Clal Insurance (TASE: CLIS) and Israel Phoenix Assurance (TASE: PHOE1, PHOE5) last Thursday bought 50% of the Givatayim shopping mall in equal shares from Shikun Ovdim. The two insurance companies will jointly pay $48.5 million, reflecting a 9.5% return, at a value of $97 million for the entire mall. The final price, to be determined in 2008, will be between $44.5 million and 52.5 million.
Construction of the mall, which has 18,000 sq.m. of income producing space, is in final stages. The mall will be inaugurated in September 2004. 80% of the space has already been leased at $50-70 per sq.m. per month, and it is believed that the remaining 20% will be leased by the time the mall opens.
The contract stipulates that the parties will consider the business results of the mall in another four years, and determine the final price. If the actual return is greater than 9.5%, the price will be raised accordingly, up to a ceiling of $52.5 million.
If the return is low, the price will be lowered in proportion to a minimum of $44.5 million, and Shikun Ovdim will return $4 million to the insurance companies. Shikun Ovdim believes that it will not have to return any money.
The deal also includes a 4,000-sq.m., still un-leased rental office building, and a covered parking lot with 1,250 spaces, some of which will be reserved for free parking by the mall’s customers. In addition, the deal includes future rights, if Shikun Ovdim obtains approval for construction of 2,500 sq.m. of extra office space.
Clal Insurance had planned to buy half the mall by itself. During the negotiations, Clal Insurance notified Shikun Ovdim that it planned to recruit a strategic partner in order to reduce the risk, since the mall was its first investment in income-producing real estate.
Clal Insurance and Phoenix Assurance will finance most of the investment premiums on participating life insurance policies, plus an addition sum from the two companies’ nostro accounts. Clal Insurance will pay for its share through its Clal Finances Batucha subsidiary.
Supervisor of Insurance Eyal Ben-Chelouche approved the deal in principle, after being told that the rights to the land would pass to Shikun Ovdim in the next few months, which would give half of them to Clal Insurance and Phoenix Assurance.
Published by Globes [online] - www.globes.co.il - on March 21, 2004