In one of the biggest real estate deals ever seen in Jerusalem in January 2023, American Jewish real estate businessman Gary Barnett bought land owned by the Greek patriarchate for NIS 750 million. The aim of the deal was to end the stalemate around the leasing of the land so that it could be developed. But 18 months later there has been no practical progress.
For the past few months "Globes" has been monitoring development on the matter. The Jewish National Fund (JNF) (Keren Kayemeth le-Israel), which owns the lease on the land until 2052, and is a central player in the future of the land, initially insisted that Barnett and his representatives had not contacted them and had not met with them to discuss the matter. But now JNF has admitted that several meetings have been held between the parties since the beginning of the year.
The former Greek patriarchate land covers 500 dunams (125 acres) in the center of Jerusalem. JNF bought rights to lease the land in the middle of the 20th century and there remains another 28 years on the lease. Not knowing whether JNF plans to extend the lease rights or relinquish them, as well as purchases of land over the years by external parties, have created great uncertainty on future development there.
As long as the fate of the JNF lease on the land is not vlear, it is not possible to promote demolish and rebuild urban renewal projects on the lands, which anyway take years to complete. Due to this uncertainty, tenants and real estate professionals in Jerusalem claim, the value of existing houses on the land has fallen at least 40% over the years.
Barnett’s purchase was supposed to move things forward and solve the issue. The real estate company owns, Extell, has even formed an outline plan. The veteran tenants (who are a small part of all the tenants living on the relevant lands) will be able to purchase their apartment for NIS 3,000 per square meter, and it will be registered in their name.
However, this outline plan cannot be implemented until a solution is reached with JNF-KKL as the owner of the lease rights until 2052. It could extend the lease for another period, in which case the tenants would not be able to receive ownership rights. For such a move to actually happen, JNF has to relinquish the lease rights, and it is seeking compensation for this.
According to information obtained by "Globes," Extell has already offered JNF compensation, in the form of building parks and carrying out other public tasks that JNF usually finances itself. Despite this, according to sources familiar with the details, JNF has not decided on the matter: "It is a body that likes to have decisions made for it," those sources say.
Extell has other reasons for promoting development of the land. Hovering above the issue is the threat of proposed legislation dealing exactly with situations like the one that caused by the Greek patriarchate lands. The "fair lease bill," if enacted could harm Barnett’s plans and the company he owns.
To date, the bill has been submitted twice - in 2023 and last February. In its latest version, the bill states, among other things, that the rate of lease fees to be paid by each tenant, in the event of an extension, will be only 5.5% of the value of the land (without the buildings and infrastructure on it). This is significantly lower than the amount Barnett is supposed to receive as part of the outline he has drawn up. The latest bill was submitted jointly by 41 members of the Knesset from both the government coalition and the opposition.
JNF-KKL said, "As has been made clear in the past, JNF-KKL is concerned about the interests of the residents - the sublessees, in addition to its own rights. In light of the many consequences, economic and social, including in the long term, both in relation to JNF-KKL rights and regarding the sublessees, JNF-KKL is examining the various possibilities."
Extell said, "The plan we are presenting is profitable for the sub-leasers and promotes the development of Jerusalem. We hope that it will be promoted."
Published by Globes, Israel business news - en.globes.co.il - on July 24, 2024.
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