd.
1 Hashalom Rd.
Tel-Aviv 67892, Israel
(972)(3) 694-8000

 

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Gazit Group USA, Inc.
1696 NE Miami Gardens Drive,
North Miami Beach, FL
33179, USA
(305) 947-8800

 

(Name, Address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all correspondence to:

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

Subject to Completion, Dated December 5, 2011

 

PROSPECTUS

 

12,000,000 Shares

Gazit-Globe Ltd.

Ordinary Shares

 

 

 

This is our initial public offering in the United States. We are offering 12,000,000 of our ordinary shares. Prior to this offering, there has been no public market in the United States for our ordinary shares. All of the 12,000,000 ordinary shares to be sold in the offering are being sold by us. We have granted the underwriters a 30-day option to purchase up to an additional 1,800,000 ordinary shares from us to cover over-allotments.

 

 

Our ordinary shares are listed on the Tel Aviv Stock Exchange, or the TASE, under the symbol “GLOB.” On December 4, 2011, the last reported sale price of our ordinary shares on the TASE was NIS 39.28, or U.S.$10.52, per share (based on the exchange rate reported by the Bank of Israel on such date, which was NIS 3.732 = U.S.$1.00).

 

 

We have applied to have our ordinary shares listed on the New York Stock Exchange, or the NYSE, under the symbol ‘‘GZT.”

 

 

 

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 15 of this prospectus.

 

 

 

Neither the U.S. Securities and Exchange Commission, the Israel Securities Authority nor any state or other foreign regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The underwriters expect to deliver the ordinary shares against payment on or about          , 2011.

 

 

 

 

          , 2011.

TABLE OF CONTENTS

 

 

You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by or on behalf of us. We have not, and the underwriters have not, authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, offering to sell, or solicit any offers to buy, any security other than the ordinary shares offered by this prospectus. In addition, we are not offering, and the underwriters are not offering, to sell any securities to, or solicit any offers to buy any securities from, any person in any jurisdiction where it is unlawful to make this offer to or solicit an offer from a person in that jurisdiction. The information contained in this prospectus is accurate as of the date on the front of this prospectus only, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares.

 

Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required other than the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our ordinary shares and the possession and distribution of this prospectus outside of the United States.

 

We obtained the industry and market overview data in this prospectus from a third-party report prepared by Cushman & Wakefield, Inc., who has filed a consent to be named in this prospectus. This prospectus includes other statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the

information. Although we believe that these sources are reliable, we have not independently verified the information contained in such publications.

 

Except where the context otherwise requires, references in this prospectus to:

 

 

Our principal subsidiaries and affiliates are:

 

 

Unless otherwise noted, all monetary amounts are in NIS and for the convenience of the reader certain NIS amounts have been translated into U.S. dollars at the rate of NIS 3.712 = U.S.$1.00, based on the daily representative rate of exchange between the NIS and the U.S. dollar reported by the Bank of Israel on September 30, 2011. References in this prospectus to (i) “New Israeli Shekel” or “NIS” mean the legal currency of Israel, (ii) “U.S.$,” “$,” “U.S. dollar” or “dollar” mean the legal currency of the United States, (iii) “Euro,” “EUR” or “€” mean the currency of the participating member states in the third stage of the Economic and Monetary Union of the Treaty establishing the European community, (iv) “Canadian dollar” or “C$” mean the legal currency of Canada, and (v) “BRL” means the legal currency of Brazil.

	•	Necessity-driven asset class.  The substantial majority of our rental income is generated from shopping centers with supermarkets as their anchor tenants that drive consistent traffic flow throughout various economic cycles. Our supermarket-anchored shopping centers attract high-quality tenants seeking long-term leases, which provide us with high occupancy rates, favorable rental rates and stable cash flows. A critical element of our business strategy is to have market-leading supermarkets as our anchor tenants. During the global economic downturn in 2008 and 2009, our average occupancy rate was 94.5% and 93.6%, respectively, and our average same property net operating income, or NOI, increased by 2.5% from 2007 to 2008 and 3.1% from 2008 to 2009. In 2010, NOI increased by 3.6% from 2009, and in the first nine months of 2011, NOI increased by 4.7% from the first nine months of 2010.
	•	Diversified global real estate platform across 20 countries.  We focus our investments primarily on developed economies. More than 95% of our NOI for the year ended December 31, 2010 was derived from properties in countries with investment grade credit ratings as assigned either by Moody’s or Standard & Poor’s, and 87% of our NOI for the year ended December 31, 2010 and 86% of our NOI for the nine months ended September 30, 2011 was derived from properties in countries with at least AA+ ratings as assigned by Standard & Poor’s. We believe that our geographic diversity provides Gazit-Globe with flexibility to allocate its capital and improves our resilience to changes in economic conditions and the cyclicality of markets, enabling us to apply successful ideas and proven market strategies in multiple countries.
	•	Proven business model implemented in multiple markets driving growth.  The business model that we have developed and implemented over the last 20 years, whereby we own and operate our properties through our public and private subsidiaries and affiliates, has driven substantial and consistent growth. We continue to expand our business and drive growth while optimizing our capital structure with respect to our assets. For example, in the United States, Equity One acquired its first property in 1992 and became a publicly-traded REIT listed on the New York Stock Exchange in 1998. As of September 30, 2011, Equity One owned 197 properties (including properties under development) with a GLA of 22.8 million square feet. Similarly, our business in Canada began in 1997 with the purchase of eight properties, followed by the acquisition of a controlling stake in a Toronto Stock Exchange-listed company in 2000. We have since expanded to 166 properties

		(including properties under development) in Canada with a GLA of 22.8 million square feet as of September 30, 2011. Following our successes in both the United States and Canada, we identified new and attractive regions and expanded by replicating this business model.

	•	Leading presence and local market knowledge.  We have a leading presence in most of our markets. Leveraging our leading market positions and our local management teams’ extensive knowledge of these markets gives us access to attractive acquisition, development and redevelopment opportunities while mitigating the risks involved in these opportunities. In addition, our senior management provides our local management teams with strategic guidance to proactively manage our business, calibrated to the needs and requirements of each local management team. This approach also allows us to address the needs of our regional and national tenants and to anticipate trends on a timely basis.
	•	Strong financial position and global access to capital.  As of September 30, 2011, Gazit-Globe had available liquid assets, including short term investments, and unused lines of credit of NIS 1.7 billion ($453 million) and Gazit-Globe, together with its subsidiaries and affiliates, had NIS 7.7 billion ($2.1 billion) for acquisition of assets, development and redevelopment of our properties and opportunistic expansion of our business. We have capacity to incur additional secured and unsecured indebtedness in each of our markets. In addition to liquidity from internally-generated cash and available lines of credit, our securities and the securities of our major subsidiaries and affiliates are traded on six international stock exchanges, and we have benefited from the flexibility offered by raising debt or equity financing on many of these public markets. We believe that this global access to liquidity lowers our overall cost of capital to grow our business and provides us with the ability to pursue opportunities quickly and efficiently.
	•	Strong relationships with a diverse group of market-leading tenants.  We have strong relationships with a diverse group of market-leading tenants in the countries in which we operate. These tenants are well-established, market-leading supermarkets, drugstores and discount retailers and other necessity-driven businesses. These relationships enable us to involve our tenants in the early stages of development or redevelopment projects, which significantly reduces our leasing risk. We also use these relationships as the basis for acquisition of properties in markets in which these tenants already have a presence or into which they want to expand. For the year ended December 31, 2010, our single largest tenant and our ten largest tenants as a group each represented only 4.2% and 20.0% of our rental income, respectively.
	•	Highly experienced and committed management team with strong track record.  Our senior management team includes Chaim Katzman, our Chairman, Dori Segal, our Executive Vice Chairman, Aharon Soffer, our President, Eran Ballan, our Senior Executive Vice President and General Counsel, and Gadi Cunia, our Senior Executive Vice President and Chief Financial Officer. Our management team has shown the ability to continually grow our business and build shareholder value. We believe that the significant equity holdings of Messrs. Katzman and Segal, who beneficially hold 24.2% and 12.7% of the economic interests in Gazit-Globe as of November 30, 2011, and have built our business over the past 20 years, strongly align their interests with the interests of our shareholders.

	•	Continue to focus on supermarket-anchored shopping centers.  We will continue to concentrate on owning and operating high quality supermarket-anchored neighborhood and community shopping centers and other necessity-driven real estate assets predominantly in densely-populated areas with high barriers to entry and attractive demographic trends in countries with stable GDP growth, political and economic stability and strong credit ratings. We believe that this approach, combined

		with the geographic diversity of our current properties and our conservative approach to risk, will provide growing long-term returns.

	•	Pursue high growth opportunities to complement our stable asset base.  We intend to continue to expand into new high growth markets and other high growth necessity-driven asset types that generate strong and sustainable cash flow using our experience developed over the past 20 years. While we currently have no specific plans to expand into new geographic markets, we will seek to prudently expand into politically and economically stable countries with compelling demographics through a thorough knowledge of local markets. For example, since we first established an office in Brazil in 2007, we have grown our presence there from one shopping center to four shopping centers with a GLA of approximately 384,000 square feet as of September 30, 2011. We also intend to continue investing in medical office buildings as we believe that this class of real estate investments is less sensitive to economic cycles than commercial real estate in general and that demand will continue to grow for healthcare services, particularly in North America.
	•	Enhance the performance of existing assets.  We continually seek to enhance the performance of our existing assets by repositioning, expanding and redeveloping our existing properties. We believe that improving our properties makes them more desirable for both our supermarket anchor tenants and our other tenants, and drives more consumers to our properties, increasing occupancy and our rental income. We continue to actively manage our tenant mix and placement, re-leasing of space, rental rates and lease durations. We believe that the repositioning of our properties and our active management will improve our occupancy rates and rental income, lower our costs and increase our cash flows.
	•	Selectively develop new properties in strategic locations.  We intend to leverage our experience in all stages of the development and ownership of real estate to continue to selectively develop new properties in our current markets and in new markets. We intend to continue our disciplined approach to development which is characterized by developing supermarket-anchored properties for specific anchor tenants in locations that we believe have high barriers to entry, thereby significantly decreasing the risk associated with development of real estate. From January 1, 2008 to September 30, 2011, we invested approximately $1.9 billion in development, redevelopment, expansion and improvement projects (including lease expenditures). For example, in 2005, First Capital purchased Morningside Mall, a well-located 13 acre shopping mall for C$12.9 million, which had housed a Walmart and an A&P. The site had deteriorated and both of the anchor tenants had vacated. Today Morningside Crossing, comprising 261,000 square feet of GLA, is a leading shopping destination in a growing urban neighborhood, with tenants such as a Food Basics grocery store, a Shoppers Drug Mart, a medical facility and several banks.
	•	Proactively optimize our property base and our allocation of capital.  Using the expertise of our local management, we carefully monitor and optimize our property base by taking advantage of opportunities to purchase and sell properties. Proactive management of our property base allows us to use our resources prudently and recycle our capital when we determine that more accretive opportunities are available. We may determine to sell a property or group of properties for a number of reasons, including a determination that we are unable to build critical mass in a particular market, our view that additional investment in a property would not be accretive or because we acquired non-core assets as part of a larger purchase. We may use joint ventures to enter into new markets where we are not established to access attractive opportunities with lower capital risk.

