Alrov Properties and Lodgings Ltd. (TASE: ALRPR) announced last week an arbitrator had ruled that it was entitled to an additional NIS 29 million from Carta, a development company owned by the Ministry of Housing and Construction (75%) and the Jerusalem municipality (25%). This was the second stage in the dispute between Alrov and Carta over the construction of the Mamilla commercial district (David’s Village) in Jerusalem.
Carta is already obliged to pay Alrov NIS 80 million in compensation for violating the contract between the two companies. The combined NIS 109 million payment is compensation for delay in building the Mamilla commercial district located between the Old City and King David St. in downtown Jerusalem. The project includes hotels, office and commercial space, and residences.
Alrov, which has building rights to the Mamilla commercial district, books the project at a value of NIS 184 million. Apartments in the project will reportedly be sold at $6,000 per sq.m. Analysts previously estimated that if all the apartments in the project, with an aggregate area of 13,000 sq.m., are sold Alrov could make a profit of NIS 200 million.
The dispute between Alrov and Carta arose over the future façade of the commercial center and over the type of registration in the Urban Building Plan (UBP). Carta claimed that Alrov wanted to change the original UBP to replace originally agreed balconies with shops. Alrov claimed that Carta opposed the building of a cinema. Carta in turn blamed the Jerusalem municipality, and alleged that the dispute was a trick by Alrov to drag out the project and obtain compensation for not completing it.
The first arbitration ruling in late 2004 was in favor of Alrov. The arbitrator said Carta had not signed the change in the UBP, thereby preventing Alrov from obtaining a grant from the Investment Promotion Center, due to the delay in the project. Carta refused to settle for a lower fine of NIS 32 million, provided it signed the UBP, making it possible for Alrov to obtain the grant.
Published by Globes [online], Israel business news - www.globes.co.il - on January 15, 2006