Burger King UK cancels lease with Arazim

Arazim had previously estimated revenue from the lease at ₤2.3 million a year beginning in 2010.

Burger King UK's franchisee has cancelled an memorandum of understanding (MOU) with Arazim Investment Ltd. (TASE: AZRM) to rent 25 restaurant properties and called off negotiations on a lease. Arazim had previously estimated revenue from the lease at ₤2.3 million a year beginning in 2010.

Arazim, controlled by chairman Meir Gurvitz, began negotiating the lease with Burger King UK in July, and had been optimistic that a deal would be reached.

In February 2006, Arazim bought properties of UK roadside restaurant chain Little Chef for ₤60 million. The deal covered 65 restaurants and a 56-room hotel, with an aggregate space of 17,000 square meters of built-up space. Little Chef was supposed to lease back the properties for 35 years, but the deal collapsed when it fell into financial difficulties in early 2007. Little Chef's new owners continued renting the properties, and Arazim bought an option to purchase the operation of the chain's entire chain of 200 restaurants. However, Little Chef's new owners miscalculated the company's revenue and it went into liquidation in June 2008.

Arazim then began seeking new tenants for the properties, and leased 47 to Little Chef's latest operator, but at a substantially lower rent for 20 restaurants, under what Arazim assumed would be a temporary lease until a deal was closed with Burger King. 18 restaurants are unoccupied.

Arazim's share rose nearly 10% today to NIS 2.40. The share has fallen from NIS 69 at the beginning of 2008. The company's market cap has fallen to NIS 21 million from its mid-2007 peak of NIS 1.16 billion.

Arazim will hold a bondholders meeting on January 14

Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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