The state plans to buy an apartment block in Ashkelon to house 60 families evacuated from the Gaza Strip settlement of Kfar Darom. As the state is only committed to provide such housing for two years, the state is projected to lose $2.5 million on the short-term real estate deal when it sells the property two years down the line.
The apartment block, situated on the city's Ben-Gurion Boulevard, was built by Jerusalem contractor Menashe Levy two years ago. About half of the 132 housing units have already been sold, and Sela, the state's Disengagement Authority, is interested in buying the remaining 60 apartments for $8 million, although Levy is asking for $9.5 million.
The contractor is likely to offer a buy-back option, whereby the state would sell the block back to Levy for $5-5.5 million in two years time, hence the quick $2.5-3 million loss for the state.
If the state found a better buyer, it might chose not to exercise such an option, and the loss could be less. Ashkelon, it must be said, is not a thriving real estate market, and deals involving the purchase of 60 apartments in one swoop are rare indeed.
How can one analyze such a significant loss? It works out to NIS 8,000 per month per family, and in the Ashkelon region, rent stands at around $600, or NIS 2,700, a month for a five-room apartment. In other words, in the Ashkelon tower deal the state will be spending three times more on housing the evacuees for the two years than if it just rented individual apartments in the area.
The reasoning behind this real estate transaction is that these families - almost 70 of them, and large ones too, requiring five-room housing units - would prefer to live together. Sela may also be under pressure from two other factors; it tried to reach a rental agreement on the units with Levy, but he refused, hence the purchase option; and a time factor, that these families have yet to even find temporary housing after being evacuated from Kfar Darom.
The deal has been approved by a government committee, and given the large sums involved, the Finance Ministry is also keeping an eye on the matter.
Sela said, "If we discount the cost of a rental contract for 70 large families, at some $600 per apartment/family for a two-year period - or the cost of setting up 70 caravillas as an option, then we see that this is a reasonable deal."
The apartment block has been built to high technical standards, offers a view of the sea and is considered a desirable buy, but realtors in Ashkelon point to the poor state of the market in the coastal city in explaining why only half of the units have been sold in the two and a half years since the project was completed. "Looking at the deal in the light of the prices, and the marketing situation of the project, a price of $8 million for 60 apartments seems perfectly reasonable," said one local realtor. "However," he continued, "selling it back at $5 million-5.5 million in two years time would be blatant stupidity on the part of the state."
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