 

 

																						Nine								Nine								Nine								Nine
																		Year				Months				Year				Months				Year				Months				Year				Months
																		Ended				Ended				Ended				Ended				Ended				Ended				Ended				Ended				As of
																		December 31,				September 30,				December 31,				September 30,				December 31,				September 30,				December 31,				September 30,				September 30,
		As of September 30, 2011																2010				2011				2010				2011				2010				2011				2010				2011				2011
						Gazit-
						Globe’s
		Total No. of				Ownership
Region		Properties(1)				Interest				GLA(1)				Occupancy				Rental Income(2)								Percent of Rental Income								Net Operating Income(2)								Same Property NOI Growth(3)								Fair Value(4)(5)
										(thousands of								(U.S.$ in thousands)																(U.S.$ in thousands)																(U.S.$ in
										sq. ft.)																																								thousands)
Shopping Centers
United States(6)			196				43.1	%			22,802				90.6	%(7)			286,940				247,695				23	%			24	%			208,754				176,212				(0.5	)%			1.4	%			3,411,690
Canada			158				49.6	%			22,811				96.3	%			466,768				379,810				38	%			37	%			302,632				244,934				3.9	%			3.5	%			5,167,542
Northern Europe			80				47.8	%			10,762				95.4	%			261,485				215,431				21	%			21	%			170,080				143,478				(0.3	)%			2.7	%			3,361,861
Central and Eastern Europe(1)			154				31.2	%			12,643				97.0	%			86,373				73,505				7	%			7	%			53,870				47,636				8.9	%			10.4	%			848,179
Germany			6				100.0	%			1,064				95.6	%			20,946				16,012				2	%			1	%			15,178				11,811				5.3	%			0.7	%			266,336
Israel(8)			11				75.0	%			1,446				98.9	%			42,868				38,608				4	%			4	%			31,276				29,268				7.2	%			12.1	%			618,319
Brazil			4				100.0	%			384				89.1	%			4,301				6,180				—				—				3,915				5,374				—				—				133,226
Healthcare Properties
Senior housing(1)			15				60	%			1,312				87.7	%			29,679				21,838				2	%			2	%			11,277				9,385				16.9	%			14.0	%			141,661
Medical office			24				—	(9)			2,067				93.5	%			38,036				36,682				3	%			4	%			26,320				24,046				(0.6	)%(10)			0.4	%(10)			638,232
Other Properties
Land for future development			—				—				—				—				—				—				—				—				—				—				—				—				520,403
Properties under development(11)			15				—				—				—				—				—				—				—				—				—				—				—				199,813
Other			4				—				84				—				709				486				—				—				380				224				—				—				18,966
Total			667				N/A				75,375				94.3	%			1,238,105				1,036,247				100	%			100	%			823,682				692,368				3.6	%			4.7	%			15,326,228	(12)

(1)		Amounts in this table with respect to shopping centers in Central and Eastern Europe and senior housing facilities reflect 100% of the number of properties and GLA of Atrium and Royal Senior Care, respectively, both of which are consolidated according to the proportionate consolidation method under IAS 31 in Gazit-Globe’s financial statements.
(2)		Represents amounts translated into U.S.$ using the exchange rate in effect on September 30, 2011 (U.S.$1.00 = NIS 3.712).

(3)		Same property amounts are calculated as the amounts attributable to properties which have been owned and operated by us, and reported in our consolidated results, for the entirety of the relevant periods. Therefore, any properties either acquired after the first day of the earlier comparison period or sold, contributed or otherwise removed from our consolidated financial statements before the last day of the later comparison period are excluded from same properties. Same property NOI growth excludes redevelopment and expansion.
(4)		Investment properties are measured initially at cost, including costs directly attributable to the acquisition. After initial recognition, investment property is measured at fair value which reflects market conditions at the balance sheet date. Investment property under development, designated for future use as investment property, is also measured at fair value, provided that fair value can be reliably measured. However, when fair value is not reliably determinable, such property is measured at cost, less any impairment losses, if any, until either development is completed, or its fair value becomes reliably determinable, whichever is earlier. The cost of investment property under development includes the cost of land, as well as borrowing costs used to finance construction, direct incremental planning and construction costs, and brokerage fees relating to agreements to lease the property. Fair value of investment property was determined by accredited independent appraisers with respect to 69% of such investment properties during the year ended December 31, 2010 (51% of which were performed at December 31, 2010) and 56% of such investment properties for the nine months ended September 30, 2011 (36% of which were performed at September 30, 2011). Fair value of investment property under development was determined by accredited independent appraisers with respect to 51% of such investment properties during the year ended December 31, 2010 (49% of the valuations were performed at December 31, 2010) and 10% of such investment properties for the nine months ended September 30, 2011 (10% of which were performed at September 30, 2011). In each case, the remainder of the valuations was performed by management of our subsidiaries. In determining fair value of investment property and investment property under development, the appraisers and our management used either (1) the comparative approach (i.e. based on comparison data for similar properties in the vicinity with similar uses, including required adjustments for location, size or quality), (2) the discounted cash flow approach (less cost to complete and developer profit in the case of investment property under development) or (3) the direct capitalization approach. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Investment Property and Investment Property Under Development.”
(5)		Includes 100% of the fair value of the properties of entities whose accounts are consolidated in Gazit-Globe’s financial statements. Includes the applicable proportion of the fair value of the properties of Atrium and Royal Senior Care each of which is proportionately consolidated in Gazit-Globe’s financial statements with respect to the nine months ended September 30, 2011.
(6)		As of September 30, 2011, includes 9 office, industrial, residential and storage properties. As of December 31, 2010, includes six office, industrial, residential and storage properties. On September 26, 2011, Equity One announced that it had entered into an agreement to sell 36 shopping centers comprising approximately 3.9 million square feet. The 36 shopping centers generated net operating income for Equity One of approximately U.S.$35.4 million for the twelve months ended June 30, 2011. Closing of the transaction is subject to customary conditions and is expected to occur in the fourth quarter of 2011.
(7)		Occupancy data excludes the occupancy of 9 office, industrial, residential and storage properties. The properties are excluded because they are non-retail properties that are not considered part of Equity One’s core portfolio. If these properties were included in the occupancy data, the occupancy rate would be 90.3%.
(8)		Israel includes one income-producing property in Bulgaria.
(9)		Our medical office buildings are held through (i) ProMed, our wholly-owned subsidiary and (ii) ProMed Canada, a wholly-owned subsidiary of Gazit America, in which Gazit-Globe held a 73.1% interest as of September 30, 2011.
(10)		Represents medical office building same property NOI growth in the United States.
(11)		As of September 30, 2011, total GLA under development was 1.8 million square feet.
(12)		This amount would be approximately NIS 68.7 billion ($18.5 billion) if it included 100% of the fair value of properties held by Atrium and Royal Senior Care and 100% of the fair value of properties operated by us through joint ventures or other management arrangements which are accounted for using the equity method of accounting. This amount represents the following amounts recorded in our consolidated statements of financial position as of September 30, 2011 included elsewhere in this prospectus: NIS 51,613 million ($13,904.4 million) of investment property, NIS 2,674 million ($720.4 million) of investment property under development, NIS 2,026 million ($545.8 million) of assets classified as held for sale and NIS 709 million ($191.0 million) of fixed assets, net.

 

 

				Ownership
		Primary Stock Exchange		Interest (%) as of
Subsidiary		(If Publicly Traded)		September 30, 2011				Asset Class
Shopping Centers
Equity One(1)(2)		New York Stock Exchange			43.1			Shopping Centers
First Capital		Toronto Stock Exchange			49.6			Shopping Centers
Citycon		OMX Helsinki			47.8			Shopping Centers
Atrium(3)		Vienna Stock Exchange and EURONEXT			31.2			Shopping Centers
Gazit Germany					100.0			Shopping Centers
Gazit Development					75.0			Shopping Centers
Gazit Brazil					100.0			Shopping Centers
Healthcare Properties
ProMed					100.0			Medical and Research Office Buildings in the United States
Royal Senior Care(3)					60.0			Senior Care Facilities
Gazit America(2)		Toronto Stock Exchange			73.1			Medical and Research Office Buildings in Canada
Other
U. Dori(4)		Tel Aviv Stock Exchange			55.4			Real Estate Construction and Development

(1)		Gazit-Globe’s economic ownership interest in Equity One, which comprises shares held through wholly-owned subsidiaries of Gazit-Globe and through its holding in Gazit America (refer to footnote (2)).
(2)		As of September 30, 2011, Gazit America held 12.7% of Equity One’s share capital.
(3)		Gazit-Globe jointly controls Atrium and Royal Senior Care. For the year ended December 31, 2010 and the nine months ended September 30, 2011, Gazit-Globe proportionately consolidated the results of Atrium and Royal Senior Care.
(4)		Gazit-Globe jointly controlled U. Dori during the year ended December 31, 2010 and during the period ended April 17, 2011 and proportionately consolidated its results for these periods. Until April 17, 2011, Gazit-Globe had a 36.9% interest in U. Dori. On April 17, 2011, Gazit-Globe increased its holding in U. Dori to 73.8%. In June 2011, Gazit-Globe sold 100% of Acad, which holds the 73.8% interest in U. Dori to Gazit Development in which it holds a 75% interest. For further details, see note 3(b) to our financial statements for the nine months ended September 30, 2011 included elsewhere in this prospectus.

	•	Economic conditions may make it difficult to maintain or increase occupancy rates and rents and a deterioration in economic conditions in one or more of our key regions could adversely impact our results of operations.
	•	We seek to expand through acquisitions of additional real estate assets and commence operations in new geographic markets; such expansion may not yield the returns expected, may result in disruptions to our business, may strain management resources and may result in dilution to our shareholders or dilution of our interests in our subsidiaries and affiliates.
	•	We are dependent upon large tenants that serve as anchors in our shopping centers and decisions made by these tenants or adverse developments in their businesses could have a negative impact on our financial condition.
	•	If we or our public subsidiaries are unable to obtain adequate capital, we may have to limit our operations substantially. Additionally, the inability of any of our public subsidiaries to satisfy their liquidity requirements may materially and adversely impact our results of operations.
	•	We have substantial debt obligations which may negatively affect our results of operations and financial position and put us at a competitive disadvantage. A significant portion of our business is conducted through public subsidiaries and our failure to generate sufficient cash flow from these subsidiaries could result in our inability to repay our indebtedness.
	•	Our results of operations may be adversely affected by fluctuations in currency exchange rates and we may not have adequately hedged against them.
	•	Our reported financial condition and results of operations under IFRS are impacted by changes in value of our real estate assets, which is inherently subjective and subject to conditions outside of our control.
	•	Our controlling shareholder has the ability to take actions that may conflict with the interests of other holders of our shares.

	•	We may face difficulties in obtaining or using information from our public subsidiaries.
	•	The control that we exert over our public subsidiaries may be subject to legal and other limitations.
	•	The market price of our ordinary shares may be adversely affected if the market prices of our publicly traded subsidiaries and affiliates decrease.

