The Government Housing Administration plans to exercise its option to buy the Beersheva government complex from Migdal Insurance and Financial Holdings Ltd. (TASE:MGDL) for $60 million, and assume ownership of the property in November 2007. The deal involves 28,000 sq.m. in four buildings: 22,000 sq.m. leases to the state at $11 per sq.m. per month, and 6,000 sq.m. in commercial space. Ashtrom Properties Ltd. (TASE:ASPR) and Housing and Construction Holding Co. Ltd. (Shikun u'Binui) (TASE:HUCN) subsidiary Secom (Israel) Ltd. built the Beersheva government complex in the late 1990s.
Migdal bought the office buildings from Ashtrom in 2003 for $43 million. Ashtrom and Secom still own the commercial space.
The state intends to exploit the difference between interest rates and returns to buy the government complex at a return of 9%, and sell it immediately afterwards, thereby making an additional profit. Under the terms of the contract between the state and Migdal, the state has the right to exercise the option only in November 2007.
The Government Housing Administration is now publishing tenders to sell the four buildings. If it receives no worthwhile offers, it will forego the option, and continue to rent the properties from Migdal. If a new buyer is found, the government will rent the properties in a 20-year lease with a three-year option.
The Government Housing Administration is planning similar deals for the government complexes in Haifa, Ramle and Tel Aviv. The states rents the Tel Aviv government complex from Half Jubilee Ltd., a subsidiary of Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) and Minrav Holdings Ltd. (TASE:MNRV).
Published by Globes [online], Israel business news - www.globes.co.il - on December 18, 2005