UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35378

GAZIT-GLOBE LTD.

(Exact name of registrant as specified in its charter)

Israel

(Jurisdiction of incorporation or organization)

1 Hashalom Rd.

Tel-Aviv 67892, Israel

(972)(3) 694-8000

(Address of principal executive offices)

Adi Jemini,

Chief Financial Officer

Tel: (972)(3) 694-8000

Email: ajemini@gazitgroup.com

1 Hashalom Rd. Tel-Aviv 67892, Israel

(Name, telephone, email and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 195,550,414 Ordinary Shares, par value NIS 1.00 per share (excluding Treasury Shares).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one).

Large Accelerated Filer ☒     Accelerated Filer ☐     Non-Accelerated Filer ☐     Emerging Growth Company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards^† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes ☒ No

GAZIT-GLOBE LTD.

FORM 20-F

ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016

TABLE OF CONTENTS

Introduction and Use of Certain Terms

Unless otherwise indicated, all references to (i) “we,” “us,” or “our,” are to Gazit-Globe Ltd. and, where applicable, its investees, and (ii) “Gazit-Globe” or the “Company” are to Gazit-Globe Ltd., not including any of its investees.

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

As of December 31, 2016 our principal subsidiaries were:

Presentation of Financial Information

Our audited consolidated financial statements included elsewhere in this annual report have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

Unless otherwise noted, all monetary amounts are in New Israeli Shekel (or “NIS”), and for the convenience of the reader certain NIS amounts have been translated into U.S. dollars at the rate of NIS 3.845 = 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 December 31, 2016. References herein to (i) “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” mean the legal currency of Brazil.

We also refer in various places within this annual report to non-IFRS measures, including NOI, Adjusted EBITDA, EPRA Earnings, Adjusted EPRA Earnings, EPRA NAV and EPRA NNNAV. For definitions and reconciliations of NOI, Adjusted EBITDA, EPRA Earnings, Adjusted EPRA Earnings, 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 “Item 5—Operating and Financial Review and Prospects”. The presentation of these non-IFRS measures is not meant to be considered in isolation or as a substitute for our consolidated financial results prepared in accordance with IFRS as issued by the IASB.

Forward-Looking Statements

We make forward-looking statements in this annual report that are subject to risks and uncertainties. These forward-looking statements include, but are not limited to, 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,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. The forward-looking statements contained in this annual report reflect our views as of the date of this annual report 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 guaranty future events, results, actions, levels of activity, performance or achievements. You are cautioned not to place undue reliance on these forward-looking statements. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could have an impact on us include, but are not limited to, the following:

Readers are urged to read this annual report and carefully consider the risks, uncertainties and other factors that affect our business. The information contained in this annual report is subject to change without notice, and we are not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by us with the Securities Exchange Commission (“SEC”).

Statistical Data

This annual report also includes statistical data regarding the commercial real estate rental industry. We generated some of this data internally, and some was obtained from independent industry publications and reports what we believe to be reliable sources. We have not independently verified this data nor sought the consent of any organizations to refer to their reports in this annual report.

Not applicable.

Not applicable.

The following tables set forth our selected consolidated financial data. You should read the following selected consolidated financial data in conjunction with “Item 5—Operating and Financial Review and Prospects” and our audited consolidated financial statements and related notes included elsewhere in this annual report. Historical results are not necessarily indicative of the results that may be expected in the future. Our financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

The selected consolidated statement of income data set forth below for each of the years ended December 31, 2014, 2015, and 2016 and the selected consolidated balance sheet data set forth below as of December 31, 2015 and 2016 are derived from our audited consolidated financial statements appearing in this annual report. For these periods, Equity One and Luzon Group are presented in the consolidated statements of income data under discontinued operations, giving effect to the Regency Merger in March 2017 and Gazit Development’s sale of its entire holding in Luzon Group in January 2016. Following the Regency Merger, Equity One is presented in the consolidated statements of financial position as of December 31, 2016 under assets and liabilities classified as held for sale. See Note 9(d) to our audited consolidated financial statements included elsewhere in this annual report. The selected consolidated statement of income data for each of the years ended December 31, 2012 and 2013, and the selected consolidated balance sheet data as of December 31, 2012, 2013 and 2014, are derived from our audited consolidated financial statements that are not included in this annual report. The selected consolidated statements of income data for each of the years ended December 31, 2012 and 2013 have been reclassified to present Equity One and Luzon Group as discontinued operations, and such reclassification has not been audited.

The selected consolidated financial data set forth below should be read in conjunction with “Item 5—Operating and Financial Review and Prospects” and our audited consolidated financial statements and notes to those statements for the years ended December 31, 2014, 2015 and 2016 included elsewhere in this annual report. Historical results are not necessarily indicative of future results. The following tables also contain translations of NIS amounts into U.S. dollars for amounts presented as of and for the year ended December 31, 2016. These translations are solely for the convenience of the reader and were calculated at the rate of NIS 3.845 = U.S.$ 1.00, the daily representative rate of exchange between the NIS and the U.S. dollar reported by the Bank of Israel on December 31, 2016. 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.

Exchange Rate Information

The following table sets forth, for each period indicated, the low and high exchange rates for NIS expressed as NIS per U.S. dollar, the exchange rate at the end of such periods and the average of such exchange rates during such periods, based on the daily 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 annual report may vary.

The following table shows, for each of the months indicated, the high and low exchange rates between the NIS and the U.S. dollar, expressed as NIS per U.S. dollar and based upon the daily representative rate of exchange as published by the Bank of Israel:

On April 10, 2017, the daily representative rate of exchange between the NIS and U.S. dollar as published by the Bank of Israel was NIS 3.649 to $1.00.

Not applicable.

Not applicable.

Our business involves a high degree of risk. Please carefully consider the risks we describe below in addition to the other information set forth elsewhere in this annual report and in our other filings with the SEC. These material risks could adversely affect our business, financial condition and results of operations.

Risks Related to Our Business and Operations

The economic performance and value of our shopping centers depend on many factors, each of which could have an adverse impact on our cash flows and operating results.

The economic performance and value of our properties can be affected by many factors, including the following:

To the extent that any of these conditions occurs or accelerates, it could adversely affect market rents for retail space, portfolio occupancy, our ability to sell, acquire or develop properties, and cash available for distribution to shareholders.

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 2016, our rental income (assuming full consolidation of jointly-controlled entities and discontinued operations) was derived as follows: 30.7% from Canada, 22.6% from the United States, 24.9% from Northern and Western Europe, 17.1% from Central and Eastern Europe, 3.3% from Israel, and 1.5% from Brazil. Our operations in the United States were conducted through Equity One, which is presented in our audited consolidated financial statements included elsewhere in this annual report as a discounted operation. During the economic downturn of 2008-2009, general market conditions deteriorated in many of our markets, particularly the United States and Central and Eastern Europe. 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 90.7% as of December 31, 2010. 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 were devalued against the NIS during that period. Although general market conditions have improved 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 economies in many of the cities within our markets have continued to gradually improve (with certain exceptions, including Russia), 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 have been vulnerable to declining sales and reduced access to capital. Europe in particular remains vulnerable to volatile financial and credit markets due to economic and political uncertainties, including the United Kingdom’s decision to withdraw from the European Union, the ongoing refugee crisis, financial uncertainty in Greece and a lack of confidence in the European Union’s banking system and Finland’s credit rating was downgraded by Fitch in the first quarter of 2016. Additionally, Russia is suffering from significant economic and political turmoil. 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. 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 other investees.

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 provide 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 investees issue could have rights, preferences and privileges senior to those of holders of our ordinary shares. If our public investees raise additional funds through further issuances of equity or convertible debt securities, Gazit-Globe, as the holder of equity securities of our public investees, could suffer significant dilution, and any new equity securities our public investees 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 particularly 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 6.6% of Citycon’s rental income in 2016, AFM (and other affiliated brands) accounted for 4.0% of Atrium’s rental income in 2016, and Loblaws and Sobey’s accounted for 10.2% and 6.6% respectively, of First Capital’s total annual minimum rent as of December 31, 2016. In addition, supermarkets and other grocery stores, many of which are anchor tenants, accounted for approximately 16.2% of our total rental income in 2016.

Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis. Any reduction in our tenants’ abilities to pay rent or other charges on a timely basis, including tenants filing for bankruptcy protection, could adversely affect our financial condition and results of operations. In the event of default by tenants, we may experience delays and unexpected costs in enforcing our rights as landlords under the leases, which may also adversely affect our financial condition and results of operations.

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, delay lease commencement or reduce their square footage needs. 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.

Online sales can have an adverse impact on our tenants and our business.

