The project that complicated the investor: 'If I lose only 200,000 shekels, I will be satisfied'

In 2020, Yahav Spinerd was convinced he was making an excellent deal when he purchased a new apartment 'on paper' in Jaffa at a price that was 300,000 shekels below the market price at the time. Today, he declares that if he emerges with a loss of 'only 200,000 shekels' from the Jaffa adventure, he will be satisfied.

'About six years ago, I sold an apartment after making a very large profit. Essentially, I had exhausted the profit potential and was looking to increase leverage and buy another apartment in the same area,' says Spinerd. However, at the beginning of 2020, the coronavirus pandemic broke out, which, among other things, led to the closure of a startup he owned that operated in the museum sector abroad.

In this situation, he found it difficult to get a mortgage, so he abandoned the idea of a second-hand apartment for investment and focused on a new apartment. He set his sights on a project called 'Yaffa' by the Tzabarim company on Tucholsky Street in Jaffa. 'While I was negotiating with the developer regarding a 4-room apartment with parking and a storage room, I suddenly discovered an ad on the Yad2 website for a 4-room apartment on the fifth floor that a buyer in the project was trying to sell,' he says.

The opportunity: buying from a buyer who bought at the beginning of the project

Spinerd explains that while the company demanded a price of 2.3 million shekels, the apartment on the website was sold at a lower price, and in the end, the deal was closed at 2 million shekels. 'There is no other way to present it: I bought an apartment for 300,000 shekels less than the developer's price. And it sounded like an excellent deal to me,' he explains the logic that guided him.

But hidden within this deal was a matter that would complicate things for him later.

'I did not receive a full Sale Law guarantee because the seller bought the apartment as part of an 80/20 promotion in 2015 at a price of 1.5 million shekels. That is, he put down only 300,000 shekels as a down payment, and he had a debt to the developer of 1.2 million shekels. When I bought the apartment for 2 million, I essentially stepped into his shoes regarding the 300,000 shekels for which there is a Sale Law guarantee, but I added 500,000 shekels to him without a Sale Law guarantee,' says Spinerd.

Yahav Spinerd, Amdocs

• Personal: 37 years old, married +2, lives in Kfar Shmuel

• Professional: CEO of Captain Invest

• Something else: I crossed the Pacific Ocean on a sailboat in 2017

The story of Spinerd's investment in Jaffa, described in detail in a special episode of 'Kesef BaKir' ('Money in the Wall'), the real estate and investment podcast of Globes, illustrates one of the most basic maxims in the world of investments: risk vs. reward — why it is so important to insist on a Sale Law guarantee — and also teaches once again about the complexity of TAMA 38/1 projects. This is certainly true when it comes to a large-scale project like the one planned by the late developer Roni Tzabari, the former controlling shareholder of the Tzabarim company, which collapsed about three years ago.

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The complexity: the difficulty of completing a TAMA 38/1 project in the area

In the first decade of the century, Dr. Ora Bloom directed the legal clinic at Tel Aviv University. This is a university and student project that provides volunteer legal aid. Somehow, they became aware of the fact that several old buildings on Tucholsky Street in Jaffa had received 'Order 3' notices from the municipality, meaning that the structures were dangerous for habitation and that defects had to be repaired quickly, or they would be evacuated.

'The population living in these buildings are public housing tenants, most of whom bought the apartments with very large discounts of up to 95% of the house's value, and became owners,' says Dr. Bloom. 'But they did not become wealthy, so they had no ability to pay the costs required to repair the defects.'

The Sale Law guarantee problem: things must be regulated between the buyer and the seller | Arik Mirovsky, commentary

When Yahav entered the deal, he knew it was risky, but decided to put in half a million shekels that were not secured by a Sale Law guarantee because of the hope for an increase in value.

The Commissioner for the Sale Law at the Ministry of Housing identified that there is a phenomenon here: there are many cases where people bought apartments 'on paper' from the developer, saw that prices were rising during construction, and decided to realize profits and sell the apartment on.

In such a situation, there is no one to provide a Sale Law guarantee to the new buyers, because the one who contracted with the contractor or developer in the contract was the previous buyer. Therefore, the Commissioner for the Sale Law determined that whoever bought an apartment 'on paper' and sold it to someone else would be responsible under the Sale Law for the price gaps between what he bought it for and what he sold it for. However, these things must be anchored in an agreement between the parties. In such cases, things must be regulated between the buyer and the seller.

