A major deal in the rental housing market has been signed. Mivne Group will purchase from Aura rights in six projects, including 290 rental units, about 4,000 sq.m. of commercial floor area, and student dormitories in projects currently under construction in Ramat HaSharon, Ramat Hen (Ramat Gan), Kiryat Ono, Ben Shemen, and Hadera. Consequently, Aura announced its intention to cancel the IPO of the Real Estate Investment Trust for housing.
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Mivne will pay NIS 750 million for rights in the housing and commercial units and the student dormitories, funding the first payments with its owner's capital. According to Mivne, the anticipated return on the capital will be about 11%. Mivne plans to manage the assets and rent the apartments to the general public while seeking benefits based on the Law for the Encouragement of Capital Investment. In light of the transaction's specifics, the group even expects to report a capital gain.
For Aura, the sale will contribute to an increase in income and improve the group's operational and financial parameters beginning in the second quarter of 2021 and in the next quarters. These will lead to a major reduction of the debt in Aura's construction loan accounts and will improve its financial relationships, and will also significantly increase its owner's capital. Accordingly, Aura expects to report a major gross profit in the present quarter. The group expects that this important transaction will have a positive influence on the company's rating and will benefit its trading conditions with financial institutions, including a reduction in future financing expenses.
The agreement further stipulates that Aura will grant Mivne an irrevocable option to purchase 20 to 50 housing units out of the total number of apartments offered for sale, as part of the pre-sale arrangements in each of its 17 future projects, at a price that reflects a 5% discount on the appraisal price. Mivne will be able to trade the option to a corporation in which it holds at least 50% of the issued and paid-up share capital during the exercise period.
The deal will allow Mivne to expand its portfolio and improve its status in the long-term rental market. It follows the company's acquisitions over the past year of the Hen hotel in Jerusalem and the Elef complex in Rishon LeZion.
The contract further stipulates that if a company controlled by Mivne and operating under a Real Estate Investment Trust forecasts a security IPO, under certain conditions Aura Group will have the right to purchase up to 15% of the REIT shares, at a price equal to the value of the share at the time of issue, less 7.5%.
Dudu Zvida, Mivne CEO: "The deal with Aura includes high-quality assets in prime locations. We see this transaction as an opportunity to enhance our position in the long-term rental market, while gaining a major advantage in the existing market for small apartments. We are now beginning to market the apartments in our flagship project – HaSolelim in Tel Aviv, where we also intend to designate some of the apartments for long-term rental contracts."
Yaakov Atrakchi, Aura CEO: "The deal is a clear vote of confidence in our projects in locations in high demand in the center of the country. We are convinced that the sale guarantees professional management and maintenance of the assets by one strong, specialized body with a forward-looking perspective and the ability to maintain the apartments for residents and create a harmonious, high-quality residential experience. We believe the sale will allow us to focus on developing residential neighborhoods in high-demand areas and further advance the group's huge array of projects, as well as improve its financial stability for the short- and long-term."
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Recently, Mivnei Taasia and Jerusalem Economy Ltd. merged to become Mivne Group. Mivne has assets throughout the country in various segments: about 40% in industry and logistics (valued at about NIS3.6 billion), about 38% in office space (NIS3.3 billion), and about 22% in trade (NIS2 billion). In all, the group has performing assets totaling about 1.6 million sq.m. in Israel – the largest rental space among all the real estate companies operating in Israel.
Aura is a leader in developing housing projects in Israel, specializing in development, planning, and construction of urban renewal complexes in city centers in high demand. In all, the group is at this time developing, planning, and building in Israel – including in collaboration with other companies – 46 housing projects that comprise over 20,600 units (the company's effective share is over 15,000 sq.m.).
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