Hagag Group Real Estate Development Ltd. (TASE: HGG), controlled by Tsahi and Ido Hagag, has signed a cooperation agreement with the Selina international hotel and accommodation chain. Under the terms of the agreement, Hagag will purchase properties and finance the appropriate changes to convert them to accommodations and then lease them to Selina. Hagag will also undertake to make such conversions in properties that Selina will lese from third parties. The value of the investment is estimated at more than NIS 500 million.
This will be Hagag's first foray into hotel operations in Israel and following the agreement, Hagag will become Selina's exclusive local partner.
The cooperation agreement for purchasing and converting properties will remain in effect until Hagag has invested $150 million, while Hagag will invest an additional $30 million in converting properties that Selina leases. Hagag has an option to increase investments by an additional $60 million.
In exchange, Selina will pay Hagag rent that will represent a minimum of an 8% annual return. Hagag will also be entitled to 20% of the profits of Selina on these accommodations projects. On the projects that Hagag only converts the buildings that Selina has leased from third parties, Selina will pay 10% of the investment each year for 20 years and 20% of the profits in these accommodations.
Selina already operates four accommodations in Israel in Tel Aviv's Neve Tzedek, Kibbutz Beit Oron, Kibbutz Ma'aleh Hahamisha, and Mitzpeh Ramon. It will soon open a fifth Israel accommodation in Kinneret. Each accommodation combines boutique hotel style rooms for hundreds of dollars a night through to shared rooms for tens of dollars per night.
Published by Globes, Israel business news - en.globes.co.il - on September 30, 2021
Copyright of Globes Publisher Itonut (1983) Ltd. 2021