Although the present economic crisis intensified only during the fourth quarter, the credit crisis was already affecting housing sales and residential developers' balance sheets. Some developers, despite discouraging quarterly results, have a policy of full disclosure, and publish precise figures. Alrov Properties and Lodgings Ltd. (TASE: ALRPR), controlled by chairman Alfred Akirov, and Isras Investment Co. (TASE: ISRS), controlled by Shlomo Eisenberg, are examples.
Other developers, however, conceal their figures as much as possible, and even a close examination of their financial reports cannot uncover how many apartments they sold during the third quarter, let alone in which projects in which cities. These are companies that do not hesitate to publish celebratory press releases about successful sales, but when it comes to disclosing the actual facts in the financial reports, matters appear somewhat different.
Habas HZ Investments Ltd. (TASE: HABS) convened a celebratory press conference in June to announce the sale of all the apartments in its luxury Tel Aviv high-rise at 1 Rothschild Boulevard, within a year of the start of marketing and 18 months before occupancy. Company chairman Herzl Habas said that only the top floor penthouse had not been sold and that the company was waiting to market it; a mistake in view of the financial crisis.
Habas said that sales contracts were pending on the last three apartments. However, the company unexpectedly stated in its financial report for the third quarter that "Sales of the apartment inventory in the 1 Rothschild Boulevard project are complete, except for the office building under construction adjacent to the residential high-rise, the penthouse and two apartments on the first residential floor." In fact, the company sold only one apartment during the third quarter, and provided no adequate explanation.
The situation in Habas's luxury Yoo project in Park Hazameret in north Tel Aviv is also not great, even though the first of the project's two buildings is already occupied. Apartment sales in the project totaled just NIS 95 million in January-September, with 87% of the apartments sold, compared with 79% of the apartments sold by the end of 2007. In short, sales are barely moving. The company owns land for two more luxury high-rises, which are unlikely to be built anytime soon.
Sales at the Meier tower at the corner of Rothschild Boulevard and Allenby Street in Tel Aviv are also limping. Berggruen Residential Ltd. (TASE:BRGN.B1) sold just one apartment in the project during the third quarter: an entire floor for NIS 55 million. The sale follows just a single sale in the second quarter.
The situation in Jerusalem is complicated. Isras sold two apartments in the Neve Moshava project on the edge of the German Colony. The company also sold three apartments in a project in Nahariya. In the past two years, the company sold only four apartments at its luxury YMCA in the Jerusalem city center.
Alrov is also struggling to sell apartments in its luxury Mamilla project facing the Old City in Jerusalem. There has not been a single sale in the past 18 months, and altogether, only 20 of the project's 50 apartments have been sold.
B.Yair Building Corporation 1988 Ltd. (TASE:BYAR) saw a strong increase in apartment sales in the third quarter, but the future looks dim. The company has sold just 10% - 27 of the 274 apartments in the first stage of its luxury Ha'Uma project on Jaffa Street at the western entrance to Jerusalem. The average price per apartment was NIS 2.3 million. The full project will have 680 apartments, and given the grim real estate market climate, the company and its peers in the city will struggle to find buyers for their projects.
The sales champion for the third quarter was Azorim Investment, Development and Construction Ltd. (TASE: AZRM), controlled by chairman Shaya Boymelgreen. Third quarter sales were nevertheless still far below sales for the corresponding quarter of 2007. On the other hand, the company sold 632 apartments in January-September, 27% more than the 498 apartments in the corresponding period of last year, and sales rose to NIS 540 million from NIS 435 million. The problem is that the average price per apartment fell 2.2% to NIS 854,000 from NIS 873,000.
Africa-Israel Housing Ltd. (TASE:AFHS), the domestic residential arm of Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY), controlled by chairman Lev Leviev, also reported fewer apartment sales for the third quarter compared with the corresponding quarter. However, an analysis of its financial report indicates that the average price per apartment rose to over NIS 1.5 million in the third quarter.
Despite the capital market plunge, Africa-Israel Housing's condition can be described as satisfactory, mainly because most of the apartments in projects nearing completion have already been sold. 523 of the 737 apartments in projects under construction and due for delivery between 2008 and 2011 have already been sold. However, the proportion of sales of the company's luxury projects due for completion in 2009 is lower: 50 of the 66 apartments in the Savionei Platinum project in Ramat Gan, and 13 of the 21 apartments in Building 7 in Savionei Ramat Aviv.
Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2008
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