The use of the internet by consumers continues to gain in popularity and growth in online sales is likely to continue in the future. The increase in online sales could result in a downturn in the business of some of our current tenants and could affect the way other current and future tenants lease space. For example, the migration towards online sales has led many retailers to reduce the number and size of their traditional “brick and mortar” locations in order to increasingly rely on e-commerce and alternative distribution channels. Many tenants also permit merchandise purchased on their websites to be picked up at, or returned to, their physical store locations, which may have the effect of decreasing the reported amount of their in-store sales and the amount of rent we are able to collect from them (particularly with respect to those tenants who pay rent based on a percentage of their in-store sales). We cannot predict with certainty how growth in online sales will impact the demand for space at our properties or how much revenue will be generated at traditional store locations in the future. If we are unable to anticipate and respond promptly to trends in retailer and consumer behavior, our occupancy levels and financial results could be negatively impacted.

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 December 31, 2016, Gazit-Globe and its private subsidiaries had outstanding interest-bearing debt in the aggregate amount of NIS 15,146 million (U.S.$ 3,939 million) and other liabilities outstanding in the aggregate amount of NIS 1,113 million (U.S.$ 289 million) of which approximately 10.3% matures during 2017. On a consolidated basis, we had debt and other liabilities outstanding as of December 31, 2016 in the aggregate amount of NIS 53,119 million (U.S.$ 13,815 million), of which 12.1% matures during 2017. We are subject to covenant compliance obligations and each of our public subsidiaries and certain other investees is subject to its own covenant compliance obligations. Furthermore, the indebtedness of each of our public investees is independent of each other investee and is not subject to any guaranty 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 investees. For example, it could:

If our or our public investees’ internally generated cash is inadequate to repay indebtedness upon an event of default or upon maturity, then we or our public investees will be required to repay or refinance the debt. If we or our public investees are unable to refinance our or their indebtedness on acceptable terms or if the amount of refinancing proceeds is insufficient to fully repay the existing debt, we or our public investees might be forced to dispose of properties, potentially upon disadvantageous terms, which might result in losses and might adversely affect our or their 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 investees 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 investees, 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 finance expenses. Another covenant requires First Capital to maintain a minimum ratio of EBITDA to finance expenses. If the performance of any of our public investees causes us to breach such covenants in our debt financing agreements or the debt financing agreements of public investees, we or they may be required to prepay amounts of indebtedness that we or they may be unable to pay at such time, which would cause us or them to default under such agreements.

Should we or our public investees 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 investees 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 may 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 investees, as applicable, may be required to prepay the relevant loan. A significant portion of Gazit-Globe’s equity interests in its subsidiaries and other investees are pledged as collateral for Gazit-Globe’s revolving credit facilities and other indebtedness incurred by Gazit-Globe and its private subsidiaries. As of December 31, 2016, the principal amount of such indebtedness was NIS 2,839 million (U.S.$ 738 million), which constituted 6.3% of our consolidated indebtedness as of such date. In the event that Gazit-Globe is required to prepay its loans and is unable to do so, the lenders under such loans may determine to pursue remedies against Gazit-Globe and cause the sale of those equity interests, which could have an adverse effect on our financial condition and results of operations. In addition, since certain of our properties were mortgaged to secure payment of indebtedness with a principal amount of NIS 5,853 million (U.S.$ 1,522 million) as of December 31, 2016, which constituted 13.0% 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.

Volatility in the credit markets may affect our ability to obtain or re-finance our indebtedness at a reasonable cost.

At times during the last decade, global credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which at times caused the spreads on debt financings to widen considerably. Additionally, the U.S. Federal Reserve System increased short-term interest rates in December 2015, December 2016 and March 2017, and expressed intentions to further increase rates in the near future. If a downturn or dislocation in credit markets were to occur or if interest rates were to dramatically increase from their current low levels, we may experience difficulty refinancing our upcoming debt maturities at a reasonable cost or with desired financing alternatives. For example, it may be difficult to raise new unsecured financing in the form of additional bank debt or corporate bonds at interest rates that are appropriate for our long term objectives. Any change in our credit ratings could further impact our access to capital and our cost of capital. Additionally, we may be unable to further diversify our lending portfolio so as not to depend substantially on Israeli financial institutions for our financing requirements due to market conditions or other factors, which may limit our ability to efficiently access credit markets. To the extent we are unable to efficiently access the credit markets, we may need to repay maturing debt with proceeds from the issuance of equity or the sale of assets. In addition, lenders may impose upon us more restrictive covenants, events of default and other conditions.

The inability of any of our public investees 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 and on the equity method for certain public investees, our public investees 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 our public investees since the liquidity and available borrowings of each of them are not available to support the others’ operations. Although we have from time to time purchased equity securities of our public investees, we have not generally made shareholder loans to them (with exceptions during 2014 and 2015, when we made loans to Luzon Group, see Note 9(g) to our audited consolidated financial statements included elsewhere in this annual report) and may have insufficient resources to do so even if our overall financial position on a consolidated basis is positive. Each public investee is subject to its own covenant compliance obligations and the failure of any public investee 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.

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. 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 potentially 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 our investment of significant resources without realizing a return and may adversely impact our future growth.

If we 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, notes, debentures and convertible debentures in public and private offerings. Our public investees 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 partly on bank lending and others depending significantly on accessing the capital markets. Our ability to obtain economically desirable financing terms 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.

Future terrorist acts and shooting incidents could harm the demand for, and the value of, our properties.

Over the past few years, a number of terrorist acts and shootings have occurred at retail properties throughout the world, including highly publicized incidents in the U.S., Europe and Israel. In the event concerns regarding safety were to alter shopping habits or deter customers from visiting shopping centers, our tenants would be adversely affected, as would the general demand for retail space. Additionally, if such incidents were to continue, insurance for such acts may become limited or subject to substantial cost increases.

Many of our real estate costs are fixed, even if income from our properties decreases.

Our financial results depend in part on leasing space to tenants on favorable financial terms. Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs generally are not reduced even when a property is not fully occupied, or when rental rates decrease, or when other circumstances cause a reduction in income from the property. As a result, cash flow from the operations of the properties may be reduced if a tenant does not pay its rent or we are unable to fully lease the properties on favorable terms. Additionally, properties that we develop or redevelop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such projects until they are fully occupied.

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, 2016, 30.7% of our rental income (assuming full consolidation of jointly-controlled entities and discontinued operation) was earned in Canadian dollars, 29.7% in Euros, 22.9% in U.S. dollars, 3.0% in Swedish Krona, 5.7% in Norwegian Krone, 3.3% in NIS and 4.7% in other currencies. In addition, our reporting currency is the NIS, and the functional currency is separately determined for each of our subsidiaries and certain of our investees. When an investee’s functional currency differs from our reporting currency, the financial statements of such investee 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 average annual rate in NIS of the U.S. Dollar, the Canadian Dollar and the Euro weakened by 1.2%, 4.9% and 1.5%, respectively, for 2016 compared to 2015, which resulted in our net operating income decreasing by 2.1% or a total amount of NIS 89 million. 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. 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 certain of our investees 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.

Furthermore, the Company engages in currency and interest rate swap transactions, some of which are governed by agreements entered into by the Company that provide for mechanisms for the current settling of accounts in connection with the fair value of the swap transactions. Consequently, the Company could be required, from time to time, to transfer material amounts to the banking institutions based on the fair value of such transactions.

Our ability to manage risks through derivatives may be negatively affected by the Dodd-Frank Act and legislation initiatives of the European Commission, which provide for a new framework of regulation of over-the-counter derivatives markets. These new regulations may require us to clear certain types of transactions currently traded in the over-the-counter derivative markets through a central clearing organization and may limit our ability to customize derivative transactions for our needs. As a result, we may experience additional collateral requirements and costs associated with derivative transactions.

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

As of December 31, 2016, approximately 10.3%, 6.9% and 3.9% of our total GLA was located in the greater Toronto area (Canada), the 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 Russia and Brazil, which as of December 31, 2016 comprised 16.7% and 2.1% of our total GLA, respectively, and in India, where we have an investment commitment in Hiref International LLC (“Hiref”), a real estate fund, for U.S.$ 110 million (of which we had invested U.S.$ 95 million through December 31, 2016) 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 (including Market Abuse Regulation in the European Union) 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. Recent examples of potentially detrimental developments in emerging markets include the economic downturn and political developments in Brazil (including the impeachment of president Dilma Rousseff in 2016) and the geopolitical tension between Russia and its neighbors. 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.

Furthermore, we are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”) and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. We currently and may in the future conduct business in countries and regions in which we may face, directly or indirectly, corrupt demands by officials, tribal or insurgent organizations, or private entities. Thus, we face the risk of unauthorized payments or offers of payments by one of our employees or consultants, even though these parties are not always subject to our control. Our existing safeguards and any future improvements may prove to be less than effective, and our employees and consultants may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition or results of operations. In addition, governments may seek to hold us liable for successor liability anti-corruption violations committed by our investees.

