Jerusalem Land Lessees Forum: "The crisis has cut apartment values by about 50%"

The crisis of leased lands in Jerusalem has led to a decline of up to 50% in the value of apartments in the prestigious neighborhoods of Talbiya, Rehavia, and Nitzan, and banks have even stopped providing mortgages to apartment buyers. This is claimed by Adv. Doron Shmueli, chairman of the Jerusalem Land Lessees Forum, in a letter sent to the chairman of the Jewish National Fund (KKL), Eyal Ostrinsky, which reached Calcalist.

According to Shmueli, the uncertainty surrounding the future of about 1,100 apartments built on lands previously leased by the Greek Patriarchate, and subsequently purchased by the Extell company controlled by American real estate mogul Gary Barnett, has led to an almost complete paralysis of the apartment market in the neighborhoods.

"Banks have stopped providing mortgages, the value of our assets has plummeted by about 50%, and the maintenance and renewal of the buildings have frozen due to their ownership status," wrote Shmueli.

According to him, the apartment owners have become "paper poor" because they find it difficult to sell their apartments or bequeath them to their children.

At the beginning of 2023, Barnett purchased the ownership rights to about 500 dunams in central Jerusalem for about 750 million shekels. The lands, on which more than a thousand apartments, hotels, and public institutions are currently built, including the Inbal Hotel, Prima Hotel, Dan Panorama, part of the Great Synagogue, and the Israel Museum, are supposed to pass into his ownership upon the expiration of the lease between 2050 and 2052. The lessees currently hold the lease rights through the KKL, which serves as the primary lessee, but as the lease expiration date approaches, the uncertainty surrounding the future of the rights increases.

According to Shmueli, the crisis is already reflected in transactions on the ground. "Even before the lease dropped below 25 years, an apartment on Ahad Ha'am Street in Talbiya was sold for about 35,000 shekels per square meter, compared to about 70,000 shekels per square meter in similar transactions in the area. This is one of the most sought-after streets in Jerusalem," he told Calcalist. Furthermore, according to him, as the lease period shortens, tax uncertainty also arises, as the lessees may no longer be considered as having full rights to the apartment.

In his letter, Shmueli calls on the KKL to accelerate negotiations with the landowners and lead to an agreed settlement, which he says will allow apartment owners to purchase the land or extend the lease period. "An agreed solution is not a wishful thinking, but achievable, here and now," he wrote. According to him, the Lessees Forum is currently conducting advanced contacts with the landowners, but without the involvement and leadership of the KKL, there is a fear that the move will not come to fruition. "An agreement is in the interest of all parties and can prevent a social and economic crisis in the heart of Israel's capital," he wrote. The KKL's response has not yet been received.