Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) and Allied Group (35%) have acquired all of the rights in the new Psagot Jerusalem commercial center in the Jerusalem neighborhood of Romema for NIS 170 million, plus VAT. The center's developers were Carasso Real Estate, AKA Real Estate, and Taaman Real Estate. Construction of the center has been completed, and its occupancy rate is 90%.
Five residential buildings with 276 housing units have been built above the commercial center. It is located close to main western entrance to Jerusalem from Road 1. The center contains 9,800 square meters of space, 7,500 square meters of which is commercial space housing 20 stores of retail chains appealing to the haredi (Jewish ultra-Orthodox) sector. The complex also has 250 parking places in an 8,950-square meter parking lot.
The leading tenant in the center is the Shufersal Ltd. (TASE:SAE) chain, which signed an eight-year lease for 5,000 square meters. The lease also gives Shufersal two eight-year extension options. Additional space in the center are leased to other leading chains in the haredi sector, such as Optica Halperin.
Romema is located close to the entrance to Jerusalem, bordered by the industrial zone on the north and west, Sarei Israel Boulevard on the east, and Jaffa Road on the south. The neighborhood features high-density construction on its east and north sides and garages and old one-storey industrial buildings on its north side. The neighborhood's vicinity contains a firefighting station, the Israel Broadcasting Authority, Rafa Laboratories, the Central Bus Station, the National Insurance Institute headquarters, Bezeq, Beit Yahav, the Jerusalem Gate Hotel, and the Jerusalem Gold Hotel. The neighborhood has 40,000 residents.
A unique deal for Migdal
The deal was conceived four years ago, but is going through only now with the completion of the center's construction and its occupancy. The purchasers' annual return is estimated at 7.7%.
Real estate experts working in Jerusalem explain that the center is located in a neighborhood that has been experiencing a construction boom in recent years. Psagot Jerusalem is very close to the centers of three large Hasidic communities: Gur, Belz, and Boyan, which have great consumer power.
The deal differs greatly from other recent deals by Migdal, for example the deal to acquire a lot zoned for construction of the Elite Tower in the area of the Ramat Gan Diamond Exchange from a group of diamond dealers for NIS 325 million and a deal to acquire the Elbit lot in the new Netanya industrial zone for NIS 223 million.
The current deal is more modest, but is consistent with the company's investment strategy of investing in neighborhood income-producing commercial real estate projects in which agreements were signed with anchor tenants. In these deals, Migdal goes ahead with the deal only when the project starts generating revenue.
Published by Globes, Israel business news - en.globes.co.il - on November 6, 2019
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