Pressure Is On Both Buyers, Sellers
The Wall Street Journal reports: Africa Israel Investments Ltd., a beleaguered Israeli real-estate company, has cut the price of a Miami parcel of land by more than half so it could complete its sale.
A group affiliated with Africa Israel agreed in 2006 to sell the seven-acre parcel in 2006 for about $88.7 million to a partnership led by Falcone Group of Boca Raton, Fla. But the deal never closed as the recession deepened and property values tumbled. Now, to end three years of wrangling, Africa Israel has agreed to reduce the price to about $39 million. The deal is expected to close later this month.
The deal reflects, in part, the pressure that Africa Israel has been under to raise cash. Led by Lev Leviev, an Israeli diamond merchant, the company is best known for its top-of-the-market purchase of the old New York Times building and the troubled Apthorp condominium-conversion development on Manhattan's Upper West Side. The company is selling some real-estate assets to pay off debt.
But the buyers also were under pressure to compromise. The group led by Falcone, a real-estate company owned by three brothers, had already sunk $18 million into the deal from the original deposit along with increases paid to keep extending the closing. In 2007, the Falcone-affiliated group, known as 150 NE 7th Street LLC, filed a lawsuit in a Florida circuit court and sought to recover its deposit money. But Africa Israel battled back. In an amended complaint filed earlier this year, the buyers alleged that the seller didn't meet certain conditions of sale, including failing to remove defects in the property's title in a "timely basis."
Art Falcone, Falcone Group's chief executive, described the price cut as a "settlement."
If the transaction closes as expected, it will be one of only a handful of larger commercial land sales this year. From January through July, the total value of sales of vacant land entitled for commercial development in the U.S. fell to about $636 million, from $5.5 billion in the year-earlier period, according to data from Real Capital Analytics based on transactions valued at $5 million or more.
The decline comes as some lenders, already skittish about financing any real-estate purchases in the recession, are just saying no to borrowers seeking loans on acquisitions of vacant land and empty buildings with no hope of near-term income.
"Lenders are avoiding properties without income like the plague," says Dan Fasulo, managing director of Real Capital Analytics.
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Posted by: Matthew Stone