Beresheet Tower's Struggles: Only 76 Apartments Sold After a Decade
A decade of marketing for Tel Aviv's Beresheet Tower has yielded only 76 sales out of 168 apartments, marred by a 2021 fire and hundreds of millions in mutual lawsuits.
The endless troubles plaguing the Beresheet Tower in Tel Aviv are significantly impacting its sales pace. Out of the 168 apartments built in the luxury skyscraper, only 76 have been sold so far, following a decade of marketing. Members of the Kozaynoff developer family hold another 15 apartments, Globes has learned. Despite this, the family has no intention of lowering prices beyond what they deem a necessary flexibility given the difficult state of the real estate market.
What was considered in the mid-2010s to be Tel Aviv's "hottest tower" in terms of marketing potential has indeed become hot, but for all the wrong reasons. The project was hit by a major fire in 2021 caused by an electrical short circuit, resulting in massive damages and mutual recriminations among the various parties involved involveld in the venture.
Mutual Lawsuits and Arbitration
Late last week, "Migdalei Beresheet Daniel Ltd.," which manages the project on behalf of the Kozaynoff family, and Electra Construction filed mutual lawsuits totaling hundreds of millions of shkels as part of an arbitration proceeding.
The proceeding, which is in its early stages, is classified under confidentiality. However, a report submitted by Electra Construction to the capital market reveals that its claim amounts to 270 million shekels. Electra argues this is owed for work performed on the project, changes in execution plans, and compensation for alternative yields and loss of profits. In addition, Electra raises claims regarding external factors that delayed the project, including the fallout from the 2021 fire during construction.
In the counter-lawsuit, Migdalei Beresheet Daniel filed a claim of approximately 900 million shekels against Electra. This lawsuit focuses on allegations that Electra delayed completion dates, which the developers claim severely impacted the pace of apartment sales in the project.
Market estimates also indicate that although the occupancy permit for the building was issued in April of last year, a significant portion of the apartments remain unfit for occupancy, keeping the building's actual move-in rate low.
These claims add to a 480 million shekel lawsuit filed by Migdalei Beresheet Daniel against Migdal Insurance. Filed about two months ago, the lawsuit alleges that the insurance company delayed insurance payouts required to repair building systems damaged in the fire. Furthermore, the company claims that Migdal caused Electra to leave the site without completing the work, delaying project completion by at least 15 months.
Severe Slowdown in Sales
All of these malfunctions have apparently triggered a severe slowdown in apartment sales. Tax Authority records show only 76 apartments sold over the decade the project has been marketed—less than half of the 168 units. Company CEO Moti Kozaynoff told Globes that the family owns an additional 14 apartments.
Beyond this, several buyers have canceled contracts, and the company currently faces about seven lawsuits in various stages brought by dissatisfied purchasers.
Overall, the damages to the project consist of physical destruction from the fire, unfinished or partially completed construction work, and the cascading effects of these events on sales and occupancy rates. Sales are moving at a sluggish pace, though this has seemingly done little to impact prices. In recent months, only two deals were finalized, but at exceptionally high prices: two 4-room apartments on high floors sold for 15.7 million shekels and 14.2 million shekels, translating to a price per square meter of roughly 110,000 shekels—among the highest ever recorded in Israel. Thus, while the market may not be booming as expected, buyers determined to live in Beresheet Tower are still willing to pay a premium.
Financial damages stemming from sluggish marketing and construction delays have also mounted. Compounding the issue, the devastating fire struck in early 2021—historically Israel's peak year for real estate—meaning Beresheet Tower completely missed out on the country's unprecedented sales boom.
"We are continuing to market the project and working hard. It won't be easy from a marketing perspective right now, both due to the general market conditions and the execution methods used in the project, so we are trying to do our utmost to keep selling. We are progressing as much as we can. The tower stands, the tenants are the focus, and there are many families living in the building," Kozaynoff acknowledged regarding the real estate market, which is currently less than favorable for developers. According to him, "The company is forced to compromise on price, but the family views the project as the most luxurious tower in the country, and only because they are an affluent family can they bear the enormous damages incurred without being pressured to sell at any price."
