Reuven Elkes founding hotel chain with Israel Canada

Midtown Play Hotel  photo: Ronen Topelberg

A new company will be formed to build hotels in Tel Aviv under the Play brand.

Brown Hotel chain CEO Reuven Elkes will leave his position to found a hotel chain in partnership with Israel Canada Ltd. (TASE: ISCN), owned by Barak Rosen and Assaf Tuchmeir.

The company signed an agreement with Elkes and Ofer Feldman, who was co-CEO with responsibility for business development at Israel Canada until six months ago. The agreement includes the founding of a new company through which hotels will be constructed in Tel Aviv under the Play brand.

Israel Canada will own 75% of the new company, Elkes 20%, and Feldman 5%. Feldman will receive 2.5% more of the hotel company if its value exceeds NIS 300 million in the next three years. Elkes will be CEO of the new hotel company and receive monthly management fees.

The first hotel, scheduled to open towards the end of this year, is located in the Tel Aviv Midtown project, following the signing of a lease for monthly rental of 4,350 square meters of the commercial space in the project. The hotel is designed to be premium class, and therefore does not conform to the Ministry of Tourism's goal of encouraging construction of hotels at popular prices.

The plan is to build a number of hotels with a total of 1,000 rooms. The next hotels will be built on a similar format of leasing additional space in the company's projects, whether in existing projects or new ones, with hotels being built on properties owned by Israel Canada. The company will also consider new locations.

The plans include construction of a hotel in the Da Vinci Towers on Kaplan Street in Tel Aviv; a hotel on a lot on the corner of Herzl Street and Yehuda Halevy Street near Rothschild Street in Tel Aviv purchased from Bank Leumi (TASE: LUMI); and a hotel on Harakevet Street, where Israel Canada recently reported that it had purchased land for construction of residences, commerce, and a hotel. Israel Canada is also negotiating to build a hotel on Eilat Street under the luxury Four Seasons brand.

The hotel in the Midtown project is already under construction. Israel Canada owns 75% of the Midtown project. The hotel will have 120 rooms of various sizes, with ceilings six meters high, suites, and duplexes. The hotel, which is aimed at the luxury category, is scheduled to open in the fourth quarter of this year.

Israel Canada has acquired land for improvement in recent years, such as the Pi Glilot site; the Elco site in Ramat Hasharon; the Kanarit-Da Vinci project, on which construction has already begun; and the Lapid site on Eilat Street in Tel Aviv. The company also recently completed the NIS 2.5 billion Midtown project on Menachem Begin Street in Tel Aviv, which includes construction of headquarters for the Ernst & Young accounting firm. Israel Canada is currently building Microsoft's new 45,000-square meter headquarters building in Herzliya.

Elkes will resign his position at Brown Hotels when the agreement goes into effect. Elkes was CEO of Fattal Holdings (1998) Ltd. (TASE:FTAL) until 2012, and before that was CEO of Israel Land Development Hotels until 2007. Over the past year, Elkes founded an independent management company that managed 500 rooms, a tourism school, and sports and recreational centers. The joint company will manage this activity.

Brown Hotels and Nir Weizman are currently competing against three other potential purchasing consortia for the acquisition of Israir Airlines and Tourism Ltd. from IDB Development. Weizman-Brown made the highest bid for the airline - $70 million. The parties are currently in intensive talks. As reported by "Globes," Israir pilots are opposing the financing plan for the deal out of concern that the financing and future plans for the company could jeopardize its existence.

Published by Globes, Israel business news - en.globes.co.il - on February 11, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Midtown Play Hotel  photo: Ronen Topelberg
Midtown Play Hotel photo: Ronen Topelberg
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