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 audited 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 properties even if no actual disposition of assets took place. For example, in 2016, we increased the fair value of our properties on a consolidated basis by NIS 885 million and in 2015 we decreased the fair value of our properties on a consolidated basis by NIS 372 million.

The valuation of property is inherently subjective due to the individual nature of each property as well as exposure to macro-economic conditions. As a result, valuations are subject to uncertainty. Fair value of investment property including development and land was determined by accredited independent appraisers with respect to 68.5% of such investment properties during the year ended December 31, 2016 (53.5% of which were performed at December 31, 2016). A significant proportion of the valuations of our properties were not performed by appraisers at the balance sheet date, based on materiality thresholds and other considerations 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 value of their real estate assets on a quarterly basis. As a result, significant declines or fluctuations in the value of their real estate could impact us disproportionately compared to these other companies.

In addition, in recent years several amendments have been made to IFRS standards, including those that affect us, and we have had to revise our accounting policies in order to comply with such amended standards. Commonly, the transition provisions of these amendments require us to implement the amendments with respect to comparative figures as well. Figures with respect to prior periods that are not required to be included in our financial statements are therefore not adjusted retrospectively. As a result, the utility of the comparative figures for certain years may be limited.

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 investees.

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 investees. Mr. Katzman does not have an employment agreement with Gazit-Globe. Even though his employment agreement has expired, Mr. Katzman is continuing to serve as our executive chairman. As of December 31, 2016, Mr. Katzman also served as the chairman of the board of Equity One, Citycon, Atrium, and Norstar, and as a director of First Capital. With respect to some of these positions, Messrs. Katzman has written engagement and remuneration agreements with these public investees. As of December 31, 2016, Dor J. Segal served as the executive vice chairman of the board of Gazit-Globe, chairman of the board of First Capital, deputy chairman of the board of Citycon, vice chairman of the board of Equity One and vice chairman of the board and CEO of Norstar. Mr. Segal no longer serves on the board of Citycon as of the date of this annual report. In January 2017, Mr. Segal was appointed vice chairman of the board and CEO of Gazit-Globe. Mr. Segal intends to step down as CEO of Norstar and will be replaced by Mr. Katzman, subject to approval by Norstar’s shareholders in the annual general meeting. Effective as of March 1, 2017, Equity One completed the Regency Merger and is no longer a consolidated subsidiary of Gazit-Globe. In connection with such merger, Mr. Katzman was appointed to serve as the non-executive vice chairman of Regency’s board of directors, and Mr. Segal no longer serves on the board of Equity One. In addition, legislation in Israel, specifically Amendment 20 to the Israeli Companies Law, requires, in certain circumstances, that the Company’s compensation plan for officers as well as the employment agreement of its CEO be approved by a special majority shareholder vote. The loss of some or all of these individuals or an inability to attract, retain and maintain additional personnel, including due to the possible failure to attain special majority shareholder approval as aforementioned, 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 guarantee 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 retail 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 acquisition prices increase, 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 are at various stages of development and redevelopment (including expansions), representing 1.0% and 4.1%, respectively, of the value of our properties (including our jointly-controlled entities and discontinued operation) as of December 31, 2016. 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. 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. 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 Regency to be treated as a REIT could have an adverse effect on our investment in Regency.

As of December 31, 2016, Regency has been treated as a Real Estate Investment Trust (“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 Regency ceases to be treated as a REIT and cannot qualify for any relief provisions under the Internal Revenue Code of 1986, as amended (the “Code”), Regency would generally be subject to an entity-level tax on its income at the graduated rates applicable to corporations. Such tax would reduce Regency’s profitability and would have an adverse effect on our investment in Regency.

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 represented 0.8% of our total GLA as of December 31, 2016. 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 guarantee 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 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 operations. In addition, each maintenance, 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.

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 rely extensively on computer systems to process transactions and manage our business. Disruptions in both our primary and secondary (back-up) systems or breaches of our network security could harm our ability to run our business and expose us to liability.

In order to successfully operate our business, it is essential that we maintain uninterrupted operation of our business-critical computer systems. Our computer systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, cyber-attacks, catastrophic events such as fires, hurricanes, earthquakes and tornadoes, and usage errors by our employees. If our computer systems cease to function properly or are damaged, we may have to make a significant investment to repair or replace them, and we may suffer interruptions in our operations in the interim. Any material interruption in our computer systems may have a material adverse effect on our business or results of operations.

Additionally, increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. In the event a security breach or failure results in the disclosure of sensitive third party data or the transmission of harmful/malicious code to third parties, we could be subject to liability claims. Depending on their nature and scope, such threats also could potentially lead to improper use of our systems and networks, manipulation and destruction of data, loss of trade secrets, system downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

If we do not maintain the security of tenant-related information, we could incur substantial costs and become subject to litigation.

We receive certain information about our tenants that depends upon secure transmissions of confidential information over public networks, including information permitting cashless payments. A compromise of our security systems that results in information being obtained by unauthorized persons could result in litigation against us or the imposition of penalties and require us to expend significant resources related to our information security systems. Such disruptions could adversely affect our operations, results of operations, financial condition and liquidity.

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.

We have in the past restated our historical financial statements. Restatements of our historical financial statements may have a material adverse effect on our business, financial condition or operations.

During 2014, we restated our audited consolidated financial statements as of and for the year ended December 31, 2013 (which also included corrections to the audited consolidated financial statements as of and for the year ended December 31, 2012, which were not material) and our audited consolidated financial statements as of and for the period ended March 31, 2014, to retrospectively reflect a change in the estimated revenues and costs for completion of construction projects of Dori Construction, which was sold as of January 2016. See Note 9(g) to our audited consolidated financial statements included elsewhere in this annual report.

We cannot be certain that measures we have taken to prevent future restatements will ensure that no additional restatements will occur in the future. A restatement may affect investor confidence in the accuracy of our financial disclosures, may raise reputational issues for our business, and frequently triggers litigation.

In addition, we may receive inquiries from the SEC, the Israeli Securities Authority, or the Canadian Securities Administrators regarding our past restated financial statements or matters relating thereto. Any future inquiries from the SEC, the Israeli Securities Authority, or the Canadian Securities Administrators as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our internal resources and result in additional legal and accounting costs. The restatement of our historical financial statements may result in litigation. If litigation were to occur, we may incur additional substantial legal defense costs regardless of the outcome of such litigation. Likewise, such events might cause a diversion of our management’s time and attention. If we do not prevail in any such litigation, we could be required to pay substantial damages or settlement costs.

We have in the past identified a material weakness in our internal control over financial reporting.

Partly as a result of the restatement of our historical financial statements described above, we reassessed our disclosure controls and procedures and determined that, as of December 31, 2013, they were not effective due to a material weakness in our internal control over financial reporting. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected on a timely basis. We subsequently remediated the material weakness. For further information, see “Item 15—Controls and Procedures.”

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.

Any failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Insufficient internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. It is possible that additional material weaknesses or restatements of financial results may arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities and errors or to facilitate the fair presentation of our audited consolidated financial statements.

Risks Related to Our Structure

We may face difficulties in obtaining or using information from our public subsidiaries and other investees, and it is possible that such information, if received, may contain inaccuracies.

We rely on information that we receive from our public subsidiaries and other investees both to provide guidance in connection with managing the business and to comply with our reporting obligations as a public company. We receive information from our public subsidiaries and other investees on a quarterly basis in connection with the preparation of our quarterly or annual results of operations. While we request that our subsidiaries and other investees provide us with all material information that we require to manage our business and comply with our reporting obligations as a public company, we do not have formal arrangements with all of them requiring them to do so. In addition, directors of our public subsidiaries and other investees 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 or other investee, as applicable, may be subject to limitations resulting from the corporate governance and securities laws governing such subsidiary or other investee, as applicable, and contractual and fiduciary obligations limiting the actions of its directors. In limited circumstances, we could face a conflict between our disclosure obligations and the disclosure obligations of our public subsidiaries and other investees. 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 and other investees 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 and other investees 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.

In addition, we consolidate the financial statements of our subsidiaries into our audited consolidated financial statements and we include the financial information of certain other investees, which are accounted for in our audited consolidated financial statements using the equity method. In doing so, we rely on their published financial statements. Accordingly, a material inaccuracy in the financial statements of one of our subsidiaries or other investees can result in a material error in our audited consolidated financial statements. In 2014, the Company was compelled to restate and refile its audited consolidated financial statements as of and for the year ended December 31, 2013 (which also included corrections to the audited consolidated financial statements as of and for the year ended December 31, 2012, which were not material) and its consolidated financial statements as of and for the period ended March 31, 2014, following the restatement and refiling of the financial statements for the same periods of its fully-consolidated subsidiary, Dori Construction, due to a material deviation in the estimates of anticipated revenues and costs with respect to construction projects. We do not supervise the preparation of the financial statements of our public subsidiaries and equity-accounted investees. Accordingly, we cannot guarantee that such errors will not occur again or that the Company will not be compelled to restate its consolidated financial statements in the future.

