JNF indecisiveness delays development of Jerusalem land

In one of the largest real estate deals ever seen in Jerusalem, in January 2023, Jewish-American real estate tycoon Gary Barnett purchased land owned by the Greek Patriarchate for NIS 750 million. The deal was intended to end the deadlock over leasing the land so it could be developed. But 18 months later, there has been no practical progress.

Globes has been following developments in the matter for the past few months. The Jewish National Fund (Keren Kayemet LeIsrael), which holds the lease on the land until 2052 and is a key player in the future of the land, initially insisted that Barnett and his representatives had not contacted or met with it to discuss the matter. But the JNF has now admitted that several meetings have been held between the two parties since the beginning of the year.

The former Greek Patriarchate’s land covers 500 dunams (125 acres) in central Jerusalem. The Jewish National Fund purchased the lease rights to the land in the mid-20th century and has another 28 years left on the lease. Uncertainty about whether the JNF plans to extend or waive the lease rights, as well as land purchases over the years by outside parties, have created significant uncertainty about future development there.

As long as the fate of the JNF’s lease on the land remains undisclosed, it is impossible to promote urban demolition and reconstruction projects on the land, which in any case take years to complete. Because of this uncertainty, tenants and real estate experts in Jerusalem claim that the value of homes on the land has fallen by at least 40% over the years.

Barnett’s purchase was supposed to move things forward and solve the problem. The real estate company that owns the property, Extel, even came up with a preliminary plan. Old tenants (who make up a small portion of all tenants living in the land in question) would be able to buy their apartment for NIS 3,000 per square meter, and it would be registered in their name.

But this initial plan can only be implemented after reaching a solution with the Jewish National Fund, which holds the lease rights until 2052. The JNF can extend the lease for another period, in which case the tenants will not be able to obtain ownership rights. For this move to actually happen, the JNF would have to give up its lease rights, and it is seeking compensation for this.

According to information obtained by Globes, Extell has already offered the JNF compensation, in the form of building parks and carrying out other public works that the JNF would normally finance itself. However, according to sources familiar with the details, the JNF has not made its own decision on the matter: “It is an entity that likes to make decisions for itself,” the sources say.

But Extell has other reasons to encourage land development. One issue looming over the case is the threat posed by proposed legislation that would deal precisely with situations like the one caused by the Greek Patriarchate lands. If the “Fair Rent Act” is enacted, it could hurt Barnett’s plans and the company he owns.

So far, the bill has been submitted twice – in 2023 and last February. In its latest version, the bill stipulates, among other things, that the rental fee rate that each tenant will have to pay, in the event of an extension, will not exceed 5.5% of the value of the land (without buildings and infrastructure on it). This is significantly less than the amount that Barnett was supposed to receive as part of the scheme he set out. The latest bill was submitted jointly by 41 MKs from both the government coalition and the opposition.

“As we have made clear in the past, JNF-KKL is interested in the interests of the residents – the sub-tenants, as well as its own rights. In view of the many consequences, both economic and social, including in the long term, both with regard to JNF-KKL’s rights and with regard to the sub-tenants, JNF-KKL is examining various possibilities,” JNF-KKL stated.

“The plan we are presenting is profitable for subtenants, promotes the development of Jerusalem and we hope it will be promoted,” Extell said.

This article was published in Globes, Israeli Business News – en.globes.co.il – on July 24, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.