Housing and Construction (Shikun u'Binui) and the Red Sea Hotels company controlled by Eli Papouchado have canceled a deal, according to which they were to have purchased a plot for construction of the southern tower, with 170 apartments in the Herzliya marina from the Herzliya Marina group controlled by Moti Zisser, based on 45-50% of the apartment prices. Housing and Construction's share in the deal was 70%, and Red Sea Hotels had 30%.
At the same time, the Herzliya Marina group instructed Malibu two weeks ago to halt construction of the project's northern tower, which also has 170 apartments planned. Malibu is the executing contractor. The contract is for NIS 100 million. Construction was halted at the skeleton stage.
The projects were canceled and halted, following a ruling by the Tel Aviv District Court, which determined that the apartments in the marina must be used for hotel renting, and not as vacation apartments. The developers are of the opinion that the court ruling reduces the chances of selling the apartments and damages the project's profitability (the court decision has been appealed at the Supreme Court).
Housing and Construction and Red Sea Hotels claim that no contract was signed between them and the Herzliya Marina group for the deal. The Herzliya Marina group responded that in its opinion a binding contractual connection between the parties exists, and it regards the cancellation announcement as a violation of contract, in every sense of the term. Housing and Construction and Red Sea Hotels loaned Merkazei Shlita NIS 16 million in advance of the transaction, and are now demanding the return of their money.
The management of the Herzliya Marina group told "Globes" that it is of the opinion that the Supreme Court will in the end allow the project to be marketed according to the original plan.
Published by Israel's Business Arena on June 4, 2000