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

We conduct the substantial majority of our operations through our public investees that operate in key regions around the world. After satisfying their cash needs, certain of these investees have traditionally declared dividends to their shareholders, including us. In 2016, we received dividend payments of NIS 1,002 million from our public investees.

The ability of our investees in general and our public investees 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 investee may place limitations on payments of dividends, interest or other distributions by each of our investees 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, certain of our public investees 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 such investees will be entitled to payment from the assets of those investees before those assets can be distributed to us. The inability of our operating investees 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 consolidated 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 as of December 31, 2016 we had a controlling interest in each of our public subsidiaries—Equity One, First Capital, Citycon and 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 public 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 in subsidiary, but that are not necessarily in the best interests of Gazit-Globe. In addition, in the event that one of our subsidiaries issues additional shares either for purposes of capital raising or in an acquisition, our holdings in such subsidiary 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.

Effective as of March 1, 2017, Equity One completed the Regency Merger, and is no longer a consolidated subsidiary of Gazit-Globe. Regency is also a publicly traded company, and we are currently its largest shareholder as a result of the merger. However, we do not have a controlling interest in Regency. Therefore, Regency will not be consolidated into our financial statements in 2017 and instead we will present the investment as an available-for-sale financial asset. Equity One is presented in our audited consolidated financial statements included elsewhere in this annual report as a discontinued operation. As of March 2, 2017, we held approximately 19.5 million shares of Regency’s common stock, which constituted approximately 11.5% of Regency’s total outstanding share capital. There can be no assurance the Regency Merger and our subsequent ownership of a non-controlling equity interest in Regency will be beneficial to us or our shareholders.

Additionally, following the sale of 9 million shares of First Capital in March 2017, we reported on March 20, 2017 that we will deconsolidate First Capital from our financial statements and present the investment on an equity method basis.

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

A significant portion of our assets is comprised of equity securities of publicly traded companies, including First Capital, Citycon, Atrium and Regency. 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 investees, 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 investees 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 investees depends on whether we have legal or effective control over these investees. As of December 31, 2016, as required by IFRS, we had control over Atrium and effective control over Citycon, Equity One and First Capital even though we had less than a majority ownership interest and/or potential voting rights interest in each entity. Effective as of March 1, 2017, Equity One completed the Regency Merger, and is presented in our audited consolidated financial statements included elsewhere in this annual report as a discontinued operation. Regency will not be consolidated into our financial statements in 2017 and instead we will present the investment as an available-for-sale financial asset. Additionally, we reported on March 20, 2017 that we will deconsolidate First Capital from our financial statements and present the investment on an equity method basis. In the future, our public investees may undertake securities offerings or issue securities in connection with acquisitions which result in dilution of our ownership interest. Furthermore, we may determine that it is in our best interests and the best interests of our public investees that they undertake an acquisition that results in dilution to our equity position. In the future, if we do not exercise effective control over a particular investee, we will need to deconsolidate such investee from our financial statements. If a change in the level of control which impacts whether and how we consolidate our public investees 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.

Changes in accounting standards may adversely impact our financial condition and results of operations.

New accounting standards or pronouncements that may become applicable to us from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant adverse effect on our reported results for the affected periods.

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 do not expect to 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 First Capital’s joint venture with Main and Main Developments LP, Citycon’s joint venture with the CPPIB in the Kista Galleria Shopping Center located in Stockholm, Sweden and Atrium’s joint venture with the Otto family in the Arkády Pankrác Shopping Center located in Prague, the Czech Republic. Under the agreements with respect to certain of our jointly-controlled entities, we may not be in a position to exercise sole decision-making authority regarding the jointly-controlled entity. 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 jointly-controlled entities. Investments in jointly-controlled entities 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 jointly-controlled entity 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 from certain Israeli financial institutions.

In December 2013, the Israeli Knesset enacted a law in order to promote competition and reduce concentration (the “Concentration Law”). The Concentration Law imposes restrictions on “pyramidal structures” in Israel, which are corporate structures where control in a public company is held through a chain of more than one other public company.

The Concentration Law imposes a two-layer limitation on the total number of public companies in any pyramidal structure. Under its provisions, the Company is considered a “second layer company” (as it is controlled by Norstar, which is itself a public company). Under the Concentration Law, the Company’s former subsidiary, Luzon Group, would have been considered a “third layer company” and Luzon Group’s subsidiary, Dori Construction, a “fourth layer company.” Therefore, we were required to make structural adjustments to comply with the Concentration Law by the end of the respective transition periods (four years for a fourth layer company and six years for a third layer company), since Gazit-Globe, as a second layer company, is no longer permitted to control another public company in Israel. The sale of the entire stake in Luzon Group by Gazit Development in January 2016, primarily in an off-market transaction, has brought the Company into compliance with the aforementioned provisions of the Concentration Law.

The Concentration Law also authorizes the Israeli Minister of Finance to establish limits with respect to the aggregate credit that may be provided by financial institutions to a specific company or a business group (defined to include an ultimate controlling shareholder and the companies under its control). Such limitations, if ultimately established, might limit our ability to refinance our debt from financial institutions.

Proper Banking Management Directive No. 313 of the Supervisor of Banks in Israel imposes restrictions on the volume of loans that may be extended by a bank to a “single borrower”, a single “group of borrowers” and to the bank’s largest “groups of borrowers”, as such terms are defined in such Directive. On June 9, 2015, the Supervisor of Banks issued a Circular for the Amendment of Proper Banking Management Directive No. 313 (the “Circular”), which increased restrictions on lending activities. The Circular narrows the definition of bank equity, resulting in stricter restrictions on extensions of credit. Since the Company obtains loans and credit from Israeli banks, such restrictions could adversely affect the volumes of credit that may be attained by the Company.

Pursuant to the recommendations of the Committee to Assess the Debt Restructuring Proceedings in Israel, the Supervisor of Banks and the Commissioner of the Capital Market, Insurance and Savings in the Ministry of Finance issued updates to the Proper Banking Management Directives and to circulars (as appropriate) in May 2015 with respect to restrictions on the financing of equity transactions, restrictions on the provision and management of leveraged loans, information requirements on controlling shareholders of entities that obtain credit and additional guidelines for banks regarding credit risk management. In addition, in July 2015, the Israeli Legislation Committee approved an amendment to the Concentration Law, which sets a credit limit for business groups. Furthermore, in December 2015, the Israeli Securities Authority approved a bill imposing disclosure requirements, including: past conduct of controlling shareholders where a controlled company had encountered financial difficulties, debt obtained by a controlling shareholder in an entity to finance the acquisition of the controlling shares in the entity or the pledging of such shares, and restrictions on credit. Since the Company and its controlling shareholder raise credit on the Israeli capital markets as well as from financial institutions in Israel, such restrictions could adversely affect their ability to raise or renew credit.

In addition, the Concentration Law imposes limitations on the holdings by non-finance companies in the financial sector and similar limitations on financial institutions with holdings in non-financial sectors. Such limitations restrict the ability of financial institutions or their controlling shareholders to invest in the Company, and restricts the ability of the Company to invest in such financial institutions.

Risks Related to Investment in Our Ordinary Shares

The price of our ordinary shares may be volatile.

The market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including:

Although our ordinary shares are listed on the Tel-Aviv Stock Exchange (“TASE”), the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”), there may not be an active trading market on the NYSE and the TSX for our ordinary shares. If an active market for our ordinary shares does not exist, it may be difficult to sell our ordinary shares in the U.S. and Canada.

In addition, stock markets have experienced price and volume fluctuations. Broad market and industry factors may materially adversely affect 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 our shareholders sell substantial amounts of our ordinary shares, either on the TASE, the NYSE or the TSX, or if there is a public perception that these sales may occur in the future, the market price of our ordinary shares may decline.

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 shareholdings in us.

Our ability to pay dividends is dependent on the ability of our investees to efficiently distribute cash, including dividends, to Gazit-Globe and 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 for each fiscal year. Any dividends will depend on our earnings, financial condition and other business and economic factors affecting us as our board of directors may consider relevant at the time. We may pay dividends in any fiscal year only out of “profits,” as defined by 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.

The Company’s ability to pay dividends is dependent on the ability of our investees to efficiently distribute cash, including dividends, to Gazit-Globe. In the event that our investees 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 dividends in the amounts otherwise anticipated or at all. If we decrease or discontinue our dividend payments, the market price of our ordinary shares may decrease.

