Land Admin Revokes Gazit Globe's Contract to Build Mall in Yokneam

Rival didn't pay development costs in time, says rival Big, arguing that it should win the contract

Two and a half months ago, Gazit Globe (TASE: GLOB) won a tender to buy 8.5 acres of land zoned for a shopping mall in Upper Yokneam. But the real estate investment company neglected to pay certain tender fees to the Israel Land Administration in time, and its victory in the tender has been revoked.

Representatives of the company and the ILA are in talks to resolve the impasse, TheMarker has learned.

The land in question is in the Yokneam neighborhood of Calaniyot ("Poppies"). Several developers filed bids but Gazit Globe won, in partnership with real estate investor Gaby Edri.

They placed the highest bid - NIS 20 million, of which NIS 11 million was for the land and NIS 9 were development costs.

Another bidder was Big Shopping Centers, which came second with an offer only 1.5% below that of Gazit Globe.

Big's legal counsel, attorney Yitzhak Hajaj, wrote to the ILA, saying the company had learned that in contravention of the tender terms, Gazit Globe had neglected to pay the development costs within 50 days of being declared the winner of the tender.

Based on precedent and the formulation of the tender itself, Hajaj theefore asked the ILA's tenders committee to revoke Gazit Globe's win, and declare Big the winner by default.

The Gazit Globe spokesman said, "On January 26, 2006, the company transferred the entire consideration for the tender, NIS 21.5 million, to the Israel Land Administration and to the Housing Ministry, and paid purchase tax on the transaction, on time. In the opinion of the company and its legal advisers, the company has fulfilled all its duties under the tender."

However, the ILA tends to see the situation much as Big does. Its spokesman confirmed that it had revoked Gazit Globe's win, but refused to comment on the circumstances. However, sources at the ILA confirmed that Gazit Globe had failed to transfer the development fees on time, as the tender stipulated.