Today, there are many buyers who bought 'on paper' in promotions and planned to sell the apartments but cannot sell the apartments in the current situation, and certainly not at a higher price. There are also developers who veto such a deal. Therefore, one definitely needs to look ahead and check the matter in advance.

In addition, as a buyer, I recommend checking the status of the developer when you buy an apartment. If the situation is not solid, it is dangerous.

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With the help of a private law firm, contact was made with the developer Roni Tzabari, who, according to Dr. Bloom, was not only interested in profits, but the story of the tenants touched his heart. His company repaired the defects, and subsequently was chosen to promote a TAMA 38/1 project for the six buildings on the street, in which 96 families lived.

The project received the marketing name 'Yaffa'. The fact that it was a large and complex project, along with the fact that TAMA 38 was only in its infancy, led to the fact that only in 2015 did the new apartments in the project go on sale in a special sales promotion aimed at students.

'Two-room apartments were purchased for about a million shekels,' recalls one of the marketers. About five more years passed until things on the ground really started to move. 'The good intentions were everyone's, led by Roni. Only he did not make the right estimates and did not expect the pits that would be on the way,' explains Dr. Bloom.

And they did indeed arrive in the form of difficulties with the public housing companies, which cast a shadow over the issue of guarantees, and also the fact that the project turned out to be complex in terms of planning, mainly due to the need to build an especially large parking lot.

In 2022, the construction of the project was supposed to be completed, but the situation was far from it. The apartment owners were angry that they were living on a construction site, and the apartment buyers began to wonder how long the delay would be. Some of them demanded compensation.

'In May, they gathered us and said there was a delay in construction due to the coronavirus and Operation Guardian of the Walls, and announced that we would not receive compensation,' recalls Spinerd, who at that time was still satisfied. 'Those were good years for real estate and the value of my apartment on the free market climbed to 2.8 million shekels. So I told myself that even if it takes another year or two, on the return on equity I am doubling the money. Everything is fine.'

However, nothing was actually fine.

Back on track: the receiver: 'I am meeting chaos, a huge complication'

A year later, the Tzabarim company collapsed. The works, which were already being done slowly, stopped, Tzabari passed away, and the events of October 7 and the difficult war that broke out made progress difficult.

The one who finally managed to promote the project was Adv. Hagai Ullman, who was appointed by the court to serve as a receiver, alongside Adv. Erez Haver.

'I am meeting the project in 2023, and there is chaos,' says Adv. Ullman. 'A project that got stuck due to the insolvency of a company, by the way, after the sudden passing of its owner and manager.

'This is an extremely complex event because it is a huge TAMA 38/1 project, perhaps the largest that exists and that has fallen into insolvency.

'This is a huge complication of about 100 old apartments, on which 100 new apartments are being built. The project is stuck in the middle with an extremely complex planning situation. The execution situation is even more complex. Contractors who went bankrupt and solutions need to be found.'

Adv. Ullman says that as part of the solution that was formulated, apartment owners were asked to add money from their own pockets to the project's fund to provide capital for the continuation of construction.

'I had to make a decision,' says Spinerd. 'To take the 300,000 shekels that were protected by a Sale Law guarantee — which means that I am announcing loudly that I lost half a million shekels — or to continue construction, and in my case to add 400,000 shekels.'

Spinerd chose the second option, but the complication for him did not end there. 'There were expenses that continued to pile up. The apartment I bought was linked to the construction input index at 100% of its value. Today I have to add to the deal just because of this clause 250,000 shekels,' he says and says that today he is trying to sell the apartment, knowing that thanks to the outline and the progress of the works, the expected completion is the end of 2026.

'Throughout the way, I felt that the company tried to move forward, but apparently the project was too big for it. I was hurt, but the main victims are the people who lived and still live on a construction site, most of the time in difficult conditions,' he explains.

In conclusion, he tries to find an optimistic note as well: 'Every investor has scars on their back, and it is also important to recognize these things and the risks, and I think there is no better lesson than this lesson.'