Ordinary shares we are offering		12,000,000 ordinary shares (or 13,800,000 ordinary shares if the underwriters fully exercise their option to purchase additional ordinary shares from us).
Ordinary shares to be outstanding immediately after this offering		166,465,394 ordinary shares (or 168,265,394 ordinary shares if the underwriters fully exercise their option to purchase additional ordinary shares from us).
Use of proceeds		We estimate that we will receive net proceeds of $111.0 million, after deducting the underwriting discounts and commissions and the estimated offering expenses, from our sale of ordinary shares in this offering.
		We intend to use the net proceeds from this offering for general corporate purposes and to reduce the outstanding balance under our secured revolving credit facilities. We expect to use a portion of the net proceeds to invest in our public and private subsidiaries consistent with past practice and may also use a portion of the net proceeds for the acquisition of, or investment in, companies or properties that complement our activities in the ordinary course of business. See “Use of Proceeds.”
Dividend policy		Our current intention is to continue to declare and distribute a dividend in the future. There can be no assurance, however, that dividends for any year will be declared, or that, if declared, they will correspond to the policy described in this prospectus. In addition, under Israeli law, the payment of dividends may be made only out of accumulated retained earnings or out of the earnings accrued over the two most recent years, whichever is the higher, and in either case provided that there is no reasonable concern that a dividend will prevent us from satisfying current or foreseeable obligations as they become due. See “Dividend Policy.”
Risk factors		Investing in our ordinary shares involves a high degree of risk and purchasers of our ordinary shares may lose part or all of their investment. See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.
TASE symbol		“GLOB.”
Proposed NYSE symbol		We have applied to have our ordinary shares listed on the New York Stock Exchange under the symbol ‘‘GZT.”

	•	an initial public offering price of U.S.$10.52 per ordinary share, the U.S.$ equivalent of NIS 39.28, the last reported sale price of our ordinary shares on the TASE on December 4, 2011 (based on the exchange rate reported by the Bank of Israel on such date, which was NIS 3.732 = U.S.$1.00); and
	•	no exercise by the underwriters of their option to purchase up to an additional 1,800,000 ordinary shares from us.

		Year Ended December 31,																Nine Months Ended September 30,
(In millions except for per share data)		2008				2009				2010				2010				2010				2011				2011
		NIS												U.S.$				NIS								U.S.$
																						(unaudited)
Statement of Operations Data:
Rental income			3,556				4,084				4,596				1,238				3,412				3,847				1,036
Revenues from sale of buildings, land and contractual works performed(1)			613				596				691				186				489				901				243
Total revenues			4,169				4,680				5,287				1,424				3,901				4,748				1,279
Property operating expenses			1,170				1,369				1,551				418				1,156				1,285				346
Cost of buildings sold, land and contractual works performed(1)			679				554				622				167				443				859				232
Total cost of revenues			1,849				1,923				2,173				585				1,599				2,144				578
Gross profit			2,320				2,757				3,114				839				2,302				2,604				701
Fair value gain (loss) on investment property and investment property under development, net(2)			(3,956	)			(1,922	)			1,017				274				674				953				257
General and administrative expenses			(489	)			(584	)			(663	)			(179	)			(474	)			(556	)			(150	)
Other income			704				777				13				4				23				185				50
Other expenses			(85	)			(41	)			(48	)			(13	)			(12	)			(38	)			(10	)
Group’s share in earnings (losses) of associates, net			(86	)			(268	)			2				1				(5	)			7				2
Operating income (loss)			(1,592	)			719				3,435				926				2,508				3,155				850
Finance expenses			(1,739	)			(1,793	)			(1,869	)			(504	)			(1,403	)			(1,695	)			(457	)

		Year Ended December 31,																Nine Months Ended September 30,
(In millions except for per share data)		2008				2009				2010				2010				2010				2011				2011
		NIS												U.S.$				NIS								U.S.$
																						(unaudited)
Finance income			802				1,551				569				153				412				50				13
Increase (decrease) in value of financial investments			(727	)			81				(18	)			(5	)			—				(13	)			(3	)
Income (loss) before taxes on income			(3,256	)			558				2,117				570				1,517				1,497				403
Taxes on income (tax benefit)			(597	)			(142	)			509				137				317				290				78
Net income (loss)			(2,659	)			700				1,608				433				1,200				1,207				325
Net income (loss) attributable to:
Equity holders of the Company			(1,075	)			1,101				790				213				564				403				109
Non-controlling interests			(1,584	)			(401	)			818				220				636				804				216
			(2,659	)			700				1,608				433				1,200				1,207				325
Basic net earnings (loss) per share			(8.58	)			8.49				5.59				1.51				4.06				2.60				0.70
Diluted net earnings (loss) per share			(8.58	)			8.47				5.57				1.50				4.03				2.58				0.70

		Year Ended December 31,												Nine Months Ended September 30,
(In thousands)		2008				2009				2010				2010				2011
														(unaudited)
Number of shares used to calculate basic earnings per share			125,241				129,677				141,150				138,850				154,452
Number of shares used to calculate diluted earnings per share			125,303				129,706				141,387				139,059				154,733

(1)		Revenues from sale of buildings, land and contractual works performed primarily comprises revenue from contractual works performed by the Dori Group. For the years ended December 31, 2008, 2009 and 2010 and the period ended April 17, 2011, the Dori Group was consolidated in our financial statements in accordance with the proportionate consolidation method as required under IFRS. Since April 17, 2011, U. Dori has been fully consolidated due to our acquisition of an additional 50% interest in Acad. Cost of buildings sold, land and contractual works performed primarily comprises costs of contractual work performed by the Dori Group.
(2)		Pursuant to IAS 40 “Investment Property,” gains or losses arising from change in fair value of our investment property and our investment property under development where fair value can be reliably measured are recognized in our income statement at the end of each period.

		As of December 31,																As of September 30, 2011
(In millions)		2008				2009				2010				2010				2010				2010
		NIS												U.S.$				NIS				U.S.$
																		(unaudited)
Balance Sheet Data:
Investment property			34,966				42,174				43,634				11,755				51,613				13,904
Investment property under development			2,626				2,994				3,296				888				2,674				720
Total assets			44,730				51,504				52,550				14,157				63,746				17,173
Long term interest-bearing liabilities from financial institutions(1)			17,158				17,162				14,969				4,033				19,343				5,211
Long term debentures(2)			10,542				13,862				14,255				3,840				15,906				4,285
Total liabilities			33,624				38,238				37,381				10,071				45,596				12,283
Equity attributable to equity holders of the Company			3,334				5,189				5,915				1,593				6,521				1,757
Non-controlling interests			7,772				8,077				9,254				2,493				11,629				3,133
Total equity			11,106				13,266				15,169				4,086				18,150				4,890

(1)		As of December 31, 2010, NIS 5.7 billion (U.S.$1.5 billion) of our interest-bearing liabilities from financial institutions were unsecured and the remainder were secured. As of September 30, 2011, NIS 7.2 billion (U.S.$1.9 billion) of our interest-bearing liabilities from financial institutions were unsecured and the remainder were secured.
(2)		As of December 31, 2010, NIS 1,049 million (U.S.$283 million) aggregate principal amount of our debentures was secured and the remainder was unsecured. As of September 30, 2011, NIS 1,017 million (U.S.$274 million) aggregate principal amount of our debentures was secured and the remainder was unsecured.

		As of December 31,												As of September 30,
		2008				2009				2010				2010				2011
Other Operating Data:
Number of consolidated operating properties(1)			453				629				646				638				667
Total GLA (in thousands of sq. ft.)			50,652				67,559				70,006				68,180				75,375
Occupancy (%)			94.5				93.6				93.9				93.7				94.3

(1)		Prior periods have been revised to conform to current period presentation.

		Year Ended December 31,																Nine Months Ended September 30,
In millions (except for per share data)		2008				2009				2010				2010				2010				2011				2011
		NIS																NIS								U.S.$
														U.S.$								(unaudited)
Other Financial Data:
NOI(1)			2,396				2,729				3,058				824				2,266				2,570				692
Adjusted EBITDA(1)			1,874				2,254				2,581				695				1,898				2,142				577
Dividends			155				186				211				57				154				180				48
Dividends per share			1.24				1.42				1.48				0.40				1.11				1.17				0.32
EPRA FFO(1)(2)			(40	)			223				106				29				82				67				18
Adjusted EPRA FFO(1)(2)			190				420				359				97				251				294				79
Cash flows provided by (used in):
Operating activities			653				926				782				211				643				892				240
Investing activities			(4,880	)			(677	)			(2,618	)			(705	)			(1,466	)			(4,386	)			(1,182	)
Financing activities			4,161				1,225				1,287				347				402				3,543				954

		As of December 31,																As of September 30,
(In millions)		2008				2009				2010				2010				2010				2011				2011
		NIS												U.S.$				NIS								U.S.$
EPRA NAV(1)			3,675				5,631				5,963				1,606				5,489				7,198				1,939
EPRA NNNAV(1)			5,997				5,472				5,125				1,381				4,519				6,252				1,684

(1)		For definitions and reconciliations of NOI, Adjusted EBITDA, EPRA FFO, Adjusted EPRA FFO, EPRA NAV and EPRA NNNAV and statements disclosing the reasons why our management believes that their presentation provides useful information to investors and, to the extent material, any additional purposes for which our management uses them see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Financial Measures.”
(2)		In countries using IFRS, it is customary for companies with income-producing property to publish their “EPRA Earnings”, which we refer to as EPRA FFO. EPRA FFO is a measure for presenting the operating results of a company that are attributable to its equity holders. We believe that these measures are consistent with the position paper of the European Public Real Estate Association, or EPRA, which states, “EPRA Earnings is similar to NAREIT FFO. The measures are not exactly the same, as EPRA Earnings has its basis in IFRS and FFO is based on US-GAAP.” We believe that EPRA FFO is similar in substance to funds from operations, or FFO, with adjustments primarily for the attribution of results under IFRS.

 

 

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks we describe below in addition to the other information set forth elsewhere in this prospectus, including our consolidated financial statements and the related notes, before deciding to invest in our ordinary shares. These material risks could adversely affect our business, financial condition and results of operations, possibly causing the trading price of our ordinary shares to decline, and you could lose all or part of your investment.

 

Risks Related to Our Business and Operations

 

Economic conditions may make it difficult to maintain or increase occupancy rates and rents and a deterioration in economic conditions in one or more of our key regions could adversely impact our results of operations.

 

In 2010, our rental income was derived 28.3% from the United States, 38.0% from Canada, 22.8% from Northern and Western Europe and 7.0% from Central and Eastern Europe, with the balance derived from other regions. In the first nine months of 2011, our rental income was derived 24.9% from the United States, 41.5% from Canada, 22.3% from Northern and Western Europe and 7.0% from Central and Eastern Europe with the balance derived from other regions. During the recent economic downturn, general market conditions deteriorated in many of our markets, particularly the United States and Central and Eastern Europe, and a lack of financing and a decrease in consumer spending prevented retailers from expanding their activities. As a consequence, occupancy rates declined in some of the regions in which we operate, most significantly in the United States where the occupancy rates for our shopping centers decreased from 93.2% as of December 31, 2007 to 90.6% as of September 30, 2011. In addition, we granted rent concessions to some tenants during this period. The economic downturn adversely affected our net operating income and the value of our assets in all of the regions in which we operate. In addition, currencies in many of our markets weakened during that period. Although general market conditions have improved and currencies have strengthened in those markets since 2010, our ability to maintain or increase our occupancy rates and rent levels depends on continued improvements in global and local economic conditions.

 

While the economy in many of our markets has been improving, macro-economic challenges, such as low consumer confidence, high unemployment and reduced consumer spending, have adversely affected many retailers and continue to adversely affect the retail sales of many regional and local tenants in some of our markets and our ability to re-lease vacated space at higher rents. Moreover, companies in some of our markets shifted to a more cautionary mode with respect to leasing as a result of the prevailing economic climate and demand for retail space has declined generally, reducing the market rental rates for our properties. As a result, in these markets we may not be able to re-lease vacated space and, if we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants, including brokerage commissions paid by us in connection with new leases or lease renewals, and the cost of making leasehold improvements. These events and factors could adversely affect our rental income and overall results of operations.

