Record-high $280 Million Offered in Land Bid for Tel Aviv's Sarona

A purchasing group on Monday won the much talked-about tender for land in Tel Aviv’s Sarona, paying a cored 1.06 billion shekels ($280 million) for property zoned for three apartment towers containing 324 units.

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The United purchasing group – a consortium of home buyers led by developer Moti Peled – narrowly beat a 1.05 billion-shekel bid by the real estate company Gindi Holdings. Two other groups made bids, but at 869 million shekels and 750 million shekels, they were far out of the running.

The 1.06 billion shekels was the highest-ever sum fetched in a tender by the government’s Israel Lands Authority, exceeding the 821 million shekels paid by a partnership between property developer Canada Israel and Arco Real Estate paid for a nearby site called Kanarit zoned for 330 apartments in two towers.

The record price means buyers will be paying considerably higher prices for the Sarona units than properties now go for, perhaps as much as 60,000 shekels a square meter, said property assessor Erez Cohen.

“The land costs for an apartment in the project are about 3.5 million shekels, I estimate. For the developers to make a profit, they will need to price a four-room,100-square-meter apartment at 6 million shekels and a five-room, 125-square meter unit at 7.5 million,” Cohen said.

Another realtor estimated the price might be a slightly lower 5,000 shekels a square meter.

The property sold Monday's tender is bounded by Kalman Magen and Ha’arba Streets near the trendy Sarona Market. The site also is zoned for 11,000 square meters of offices and 3,000 square of stores.

The tender brought the competition between traditional building companies and purchasing groups to new heights, amid accusations that the purchasing groups are free to offer inflated prices for land in the knowledge that it’s the members who will pay the price, not the company managing the group.

Sources expressed doubt that the Peled group would be able to raise the money or get bank financing.

“The difference between the forecast price buyers were told when they were marketing the idea and the price they agreed to pay is huge and illogical,” said one industry source. “Apartments will cost at least 50% more than they told buyers.”