Airport City leases entire Isracard building in NIS 540m deal

Isracard Building, Tel Aviv
Isracard Building, Tel Aviv

Shared workspace company Switchup is paying Airport City NIS 27 million annually for twenty years for the downtown Tel Aviv office building.

The Tel Aviv office market continues to produce record deals. A prominent recent one is the leasing by Airport City (TASE: ARPT) of the entire Isracard building in Hamasger Street to shared workspace company Switchup for twenty years for NIS 540 million.

This is NIS 290 million more than the valuation of the building in the deal whereby Airport City bought half of it at a valuation of NIS 252 million ten years ago.

The building was designed by architect Dan Eytan and was completed twenty-five years ago. From 1997, it was leased to credit card company Isracard and Bank Hapoalim. At that time, it was owned in equal shares by Nitsba and Isracard. It has 20,000 square meters of office space and a car park with 340 spaces.

In June last year, Isracard sold its 50% rights in the building to Airport City for NIS 126 million, as part of its plan to move its offices to a newer tower in Bnei Brak.

Airport City has now leased the entire building to Switchup, of the Fattal Holdings group (TASE: FTAL) for NIS 27 million annually for 20 years.

Switchup leases offices to technology companies, mostly large companies on long leases, and provides full management services. It has 150,000 square meters of space in Israel in twenty buildings, and it is now expanding to London and New York.

"Globes" has learned that Switchup will lease out 15,000 square meters of the building immediately, and will lease out the remainder and the parking spaces when Bank Hapoalim and Isracard vacate the premises.

Switchup co-founder and CEO Yoni Porat said, "With the shortage of space in this area and the future of the city, we knew that many enquiries were made about leasing the building, but Airport City understood that our company was the leader in its field, and so it was easy for them to choose us over other potential lessees."

This may not be the highest-value deal in Tel Aviv recently, but it does stand out. Airport City will make a return of over 10% on the price it paid for the building, without having to invest in renovations and upgrading. The rent being paid by Switchup - about NIS 150 per meter monthly - is reasonable in the current market, but the company will have to add the cost of renovating the building, which could amount to tens of millions of shekels.

In this light, it would appear that Airport City underpaid when it bought 50% of the rights in the building from Isracard ten months ago.

Published by Globes, Israel business news - - on May 3, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Isracard Building, Tel Aviv
Isracard Building, Tel Aviv
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