 

While most of our shopping centers are anchored by supermarkets, drugstores or other necessity-oriented retailers, which are less susceptible to economic cycles, other tenants of our public subsidiaries, particularly small shop tenants of Equity One and Atrium, have been vulnerable to declining sales and reduced access to capital. As a result, some tenants have requested rent adjustments and abatements, while other tenants have not been able to continue in business at all. Our ability to renew or replace these tenants at comparable rents could adversely impact occupancy rates and overall results of operations.

We seek to expand through acquisitions of additional real estate assets, including other businesses; such expansion may not yield the returns expected, may result in disruptions to our business, may strain management resources and may result in dilution to our shareholders or dilution of our interests in our subsidiaries and affiliates.

 

Our investing strategy and our market selection process may not ultimately be successful, may not provide positive returns on our investments and may result in losses. The acquisition of properties, groups of properties or other businesses entails risks that include the following, any of which could adversely affect our results of operations and financial condition:

 

 

Together with our acquisition of individual properties and groups of properties, we have been an active business acquirer and, as part of our growth strategy, we expect to seek to acquire real estate-related businesses in the future. The acquisition and integration of each business involves a number of risks and may result in unforeseen operating difficulties and expenditures in assimilating or integrating the businesses, properties, personnel or operations of the acquired business. Our due diligence prior to our acquisition of a business may not uncover certain legal or regulatory issues that could affect such business. Furthermore, future acquisitions may involve difficulties in retaining the tenants or customers of the acquired business, and disrupt our ongoing business, divert our resources and require significant management attention that would otherwise be available for ongoing operation and development of our current business. Moreover, we can make no assurances that the anticipated benefits of any acquisition, such as operating improvements or anticipated cost savings, would be realized or that we would not be exposed to unexpected liabilities in connection with any acquisition.

 

To complete a future acquisition, we may determine that it is necessary to use a substantial amount of our available liquidity sources or cash or engage in equity or debt financing. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we or our subsidiaries or affiliates issue could have rights, preferences and privileges senior to those of holders of our ordinary shares. If our subsidiaries or affiliates raise additional funds through further issuances of equity or convertible debt securities, Gazit-Globe, as the holder of equity securities of our subsidiaries and affiliates, could suffer significant dilution, and any new equity securities our subsidiaries or affiliates issue could have rights, preferences and privileges senior to those held by Gazit-Globe. We may not be able to obtain additional financing on terms favorable to us, if at all, which could limit our ability to engage in acquisitions.

 

We are dependent upon large tenants that serve as anchors in our shopping centers and decisions made by these tenants or adverse developments in their businesses could have a negative impact on our financial condition.

 

We own shopping centers that are anchored by large tenants. Because of their reputation or other factors, these large tenants are particularly important in attracting shoppers and other tenants to our centers. Our rental income depends upon the ability of the tenants of our properties and, in particular, these anchor tenants, to generate enough income to make their lease payments to us. Certain of our anchor tenants may make up a significant percentage of our rental income in certain markets. For example, Kesko accounted for 19.9% of Citycon’s rental income in 2010, and Publix accounted for 11.3% of Equity One’s gross annual minimum rent

in 2010. In addition, supermarkets and other grocery stores, many of which are anchor tenants, accounted for approximately 21% of our total rental income for 2010. We generally develop or redevelop our shopping centers based on an agreement with an anchor tenant. Changes beyond our control may adversely affect the tenants’ ability to make lease payments or could result in them terminating their leases. These changes include, among others:

 

 

As a result, tenants may determine not to renew leases or delay lease commencement. In addition, anchor tenants often have more favorable lease provisions and significant negotiating power. In some instances, we may need to seek their permission to lease to other, smaller tenants. Anchor tenants, particularly retail chains, may also change their operating policies for their stores (such as the size of their stores) and the regions in which they operate. As a result, anchor tenants may determine not to renew leases or delay lease commencement. An anchor tenant may decide that a particular store is unprofitable and close its operations in our center, and, while the tenant may continue to make rental payments, such a failure to occupy its premises could have an adverse effect on the property. A lease termination by an anchor tenant or a failure by that anchor tenant to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping center. In addition, we are subject to the risk of defaults by tenants or the failure of any lease guarantors to fulfill their obligations, tenant bankruptcies and other early termination of leases or non-renewal of leases. Any of these developments could materially and adversely affect our financial condition and results of operations.

 

Commencement of operations in new geographic markets and asset classes involves risks and may result in us investing significant resources without realizing a return and may adversely impact our future growth.

 

The commencement of operations in new geographic markets or asset classes in which we have little or no prior experience involves costs and risks. In the past, we expanded into new regions, including Central and Eastern Europe and Brazil, and into other asset classes, such as medical office buildings and senior care facilities. While we currently have no specific plans to commence operations in new geographic markets or asset classes, we may decide to enter into new markets or asset classes in the future when an opportunity presents itself. When commencing such operations, we need to learn and become familiar with the various aspects of operating in these new geographic markets or asset classes, including regulatory aspects, the business and macro-economic environment, new currency exposure, as well as the necessity of establishing new systems and administrative headquarters at substantial costs. Additionally, it may take many years for an acquisition to achieve desired results as factors such as obtaining regulatory permits, construction, signing the right mix of tenants and assembling the right management team take time to implement. In some cases, we may commence such operations by means of a joint venture which often offers the advantage of a partner with superior experience, but also has the risks associated with any activity conducted jointly with a non-controlled third party. In addition, entry into new geographic markets may also lead to difficulty managing geographically separated organizations and assets, difficulty integrating personnel with diverse business backgrounds and organizational cultures and compliance with foreign regulatory requirements applicable to acquisitions. Our failure to successfully expand into new geographies and asset classes may result in us investing significant resources without realizing a return and may adversely impact our future growth.

If we or our public subsidiaries are unable to obtain adequate capital, we may have to limit our operations substantially.

 

Our acquisition and development of properties and our acquisition of other businesses and equity interests in real estate companies are financed in part by loans received from banks, insurance companies and other financing sources, as well as from the sale of shares and notes and debentures in public and private offerings. Our public subsidiaries satisfy their capital requirements through debt and equity financings in their respective local markets. The practices in these markets vary significantly, for example, with some of the markets based entirely on bank lending and others depending significantly on accessing the capital markets. Our ability to obtain, or obtain on economically desirable terms, financing could be affected by unavailability or a shortage of external financing sources, changes in existing financing terms, changes in our financial condition and results of operations, legislative changes, changes in the public or private markets in our operating regions and deterioration of the economic situation in our operating regions. Should our ability to obtain financing be impaired, our operations could be limited significantly. Our business results are dependent on our ability to obtain loans or capital in the future in order to repay our loans, notes and debentures.

 

We have substantial debt obligations which may negatively affect our results of operations and financial position and put us at a competitive disadvantage.

 

Our organizational documents do not limit the amount of debt that we may incur and we do not have a policy that limits our debt to any particular level. As of September 30, 2011, we and our private subsidiaries had debt and other liabilities outstanding in the aggregate amount of NIS 14,020 million (U.S.$3,777 million) and NIS 725 million (U.S.$195 million), respectively, of which 3.4% matures during the remainder of 2011 and 9.9% matures during 2012. On a consolidated basis, we had debt and other liabilities outstanding as of September 30, 2011 in the aggregate amount of NIS 45,596 million (U.S.$12,283 million), of which 13.4% matures during the next 12 months. Each of our public subsidiaries is subject to its own covenant compliance obligations. Furthermore, the indebtedness of each of our public subsidiaries is independent of each other public subsidiary and is not subject to any guarantee by Gazit-Globe or its wholly-owned subsidiaries.

 

The amount of debt outstanding from time to time could have important consequences to us and our public subsidiaries. For example, it could

 

 

If our or our public subsidiaries’ internally generated cash is inadequate to repay indebtedness upon an event of default or upon maturity, then we or our public subsidiaries will be required to repay or refinance the debt. If we or our public subsidiaries are unable to refinance our indebtedness on acceptable terms or if the amount of refinancing proceeds is insufficient to fully repay the existing debt, we or our public subsidiaries might be forced to dispose of properties, potentially upon disadvantageous terms, which might result in losses

and might adversely affect our cash available for distribution. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, our interest expense would increase without a corresponding increase in our rental rates, which would adversely affect our results of operations.

 

In addition, our debt financing agreements and the debt financing agreements of our public subsidiaries contain representations, warranties and covenants, including financial covenants that, among other things, require the maintenance of certain financial ratios. Certain of the covenants that apply to Gazit-Globe depend upon the performance of our public subsidiaries and we therefore have less control over our compliance with those covenants. For example, covenants that apply to Gazit-Globe require Citycon to maintain a minimum ratio of equity to total assets less advances received and a minimum ratio of EBITDA to net financial expenses. Another covenant requires First Capital to maintain a minimum ratio of net financial debt to equity.

 

Should we or our public subsidiaries breach any such representations, warranties or covenants contained in any such loan or other financing agreement, or otherwise be unable to service interest payments or principal repayments, we or our public subsidiaries may be required immediately to repay such borrowings in whole or in part, together with any related costs and a default under the terms of certain of our other indebtedness result from such breach. For example, a decline in the property market or a wide scale tenant default may result in a failure to meet any loan to value or debt service coverage ratios, thereby causing an event of default and we or our public subsidiaries, as the case may be, may be required to prepay the relevant loan. Gazit-Globe’s equity interests in its subsidiaries are pledged as collateral for Gazit-Globe’s revolving credit facilities and other indebtedness incurred by Gazit-Globe directly and private subsidiaries. As of September 30, 2011, the principal amount of such indebtedness was NIS 2,903 million (U.S.$782 million), which constituted 6.4% of our consolidated indebtedness as of such date. In the event that Gazit-Globe is required to prepay its loans, the lenders under such loans may determine to pursue remedies against and cause the sale of those equity interests. In addition, since certain of our properties were mortgaged to secure payment of indebtedness with a principal amount of NIS 11,308 million (U.S.$3,046 million) as of September 30, 2011, which constituted 24.8% of our consolidated indebtedness as of such date, in the event we are unable to refinance or repay our borrowing, we may be unable to meet mortgage payments, or we may default under the related mortgage, deed of trust or other pledge and such property could be transferred to the mortgagee or pledgee, or the mortgagee or pledgee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value. Moreover, any restrictions on cash distributions as a result of breaching financial ratios, failure to repay such borrowings or, in certain circumstances, other breaches of covenants, representations and warranties under our debt financing agreements could result in us being prevented from paying dividends to our investors and have an adverse effect on our liquidity.

 

The inability of any of our public subsidiaries to satisfy their liquidity requirements may materially and adversely impact our results of operations.

 

Even though we present the assets and liabilities of our public subsidiaries on a consolidated basis, they satisfy their short-term liquidity and long-term capital requirements through cash generated from their respective operations and through debt and equity financings in their respective local markets. Our liquidity and available borrowings presented on a consolidated basis may not therefore be reflective of the position of any one of our public subsidiaries since the liquidity and available borrowings of each of our public subsidiaries are not available to support the others’ operations. Although we have from time to time purchased equity or convertible debt securities of our public subsidiaries, we have not generally made shareholder loans to them and may have insufficient resources to do so even if our overall financial position on a consolidated basis is positive. Each public subsidiary is subject to its own covenant compliance obligations and the failure of any public subsidiary to comply with its obligations could result in the acceleration of its indebtedness which could have a material adverse effect on our financial position and results of operations.

Our results of operations may be adversely affected by fluctuations in currency exchange rates and we may not have adequately hedged against them.

