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The Jerusalem Economic Corporation (JEC) failed to meet some of the covenants on a loan of NIS 189 million it took from Bank Hapoalim in 1993, according to a prospectus the firm published yesterday before its bond issue. The JEC took the loan to buy control of Industrial Buildings Co. from the state.

Covenants are conditions which the borrower must comply with to keep to the terms of the loan. If the borrower does not observe the covenants, the loan can be considered in default and the lender has the right to call it in - usually in full.

But Bank Hapoalim waived its right to do so and has deferred dealing with the case until early next year, to allow the JEC not to classify the loan as short-term credit.

The JEC and its subsidiary, Industrial Buildings Co., are also big investors in Bank Hapoalim stock. According to the prospectus published yesterday, the two companies recently sold Hapoalim shares for NIS 109.5 million.

The prospectus also exposes the problematic status of the office space market in Herzliya Pituah, where Industrial Buildings Co. is involved in a large project known as Ackerstein Towers. This is two nine-story structures with 25,000 square meters of office space, a 5,000 square meter commercial level, and 48,000 square meters of parking space. Industrial Buildings Co. is at odds with the Ackerstein company, which owns the land, over Industrial's decision not to proceed with stage two of the project.

Its breach of the Ackerstein contract is put down to its lack of economic viability.

"There are tens of thousands of empty offices in the Herzliya Pituah industrial area," the prospectus states.

Stage one of the Ackerstein Towers project cost NIS 200 million. Annual rents are NIS 15 million - a relatively low yield of 7.5 percent.