As it has repeatedly threatened to do in recent weeks, Swiss real estate and retail holding company Jelmoli filed a suit in a Zurich court against the Israeli consortium of Egal Ahouvi's Blenheim Properties, and Yitzhak Tshuva's Delek Global Real Estate and Delek Belron International.
Jelmoli has sued for breach of contract after the Israeli partners demanded last September that the terms of their purchase of Jelmoli's real estate portfolio in July be renegotiated.
The consortium and Jelmoli had agreed on the $3.3 billion sale of 88 existing properties and two others being developed. The deal would have been the largest-earning real estate deal ever conducted by Israelis overseas.
The Tshuva-Ahouvi consortium outbid leading Western European real estate companies to purchase Jelmoli's portfolio of assets, one of the leading real estate and retail firms in Switzerland.
The deal includes assets such as Jelmoli's top department store in Zurich and the Grand Passage in Geneva, as well as properties located in prime locations like Lausanne, Bern, St. Galen and other central cities in Switzerland. The revenues-earning properties include 530,000 square meters of rented floor space. When the development of the two additional properties is completed, the properties included in the transaction are expected to earn about NIS 659 million annually.
Rental agreements linked to the properties include an automatic annual rent increase mechanism. The assets included in the transaction carry rental contracts for an average of 13.5 years, and some are for a period of 25 years.
About 20% of the properties in the transaction are office space, and the rest are commercial buildings and shopping centers. The development projects included in the deal include a 40,000 sq.m. commercial center in Saint Galen, scheduled to open this April, and a shopping center located near Geneva with a floor space of about 11,000 square meters, which is expected to open in October.
Nevertheless, with the development of the sub-prime mortgages crisis, and resulting credit crunch and changes in macro-economic market conditions, the Israeli partners demanded a discount on the original price tag.
When refused, the Tshuva-Ahouvi consortium sought to withdraw from the deal. The Jelmoli management was outraged.
"We are asking for the completion of the purchase agreement and also the payment of the agreed purchase price, and additionally compensation and interest of eight percent per year," Jelmoli CEO Harald Pinger told Reuters.