 

Because we own and operate assets in many regions throughout the world, our results of operations are affected by fluctuations in currency exchange rates. For the year ended December 31, 2010, 33.5% of our total revenues were earned in Canadian dollars, 24.9% in U.S. dollars, 18.1% in Euros, 14.2% in NIS and 0.3% in BRL. For the nine months ended September 30, 2011, 30.5% of our total revenues were earned in Canadian dollars, 20.4% in U.S. dollars, 20.7% in NIS, 16.0% in Euros and 0.5% in BRL. In addition, our reporting currency is the New Israeli Shekel, or NIS, and the functional currency is separately determined for each of our subsidiaries. When a subsidiary’s functional currency differs from our reporting currency, the financial statements of such subsidiary are translated to NIS so that they can be included in our financial statements. As a result, fluctuations of the currencies in which we conduct business relative to the NIS impact our results of operations and the impact may be material. For example, the Canadian dollar appreciated 5% against the NIS for 2010 compared to 2009, which resulted in our net operating income increasing by NIS 58 million, or 1.3%, compared to 2009. The Canadian dollar depreciated 0.8% against the NIS for the first nine months of 2011 compared to the first nine months of 2010, which resulted in our net operating income decreasing by NIS 7 million, or 0.2%. We continually monitor our exposure to currency risk and pursue a company-wide foreign exchange risk management policy, which includes seeking to hold our equity in the currencies of the various markets in which we operate in the same proportions as the assets in each such currency bear to our total assets. We have in the past and expect to continue in the future to at least partly hedge such risks with certain financial instruments. Future currency exchange rate fluctuations that we have not adequately hedged could adversely affect our profitability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Qualitative and Quantitative Disclosure of Market Risk—Foreign currency risk.” We also face risks arising from the imposition of exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into NIS or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation.

 

We are subject to a disproportionate impact on our properties due to concentration in certain areas.

 

As of September 30, 2011, approximately 12.4%, 7.0%, 6.1% and 3.5% of our total GLA was located in Florida (U.S.), greater Toronto area (Canada), greater Montreal area (Canada) and metropolitan Helsinki (Finland), respectively. A regional recession or other major, localized economic disruption or a natural disaster, such as an earthquake or hurricane, in any of these areas could adversely affect our ability to generate or increase operating revenues from our properties, attract new tenants to our properties or dispose of unproductive properties. Any reduction in the revenues from our properties would effectively reduce the income we generate from them, which would adversely affect our results of operations and financial condition. Conversely, strong economic conditions in a region could lead to increased building activity and increased competition for tenants.

 

Certain emerging markets in which we have properties are subject to greater risks than more developed markets, including significant legal, economic and political risks.

 

Some of our current and planned investments are located in emerging markets, primarily within Central and Eastern Europe and Brazil, which as of September 30, 2011 comprised 16.8% and 0.5% of our total GLA, respectively, and in India, where we have an investment commitment in Hiref International LLC, a real estate fund, for $110 million (of which we had invested $76 million through September 30, 2011) and, as such, are subject to greater risks than those in markets in Northern and Western Europe and North America, including greater legal, economic and political risks. Our performance could be adversely affected by events beyond our control in these markets, such as a general downturn in the economy of countries in which these markets are located, conflicts between states, changes in regulatory requirements and applicable laws (including in relation to taxation and planning), adverse conditions in local financial markets and interest and inflation rate

fluctuations. In addition, adverse political or economic developments in these or in neighboring countries could have a significant negative impact on, among other things, individual countries’ gross domestic products, foreign trade or economies in general. While we currently have no plans to enter new emerging markets, some emerging economies in which we currently operate have historically experienced substantial rates of inflation, an unstable currency, high government debt relative to gross domestic products, a weak banking system providing limited liquidity to domestic enterprises, high levels of loss-making enterprises that continue to operate due to the lack of effective bankruptcy proceedings, significant increases in unemployment and underemployment and the impoverishment of a large portion of the population. This may have a material adverse effect on our business, financial condition or results of operations.

 

Our reported financial condition and results of operations under IFRS are impacted by changes in value of our real estate assets, which is inherently subjective and subject to conditions outside of our control.

 

Our consolidated financial statements have been prepared in accordance with IFRS. There are significant differences between IFRS and U.S. GAAP which lead to different results under the two systems of accounting. Currently, one of the most significant differences between IFRS and U.S. GAAP is an option under IFRS to record the fair market value of our real estate assets in our financial statements on a quarterly basis, which we have adopted. Accordingly, our financial statements have been significantly impacted in the past by fluctuations due to changes in fair market value of our assets even though no actual disposition of assets took place. For example, in 2009, we wrote down the fair value of our properties on a consolidated basis by NIS 1,922 million and in 2010 we increased the fair value of our properties on a consolidated basis by NIS 1,017 million. Our pretax share of these amounts was NIS 845 million and NIS 579 million, respectively.

 

The valuation of property is inherently subjective due to the individual nature of each property. As a result, valuations are subject to uncertainty. Fair value of investment property was determined by accredited independent appraisers with respect to 69% of such investment properties during the year ended December 31, 2010 (51% of which were performed at December 31, 2010). A significant proportion of the valuations of our properties were not performed by appraisers at the balance sheet date, based on materiality thresholds that we have applied across our properties. As a result of these factors, there is no assurance that the valuations of our interests in the properties reflected in our financial statements would reflect actual sale prices even where any such sales occur shortly after the financial statements are prepared.

 

Other real estate companies that are publicly traded in the United States use U.S. GAAP to report their financial statements and are therefore not currently required to record the fair market of their real estate assets on a quarterly basis. As a result, significant declines or fluctuations in the value of real estate assets could impact us disproportionately compared to these other companies.

 

Real estate is generally an illiquid investment.

 

Real estate is generally an illiquid investment as compared to investments in securities. While we do not currently anticipate a need to dispose of a significant number of real estate assets in the short-term, such illiquidity may affect our ability to dispose of or liquidate real estate assets in a timely manner and at satisfactory prices in response to changes in economic, real estate market or other conditions.

 

We may be obliged to dispose of our interest in a property or properties at a time, for a price or on terms not of our choosing. In addition, some of our anchor tenants have rights of first refusal or rights of first offer to purchase the properties in which they lease space in the event that we seek to dispose of such properties. The presence of these rights of first refusal and rights of first offer could make it more difficult for us to sell these properties in response to market conditions. These limitations on our ability to sell our properties could have an adverse effect on our financial condition and results of operations.

Our competitive position and future prospects depend on our senior management and the senior management of our subsidiaries and affiliates.

 

The success of our property development and investment activities depend, among other things, on the expertise of our board of directors, our executive team and other key personnel in identifying appropriate opportunities and managing such activities, as well as the executive teams of our subsidiaries and affiliates. The employment agreements pursuant to which Messrs. Katzman and Segal provide such services to Gazit-Globe have expired. Even though their employment agreements have expired, Messrs. Katzman and Segal are continuing to serve as our executive chairman and executive vice chairman, respectively. We are currently in the process of negotiating new terms of employment and compensation for them, but there can be no assurance that we will be able to reach new agreements with either or both of Messrs. Katzman and Segal or that such agreements will be approved as required under the Israeli Companies Law. See “Management—Compensation of Executive Officers and Directors—Employment and Consultant Agreements.” Mr. Katzman currently serves also as the chairman of the board of Equity One, First Capital, Citycon and Atrium, and Mr. Segal currently serves also as the vice chairman of the board, president and chief executive officer of First Capital, the vice chairman of the board of Equity One, a board member in Citycon and the chairman of Gazit America. With respect to some of these positions, Messrs. Katzman and Segal have written engagement and remuneration agreements with such public subsidiaries and affiliates which remain in effect. See “Management—Compensation of Executive Officers and Directors—Employment and Consultant Agreements.” The loss of some or all of these individuals or an inability to attract, retain and maintain additional personnel could prevent us from implementing our business strategy and could adversely affect our business and our future financial condition or results of operations. We do not carry key man insurance with respect to any of these individuals. We cannot assure you that we will be able to retain all of our existing senior management personnel or to attract additional qualified personnel when needed.

 

We face significant competition for the acquisition of real estate assets, which may impede our ability to make future acquisitions or may increase the cost of these acquisitions.

 

We compete with many other entities for acquisitions of necessity-driven real estate, including institutional pension funds, real estate investment trusts and other owner-operators of shopping centers. This competition may affect us in various ways, including:

 

 

The number of entities and the amount of funds competing for suitable properties and companies may increase. Such competition may reduce the number of suitable properties and companies available for purchase and increase the bargaining position of their owners. We may lose acquisition opportunities in the future if we do not match prices, structures and terms offered by competitors and if we match our

competitors, we may experience decreased rates of return and increased risks of loss. If we must pay higher prices, our profitability may be reduced.

 

Our competitors may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Some of these competitors may also have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of acquisitions. Furthermore, companies that are potential acquisition targets may find competitors to be more attractive because they may have greater resources, may be willing to pay more or may have a more compatible operating philosophy. These factors may create competitive disadvantages for us with respect to acquisition opportunities.

 

Our investments in development and redevelopment projects may not yield anticipated returns, and we are subject to general construction risks which may increase costs and delay or prevent the construction of our projects.

 

An important component of our growth strategy is the redevelopment of properties we own and the development of new projects. Some of our assets, representing 2.5% of the value of our properties as of December 31, 2010 and 1.3% of the value of our properties as of September 30, 2011, are at various stages of development (excluding redevelopment). These developments and redevelopments may not be as successful as currently expected. Expansion, renovation and development projects and the related construction entail the following considerable risks:

 

 

The inability to complete the construction of a property on schedule or at all for any of the above reasons could have a material adverse effect on our business, financial condition and results of operations.

 

Insurance on real estate may not cover all losses.

 

We currently carry insurance on all of our properties. Certain of our policies contain coverage limitations, including exclusions for certain catastrophic perils and certain aggregate loss limits. For example, we have a portfolio of properties located in California, including two properties in the San Francisco Bay area. These properties may be subject to the risk that an earthquake or other similar peril would affect the operation of these properties. We currently do not have comprehensive insurance covering losses from these perils due to the properties being uninsurable, not justifiable and/or commercially reasonable to insure, or for which any insurance that may be available would be insufficient to repair or replace a damaged or destroyed property. In addition, we have a number of properties in Florida that are susceptible to hurricanes and tropical storms. While we generally carry windstorm coverage with respect to these properties, the policies contain per occurrence deductibles and aggregate loss limits that limit the amount of proceeds that we may be able to recover. In addition, our properties in Central and Eastern Europe are generally not subject to flood insurance.

Further, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed.

 

The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred by the insurance industry. In the event of future industry losses, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available.

 

Should an uninsured loss, a loss over insured limits or a loss with respect to which insurance proceeds would be insufficient to repair or replace the property occur, we may lose capital invested in the affected property as well as anticipated income and capital appreciation from that property, while we may remain liable for any debt or other financial obligation related to that property.

 

A failure by Equity One to be treated as a REIT could have an adverse effect on our investment in Equity One.

 

As of September 30, 2011, Equity One has been treated as a REIT for U.S. federal income tax purposes. Subject to certain exceptions, a REIT generally is able to avoid entity-level tax on income it distributes to its shareholders, provided certain requirements are met, including certain income, asset, and distribution requirements. If Equity One ceases to be treated as a REIT and cannot qualify for any relief provisions under the Internal Revenue Code of 1986, as amended, or the Code, Equity One would generally be subject to an entity-level tax on its income at the graduated rates applicable to corporations. Such tax would reduce Equity One’s profitability and would have an adverse effect on our investment in Equity One.

