Leumi sells Tel Aviv Lillienblum building

31 Lillienblum Street Photo: Eyal Izhar

Bank Leumi received NIS 66 million for the four floor office building, well above the market price of NIS 50 million. Real estate appraiser Israel Yaacov explains why.

Bank Leumi (TASE: LUMI) recently sold the building at 31 Lillienblum Street for NIS 66 million plus VAT.

The area in the heart of Tel Aviv's financial district is characterized by mixed-use buildings including stores and commercial premises, offices, apartments, restaurants and cafes, clubs and bars, and public buildings. Lillienblum links Allenby Street to the east with Herzl Street and Pines Street to the west and is one way.

The building which Leumi has sold was built in the 1950s as offices for the Zim Shipping Co. and was bought by various companies over the years until Bank Leumi assumed ownership in partnership with a private company.

The building itself includes a partial basement floor as well as four floors offices including the ground floor and a roof area. Including the basement the building has 1,640 square meters total space, with an elevator, stone façade and not balconies.

There is potential to convert the building from offices to apartments or commercial space. Because the locations is defined as a metropolitan area near the light rail, the owners also have rights to add between 2,400-6,000 square meters for use mainly as offices. If the building is merged with neighboring buildings then up to 7,400 square meters can be added.

But realizing all the conditions for the rights is a complicated matter involving the uncertainties of decisions by committees about the amount of construction that can be added and which will anyway be exclusively offices, postponements and protracted decision making, betterment fees, and the agreement of neighboring lots, so that it is probably not worthwhile seeking these rights.

However, under the TAMA 38 earthquake strengthening program, an extra floor and possible part of another floor as well could be approved.

Taking all this into account, the property is probably only worth NIS 50 million, meaning that the price paid for the Leumi building is well above the market price. There are several reasons why this might be. Firstly, there is a significant premium on complete buildings in central Tel Aviv, which can then be please out while building permits are sought, thus reducing the cost of financing the project.

In addition, if the developers manage to buy the neighboring buildings then the potential of enhancing the property will grow and there are no tenant to object to TAMA 38 additions, or even renovations like adding balconies, which would add to the value of the real estate.

The author is a real estate appraiser

Published by Globes, Israel business news - en.globes.co.il - on June 7, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

31 Lillienblum Street Photo: Eyal Izhar
31 Lillienblum Street Photo: Eyal Izhar
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