The 5 Towns Jewish Times

From the Editor: Earthshaking Events in Israel

By Larry Gordon

A few weeks ago, there was a series of minor earthquakes in Israel. The Richter scale measured the tremors in the 3-4-point level, which constitutes relatively minor rumbling but certainly enough to shake people up both literally and figuratively.

The trembling and vibrations were mostly felt in parts of Tiberias and Tzfat as well as in parts of Syria and Lebanon. We do not ordinarily consider parts of Israel as being seismically vulnerable to earthquakes, but if history is any indicator, an earthquake throughout the state of Israel is certainly possible.

The Syrian-African fault line runs along the Jordan rift valley on the border of Israel, Syria, Jordan and Lebanon. Back in 1837, and again in 1927, there were major earthquakes felt throughout what is today the state of Israel, from Tiberias to Jerusalem, even inflicting damage all the way up to the al-Aksa Mosque on the Temple Mount in Jerusalem.

This is in the news today because those who forecast these things say that the region is susceptible to a major earthquake every hundred or so years.

Recently, the Jerusalem Post reported that if the “big one” hits in the next few years, as many as 7,000 people might lose their lives. Officials in Israel have been moving quickly to make buildings throughout the country earthquake-proof while at the same time creating a business opportunity that could be worth millions of dollars to investors. That seems to be the perfect combination: keeping Israelis safe and generating significant income for investors.

Here are the facts and business opportunities according to Donny Fein, director of business development for the American-Israel Corporation based in Jerusalem. Most buildings in Israel built after 1980 have been constructed to withstand even a strong earthquake. Tens of thousands of homes throughout the length and breadth of the country were built prior to 1980 and are therefore susceptible to incurring significant damage if a strong earthquake strikes the country.

To deal with this matter, the Israeli government instituted what it refers to as the TAMA 38 program. The government is allowing contractors to add additional floors or apartments to any residential buildings and to sell those apartments at market rates in exchange for fortifying the construction of the buildings and keeping them earthquake-proof.

This is where the investment opportunities come into the picture. American-Israel Corporation is looking for investors to allocate a minimum of $100,000 with a starting dividend on the investment listed at 13 percent. The loan or the investment is collateralized both contractually and by the real estate involved in the project. The lending period is 24-30 months, and investors of larger amounts — for example, $2 million or more — can earn as much as 17 percent, Mr. Fein says.

So it seems like a unique opportunity for investors as well as a chance to quite literally strengthen Israel in a most urgent and even matchless fashion.

On the other hand, however, one can submit that few things in Israel are that simple. The cost of the Israeli government undertaking a project like this could bankrupt the country. At the same time, though, the development of the TAMA 38 program is ingenious and is a win-win for everyone involved in the matter.

Builders are focused on undertaking projects in parts of the country where they can realize a high market price and thereby generate a hefty profit after the sale of the new apartments in those buildings. While the conventional wisdom is that most of this type of building will take place in either Tel Aviv or Jerusalem, the new reality is that a great deal of the builders are preferring cities off the beaten track like Afula, Holon, and Bat Yam.

Why those cities? Donny says that these are gentrified areas of the country that are increasing in their popularity in part because Jerusalem and Tel Aviv have become too expensive for the average Israeli.

At the same time, it appears that for now there are issues in both Beit Shemesh and Tiberias where, according to Mr. Fein, housing prices are a bit depressed. The fact that real-estate values in these two cities have not increased at the pace of other parts of the country has left the contractors and investors less interested in these areas.

So in a sense the TAMA 38 project has evolved into a competition of sorts between what the country desperately needs and the interests of investors looking to reap profits. I asked Donny Fein and American-Israel CEO Larry Deverett what the government might do in order to get the reinforcement of buildings in Beit Shemesh and Tiberias underway. Surprisingly, they said that there is so much work in other parts of Israel that no one is dealing with this other matter for now.

We all know that there are intermittent earthquakes in other parts of the world every now and then. In the poorer areas of the world, buildings just collapse; people lose their lives and incur terrible injuries. Is there a TAMA 38 option in these other countries? If there is I never heard of it, so this just might be something that is distinct to the state of Israel.

While the seeming government disinterest in helping areas like Beit Shemesh seems rather surprising, the reckoning with the possible reality of an earthquake is a matter of the Israeli government hedging their bets. I mean, how certain are we anyway that there will be a major earthquake in Israel between now and 2027, the 100th anniversary of the last big quake? It looks like the government is hoping that situation never comes to pass. As for us here in the United States, I guess we are hoping for the same thing.