 

If we or third-party managers fail to efficiently manage our properties, tenants may not renew their leases or we may become subject to unforeseen liabilities.

 

If we fail to efficiently manage a property or properties, increased costs could result with respect to maintenance and improvement of properties, loss of opportunities to improve income and yield and a decline in the value of the properties. In addition, we sometimes engage third parties to provide management services for our properties. We may not be able to locate and enter into agreements with qualified management service providers. If any third parties providing us with management services do not comply with their agreements or otherwise do not provide services at the level that we expect, our tenant relationships and rental rates for such properties and, therefore, their condition and value, could be negatively affected.

 

We rely on third-party management companies to manage certain of our properties which represent 4.5% of our total GLA as of September 30, 2011, including properties owned by ProMed, Royal Senior Care and Gazit America. While we are in regular contact with our third-party managers, we do not supervise them and their personnel on a day-to-day basis and we cannot assure you that they will manage our properties in a manner that is consistent with their obligations under our agreements, that they will not be negligent in their performance or engage in other criminal or fraudulent activity, or that they will not otherwise default on their management obligations to us. If any of the foregoing occurs, the relationships with our tenants could be damaged, which may cause the tenants not to renew their leases, and we could incur liabilities resulting from loss or injury to the properties or to persons at the properties. If we are unable to lease the properties or we become subject to significant liabilities as a result of third-party management performance, our operating results and financial condition could be substantially harmed.

 

Properties held by us are subject to multiple permits and administrative approvals and to compliance with existing and future laws and regulations.

 

Our operations and properties, including our construction, development and redevelopment activities, are subject to regulation by various governmental entities and agencies in connection with obtaining and renewing

various licenses, permits, approvals and authorizations, as well as with ongoing compliance with existing and future laws, regulations and standards. A significant change in the regime for obtaining or renewing these licenses, permits, approvals and authorizations, or a significant change in the licenses, permits, approvals and authorizations our operations and properties are subject to, could result in us incurring substantially increased costs which could adversely affect our business, financial condition and results of operation. In addition, each maintenance, construction, development and redevelopment project we undertake must generally receive administrative approvals from various governmental agencies, including fire, health and safety and environmental protection agencies, as well as technical approvals from various utility providers, including electricity, gas and sewage services. These requirements may hinder, delay or significantly increase the costs of these projects, and failure to comply with these requirements may result in fines and penalties as well as cancellation of such projects even, in certain cases, the demolition of the building already constructed. Such consequences could have a material adverse effect on our business, financial condition and results of operations.

 

We may be subjected to liability for environmental contamination.

 

As an owner and operator of real estate, we may be liable for the costs of removal or remediation of hazardous or toxic substances present at, on, under, in or released from our properties, as well as for governmental fines and damages for injuries to persons and property. We may be liable without regard to whether we knew of, or were responsible for, the environmental contamination and with respect to properties we have acquired, whether the contamination occurred before or after the acquisition. The presence of such hazardous or toxic substances, or the failure to remediate such substances properly, may also adversely affect our ability to sell or lease the real estate or to borrow using the real estate as security. Laws and regulations, as these may be amended over time, may also impose liability for the release of certain materials into the air or water from a property, including asbestos, and such release can form the basis for liability to third persons for personal injury or other damages. Other laws and regulations can limit the development of, and impose liability for, the disturbance of wetlands or the habitats of threatened or endangered species.

 

We own several properties that will require or are currently undergoing varying levels of environmental remediation. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. Although we have environmental insurance policies covering most of our properties, there is no assurance that these policies will cover any or all of the potential losses or damages from environmental contamination; therefore, any liability, fine or damage could directly impact our financial results.

 

We have significant investments in different countries and our worldwide after-tax income as well as our ability to repatriate it might be influenced by any change in the tax law in such countries.

 

Our effective tax rate reflected in our financial statements might increase or decrease over time as a result of changes in corporate income tax rates, or by other changes in the tax laws of the various countries in which we operate which could reduce our after-tax income or impose or increase taxes upon the repatriation of earnings from countries in which we operate.

 

Risks Related to Our Structure

 

We may face difficulties in obtaining or using information from our public subsidiaries.

 

We rely on information that we receive from our public subsidiaries both to provide guidance in connection with the business and to comply with our reporting obligations as a public company. We receive information from our public subsidiaries on a quarterly basis in connection with the preparation of our quarterly or annual results of operations. While we believe that we have been, and will continue to be, provided with all material information from our subsidiaries that we require to manage our business and

comply with our reporting obligations as a public company, we do not have formal arrangements to receive information with all of our public subsidiaries. In addition, directors in our public subsidiaries who are affiliated with us receive information at their periodic board meetings and through their discussions with management. However, the ability of these directors to use or disclose that information to others at Gazit-Globe prior to its disclosure by the public subsidiary may be subject to limitations resulting from the corporate governance and securities laws governing such subsidiaries and contractual and fiduciary obligations limiting the actions of their directors. In limited circumstances, we could face a conflict between our disclosure obligations and the disclosure obligations of our public subsidiaries. In addition, if we wish to engage in a capital markets or other transaction in which we are required to disclose certain information that our subsidiaries are not required or willing to disclose under their respective securities laws, we may need to change the timing or form of our capital raising plans. Our public subsidiaries are listed in different jurisdictions and operate in different geographic markets and do not present information regarding their operations on a uniform basis. Accordingly, we may not present certain data that is typically presented by other real estate companies in certain jurisdictions.

 

A significant portion of our business is conducted through public subsidiaries and our failure to generate sufficient cash flow from these subsidiaries, or otherwise receive cash from these subsidiaries, could result in our inability to repay our indebtedness.

 

We conduct the substantial majority of our operations through public subsidiaries that operate in our key regions around the world. After satisfying their cash needs, these subsidiaries have traditionally declared dividends to their stockholders, including us. In 2010, we received dividend payments of NIS 470 million from these subsidiaries, as well as interest payments of NIS 40 million on account of convertible debentures issued by certain of these subsidiaries. During the nine months ended September 30, 2011, we received and were entitled to dividend payments of NIS 399 million from these subsidiaries, as well as interest payments of NIS 34 million on account of convertible debentures issued by certain of these subsidiaries.

 

The ability of our subsidiaries in general, and our public subsidiaries in particular, to pay dividends and interest or make other distributions on equity to us, is subject to limitations that could change or become more stringent in the future. Applicable laws of the respective jurisdictions governing each subsidiary may place limitations on payments of dividends, interest or other distributions by each of our subsidiaries or may subject them to withholding taxes. The determination to pay a dividend is made by the boards of directors of each entity and our nominees or persons otherwise affiliated with us represent less than a majority of the members of the boards of directors of each of these entities. In addition, our subsidiaries incur debt on their own behalf and the instruments governing such debt may restrict their ability to pay dividends or make other distributions to us. Creditors of our subsidiaries will be entitled to payment from the assets of those subsidiaries before those assets can be distributed to us. The inability of our operating subsidiaries to make distributions to us could have a material adverse effect on our business, financial condition and results of operations.

 

The control that we exert over our public subsidiaries may be subject to legal and other limitations, and a decision by us to exert that control may adversely impact perceptions of investors in those subsidiaries.

 

Although we have a controlling interest in each of our public subsidiaries, Equity One, First Capital, Citycon and Gazit America, and have joint control over Atrium, they are publicly traded companies in which significant portions of the shares are held by public shareholders. These entities are subject to legal or regulatory requirements that are typical for public companies and we may be unable to take certain courses of action without the prior approval of a particular shareholder or a specified percentage of shareholders (either under shareholders’ agreements or by operation of law or the rules of a stock exchange). The existence of minority interests in certain of our subsidiaries may limit our ability to influence the operations of these subsidiaries, to increase our equity interests in these subsidiaries, to combine similar operations, to utilize synergies that may exist between the operations of different subsidiaries or to reorganize our structure in ways that may be beneficial to us. Under certain circumstances, the boards of directors of those entities may decide to undertake actions that they believe are beneficial to the shareholders of the subsidiary, but that are not

necessarily in the best interests of Gazit-Globe. In addition, in the event that one of our subsidiaries or affiliates issues additional shares either for purposes of capital raising or in an acquisition, our holdings in such subsidiary or affiliate may be diluted or we may be forced to invest capital in such subsidiary to avoid dilution at a time that is not of our choosing and that adversely impacts our capital requirements.

 

The market price of our ordinary shares may be adversely affected if the market prices of our publicly traded subsidiaries and affiliates decrease.

 

A significant portion of our assets is comprised of equity securities of publicly traded companies, including Equity One, First Capital, Citycon and Atrium. The stock prices of these publicly traded companies have been volatile, and have been subject to fluctuations due to market conditions and other factors which are often unrelated to operating results and which are beyond our control. Fluctuations in the market price and valuations of our holdings in these companies may affect the market’s valuation of the price of our ordinary shares and may also thereby impact our results of operations. If the value of our assets decreases significantly as a result of a decrease in the value of our interest in our publicly traded subsidiaries, our business, operating results and financial condition may be materially and adversely affected and the market price of our ordinary shares may also decline.

 

Changes in our ownership levels of our public subsidiaries and related determinations may impact the presentation of our financial statements and affect investor perception of us.

 

The determination under IFRS as to whether we consolidate the assets, liabilities and results of operations of our public subsidiaries depends on whether we have legal or effective control over these subsidiaries. As of September 30, 2011, we determined that we had effective control over Citycon, Equity One and First Capital even though we had less than a majority ownership interest and voting rights interest in each entity. In the future, our public subsidiaries may undertake securities offerings or issue securities in connection with acquisitions which result in dilution of our ownership interest. To date, we have frequently participated in securities offerings by our subsidiaries with the result that our ownership interest has generally not been diluted or the dilution has been minimal; however, there can be no assurance that we will do so in the future. Furthermore, we may determine that it is in our best interests and the best interests of our public subsidiaries that they undertake an acquisition that results in dilution to our equity position. In the recent acquisition of CapCo by Equity One, our voting rights interest was reduced from 45.2% to 39.2% which we subsequently increased to 43.1%. In the future, if we do not exercise effective control over a particular subsidiary, we will need to account for our investment in that subsidiary on an equity basis rather on a consolidated basis. If a change in the level of control which impacts whether and how we consolidate our public subsidiaries occurs, such an event may affect investor perception of us and our business model even if there is no material economic impact on our company.

 

It would have an adverse effect on our results of operations and our shareholders if we become subject to regulation under the U.S. Investment Company Act of 1940.

 

We believe that we will not be subject to regulation under the U.S. Investment Company Act of 1940, or the Investment Company Act, because we are not engaged in the business of investing or trading in securities. In the event we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. In this event, we would be required to register as an investment company and become obligated to comply with a variety of substantive requirements under the Investment Company Act, including limitations on capital structure, restrictions on specified investments, and compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses, which may make it impractical, if not impossible, for us to continue our business as currently conducted. Furthermore, as a non-U.S. entity, we would be unable to register as an investment company under the Investment Company Act, which could result in us needing to reincorporate as a U.S. entity or cease being a public company in the

United States. As a result of these restrictions, any determination that we are an investment company would have material adverse consequences for our investors.

 

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.

 

We enter into joint ventures, partnerships and other co-ownership arrangements for the purpose of making investments, which currently include primarily our investment in Atrium with Apollo (formerly CPI) and Equity One’s joint ventures with Liberty International Holdings Limited, Global Retail Investors LLC and DRA Advisors, LLC. Under the agreements with respect to certain of our joint ventures, we may not be in a position to exercise sole decision-making authority regarding the joint venture. Co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. While we have not experienced any material disputes in the past, disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.

