Gazit Globe Ltd. or First Capital Realty Inc.: Which Is the Better Buy?

Gazit Globe Ltd. (TSX:GZT)(NYSE:GZT) owns 33% of First Capital Realty Inc. (TSX:FCR). Both have underperformed in 2017. Both are worth considering.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Does the name Dori Segal ring any bells?

It should if you’ve owned First Capital Realty Inc. (TSX:FCR) for more than five years. Segal was CEO for 15 years until February 2015 and is still the company’s chairman.

Segal transitioned out of his position to spend more time growing Gazit Globe Ltd. (TSX:GZT)(NYSE:GZT), an Israeli-controlled real estate company, which, not coincidentally, also owns 33% of First Capital.

Both have underperformed relative to the TSX Composite Index in 2017 — Gazit Globe and First Capital are up 1% and 5.4%, respectively, versus 7.3% for the TSX — yet an argument can be made to buy either stock.

By the end of this article, you’ll have my answer as to which is the better buy.

Gazit Globe’s value

Over the past three years, Gazit Globe’s stock’s delivered a negative annual return of 2.1% at a time when both the TSX and New York Stock Exchange have handily beat it.

In those three years, Gazit Globe’s net operating rental income has remained relatively flat around US$831 million, or $1.02 a share.

The company has ownership varied ownership interests in four publicly traded companies: First Capital at 33%, Regency Centers Corp. (NYSE:REG) at 12%, Citycon (trades on Helsinki Stock Exchange) at 44% and Atrium (trades on the Vienna and Euronext Stock Exchanges) at 60%. It also owns 100% of the three private subsidiaries operating shopping centres in Brazil, Israel and Gazit Horizons, its new U.S. subsidiary investing in mixed-use developments in urban centres.

Together, it has an ownership interest in 426 properties in 20 countries with 71 million square feet of space valued at US$22.1 billion.

A quick back-of-the-napkin calculation of its interests in the four public companies is $5.3 billion, or more than double its current market cap, and that doesn’t include its three private subsidiaries.

It’s a buy, right? Not so fast.

Both its Citycon and Atrium ownership interests are consolidated on its balance sheet, meaning the debt of those businesses, as well as its private subsidiaries, also have to be considered before making an assessment.

At the end of 2016, it had $5 billion in long-term debt outstanding. So, for the investment to make sense, the private subsidiaries need to be worth more than $300 million to deliver any value.

Considering it carries its investment in its Brazil subsidiary at $818 million, I’d say Gazit Globe’s stock is undervalued. By how much? That’s the million-dollar question.

Bottom line on both stocks

Risk-averse investors should buy First Capital’s stock for two reasons. First, because it avoids the various currencies Gazit Globe uses to carry out its business. Second, it’s got a dividend yield of 4.1% you can count on.

However, as value investments go, if you’re a patient investor, Gazit Globe probably has the better upside.

Should you invest $1,000 in Algonquin Power and Utilities right now?

Before you buy stock in Algonquin Power and Utilities, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Algonquin Power and Utilities wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned.   

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

a person looks out a window into a cityscape
Metals and Mining Stocks

Why I’d Consider This Canadian Stock for My TFSA as Tariffs Reshape Markets

Cameco (TSX:CCO) stock could fortify your TFSA against tariff war headwinds, and provide growth opportunities during recessions

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Top Energy Stocks to Invest in for 2025

Energy stocks are a solid choice for investors, but these could be the best option in 2025.

Read more »

cloud computing
Tech Stocks

How I’d Allocate $1,000 in Tech Stocks in Today’s Market

Investing regularly in undervalued tech stocks such as RingCentral should help you derive outsized gains in 2025 and beyond.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

The 1 Canadian Stock I’d Buy and Hold Forever in a TFSA

This Canadian stock is a strong option for any TFSA, and here's why.

Read more »

Asset Management
Stocks for Beginners

Got $3,000? How I’d Distribute it Among 3 Growth Stocks for Decade-Long Appreciation 

The market crashed after Trump's tariffs became effective on April 2. You can still make money in this market with…

Read more »

grow money, wealth build
Stocks for Beginners

How I’d Allocate $20,000 in Growth Stocks in Today’s Market

Here’s how I’d split a $20K investment between two Canadian growth stocks with big potential in the years ahead.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,267 in Annual Passive Income

Dividend stocks are strong options, but these two could be some of the best long-term options.

Read more »

Stethoscope with dollar shaped cord
Investing

2 Healthcare Stocks I’d Buy With $20,000 Whenever They Dip in Price

Well Health stock is just one of two healthcare stocks to buy, as they offer defensive and economically insensitive earnings…

Read more »