State hopes for record price in South Kirya Tel Aviv land sale

Bidding on the most prestigious parcel of land that the Israel Lands Administration has ever offered via public tender will close on Sunday. The parcel, located near the Defense Ministry in the South Kirya area of Tel Aviv, is being offered for a minimum price of about NIS 260 million.

The area is slated for the construction of three apartment towers with 108 apartments each, in addition to commercial space and offices. Industry observers anticipate sky-high bidding, which could add between NIS 350 million and NIS 400 million to state coffers.

"The only winner in the South Kirya tender will be the state, which will receive high prices that are out of all proportion to the [value of the] land. Whoever wins could soon discover that he lost, because he will pay much higher than market prices for his apartments," said appraiser Ehud Hameiri, and he is not alone in his opinion. The feeling among real estate industry sources is that developers' enthusiasm, especially among those entering the bidding, will generate record prices that are not justified.

The property in question lies north of and parallel to the Platinum and Millennium office towers on Ha'arba'a Street and south of the historic Sharona neighborhood.

The tender's terms give bidders two options: Either they can submit separate bids for one or more of the plots on which each of the three towers is to be built, or they can bid for the entire parcel, encompassing all three towers. The minimum bid on the north and south parcels is NIS 85.5 million each, whereas the middle parcel will cost at least NIS 91 million. The prices include development costs, but not value-added tax.

If sold as three separate parcels, the minimum that the state is prepared to accept is therefore NIS 262 million. But if a bidder is willing to fork over the purchase price for the whole site, the state will accept a minimum price of NIS 234 million.

At the moment, the residential market in general and the luxury market in particular are fetching record prices. As a result, the Israel Lands Administration thinks the land is now worth NIS 350 million. Yet when the state first attempted to sell the parcel, last year, it was unable to attract takers even at lower minimum bids. At that time, the state estimated that the land was worth over NIS 300 million.

Although the state is asking for more this year, about 15 potential bidders appear to be seriously interested. Most are purchasing consortia rather than contractors. Competition for the property is therefore expected to be stiff.

The need to monitor apartment prices closely has led some of the bidders, mostly purchasing groups, to set up "intelligence units" to scrutinize every twist and turn in the market.

There are those who argue that the tender is less attractive than initially meets the eye because the site is not a classic residential area. But others contend that a massive project involving over 300 apartments, along with expectations that three additional towers will be constructed in the future, will transform the area into a true residential neighborhood.