 

Proposed changes to enhance Israeli corporate governance laws may adversely affect our ability to expand our business and raise capital.

 

In October 2011, an Israeli governmental committee appointed by the Prime Minister, the Minister of Finance and the Governor of the Bank of Israel, or the Committee, published its draft report on certain legislative and regulatory measures intended to enhance the competitiveness in the Israeli market. The proposed recommendations relate, among other issues, to structures of certain public companies in which the ultimate controlling shareholder owns, indirectly, through at least one parent public company, less than 50% of the equity interest in any company which is controlled by its public parent (also referred to by the Committee as a “Pyramidal Structure”). The draft report defines such companies as “Wedge Companies,” reflecting the wedge between the controlling shareholder’s effective control over such company and his or her minority equity stake in it. Gazit-Globe may be viewed as a “Wedge Company” under the Committee’s current definition, as it is controlled by Norstar, another public company listed on the TASE and ultimately controlled by Mr. Katzman who, indirectly, owns less than 50% of the equity interest in Gazit-Globe.

 

The Committee’s draft report includes recommendations which, if adopted, would place certain material burdens on Wedge Companies regarding corporate governance requirements, the manner in which such companies will have to approve certain actions and the ability to acquire control of such companies. For example, the draft report recommends that the following actions by a Wedge Company be approved at the company’s shareholders meeting, with a requirement that it be approved by a majority of the non-controlling shareholders: remuneration agreements with executive officers, the purchase of a substantial business or of a controlling interest in another public company, and capital raising (either equity or debt) in a substantial amount. In addition, the draft report recommends that at least a third of the board members of a Wedge Company be external directors (see “Management—Board Practices—External Directors”), and not only that the appointment of all external directors will require the vote of the majority of the non-controlling shareholders (as under the current rule), but also that the appointment will not require the regular majority vote by all shareholders, thus excluding the controlling shareholder from any involvement in the vote, and leaving it with no ability to block such appointment. The draft also recommends that the appointment of board members of a subsidiary will require the approval of the parent’s audit committee. In addition, if a tender offer is made for all the shares of a Wedge Company, under certain conditions, if such offer is not

successfully completed only because of the parent company’s objection to the offer, then the parent company will be obligated to purchase the (non-controlling) shareholders’ shares at the same price. The Committee also recommends that financing expenses in a corporation shall be attributed initially to revenue from dividends, and that there will be further substantial limitations on the permitted deduction of financing expenses from other sources of income. The draft report also raises the possibility of changing the voting power of a parent company in the shareholders’ meetings of its Wedge Company subsidiary, in a manner that only the indirect holdings of the ultimate shareholder (calculated by multiplying its interests in each of the parent companies) will be counted, thus increasing the voting power of the non-controlling shareholders at the expense of the controlling parent.

 

The Committee has called for responses from the public with respect to its draft proposals, and intends to hold public hearings thereon. After submitting its final report and recommendations, the Government of Israel will have to prepare, discuss and approve the detailed amendments to the Companies Law and other relevant statutes, and the Israeli Parliament will also have to discuss and approve such proposed amendments. We cannot predict what the Committee’s final recommendations will be and what the final amendments (if any) to the relevant statutes will be, as changes may be effected in each of the stages of the legislative process and if and when such process will be concluded.

 

If the preliminary recommendations of the Committee are adopted as proposed, our ability to enter into transactions such as the acquisition of a substantial business or a controlling interest in another public company or equity or debt fundraising that our board would determine to be in our best interests, could be limited since such transactions will require approval at a general meeting of shareholders, in a process which is lengthy and public and which requires shareholders who do not generally have the same level of understanding and professional knowledge regarding our company and our business as our board of directors to make the ultimate determination as to the approval of these transactions. If we are unable to consummate such transactions on a timely basis, or at all, our ability to expand our business and raise capital could be negatively affected. In addition, if the preliminary recommendations are so adopted, our tax liability may increase as a result of limitations that would be imposed on deduction of financing expenses.

 

Risks Related to Investment in our Ordinary Shares

 

An active, liquid and orderly trading market for our ordinary shares may not develop in the United States, the price of our ordinary shares may be volatile, and you could lose all or part of your investment.

 

Prior to this offering, there has been no public market in the United States for our ordinary shares. The initial public offering price of our ordinary shares in this offering will be based in part on the price of our ordinary shares on the TASE and determined by negotiation among us and the representatives of the underwriters. This price may not reflect the market price of our ordinary shares following this offering and the price of our ordinary shares may decline. In addition, the market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including:

 

 

 

Although we intend to apply to have our ordinary shares listed on the NYSE, an active trading market on the NYSE for our ordinary shares may never develop or may not be sustained following this offering. If an active market for our ordinary shares does not develop, it may be difficult to sell your ordinary shares in the U.S.

 

In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could incur substantial costs and our management’s attention and resources could be diverted.

 

Future sales of our ordinary shares could reduce the market price of our ordinary shares.

 

If we or our shareholders sell substantial amounts of our ordinary shares, either on the TASE or on the NYSE, or if there is a public perception that these sales may occur in the future, the market price of our ordinary shares may decline. We, our directors and officers, and the beneficial owners of 59.6% of our outstanding ordinary shares as of December 4, 2011 have agreed with the underwriters of this offering not to sell any ordinary shares, other than the shares offered through this prospectus, for a period of at least 90 days following the date of this prospectus. The ordinary shares we are offering for sale in this offering and 154,366,824 ordinary shares that are currently outstanding and traded on the TASE, 91,648,973 of which are subject to volume, manner of sale and other limitations under Rule 144, will be freely tradable in the United States immediately following this offering. As a result, except for the holders of 59.6% of our outstanding ordinary shares that are the subject of lock-up agreements entered into by the holders thereof in connection with this offering, all of our outstanding shares are available for sale on the TASE and the NYSE without restriction.

 

Raising additional capital by issuing securities may cause dilution to existing shareholders.

 

In the future, we may increase our capital resources by additional offerings of equity securities. Because our decision to issue equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our ordinary shares bear the risk of our future offerings reducing the market price of our ordinary shares and diluting their share holdings in us.

 

Although we have paid dividends in the past, and we expect to pay dividends in the future in accordance with our dividend policy, our ability to pay dividends may be adversely affected by our performance, the ability of our subsidiaries and affiliates to efficiently distribute cash to Gazit-Globe and, since we do not only use operating cash flows to pay our dividend, our ability to obtain financing.

 

In the past, our policy has been, subject to legal requirements, to distribute a quarterly dividend, the minimum amount of which we set before each fiscal year. We intend to continue our policy of distributing a quarterly dividend. Any dividend will depend on our earnings, financial condition and other business and economic factors affecting us at the time as our board of directors may consider relevant. We may pay dividends in any fiscal year only out of “profits,” as defined by the Israeli Companies Law, 5759-1999, as amended, or the Israeli Companies Law, unless otherwise authorized by an Israeli court, and provided that the distribution is not reasonably expected to impair our ability to fulfill our outstanding and expected obligations. Our ability to pay dividends is also dependent on whether our subsidiaries and affiliates distribute dividends to Gazit-Globe so that Gazit-Globe can have adequate cash for distribution to its shareholders and, since we do not only use operating cash flows to pay our dividend, on our ability to obtain financing. In the event that our subsidiaries or affiliates are restricted from distributing dividends due to their earnings, financial condition or results of operations or they determine not to distribute dividends, including as a result of taxes that may be payable with respect to such distribution, and in the event that our debt or equity financing is restricted or

limited, we may not be able to pay any dividends or in the amounts otherwise anticipated. If we do not pay dividends or pay a smaller dividend, our ordinary shares may be less valuable because a return on your investment will only occur if our stock price appreciates.

 

Our controlling shareholder has the ability to take actions that may conflict with the interests of other holders of our shares.

 

Chaim Katzman, our chairman, and certain members of his family own or control, including through private entities owned by them and trusts under which they are the beneficiaries, directly and indirectly, approximately 50.7% of Norstar’s outstanding shares as of September 30, 2011. Norstar had voting power of 58.5% of our issued ordinary shares as of September 30, 2011 and, after giving effect to this offering, will have voting power over 54.3% of our issued ordinary shares. Accordingly, Mr. Katzman is able to exercise control over the outcome of substantially all matters required to be submitted to our shareholders for approval, including decisions relating to the election of our board of directors. In addition, Mr. Katzman is able to exercise control over the outcome of any proposed merger or consolidation of our company. Mr. Katzman’s indirect control interest in us may discourage third parties from seeking to acquire control of us which may adversely affect the market price of our shares.

 

We do not expect that our ordinary shares will be included in any real estate index in the United States, which may impact demand among investors and adversely impact our share price.

 

We do not currently expect to qualify to be included in the real estate indexes in which the securities of many U.S. REITs are included. This may preclude certain investors that traditionally invest in real estate companies from investing in our shares and may adversely impact demand from other investors. This may adversely impact our share price and liquidity in the United States.

 

Risks Associated with our Ordinary Shares

 

Our ordinary shares will be traded on more than one market and this may result in price variations.

 

Our ordinary shares have been traded on the TASE since January 1983 and we have applied to have our ordinary shares listed on the NYSE. Trading in our ordinary shares on these markets will take place in different currencies (U.S. dollars on the NYSE and NIS on the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the TASE could cause a decrease in the trading price of our ordinary shares on the NYSE.

 

We will incur significant additional increased costs as a result of registering our ordinary shares under the Securities Exchange Act of 1934 and our management will be required to devote substantial time to compliance and new compliance initiatives.

 

As a public company in the United States, we will incur additional significant accounting, legal and other expenses that we did not incur before this offering. We also anticipate that we will incur costs associated with the requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs, such as additional stock exchange listing fees and shareholder reporting, and to take a significant amount of management’s time. The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant costs. In addition, following this offering, we will remain a publicly traded company on the TASE and be subject to Israeli securities laws and disclosure requirements. Accordingly, we will need to comply with U.S. and Israeli disclosure requirements and the resolution of any conflicts between those requirements may lead to additional costs and require significant management time.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure and other matters, may be implemented in the future, which may increase our legal and financial compliance costs, make some activities more time consuming and divert management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a publicly traded company in the United States and being subject to these rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

 

We have not yet determined whether our existing internal controls over financial reporting systems are compliant with Section 404 of the Sarbanes-Oxley Act and we cannot assure that there are no material weaknesses or significant deficiencies in our existing internal controls.

 

We will be required to comply with the internal control, evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act in our Annual Report on Form 20-F for the year ending December 31, 2012. We have not yet commenced the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404. This process will require the investment of substantial time and resources, including by our chief financial officer and other members of our senior management. In addition, the implementation of Section 404 procedures will require our public subsidiaries that are not otherwise subject to Section 404 (except Equity One which is subject to it) to become compliant, which may involve additional challenges and costs. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions in order to implement effective control over financial reporting. The determination and any remedial actions required could result in us incurring additional costs that we did not anticipate. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently, it could adversely affect our operations, financial reporting and/or results of operations and could result in an adverse opinion on internal controls from our independent auditors.

