Yonah Hotels is in advanced negotiations to purchase from Clal Tourism the Assuta hospital lot in north Tel-Aviv for $45m million. The transaction will take effect in 2007 or 2009. It forms part of a three-way deal of close on $100 million between the two groups.
The rest of the deal consists of the sale of the hotel at Jerusalem’s Mandelbaum Gate by Yonah hotels to Clal Tourism, and the exit of the Clal group from Yonah Hotels, by the sale of its shares to the controlling shareholder.
The Assuta lot consists of 8 dunam (4 acres) and is held to be the costliest land in north Tel-Aviv. It is estimated that a town planning scheme will be approved for demolishing the existing hospital buildings and putting up 250 luxury apartments, which will sell at an average of $500,000 per apartment, and a higher price for penthouses. The proceeds will amount to $140 million.
Yonah Hotels is prepared to pay $45 million for the land, assuming that current rent will fetch it an 8% yield. Also, it can, as stated, built on the hospital's land reserve. Most of the buildings will be demolished, an exception being a 1,000 sq.m. building that has been declared a site for preservation.
The second part of the deal is the sale of the shell of Yonah's hotel, being built in the Mandelbaum Gate area of Jerusalem, for $30 million.
Also, the Yonah group will undertake to complete construction within eight months, in consideration of an additional payment in accordance with actual costs plus a reasonable profit.
The Yonah group owns 55% of Yonah Hotels. Clal Tourism and French hotel company Accord own 25% and the balance is held by the public on the stock exchange. In the third part of the deal, the Yonah group will purchase the shares of Clal and Accord for $4 million, thus reverting to 80% ownership in the company, as was a number of years ago.
The object of the three deals is to introduce changes in the business policy and strategy of the two companies. Yonah Hotels, which had hitherto concentrated on the hotel sector, seeks to decentralise its activities and go also into income-producing properties.
Mordechai Yonah is one of Israel's biggest private residential building contractors and specialises in residential construction.
Clal Tourism wishes to concentrate on tourism. Therefore it seeks to buy the hotel in Jerusalem and sell the lot in Tel-Aviv which is not within its main area of activity.
Published by Israel's Business Arena July 25, 1999