Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and Isralom Properties Ltd., owned by Matthew Bronfman and Yaakov Shalom (Shulem) Fisher, have signed an agreement for the sale of Isralom's 50% stake in the IKEA building in Netanya to Harel, as well as Isralom's option to acquire the other half of the property from British Israel Investments Ltd., for NIS 289 million, according to notices to the TASE by the two companies.
The IKEA building in Netanya's Poleg industrial zone has 17,400 square meters of space. Under the terms of the deal, when the acquisition of Isralom's rights to the property is completed, Harel subsidiaries will exercise their option to acquire British Israel's share of the property, after which Harel's subsidiaries will wholly own it.
Harel undertook to exercise the option to acquire British Israel's share of the property before acquiring Isralom's rights to it. Harel will pay NIS 185 million for Isralom's rights to the property and its option on British Israel's share of the property. Harel will directly pay British Israel NIS 104 million when it exercises the option, for a total of NIS 289 million.
Harel also signed a new lease with IKEA Israel's franchisee Northern Birch Ltd., which is also owned by Bronfman. The contract is for 24 years and 11 months with no exit option. The rent is NIS 21.2 million a year, linked to the Consumer Price Index (CPI). The rent will be updated every five years by 2% in real terms.
Northern Birch will be responsible for all regular maintenance, administrative, and insurance costs of the IKEA building. Northern Birch has an option to build additional space on the property, on the basis of its current building rights. If it decides to exercise this option, it has the right to receive up to NIS 12 million in financing for the construction from Harel subsidiaries. If the additional space is built, the rent will be updated so that for Harel's additional investment in this construction, the higher rent will give an annual rental return of 7.6% for the remainder of the rental period.
Under the agreement, the additional construction will cost a maximum of NIS 316 million.
The deal is subject to conditions, including approval of the bank which holds the liens on Israel and British Israel's rights to the IKEA building, exercise of the option for the acquisition of British Israel's option, and approval by the Israel Land Authority to transfer the rights to the property to Harel's subsidiaries.
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012