Hagag Group Real Estate Development Ltd. (TASE: HGG) has paid a record price for land in Tel Aviv. Yesterday, the group won the bidding for a block of land on Einstein Street in north Tel Aviv, potentially zoned for construction of 212 residential apartments. It will pay NIS 389 million, excluding VAT. Hagag's bid beat those of, among others, Gindi Holdings, Reality Investment Fund, Netanel Group Ltd. (TASE:NTGR), and a consortium of private investors represented by Adv. Doron Ariel.
The plot is located at the corner of Einstein Street and Prof. Yuval Ne'eman Street, 100 meters from the perimeter fence of Sde Dov Airport. The plot's large area, 7.3 dunams (1.83 acres), make it particularly attractive.
The price paid by Hagag Group is especially high, considering that the approved urban building plan that currently applies to the block allows for the construction of two 9-storey buildings containing a total of 82 apartments above two commercial stories consisting of 1,875 square meters of main space.
According to an opinion by land surveyor Aryeh Kamil, the potential exists for the plan to be changed to include more building rights, up to 212 apartments in buildings of up to 25 stories, and 6,700 square meters of commercial space. Kamil notes that the vacation of Sde Dov Airport is part of the planning potential, as once the airport is vacated the height limit on buildings in the area will be removed.
An increase in the building rights will take several years. If it is approved, a betterment levy of about NIS 150 million will be payable.
The block in question is being sold in the course of the dissolution of a partnership between owners of land who did not manage to reach agreement between themselves on construction on the block.
The block's location is considered to be one of the best on Einstein Street, as it is on the westernmost part of the street, so that the apartments that will be constructed on it will enjoy panoramic views and will be open to the sea.
In 2010, Hagag Group bought the adjacent block and built three residential towers and a double commercial level. The land cost it NIS 101 million. The apartments are now in the process of being handed over.
In 2013, the company bought an additional block on the other side of the street, at Einstein Street 33b, in the partnership dissolution already mentioned, for NIS 120 million. Two towers and a double commercial level are currently under construction on that block.
Land surveyor Ronen Wagner, commenting on the price in the current deal, said, "The fantastic price expresses the sad state of the land market. The fact that contractors seize on every block available for construction as though it was the last piece of land on the blue planet is an indication of the crisis and of the government's impotence in dealing with it. The fact that Hagag Group, one of the most respected and realistic construction companies in Israel, offered a price like this means that it does not believe in the central government's ability to halt the rise in prices, but very much believes in real estate as the best investment in the Israeli economy."
Published by Globes [online], Israel business news - www.globes-online.com - on June 2, 2016
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