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

Our controlling shareholder, Norstar, owned 50.6% of our outstanding ordinary shares as of April 10, 2017. 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 24.3% of Norstar’s outstanding shares as of April 10, 2017. Mr. Katzman also controls First U.S. Financial, LLC (“FUF”), which controls the voting rights of approximately 18.6% of Norstar’s outstanding shares as of April 10, 2017. In addition, Mr. Segal, our CEO and vice-chairman, holds 8.8% of Norstar’s outstanding shares. Additionally, Mr. Katzman has entered into a shareholders agreement with Mr. Segal and other related parties with respect to their holdings in Norstar, which, among other things, provides Mr. Katzman the right to vote such holders’ Norstar shares regarding certain issues relating to director nominations. In aggregate, Mr. Katzman has the right to vote 57.5% of Norstar’s outstanding shares. Accordingly, Mr. Katzman will be able to, subject to his duties as a controlling shareholder under the Israeli Companies Law, 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, except for those matters which require special majorities under Israeli law. In addition, Mr. Katzman may be able to influence the outcome of any proposed merger or consolidation of the Company. The aforementioned arrangements may discourage third parties from seeking to acquire control of us which may adversely affect the market price of our shares. See “Item 7—Major Shareholders and Related Party Transactions—Major Shareholders.”

Our ordinary shares are 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, on the NYSE since December 2011, and on the TSX since October 2013. Trading in our ordinary shares on these markets takes place in different currencies (U.S. dollars on the NYSE, NIS on the TASE, and Canadian dollars on the TSX), and at different times (resulting from different time zones, different trading days and different public holidays in the United States, Israel, and Canada). The trading prices of our ordinary shares on these three 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 and/or the TSX and vice versa.

As a foreign private issuer, we 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 are permitted to follow certain home country corporate governance practices instead of those otherwise required under the NYSE corporate governance standards for domestic issuers. We currently 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 follow home country practice in Israel. Under home country practice in Israel, we may not be required to seek the 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, 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. In addition, we are not currently obligated to follow additional corporate governance practices promulgated by the TSX provided that (i) no more than 25% of the trading volume in our ordinary shares over any six-month period occurs on the TSX and (ii) another stock exchange is providing review of the action in question. Should TSX regulations change or were we to exceed the aforementioned 25% threshold, we could become obligated to comply with TSX corporate governance requirements that also differ from those of the NYSE and from home country practice in Israel.

We are an “SEC foreign issuer” under Canadian securities regulations and are exempt from certain requirements of Canadian securities laws.

Although we are a reporting issuer in Canada, we are an “SEC foreign issuer” within the meaning of National Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to Foreign Issuers under Canadian securities law statutes and are therefore exempt from certain Canadian securities laws relating to continuous disclosure obligations and proxy solicitation as long as we comply with certain reporting requirements applicable in the United States, provided that the relevant documents filed with the SEC are also filed in Canada and sent to our shareholders in Canada to the extent and in the manner and within the time required by applicable U.S. requirements. Therefore, there may be less publicly available information in Canada about us than is regularly published by or about other reporting issuers in Canada. In the event that we cease to be an “SEC foreign issuer”, we may have to comply with additional Canadian securities laws and reporting requirements.

We may incur significant costs as a result of the registration of our ordinary shares under the Securities Exchange Act of 1934 and the listing of our shares on the New York Stock Exchange and the Toronto Stock Exchange and our management must devote substantial time to compliance and new compliance initiatives.

As a public company in the United States and Canada, we incur significant accounting, legal and other expenses. We are also incurring costs associated with the requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. Similarly, while National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings under Canadian securities law statutes permits us to satisfy the Canadian equivalent of the certification obligations under the Sarbanes-Oxley Act on an annual basis by simply re-filing as soon as practicable the same certifications in Canada as were originally filed with the SEC in the United States, we are also now obligated to file separate interim certifications in Canada with our quarterly financial results. These rules and regulations may continue to increase our legal and financial compliance costs. In addition, being a public company involves various costs, such as stock exchange listing fees and shareholder reporting fees and takes up a significant amount of management’s time. Furthermore, we remain a publicly traded company on the TASE and are subject to Israeli securities laws and disclosure requirements. Accordingly, we need to comply with U.S., Canadian, 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. Being a publicly traded company in North America and being subject to these rules and regulations has made 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.

A substantial number of the shares held by our majority shareholder, Norstar, are pledged to secure its indebtedness and foreclosure on such pledges, or other negative developments with respect to Norstar, could adversely impact the market price of our ordinary shares.

Our majority shareholder, Norstar, owned 50.6% of our outstanding ordinary shares as of April 10, 2017. Norstar is a public company listed on the TASE. A substantial number of our shares held by Norstar are pledged predominantly to a number of financial institutions who are lenders to Norstar. Based on Norstar’s most recent publicly filed reports in Israel, Norstar was in compliance as of December 31, 2016, 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., Canadian 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. In the event that the secured parties do not transfer the shares immediately, their interests may differ from those of our public shareholders. In addition, should Norstar incur significant losses, it may choose to sell its holdings of our outstanding shares and/or may no longer be able to acquire additional shares. Any of these events could adversely impact the market price of our ordinary shares.

Our U.S. 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 the average value of our gross assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes. To determine whether at least 50% of the average value of our gross 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 and may affect the determination of whether we will be considered a PFIC, there can be no assurance that we will not be considered a PFIC for any taxable year. If we are characterized as a PFIC, our U.S. 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 U.S. Holders (as defined below), and having interest charges apply to distributions by us and the proceeds of share sales. See “Item 10. Additional Information—Taxation—United States Federal Income Tax Considerations.”

Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a “United States-owned foreign corporation” unless such U.S. 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 U.S. 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 U.S. federal income tax purposes. We will generally be treated as a United States-owned foreign corporation if U.S. persons own, directly or indirectly, 50% or more of the voting power or value of our shares. To the extent any portion of our dividends is treated as U.S. source income pursuant to this rule, the ability of our U.S. 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 U.S. federal income tax principles and, therefore, if we are subject to the resourcing rule described above, U.S. shareholders should expect that the entire amount of our dividends will be treated as U.S. source income for U.S. foreign tax credit purposes. Importantly, however, U.S. 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 investors should consult their tax advisor to determine whether and to what extent they 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 “Item 10. Additional Information—Taxation—United States Federal Income Tax Considerations”.

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 certain 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, its neighboring countries and other organizations. 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 upon 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 where significant numbers of military reservists have been summoned for duty. 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 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 guarantee that this government coverage will be maintained or will be adequate in the event we submit a claim.

Provisions of Israeli law 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. For example, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights.

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. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. 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.

It may be difficult to enforce a U.S. judgment against us, our officers and directors and our independent registered public accounting firm 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. Some 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 proven as a fact by expert witnesses, 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 that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, holders of our ordinary shares may not be able to collect any damages awarded by either a U.S. or foreign court.

Shareholder rights and responsibilities are governed by Israeli law, which differs in some respects from the laws governing 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 material respects from the rights and responsibilities of shareholders in typical U.S.-based companies. 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, among other things, 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 shareholder who is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the nature of this duty or 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. companies.

We believe we are one of the leading global owners, developers and operators of supermarket-anchored shopping centers in major urban markets. As of December 31 2016 our 426 properties have a gross leasable area, or GLA, of approximately 71 million square feet and are geographically diversified across 20 countries, including the United States, Canada, Sweden, Norway, Finland, Poland, the Czech Republic, Israel, Russia and Brazil. We, through our public and private subsidiaries, acquire, manage, develop and redevelop well-located, supermarket-anchored neighborhood and community shopping centers in high growth, urban markets with high barriers to entry and strong demographic trends. Our properties are typically located in countries characterized by stable GDP growth, political and economic stability and investment-grade credit ratings, with the exception of our emerging markets operations in Brazil and Russia. In addition, we work to identify and realize business opportunities by acquiring shopping centers and/or companies operating in our sector (including with partners), in the regions in which we operate and in other regions.

Gazit-Globe Ltd. was incorporated in Israel in May 1982. The Company is a limited liability corporation, and it operates under the Israeli Companies Law 5759-1999. We issued our first prospectus on the Tel Aviv Stock Exchange in January 1983. Our ordinary shares are currently listed on the Tel Aviv Stock Exchange under the symbol “GZT.” In December 2011, we completed our initial public offering on the New York Stock Exchange where our ordinary shares are also currently listed under the symbol “GZT”. In October 2013, we listed our ordinary shares on the Toronto Stock Exchange also under the symbol “GZT”. Our principal executive offices are located at 1 Hashalom Rd., Tel Aviv 67892, Israel, and our telephone number is +972 3 694-8000. Our agent for service of process in the United States is Gazit Group USA, Inc., 1696 NE Miami Gardens Drive, North Miami Beach, FL 33179, USA, whose telephone number is (305) 947-8800.

On January 14, 2016, Gazit Development divested its entire holdings (direct and indirect) of Luzon Group for a total consideration of NIS 10.7 million (U.S.$ 2.7 million). Consequently, commencing in the first quarter of 2016, Luzon Group’s operations are no longer consolidated as an operating segment in our financial statements and are presented in our audited consolidated financial statements included elsewhere in this annual report as discontinued operations. See Note 9(g) to our audited consolidated financial statements included elsewhere in this annual report.

