The dispute between REIT 1 Ltd. (TASE:RIT1) and Africa Israel Properties (TASE: AFPR) over ownership of Hayovel Tower in Tel Aviv has been resolved. The companies today notified the Tel Aviv Stock Exchange (TASE) that agreement in principle had been reached in the negotiations between them. REIT 1 will pay Africa Israel Properties NIS 23 million, plus VAT, for the right to become a 50% shareholder in the tower (Africa Israel Properties owns the other 50%).
Hayovel Tower, also called Kiryat Hamemshala, is located at the junction of Kaplan Street and Menachem Begin Street in Tel Aviv. The 36-storey, 76,000-square meter tower, built by Africa Israel Properties in 2005, contains various government ministries, companies, and organizations.
Africa Israel Properties held the Hayovel Tower through its Mahazit Hayovel subsidiary, which also held a student dormitories project on Mount Scopus in Jerusalem. In June 2009, Africa Israel Properties sold 51% of the shares in Mahazit Hayovel to corporations owned by Gabriel Katri for NIS 135 million.
The two projects were valued for the deal at NIS 1.05 billion. Proceeds in the deal were calculated after subtracting NIS 760 million in bank credit that Mahazit Hayovel had at the time. Among other things, it was stated in the deal that Africa Israel Properties would continue providing management services for the tower.
REIT 1 suddenly entered the picture last August. The company reported the signing of an agreement to acquire full ownership of the corporations indirectly owning 51% of the shares in Mahazit Hayovel from Katri. In its announcement to the TASE, REIT 1 said that it would pay the seller NIS 120 million for full rights in the corporations.
Africa Israel Properties' management, however, did not like the new deal signed by Katri with REIT 1, and petitioned the court for an injunction against it. Africa Israel Properties told the court that it held first refusal rights to the shares in Mahazit Hayovel to be transferred to REIT 1, even though the sale deal sought to bypass this restriction through the sale of the corporations holding these shares.
Following the court hearing, REIT 1 and Africa Israel Properties were sent to mediation. Under the agreement announced today, REIT 1 will pay Africa Israel Properties NIS 23 million, plus VAT, and Africa Israel Properties will waive its claim to first refusal rights or a right to join the deal.
It was also agreed that REIT 1 and Africa Israel Properties would create a mechanism to give them equal holdings in Mahazit Hayovel, and that Africa Israel Properties would continue providing regular management services to Hayovel Tower on the current format for six more years. All decisions pertaining to the property will be made jointly by the two parties, who will sign a binding compromise agreement as early as possible. After such an agreement is reached, subject to approval by the courts and the parties who financed Mahazit Hayovel, REIT 1's deal with Katri will be completed and its compromise agreement with Africa Israel Properties will be implemented.
Published by Globes, Israel business news - en.globes.co.il - on February 4, 2019
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