Gary Barnett Closing In on Prime Jerusalem Real Estate

Gary Barnett’s Extell Development is close to finalizing a significant land deal in Jerusalem that could drastically alter a substantial portion of the city’s valuable property.

The proposed agreement involves Extell, the Jewish National Fund and properties leased from the Greek Orthodox Church, Ynet News reported. The deal was revised after initial terms revealed last month angered tenants.

Under the new terms, existing tenants on the land would be able to extend their sublease agreements for 99 years, at a cost equivalent to 5.5 percent of the land’s value. The deal also involves the transfer of ownership of national institutions situated on the land to the JNF.

The agreement is vital for Extell as it grants development rights for vacant parcels, enabling a significant urban renewal project. This project could potentially create thousands of new apartments and generate billions in revenue.

Extell acquired 128 acres of land in Jerusalem for $200 million last January. This acquisition was from a group that had purchased the land from the Greek Orthodox Church in 2016 but had been unable to develop residential projects. The land has been leased to the JNF since the 1950s, with its lease extended in the early 2000s until 2051; there are options for further extensions.

Barnett initiated discussions with tenants regarding an urban renewal project even before the land purchase was finalized. His initial offers for property rights were considerably higher than 5.5 percent of the land’s value.

Once the deal is officially signed, tenants will have the option to join the renewal project. The JNF’s objective is to prevent future legal disputes for tenants and avoid direct disputes with Barnett.

Tenant representatives are pushing for more favorable conditions, asserting that their status as sublessees should exempt them from any payment obligations. They also suggest Barnett dedicate 20 percent of development profits to the JNF.

Other critics are entirely opposed to the deal, suggesting that tenants should receive full ownership while granting Extell first refusal rights in any renewal project.

Commercial property owners are negotiating separately with Extell.

Use of open spaces is expected to become another point of dispute. Environmental groups are lobbying the JNF to prevent development in these areas, citing concerns regarding potential harm to central Jerusalem’s open spaces.

— Holden Walter-Warner