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Alon Holdings Blue Square - Israel Ltd. (NYSE:BSI) Announces The Financial Results For The Fourth Quarter Of 2012

b.  The wholesale market complex

  • On May 31, 2012, Tel Aviv Lev Towers Ltd. (the "Residential company") and the Tel Aviv City Mall Ltd. (the "Purchasers") in which BSRE held to that date indirectly 50% together with Gindi Investments 1 Ltd and a corporation controlled by Moshe and Yigal Gindi, ("Gindi"), completed the purchase of lease rights for the period ended on August 31, 2099 for a part of the wholesale market complex in Tel Aviv. The Purchasers paid the Sellers the balance of the consideration, according to the agreements, in the aggregate amount of approximately NIS 730 million (BSRE share - NIS 365 million) plus VAT. The sellers may be entitled to an additional consideration that shall be derived from the sale price of the apartments in the project. As of the date of this report, the sellers are not entitled to additional consideration. In order to pay the Balance of Consideration, the Purchasers received loans of NIS 730 million ( NIS 487 million to Tel Aviv Lev Towers Ltd and NIS 243 million to Tel Aviv City Mall Ltd.) from a bank. The Loans were extended for 18 months where the principal shall be paid in one payment at the end of the period and the interest payments of Prime + 2% are payable quarterly. The loan may be repaid early. To secure the loans, BSRE recorded a charge in favor of the Bank on the rights in the land and BSRE committed to provide unlimited guarantee in the amount of 50% of the purchasers' debts in addition to other collaterals and commitments. On December 31, 2012, the bank's consent to provide an additional loan to Tel Aviv City Mall Ltd. was received, provided that certain conditions are met, at the original loan repayment date and at the loan principal amount ( NIS 243 million) attributed to Tel Aviv City Mall Ltd. The additional loan shall be repaid in one payment until January 15, 2014.  The loan agreement determines that the bank may call the loan for immediate repayment.
  • During the quarter, the excavation and reinforcement works in the project were completed and the performance of skeleton work has commenced. On July 3, 2012, the purchasers signed an agreement with a performing contractor (the contractor) to perform all skeleton work of the parking lots, the commercial part, public structures and other finishing work. The purchasers shall pay the contractor for the work an estimated amount of NIS 286 million (BSRE portion amounts to NIS 143 million). The agreement sets forth schedules and milestones for performing this work where the contractor committed to complete the work in 19 months from receiving the work commencement order. Under the agreement, the contractor committed to provide the purchasers with guarantees and the agreement further determines agreed compensation in the event of material breach by the contractor. In addition, the agreement set forth a mechanism to calculate a bonus or penalties should the contractor performs the work earlier than the schedules or deviate from the schedules. The work commencement order was delivered to the contractor on July 4, 2012.
  • On June 29, 2011, BSRE and Gindi entered into an agreement constituting an appendix (the Appendix) to the Memorandum of Understandings dated April 15, 2010, (MOU) that regulates the relations between the Company and Gindi in all that concerns the wholesale market complex in Tel Aviv. According to the Appendix, Tel Aviv Lev Towers allocated to Gindi one additional share of NIS 1 par value for NIS 300 thousand such that after the allocation, Gindi holds (by chaining) 50.5% of the issued and outstanding share capital of Tel Aviv Lev Towers and BSRE (by chaining) holds 49.5% of the issued and outstanding share capital. On June 29, 2012, the parties completed the above allocation. The residential company ceased to exist under joint control at the end of the second quarter of 2012 and therefore the investment in Tel Aviv Lev Towers Ltd. was recorded on equity method of accounting. BSRE recorded in the statements of income, under other income (expenses), a gain of NIS 19.6 million representing the difference between the fair value of the Company's investment in the residential company upon losing control, and the investment balance as included in the books at this time.
  • In 2012, BSRE recorded a gain of NIS 87.6 million from appreciation before taxes stemming from revaluation of real estate in the Tel Aviv City Mall Company.
  • In December 2012, building permits were received for 652 apartments in the project and for two parking levels. BSRE estimates that building permits for the remaining 70 apartments, commercial space and parking shall be received in 2013.
  • As of the date of this report, the residential company signed 619 sale agreements for the sale of apartments in a total amount of NIS 1,239 million out of which, NIS 603 million were received as of the date of the report.  

c.  Hadar Mall  

In the first quarter of 2012, the construction of an additional commercial floor in Hadar Mall (BSRE share in the mall is 50%) with a total area of 12,000 sq.m and upper three parking levels with a total area of 22,000 sq.m was commenced.

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