 

Recently, we and Equity One restated our respective financial statements as of June 30, 2011 and for the six-month period ended on that date and as of March 31, 2011 and for the three-month period ended on that date to correct an error in the financial statements of Equity One. The error related to the fair value of units in Equity One’s joint venture with Liberty International Holding Limited, or Liberty. Equity One’s management classified this deficiency as a material weakness and on November 9, 2011, Equity One reported that the remediation measures had been completed. In light of the error, we reexamined our application of fair value accounting guidance, as it applies to the valuation of securities, the component within our overall internal control over financial reporting that relates to the error resulting in the restatement. Following the reexamination of our application of fair value accounting guidance, as it applies to the valuation of securities, management and our board of directors concluded that, as of March 31, June 30 and September 30, 2011, there was a significant deficiency in the internal control intended to test the reasonableness of the calculation of the fair value of the units in the joint venture allocated to Liberty. The deficiency could impact our valuation of non-routine, material, complex transactions that require an element of recording a reporting at fair value. There can be no assurance that additional material weaknesses or significant deficiencies will not be identified in the future with respect to our system of internal controls over financial reporting.

As a foreign private issuer, we are permitted to and will follow certain home country corporate governance practices instead of applicable SEC and NYSE requirements, which may result in less protection than is accorded to shareholders under rules applicable to domestic issuers.

 

As a foreign private issuer, in reliance on Section 303A.11 of the NYSE Listed Company Manual, which permits a foreign private issuer to follow the corporate governance practices of its home country, we will be permitted to follow certain home country corporate governance practices instead of those otherwise required under the NYSE corporate governance standards for domestic issuers. As of the consummation of this offering, we intend to follow the NYSE corporate governance standards for domestic issuers, except with respect to private placements to directors, officers or 5% shareholders, with respect to which we intend to follow home country practice in Israel, under which we may not be required to seek approval of our shareholders for such private placements which would require shareholder approval under NYSE rules applicable to a U.S. company. We may in the future elect to follow home country practice in Israel with regard to formation of compensation, nominating and corporate governance committees, separate executive sessions of independent directors and non-management directors and shareholder approval for establishment and material amendments of equity compensation plans and transactions involving below market price issuances in private placements of more than 20% of outstanding shares, or issuances that result in a change in control. If we follow our home country governance practices on these matters, we may not have a compensation, nominating or corporate governance committee, we may not have mandatory executive sessions of independent directors and non-management directors, and we may not seek approval of our shareholders for material amendments of equity compensation plans and the share issuances described above. Accordingly, following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NYSE may provide less protection than is accorded to investors under the NYSE corporate governance standards applicable to domestic issuers.

 

All of the shares held by our majority shareholder, Norstar Holdings Inc., are pledged to secure its indebtedness and foreclosure on the pledge could adversely impact the market price of our ordinary shares.

 

Our majority shareholder, Norstar, had voting power over 58.5% of our outstanding shares as of September 30, 2011 or 54.3% after giving effect to this offering. Norstar is a public company listed on the Tel Aviv Stock Exchange. Our shares held by Norstar are pledged predominantly to a number of financial institutions who are lenders to Norstar and are otherwise pledged to secure Norstar’s debentures. Although Norstar has agreed with the underwriters not to sell any ordinary shares for a period of at least 90 days after the date of this prospectus, the agreement does not prevent the transfer of ordinary shares to those secured parties in the event they foreclose on their pledge following a default by Norstar. Based on Norstar’s most recent publicly filed reports in Israel, Norstar was in compliance as of September 30, 2011 with all of the covenants governing such indebtedness, including the requirement that the value of the pledged shares exceeds a certain percentage of the amount of outstanding indebtedness (“loan to value ratios”). In addition, Norstar may otherwise breach applicable covenants or default on required payments. Under those circumstances, if the secured parties foreclose on the pledge, they may acquire and seek to sell the pledged shares. The secured parties will not be subject to any restrictions other than those that apply under applicable U.S. and Israeli securities laws, and there can be no assurance that they would do so in an orderly manner. Furthermore, the mere foreclosure on the pledge and transfer of shares to such financial institutions would likely be perceived adversely by investors. Finally, in the event that the secured parties do not transfer the shares immediately, their interests may differ from those of our public stockholders. Any of these events could adversely impact the market price of our ordinary shares.

 

Our United States shareholders may suffer adverse tax consequences if we are characterized as a “passive foreign investment company.”

 

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company for United States federal income tax purposes. To determine whether at least 50%

of our assets are held for the production of, or produce, passive income, we may use the market capitalization method for certain periods. Under the market capitalization method, the total asset value of a company would be considered to equal the fair market value of its outstanding shares plus outstanding indebtedness on a relevant testing date. Because the market price of our ordinary shares may fluctuate after this offering and may be volatile, and the market price may affect the determination of whether we will be considered a passive foreign investment company, there can be no assurance that we will not be considered a passive foreign investment company for any taxable year. If we are characterized as a passive foreign investment company, our United States shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are United States holders, and having interest charges apply to distributions by us and the proceeds of share sales. See “Taxation—Material United States Federal Income Tax Considerations—Passive foreign investment company considerations.”

 

Our United States shareholders may suffer adverse tax consequences if we are characterized as a “United States-owned foreign corporation” unless such United States shareholders are eligible for the benefits of the U.S.-Israel income tax treaty and elect to apply the provisions of such treaty for U.S. tax purposes.

 

Subject to certain exceptions, a portion of our dividends will be treated as U.S. source income for United States foreign tax credit purposes, in proportion to our U.S. source earnings and profits, if we are treated as a United States-owned foreign corporation for United States federal income tax purposes. Generally, we will be treated as a United States-owned foreign corporation if United States persons own, directly or indirectly, 50% or more of the voting power or value of our shares, which will become more likely as a result of this offering. To the extent any portion of our dividends is treated as U.S. source income pursuant to this rule, the ability of our United States shareholders to claim a foreign tax credit for any Israeli withholding taxes payable in respect of our dividends may be limited. We do not expect to maintain calculations of our earnings and profits under United States federal income tax principles and, therefore, if we are subject to the resourcing rule described above, United States shareholders should expect that the entire amount of our dividends will be treated as U.S. source income for United States foreign tax credit purposes. Importantly, however, United States shareholders who qualify for benefits of the U.S.-Israel income tax treaty may elect to treat any dividend income otherwise subject to the sourcing rule described above as foreign source income, though such income will be treated as a separate class of income subject to its own foreign tax credit limitations. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor to determine whether and to what extent you will be entitled to this credit, including the impact of, and any exception available to, the special sourcing rule described in this paragraph, and the availability and impact of the U.S.-Israel income tax treaty election described above. See “Taxation—Material United States Federal Income Tax Considerations—Distributions.”

 

Risks Related to Our Operations in Israel

 

We conduct our operations in Israel and therefore our business, financial condition and results of operations may be adversely affected by political, economic and military instability in Israel.

 

Our headquarters are located in central Israel and many of our key employees and officers and most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there has been an increase in unrest and terrorist activity, which began in September 2000 and has continued with varying levels of severity into 2011. In mid-2006, Israel was engaged in an armed conflict with Hezbollah in Lebanon, resulting in thousands of rockets being fired from Lebanon and disrupting most day-to-day civilian activity in northern Israel. Starting in December 2008, for approximately three weeks, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in

Israel. Recent popular uprisings in various countries in the Middle East and North Africa are affecting the political stability of those countries. Such instability may lead to a deterioration in the political and trade relationships that exist between the State of Israel and these countries. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our business, financial condition and results of operations.

 

For example, any major escalation in hostilities in the region could result in a portion of our employees, including executive officers, directors, and key personnel, being called up to perform military duty for an extended period of time or otherwise disrupt our normal operations. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. Our operations could be disrupted by the absence of a significant number of our employees or of one or more of our key employees. Such disruption could materially adversely affect our business, financial condition and results of operations. Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East, such as damages to our facilities resulting in disruption of our operations. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or will be adequate in the event we submit a claim.

 

Provisions of Israeli law and our articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

 

Israeli corporate law regulates mergers, requires that acquisitions of shares above specified thresholds be conducted through special tender offers, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. Israeli tax considerations may also make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax or who are not exempt under the provisions of the Israeli Income Tax Ordinance from Israeli capital gains tax on the sale of our shares. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. These provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares.

 

The provisions of our articles of association, as currently in effect, provide that at any annual general meeting, the office of a number of directors equal to the total number of directors in office immediately prior to the annual general meeting (other than external directors), divided by four and rounded down to the nearest whole number, shall expire and their successors shall be appointed, provided that each director shall be a candidate for replacement or reappointment at least once every five years. Our articles of association also require that the approval of 75% of the shares present and voting at a general meeting is required to amend them. We have determined that we are convening an extraordinary general meeting to amend our articles of association (i) to provide for a classified board with three classes, each of which has a three-year term and (ii) to decrease the approval requirement for amendments to our articles of association to 60% from 75%. Although Norstar, which holds 58.5% of our outstanding share capital, has undertaken to support the proposed amendments to the articles of association, there can be no assurance that we will obtain the requisite approval of 75% of the shares present and voting at a general meeting and therefore the provisions of our current articles of association may ultimately remain in effect following the extraordinary general meeting.

 

It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this prospectus in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts.

 

We are incorporated in Israel. Most of our executive officers and directors are not residents of the United States. Our independent registered public accounting firm is not a resident of the United States. The

majority of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above.

 

Your rights and responsibilities as a shareholder will be governed by Israeli law which differs in some respects from the rights and responsibilities of shareholders of U.S. companies.

 

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in the company or has another power with respect to the company, has a duty to act in fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. Because Israeli corporate law underwent extensive revisions approximately ten years ago, the parameters and implications of the provisions that govern shareholder conduct have not been clearly determined and there is limited case law available to assist us in understanding the implications of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.

 

We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. The statements we make regarding the following subject matters are forward-looking by their nature:

 

 

The forward-looking statements contained in this prospectus reflect our views as of the date of this prospectus about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. You are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

All of the forward-looking statements we have included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

Our ordinary shares have been trading on the TASE under the symbol “GLOB” since January 1983. No trading market currently exists for our ordinary shares in the United States. We have applied to have our ordinary shares listed on the NYSE under the symbol ‘‘GZT.”

 

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and U.S. dollars.

 

 

On December 4, 2011, the last reported sale price of our ordinary shares on the TASE was NIS 39.28 per share, or U.S.$10.52 per share (based on the exchange rate of NIS 3.732 = U.S.$1.00 reported by the Bank of Israel as of such date).

 

As of December 4, 2011, there were 50 shareholders of record of our ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, as shares of shareholders who hold shares on the TASE are partly recorded in the name of our nominee company, Bank Leumi le-Israel Registration Company Ltd.

 

In this prospectus, for convenience only, we have translated the New Israeli Shekel, or NIS, amounts reflected in our financial statements as of and for the year ended December 31, 2010 and as of and for the nine months ended September 30, 2011 into U.S. dollars at the rate of NIS 3.712 = U.S.$1.00, based on the daily representative rate of exchange between the NIS and the U.S. dollar reported by the Bank of Israel on September 30, 2011. You should not assume that, on that or on any other date, one could have converted these amounts of NIS into dollars at that or any other exchange rate.

 

The following table sets forth, for each period indicated, the low and high exchange rates for U.S. dollars expressed in NIS, the exchange rate at the end of such period and the average of such exchange rates on the last day of each month during such period, based upon the representative rate of exchange as published by the Bank of Israel. The exchange rates set forth below demonstrate trends in exchange rates, but the actual exchange rates used throughout this prospectus may vary.

 

 

The following table sets forth, for each of the last six months, the low and high exchange rates for U.S. dollars expressed in NIS, the exchange rate at the end of the month and the average of such exchange rates, based on the daily representative rate of exchange as published by the Bank of Israel.