In January 2016, the Company sold 6.5 million shares of First Capital on the TSX for consideration of approximately C$ 117 million (NIS 329 million; U.S.$ 84 million). In May and August 2016, First Capital issued and sold 13 million shares in a public offering in Canada, which further diluted the Company’s ownership interest. In March 2017, the Company sold 9 million shares of First Capital on the TSX for consideration of approximately C$ 185 million (NIS 500 million; U.S.$ 137 million). As of April 10, 2017, the Company held 32.7% of the share capital of First Capital. The Company reported on March 20, 2017 that, as a result of the aforementioned sale, the Company will deconsolidate First Capital from its financial statements and present the investment on an equity method basis. See Note 39(a) to our audited consolidated financial statements included elsewhere in this annual report.

In November 2016, Equity One, in which the Company held an approximately 34.3% interest as of December 31, 2016, entered into a definitive merger agreement with Regency, a U.S. real estate investment trust listed on the NYSE. Regency owns, manages and develops neighborhood and community supermarket-anchored shopping centers throughout the United States. Effective as of March 1, 2017, Equity One completed the Regency Merger, and is no longer a consolidated subsidiary of Gazit-Globe. Each share of Equity One common stock was converted into 0.45 shares of newly issued shares of Regency common stock, which reflects a tax deferred premium for Equity One’s shareholders of approximately 13.7% above Equity One’s market value (as of November 14, 2016, the date of entry into the merger agreement). As of the date of the Regency Merger, the merged company’s property portfolio was comprised of 429 retail properties, with a total GLA in excess of 57 million square feet, throughout the United States. The merged company had a market value of approximately U.S.$ 12 billion as of March 1, 2017 and, according to the 2017 FFO forecasts of Regency, the Company’s share in the economic FFO of the merged company is expected to increase by NIS 35 million (including a NIS 6 million saving in the Company’s head office related to general and administrative expenses). On March 2, 2017, the Company sold 2.8 million shares of Regency for consideration of approximately U.S.$192 million. Following these transactions, as of March 2, 2017, the Company held approximately 19.5 million shares of Regency’s common stock, which constituted approximately 11.5% of Regency’s total outstanding share capital. Equity One is presented in the Company’s financial statements included elsewhere in this annual report as a discontinued operation under “assets and liabilities held for sale.” Accordingly, the comparative financial information in the statement of income has been reclassified to reflect the change in presentation of Equity One’s operation. Regency will not be consolidated into the Company’s financial statements and instead the Company will present the investment as an available-for-sale financial asset. As a result of the Regency Merger, the Company is expected to recognize a gain (pre-taxes) of approximately NIS 0.6 billion and an increase in equity attributable to shareholders of NIS 0.8 billion, in the first quarter of 2017. For additional information on the accounting treatment of the Regency Merger and the presentation of the merged company in the financial statements of the Company, see Note 9(d) to our audited consolidated financial statements included elsewhere in this annual report.

In conjunction with the Regency Merger (to which the Company was not a party), the Company (including through certain of its wholly-owned subsidiaries) has entered into a governance agreement (the “Governance Agreement”) with Regency. Pursuant to the Governance Agreement, the number of directors on Regency’s board of directors increased by three additional directors upon the closing of the Regency Merger, from 9 to 12 directors. Of the three new directors, two are independent directors appointed on behalf of Equity One (without any commitment that such directors will be nominated for another term at Regency’s next general meeting), and one new director was appointed on behalf of the Company. The initial director to be nominated on behalf of the Company is Mr. Chaim Katzman, who currently serves as Gazit-Globe’s chairman of the board and served as Equity One’s chairman of the board. For so long as Mr. Katzman is the Company’s nominee and elected to Regency’s board of directors, he will be nominated as the non-executive vice chairman of Regency’s Board and as a member of its investment committee (which as of the date of the Regency Merger consisted of seven members). Regency has undertaken to continue to nominate one director on behalf of the Company as long as the Company holds at least 7% of Regency’s share capital, as determined based on the outstanding share capital as of the date of closing of the Regency Merger, provided that if the Company requests to nominate a director other than Mr. Katzman, such alternative nominee must be reasonably acceptable to Regency’s board of directors.

The Governance Agreement includes a standstill period, during which the Company will be prohibited from taking the following actions: (1) acquiring securities of Regency that would result in an increase of the Company’s holdings of Regency’s shares above 18% of Regency’s outstanding share capital; (2) entering into a voting or similar agreement with respect to its Regency shares, subject to certain exceptions; (3) entering into a change of control or similar transaction involving Regency, unless approved by Regency’s board of directors; (4) initiating a Regency shareholder meeting; (5) seeking additional representation on the Regency’s board of directors; and (6) proposing or seeking to change or influence Regency’s management, Regency’s board of directors, its governance structure or policies (including dividend policies). Moreover, during the term of the standstill period, the Company has undertaken to vote at Regency’s general meetings in favor of all persons nominated to serve as directors by Regency’s board of directors and against any proposal to remove any director or change the size of Regency’s board of directors. The term of the standstill period commenced upon the closing of the Regency Merger and will terminate upon the later of: (1) the date that is two years following the closing of the Regency Merger; (2) six months following the date on which the Company holds shares constituting less than 7% of Regency’s share capital (determined based on the outstanding share capital as of the date of closing of the Regency Merger); or (3) six months following the date on which there is no director nominated by the Company serving on Regency’s board of directors. In addition, the Company is entitled to certain information rights, mainly with respect to information required for its public reporting, and it is also entitled to registration rights with respect to its Regency shares.

In March 2016, Mr. Shaiy Pilpel resigned as a director of the Company and Ms. Zehavit Cohen was appointed in his place. In June 2016, Mr. Gary Epstein resigned as a director of the Company. In September 2016, Arie Mientkavich’s term as deputy chairman of the board of directors of the Company expired. In December 2016, Mr. Liad Barzilai stepped down as the Company’s Chief Investment Officer. On January 19, 2017, Ms. Rachel Lavine, the Company’s then-Chief Executive Officer and a director, concluded her service in both capacities. Mr. Dor J. Segal, then-executive vice chairman of the Company, became the Chief Executive Officer of the Company, commencing January 20, 2017, and vice chairman of the board of directors, effective as of January 23, 2017. Mr. Segal previously served as the Company’s Chief Executive Officer from 1998 to 2008 and President and Chief Executive Officer of First Capital from 2000 to 2015 and currently serves as the chairman of the board of First Capital. Mr. Segal additionally served as vice chairman of Equity One until the closing of the Regency Merger on March 1, 2017, as vice chairman of the board of directors of Citycon until March 22, 2017, and as vice chairman and Chief Executive Officer of Norstar (Mr. Segal intends to step down as Norstar’s CEO and will be replaced by Mr. Kaztman, subject to approval of Norstar’s shareholders in the annual general meeting), Gazit’s largest shareholder. Ms. Lavine has agreed to continue to serve as vice chairman of the board of Atrium and as a director of Citycon. In January 2016, Mr. Gil Kotler stepped down as the Company’s Executive Vice President and Chief Financial Officer. Mr. Adi Jemini, the Company’s then-acting Chief Financial Officer since January 2016, was appointed, effective as of January 1, 2017, Executive Vice President and Chief Financial Officer of the Company.

As part of our continued recycling of capital and in line with our strategy to increase direct holdings of our properties, during 2016, we sold all of our holdings in BR Malls Participações S.A. (“BR Malls”) for approximately BRL 532 million (NIS 611 million). We recognized a gain from the sale of BR Malls of approximately BRL 109 million (NIS 125 million), which was recycled to finance the acquisition of a 33% ownership stake in Shopping Cidade Jardim. Aside from such acquisition, Gazit Brasil acquired additional properties for approximately BRL 153 million (NIS 179 million).

On November 11, 2016, the Company announced that a wholly owned subsidiary of the Company, Gazit Brasil, entered into a binding agreement for the purchase of a 33% ownership stake in Shopping Cidade Jardim, a shopping center located in the city of Sao Paulo, from JHSF Participacoes SA (“JHSF”) for consideration of approximately NIS 470 million. Pursuant to the agreement, JHSF has also granted Gazit Brasil an option to purchase a 33% interest in the potential retail areas located on adjacent land parcels, which is designated for future development. In parallel, Gazit Brasil has granted JHSF a right of first offer to purchase 33% of Gazit Brasil’s share in an asset it partially owns in the event that Gazit Brasil decides to develop or sell it, for a period of four years. The acquisition was completed on December 29, 2016, and was funded with the proceeds from the sale of BR Malls.

