UPDATE 1-Developer Africa Israel swings to large Q4 loss

* 2.7 bln shekel loss as forecast vs year-ago 278 mln profit

* Hurt by plunge in real estate valuations

* To book gain of 1.7 billion shekels in Q1

* To buy back own bonds

By Joseph Nasr

TEL AVIV, March 30 (Reuters) - Israeli real estate developer Africa Israel Investments (AFIL01.TA) on Monday reported a steep quarterly loss due to a sharp decline in the value of its properties.

Africa Israel, 75 percent owned by billionaire Lev Leviev, posted a fourth-quarter net loss of 2.69 billion shekels ($637 million), compared with a profit of 278 million shekels a year earlier.

"The fourth quarter and full year results were substantially impacted by the global economic crisis and the uncertainty in financial markets," Izzy Cohen, Africa Israel's chief executive, said at a news conference in Tel Aviv.

It estimated that due to accounting changes, it would post a 1.7 billion shekel gain in the first quarter of 2009.

The crisis has hit Africa Israel hard largely due to sharply dropping values of its properties in the United States and Russia.

The company earlier this month had warned it would record a loss of about 2.7 billion shekels due to the decline in value of some of its properties, including The New York Times building in Manhattan, which it bought in 2007.

Asked about ongoing talks to sell 49 percent of the building to an Asian investment fund, Richard Marin, head of Africa Israel USA, said: "As part of restructuring, we might bring in a partner, but that's very unclear at this time."

Africa Israel's shares were down 0.4 percent in afternoon trading but they outperformed losses of 2.2 percent on the broader Tel Aviv bourse.

Leviev said the company was detecting some signs of recovery in Russia's devastated real estate market where its subsidiary AFI Developments (AFIDLq.L) has a portfolio valued at $2 billion at the end of 2008, down from $6 billion a year earlier.

Cohen said, without giving details, Africa Israel planned to generate cash to meet the company's financial obligations by selling off assets and refinancing bank loans.

Africa Israel said it would buy back 70 million shekels of its own bonds, which have taken a beating in recent months. It estimated that buying back the bonds would result in significant savings of future financing expenses and enable the company to book a gain by reducing its obligations.

The company's bond price ILAFIL21=TA was 0.6 percent lower after sliding 3.5 percent on Sunday.

The Israeli units of Standard & Poor's and Moody's Investors Service lowered their ratings for Africa Israel's bonds earlier this month, citing payments of 1.8 billion shekels due in 2009 and 2010. ($1 = 4.22 shekels) (Writing by Steven Scheer; Editing by Jon Loades-Carter)