Home prices are falling? Consider the following fact: In the "Arlozorov 17" project that Dan is constructing in Tel Aviv, the cost of aluminum alone amounts to NIS 570,000 per apartment. That's the cost of an entire apartment in Arad or Kiryat Shemona, just for aluminum.
Bus companies Dan and Egged are currently arguing with the Ministry of Finance over the state subsidies for their public transport operations. The subsidy for Dan is NIS 300-400 million annually. But decades ago it was clear that the two companies were sitting on goldmines, in the shape of their land in city centers, in this case the Dan depot on Tel Aviv's Arlozorov Street, close to the beach, which was built in the 1930s.
An urban plan for constructing a residential tower on the site was approved in the 1990s, before UNESCO declared Tel Aviv's White City area a heritage site, which led to restrictions on construction in the area. The fact that a plan was approved for the lot before the construction restrictions were applied sent its value shooting up to hundreds of millions of shekels.
Some buyers will combine apartments
The project, which is bounded by Arlozorov Street, Dizengoff Street, Ben Yehuda Street, and Vilna Street, stands out prominently in the neighborhood. It is 29 floors high in two wings with a transparent atrium between them in which four transparent elevators will go up and down. On the atrium entrance floor are a lounge and a library for residents' use only.
The buildings were designed by architect Moshe Zur, and two companies are carrying out the construction: Electra Ltd. (TASE: ELTR) unit Electra Construction, and Ashtrom Properties Ltd. (TASE:ASPR). The total construction cost is estimated at NIS 360 million, or NIS 10,000 per square meter.
The project comprises 131 apartments, 119 of them in the tower and 12 in a two-story building at the foot of the tower. There will be a 50-meter swimming pool, a spa and a fitness studio on the roof. So far, 118 apartments have been sold, but it is expected that some of the buyers will join apartments together so that there will be fewer than 131 occupants.
The lot is eight dunams (two acres) in area. Four dunams have been allocated for a park that will be open to the public at large. A three-level car park has been constructed under the tower. The first level will be a public car park with 162 parking spaces.
On the 29th floor, a penthouse is for sale occupying the entire floor, an area of 870 square meters: 730 square meters of main space, plus a 140 square meter veranda and a swimming pool. The asking price is NIS 200 million. The location is a winner, but considering the current state of the luxury home market, it is doubtful whether the company will receive the price it has been seeking for four years.
According to Israel Tax Authority data, the most expensive apartment sold in the project so far comprises five rooms on 247 square meters on the 26th floor. It was sold in January 2014 for NIS 22 million. The cheapest deal was in August 2016, when a two-room, 65 square-meter apartment on the first floor of the tower was sold for NIS 3 million. Management fees will be NIS 22 per square meter.
In a launch event for the project in June 2013, the company said that revenue from it was estimated at NIS 1.3 billion, and that profit after tax would be NIS 250 million, probably mostly from the penthouse. The profit will be distributed to Dan's 2,000 shareholders, who are the Dan members who became shareholders when the bus cooperative became a limited company in January 2002.
Shadow payment
One reason that construction of the project was delayed was objections by neighbors, who filed an administrative lawsuit in the Tel Aviv Magistrates Court in 2008. Dan decided to negotiate with them. In the compromise eventually reached, Dan undertook, among other things, to examine whether solar water heating panels on neighboring building would be affected by the shadow cast by the building, and to compensate residents if this was the case. The company also undertook to pay NIS 2 million into a special fund of the Tel Aviv municipality for renovation of the neighboring Vilna, Frankfurt, and Prague streets.
Published by Globes [online], Israel business news - www.globes-online.com - on May 9, 2017
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