As part of the Company’s financing strategy, the Company has determined to diversify its lending base and increase its lines of credit with international lenders. In line with this strategy, on October 26, 2016, the Company and its wholly owned subsidiaries, entered into a replacement, three-year credit facility agreement with Citibank N.A. (“Citibank”), in an amount of U.S.$ 360 million. This new credit facility agreement replaces, increases the line of credit by approximately U.S.$ 150 million, and extends the term of the Company’s pre-existing credit facility agreement with Citibank until October 2019. The loans under the facility are secured by pledges over shares of Equity One, First Capital, and Citycon. On March 1, 2017, as a result of the Regency Merger, the Company and its wholly owned subsidiaries, entered into an amendment to this credit facility agreement pursuant to which securities of Equity One which were pledged to Citibank were replaced by securities of Regency.

Our capital expenditures, consisting of the acquisition, construction and development of investment property including land for future use, amounted to NIS 4,835 million (U.S.$ 1,257 million) as of December 31, 2016. For the breakdown of these amounts by operating segments, see Note 38(b) to our audited consolidated financial statements included elsewhere in this annual report.

We financed these expenditures primarily by equity and debt offerings, and by borrowing from financial institutions. For further information regarding our methods of financing, see “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows.” For further information on our equity and debt offerings, also see Note 9, Note 20, Note 22 and Note 27(c) to our audited consolidated financial statements included elsewhere in this annual report.

For a discussion of our principal capital expenditures and divestitures over the last three financial years, see “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Cash Flows,” as well as Note 9 (for interests in other companies) and Note 38 to our audited consolidated financial statements included elsewhere in this annual report.

As of the date of this annual report, there have been no public takeover offers by third parties with respect to our ordinary shares or by the Company with respect to other companies’ shares during the last and current financial year.

We believe we are one of the leading global owners, developers and operators of supermarket-anchored shopping centers in major urban markets. As of December 31, 2016, our 426 properties have a GLA of approximately 71 million square feet across 20 countries. As of December 31, 2016, Gazit-Globe and its subsidiaries operated properties with a total value of approximately U.S.$ 22.1 billion (NIS 84.9 billion), which includes the value of properties of jointly-controlled entities and properties managed by us, approximately U.S.$ 1.6 billion (NIS 6.3 billion) of which is not recorded in our financial statements. We, through our public and private investees, acquire, develop and redevelop well-located, supermarket-anchored neighborhood and community shopping centers in high growth, urban markets with high barriers to entry and strong demographic trends. Our properties are typically located in countries characterized by stable GDP growth, political and economic stability and investment-grade credit ratings with the exception of our emerging markets operations in Brazil and Russia. As of December 31, 2016, over 95% of our occupied GLA was leased to retailers and the majority of our occupied GLA was leased to tenants that provide consumers with daily necessities and other non-discretionary products and services, such as supermarkets, drugstores, discount retailers, moderately-priced restaurants, fitness centers, hair salons, banks, dental and medical clinics and other retail spaces. Our shopping centers draw high levels of consumer traffic and have provided us with growing rental income and strong and sustainable cash flows through different economic cycles.

We own and operate our shopping centers in Brazil, Israel and Germany through private subsidiaries. Throughout 2015 and 2016, we have continued to acquire properties in Brazil. Our broad geographical footprint supports our growth strategy by giving us access to opportunities around the world, allowing us to raise capital in different markets, and reducing the risks typically inherent in operating within a narrower geographic area.

We operate by establishing a local presence in a country through the direct acquisition of either individual assets or operating businesses. We either have built or seek to build a leading position in each market through a disciplined, proactive strategy using our significant experience and local market expertise. We execute this strategy by identifying and purchasing shopping centers that are not always broadly marketed or are in need of redevelopment or repositioning, acquiring high quality, cash generating shopping centers, selectively developing supermarket-anchored shopping centers in growing areas and executing strategic and opportunistic mergers and acquisitions. As a result, our real estate businesses range from new operations with a small number of properties to large, well-established public companies, representing a range of return and risk profiles. We continue to leverage our expertise to grow and improve operations, maximize profitability, and create substantial value for all shareholders. By implementing this business model, we have grown our GLA from 3.6 million square feet as of January 1, 2000 to approximately 71 million square feet as of December 31, 2016.

Our Competitive Strengths

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. 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 NOI, excluding foreign exchange fluctuations, increased by 3.1% from 2008 to 2009. From 2009 to 2010 it increased by 3.6%, 4.0% from 2010 to 2011, 3.9% from 2011 to 2012, 3.4% from 2012 to 2013, and 1.7% from 2013 to 2014, and from 2014 to 2015 it decreased by 0.5%. In the year ended December 31, 2016, average same property NOI increased by 1.2% from the year ended December 31, 2015. For further information, see “Item 5—Operating and Financial Review and Prospects—Operating Results—Results of Operations—Same Property NOI.” Our supermarket-anchored shopping centers are generally well-located in densely populated high growth, urban markets with high barriers to entry and strong demographic trends in countries that have stable GDP growth, political and economic stability and investment-grade credit ratings. The high barriers to entry generally result from a scarcity of commercial land, the high cost of new development or limits on the availability of shopping center properties imposed by local planning and zoning requirements. These prime locations attract high-quality tenants seeking long-term leases, which provide us with high occupancy rates, favorable rental rates and stable cash flows.

Diversified global real estate platform across 20 countries. We focus our investments primarily on developed economies, including the United States, Canada, Sweden, Norway, Finland, Poland, the Czech Republic, and Israel. As of December 31, 2016, our asset base included 426 properties totaling approximately 71 million square feet of GLA. Approximately 89% of our net operating income, or NOI, on a proportionate consolidation basis, for the year ended December 31, 2016 was derived from properties in countries with investment grade credit ratings as assigned either by Moody’s or Standard & Poor’s, and 62% of our NOI on a proportionate consolidation basis for the year ended December 31, 2016, 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. Our global reach, together with our local management, enables us to make accretive acquisitions to expand our asset base both in countries where we already own properties and in countries where we do not. For example, during the global economic downturn in 2008 and 2009, we used the opportunity to invest an aggregate of approximately U.S.$ 3.8 billion to acquire, develop, and redevelop new shopping centers and other properties, to initially purchase interest in Atrium, to increase our holdings in our public subsidiaries and to repurchase our debt securities at a significant discount to par value.

Proven business model implemented in multiple markets driving growth. The business model that we have developed and implemented over the last 25 years, whereby we own and operate our properties through our public and private subsidiaries and other investees, has driven substantial and consistent growth. We leverage our expertise to grow and improve the operations of our investees, maximize profitability, mitigate risk and create value for all shareholders. We enter high growth, urban markets that are densely populated, with high barriers to entry, by acquiring and developing well-located, supermarket-anchored shopping centers. 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. We continued to expand Equity One’s platform through internal growth and acquisitions. As of December 31, 2016, Equity One owned 123 properties with a GLA of 16.4 million square feet. Effective as of March 1, 2017, Equity One completed the Regency Merger (creating one of the largest shopping centers REITs in the United States), and is presented in our audited consolidated financial statements included elsewhere in this annual report as a discontinued operation. Similarly, our business in Canada began in 1997 with the purchase of eight properties, followed by the acquisition of a controlling stake in First Capital, a Toronto Stock Exchange-listed company in 2000. We have since expanded to 160 properties (including properties under development) in Canada with a GLA of 24.7 million square feet as of December 31, 2016. We reported on March 20, 2017 that we will deconsolidate First Capital from our financial statements and present the investment on an equity method basis. Following our successes in both the United States and Canada, we identified new and attractive regions and expanded by replicating this business model. For example, we successfully applied our model in Northern Europe through Citycon and in Central and Eastern Europe through Atrium, resulting in improved performance of the shopping centers acquired in those regions.

Leading presence and local market knowledge. We have a leading presence in most of our markets, which helps us generate economies of scale and marketing and operational synergies that drive profitability. 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.

Business and Growth Strategies

Our objective is to create value through long-term maximization of cash flow and capital appreciation, while improving our properties and increasing our dividends. The strategies we intend to execute to achieve this objective are set forth below:

Increase our privately held real estate portfolio and diversify our source of funding. As part of our growth strategy, we are continuing to evaluate opportunities to increase our private real estate portfolio by directly (or through our privately held subsidiaries) owning our assets rather than through our public subsidiaries. The Company’s management believes that increasing the private real estate component of our portfolio will lead to an increase in cash flows received directly by the Company through improvement of the Company’s cost structure and revenues. Moreover, we believe that by increasing the number of properties we directly own, we are likely to strengthen our financial ratios, which, in turn, would improve our financial strength, and lead to an upgrade in our debt rating and to the receipt of international investment rating. We anticipate that these improvements would lead to a reduction in costs of capital and thereby, increase profitability. The Company also intends to reduce its costs of financing by diversifying its sources of financing through international financial institutions and accessing new capital markets. The Company’s management believes that the increase in our privately held real estate portfolio and the diversification of our sources of financing will ultimately increase the return for 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 retail real estate assets predominantly in densely-populated areas with high barriers to entry and strong demographic trends in countries with stable GDP growth, political and economic stability and investment-grade credit ratings. By maintaining this focus, we will seek to keep the occupancy and NOI performance of our properties consistent through different economic cycles. 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. We intend to continue to actively manage and grow our presence in each region in which we operate by increasing the size and quality of our asset base, while continuing to ensure geographic diversity. Our properties are held directly and indirectly, and we are working to increase our direct holdings in our properties, depending on market conditions and business opportunities.

