When the market is in crisis there are opportunities to be found and Israel's real estate market is in a double crisis. Firstly, there is of course the war, which has shuffled the deck and forced an unprecedented situation on the country. Secondly there is the stagnation in the sector itself, which has significantly reduced real estate activity and substantially increased financing costs for developers because of the interest rate hikes. This crisis has also brought many opportunities in recent months and there were those who know how to seize the bargain-price opportunities.
"Globes" has checked out the Israel Land Authority (ILA) tenders closed since December and found some tenders in which only one bidder competed, resulting in very low bids for land, which may be particularly profitable in years to come, when the industry returns to peak activity.
Under NIS 50,000 per housing unit in a demand neighborhood
"Globes" found nine lots in ILA tenders in less than the past two and a half months, in which only one bidder submitted a particularly low bid.
One of the successful single bids was by S. Elroy Building and Development for 867 housing units in the government's Target Price program in Kiryat Gat West for NIS 3.28 million or just NIS 3,783 on average for each housing unit (development costs for this tender are about NIS 211 million).
Another tender was in Ashdod's Tet Vav quarter where Jacky Ben-Zaken's Evenei Sapirim Management and Project Promotion won with the only bid of NIS 3,260 compared with the appraisal of NIS 21,684,000. The win reflects an average price of NIS 13 per housing unit, less than the cost of a portion of falafel in the city.
These were not the only tenders in which major real estate opportunities were found. For example, in the in-demand Gilo neighborhood in southwest Jerusalem, Bialik, a subsidiary of the Beit Yerushalmi group, won land for the construction of 54 housing units, for the sum of only NIS 2.42 million.
The bid was only about NIS 115,000 higher than the minimum price, and more than 50% lower than the appraised price. The win reflects an average price of NIS 44,900 for land per housing unit in a neighborhood that is considered very popular in the city. Apartment prices in the neighborhood rose by 22% between March 2021 and March 2023, according to Madlan.
In a tender not far away, which closed on December 31, 2023, Gesher G.A. Properties and Verta Tourism bid for a lot for the construction of 24 housing units in Tzur Hadassah, in the B2 neighborhood, in the Target Price program. The lot was issued without a minimum price, and the appraisal price for the land was NIS 10,488,871. The two companies were the only bidders for the lot, and won it for NIS 790,555 - 7% of the appraised price. The amount reflects an average price of NIS 32,900 per unit. To the winning amount, the development expenses of NIS 8.3 million must be added.
In Tirat Hacarmel's Ayelet Hacarmel neighborhood, Shay Hay Development and Investments won a lot for 166 housing units for NIS 2,988,000, 11% of the land appraisal of NIS 26,530,487. The company will pay development costs of NIS 46 million.
In Rechesim, also in northern Israel, Ravitz Investments won a lot for 278 housing units for NIS 3.63 million, 9% of the appraisal of NIS 37,556,307. In Migdal Ha'Emek, Geshem Holdings won a lot for 205 housing units for NIS 318,000, just 2% of the appraisal of NIS 15,518, 641.
Less than NIS 2,000 above the minimum price
One of the big advantages of tenders in which there is only one bidder is the possibility to offer prices very close to, and even identical to, the minimum price, since there is no other bidder. It is true that this is a certain risk, since bidders do not know in advance how many bidders are competing against them, if any, but when the gamble pays off, the bidder makes a big profit.
One such example of these tenders is in Abu Ghosh where five bidders - Mohammed Ibrahim, Moussa Ibrahim, Hashem Ibrahim, Ibrahim Ranin and Mongad Jaber - together filed the only bid for four housing units. The minimum for the tender closed at the end of last month was NIS 2,238,128, and they won the tneder with a bid of NIS 2,240,000, just NIS 1,872 more than the minimum price. The land was appraised at NIS 2,459,482.
In a tender for commercial and tourism land in Zichron Yaakov, Hay Shay Development and Investments bid NIS 1.3 million for one of the lots, while the minimum price was NIS 1,279,130, just NIS 21,000 below. The bid was 54% below the appraisal of NIS 2,811,275.
Paying too much
Alongside these, there were also several companies who, despite being single bidders, filed high bids. In the tender for a commercial and office complex near the Seven Stars Interchange in Herzliya, for example, the Pisgat Noam won the tender for NIS 57.4 million, NIS 13.5 million higher than the minimum price. It's still, not such a bad deal as the appraisal for the land was set at NIS 96.3 million, so the bid is 31% lower than the appraisal. Secondly, this is a fairly prestigious area, in the heart of a demand area, so such a price is in many ways a good deal.
Published by Globes, Israel business news - en.globes.co.il - on February 25, 2024.
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