How do we know that things have probably gotten out of hand? Look at the crazy prices of the deals closed recently by what is still called "the smart money" in Tel Aviv (as opposed to deals by private individuals, whose considerations are not necessarily economic and rational). Look at the huge differences between the bids and at the identity of the buyers - some of them relatively unknown names,getting intothe big league with a single leap, withthe buzz in the sector and all the cheap money floating around - and of course, look at the price tag.
At the end of last week, the Tel Aviv Central Bus Station was purchased for NIS 320 million. The minimum price was NIS 200 million, but that did not matter to the bidders in the pricing procedure - Nitsba Holdings Ltd. (TASE: NTBA), Amos Luzon, and Amram Avraham - they pushed the price up by another 60%. The bidding went up inNIS 5 million jumps,as if only a few shekels were involved.
A week earlier, Beit Sokolov (Journalists House) on Kaplan Street in central Tel Aviv was sold. Together with The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), Reality Real Estate Fund, a fund for enhancing real estate value (supposedly aiming at increasing the land's value still further) paid NIS 172 million for the lot, which includes rights for 95 apartments (and another NIS 8 million if those rights are increased). Teddy Sagi, for whom cash is the least of his worries, bid NIS 77 million for that same land.
Not far from Journalists House, also on Kaplan Street, Beit Hasofer was sold two months ago.Eighteen months after Dror Halevy paid the Israel Writers Association NIS 24 million for the property, it was sold to Yitzhak Tshuva for NIS 46 million.
These are three fresh examples from the heart of Tel Aviv, an attractive city with nothing to prove now, whose planning authorities operate transparently and properly (comparatively, at any rate), with enough deals to make everything simple and clear. In Tel Aviv, real estate appraisals should be varying within a fairly narrow band, even if every grain of sandseems likegold to an outsider.
For this exact reason, if a property jumps from NIS 200 million to NIS 320 million within minutes, if the difference between Teddy Sagi and the winning bid is NIS 100 million, if a developer makes a profit of almost 100% within 18 months with no changes in the plans, there is no doubt that Israeli real estate is losing itsconnection to any economic rationale.
Published by Globes [online], Israel business news - www.globes-online.com - on May 14, 2015
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