Pursue high growth opportunities to complement our stable asset base. We intend to continue to expand into new high growth urban markets and other high growth necessity-driven asset types that generate strong and sustainable cash flow using our experience developed over the past 25 years in entering new markets, to continue to assess opportunities, including the establishment of new real estate businesses, the acquisition of real estate companies and properties, primarily supermarket-anchored shopping centers and also other necessity-driven assets. In particular, 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, in 2007, we established an office in Brazil and began assessing local opportunities. In 2008, we acquired a 154,000 square foot shopping center in Sao Paulo for U.S.$ 31.3 million. In November 2010, we completed our first development project in Brazil. By December 2016, we had nine properties in Brazil.

We will also seek opportunities in other necessity-driven asset classes in order to drive shareholder value across a range of necessity-driven assets. We also may selectively recycle capital from time to time, including from our private subsidiaries. For example, during 2016, we sold all of our holdings in BR Malls and purchased a 33% ownership stake in Shopping Cidade Jardim using primarily the proceeds from the sale of BR Malls.

From time to time, we access capital by utilizing bank credit facilities and by issuing debt and equity. We utilize international capital markets to increase our financial flexibility and to gain greater exposure to local and international institutional investors. We are working to improve the credit rating of the Company in order to reduce our debt-related costs.

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 will focus on attracting more consumers to our properties by using advertising and promotions, building the branding of our shopping centers and providing a more consumer-friendly experience, for example, by improving our tenants’ locations. 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. We analyze development prospects utilizing our local market expertise and familiarity with tenants. From January 1, 2014 through December 31, 2016, we invested approximately NIS 5.8 billion (U.S.$ 1.5 billion) in development, redevelopment, and expansion projects as well as in other expenditures (including leasing expenditures, tenant inducements, tenant improvements, and other capital expenditures), including approximately NIS 3.7 billion (U.S.$ 1.0 billion) in development and redevelopment projects (excluding attributed lease expenditures).

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 plan to continue to seek creative structures through which to enhance our property base or divest non-core properties and allocate our capital. We continually recycle our capital to make new core acquisitions in high-density urban markets and deleverage our balance sheet. For example, in 2014, we began selling assets of ProMed, which was completed in 2015, and Gazit Germany. Our public subsidiaries also have disposed of non-core assets. For example, commencing in January 2015 Atrium has completed the sale of 89 small retail properties across the Czech Republic, with an aggregate area of 284 thousand square meters for a total consideration of EUR 186.3 million. In addition, Atrium completed the sale of three non-core assets in Poland, with an aggregate area of 15.7 thousand square meters for a total consideration of EUR 17.5 million. We may also use jointly-controlled entities to enter into new markets where we are not established to access attractive opportunities with lower capital risk.

For a breakdown of the location and type of our properties, see “—Property, Plants and Equipment—Our Properties” below.

Properties Under Development

We had 24 properties under development or redevelopment as of December 31, 2016. The following table summarizes our properties under development, redevelopment and expansion as of December 31, 2016:

The following table summarizes the rental income and NOI of our shopping center and healthcare properties for the years ended December 31, 2014, December 31, 2015 and December 31, 2016.

Our Tenants and Leases

We have strong relationships with a diverse group of market-leading tenants in the regions in which we operate. For the year ended December 31, 2016, our top three tenants (by base rent) represented 6.8% of our consolidated rental income (including rental income from discontinued operations).
Our properties are subject to over 15,000 leases.

The following table sets forth as of December 31, 2016 the anticipated expirations of tenant leases for our properties for each year from 2017 through 2025 and thereafter⁽¹⁾:

As of December 31, 2016, we had 7.3 million, 6.7 million, and 6.5 million square feet of GLA in our consolidated portfolio with leases expiring in 2017, 2018, and 2019, respectively. We expect to achieve moderate increases in average rent spreads Canada as we renew or re-lease these spaces while in East and Central Europe we expect a slight decrease and in North Europe it remains relatively flat. In addition, we believe that the information provided in “Item 5—Operating and Financial Review and Prospects—Operating Results—Shopping Centers” regarding the rental rates of renewed leases compared with the prior lease rental rates, provides certain indications of the market rents across our markets.

The following table provides a breakdown of the largest tenants of our principal investees by geographical segment:

Most of our shopping centers in the United States and Canada are located in major cities and have large supermarkets or retailers as the anchor, with outdoor parking areas and many smaller shops that depend on the traffic generated by the anchor. They attract and cater to residents of an expanded or expanding population area. On the other hand, our shopping centers in Europe, more typically in the Nordic region, and in Brazil are anchored by hypermarkets which combine the function of both grocery stores and retailers. They tend to be located in major urban cities and are comprised of one or more buildings forming a complex of retail-oriented shops with indoor parking garages and connected to metro stations.

Seasonality of the Company’s Main Business

Our main business operations are not materially impacted by seasonality. Citycon, however, has in the past disclosed that its operations benefited from milder weather.

Investments in India

In August 2007, we entered into an agreement to invest in Hiref, a real estate fund in India. Hiref was sponsored by HDFC Group, one of the largest financial services companies in India. Hiref invests directly and indirectly in real estate companies that operate in the development and construction field and in similar fields, including in special economic and trade zones, technological parks, combined municipal complexes, industrial parks, and buildings in the accommodation and leisure sector, such as hotels, residential buildings and commercial and recreation centers. We have a commitment to invest U.S.$ 110 million with Hiref, and we have invested U.S.$ 95 million as of December 31, 2016. For more details, refer to Note 11 to our audited consolidated financial statements included elsewhere in this annual report.

Marketing

From time to time we use various marketing channels for the purpose of leasing our properties, principally advertising at the relevant property location; ongoing contacts with realty brokers; advertising concentrated on local and industry media; participation in sector-orientated exhibitions and conventions; posting lists of available properties on our websites and the employment of staff whose principal roles are the marketing and leasing of our properties. The cost of such marketing activities has not been and is not expected to be material to us.

Intellectual Property

Gazit-Globe owns several trademarks in Israel: “Gazit-Globe” (in Hebrew and in English), “AAA”, “LOCATION LOCATION LOCATION” (text and design), “G”; registered trademarks in the United States: “Gazit-Globe”, “G” (design in black and white), and “G” (design in color); and a registered trademark in the European Union, in Russia and in Brazil: LOCATION LOCATION LOCATION (design).

As of the reporting date, intangible properties have not been recognized as an asset in the Company’s financial statements.

Government Regulations

Our operations and properties, including our development and redevelopment activities, are subject to regulation by various governmental entities and agencies of the country or state where that project is located 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. Each project must generally receive administrative approvals from various governmental agencies of the country or state where that project is located. No individual regulatory body, permit, approval or authorization is material to our business as a whole.

We were incorporated in Israel in May 1982. We operate our business through public and private investees in our five principal geographic regions: the U.S., Canada, Europe, Israel and Brazil. The following chart summarizes our corporate structure as of December 31, 2016:

For the country of incorporation of each subsidiary, see “Appendix A to Consolidated Financial Statements–List of Major Group Investees as of December 31, 2016.”

Our public investees are listed on stock exchanges in their local regions and are subject to oversight by their respective boards of directors. We seek to balance our role as each company’s most significant shareholder with the recognition that they are public companies in their respective countries with obligations to all of their shareholders. Chaim Katzman, the chairman of our board, serves as the chairman of the boards of our major public subsidiaries—Citycon and Atrium. Dor J. Segal, the vice chairman of our board and our CEO, serves on the board of First Capital (as chairman). In connection with the Regency Merger, Mr. Katzman serves as the non-executive vice chairman of the board of directors of Regency. Other individuals affiliated with us also serve on the boards of our public investees. As public companies, our public investees are generally required to have a number of directors who meet independence requirements under local law and stock exchange rules. As a result of this requirement and other factors, individuals affiliated with us represent less than a majority of the members of the boards of directors of each of these entities. We are also active in seeking, and assisting our public investees in engaging, experienced executive management. Beyond providing oversight and guidance through our board representation, the level of our involvement with each public investee varies based on each investee’s general business needs, with greater guidance provided to those with less well-established operations or in connection with significant transactions, such as an acquisition.

Our Properties

We own interests in 426 properties in 20 countries. The following tables summarize our properties as of December 31, 2016: