Azorim announced last week the cancellation of a huge contract with the Keren and Lerer families, for the construction of 2,200 apartments and a commercial center in the "New Rehovot" project on land owned by the two families in south Rehovot. The Keren and Lerer families deny Azorim’s claims.
"New Rehovot" is the largest residential project under construction in Israel today. Sales prices for the apartments are estimated to amount to $400 million. Azorim is currently completing construction of the project’s first 476 apartments, and is about to start building another 145 apartments. The company’s management told "Globes" that the company will complete these two stages of construction, but will not begin building additional stages unless the claimed contract violations are remedied.
Azorim purchased the land from the Keren and Lerer families three years ago in a deal in which the land owners are to receive 31% of the apartments. The Keren family owns 70% of the land, and Azorim therefore started construction on Keren land. The second stage, which includes 145 apartments, will be built on Lerer land. A large portion of the apartments have already been sold.
The contract was cancelled due to disagreements between the land owners and the Rehovot municipality regarding betterment tax. The municipality is demanding $13 million (after initially demanding a higher amount), while the land owners are proposing $6 million.
The parties have been trying unsuccessful for a year and a half to settle the disagreement. The municipality recently told Azorim that it would not approve the submitted plan for certain changes in the project, until the betterment tax problem is solved.
Azorim says that the Keren and Lerer families did not meet the schedule stipulated in determining the betterment tax liability and payment thereof, and this constitutes violation of the contract. Moreover, the company claims that in the ensuing situation, it is impossible to continue construction in an orderly manner.
There was no comment from the Keren and Lerer families’ representative, Adv. Shraga Biran.
A source from one of the families told "Globes" that they acted in good faith and that it was not their fault that a settlement with the local authority had not yet been reached regarding the betterment tax. The source said that efforts would be made in the next few weeks to solve the betterment tax problem and relations with Azorim.
328 apartments in stage A belong to Azorim and 148 to the Keren family. Azorim has sold 270 apartments so far, some of them to members of Hever (Israel Defense Forces Servicemen and Pensioners Association) under special conditions. In the past month, Azorim sold 17 apartments in stages A and B together. Three-room apartments cost $165,000, four-room apartments - $185,000, and five-room apartments - $225,000.
Published by Israel's Business Arena July 26, 1998