Set-up and Management Agreement of Agricultural Property in Rosh Pina:
Between B’Ahavat Yisrael Investments Ltd (Management)
P.O. Box 3102 Afula, 18130 Israel
And________________ US/Canadian Passport Number _____________
Phone Numbers: _____________________________________________
Email Address: ______________________________________________
Whereas an agreement has been established regarding the purchase of 15.5 dunam (approximately slightly less than 4 acres) of agricultural land part of Plot (Gush) 13948,Lot(Helka) 107 inRosh Pina,Israel (The Land).
It is hereby agreed and stipulated between the parties as follows:
1) The buyer is purchasing dunams, a dunam, or a fraction of a dunam (dunam = approximately 1000 square meters or 1/4 acre) as tenant in common. In addition to the base purchase price per dunam, the buyer will pay an additional 6% Purchase Tax and another 18% VAT (value added tax).
2) In addition to the base purchase price per dunam and the associated taxes mentioned above, the buyer will pay Management to develop and manage the land for optimum productivity. There will be a one-time set up and management fee of NIS 28,000 per dunam (including VAT) that will be in effect for the first four (4) years of the agreement.
3) The purchase price, including all taxes and the start up and management fee, will be held in the Israeli attorney’s Trust Account in Yavne’el, Israel until sufficient funds are deposited to make a purchase and only then will funds be released to the seller and to the Management, with the following exception:
- Israeli tax law mandates that purchase taxes and VAT are due upon signing of a permanent agreement that is registered with the Israeli Land Authority. In the unlikely event that the deal should fail, the taxes will be reimbursed. Arrangements will be made by the Attorney to pay these taxes in interest free installments.
4) Responsibilities are as follows:
A) Upon taking possession of the land, Management will develop the land and manage it without taking any more payments from the buyer beyond the above initial Start up and Management fee which is for four (4) years.
B) The four (4) year Start up and management services include the following:
-Implementing the agreement on behalf of the new owners.
-Plowing and clearing the land.
-Removing a section of fruit trees on the property which are no longer productive (only where necessary).
-Purchasing and planting of oil producing Olive trees.
-Installing water lines and irrigation system and purchasing all necessary parts.
-Payment of annual property taxes.
-Payment and management of water use.
-Treatments against infestations.
-Replacing damaged or destroyed trees during the first four (4) years.
-Installation and purchase of individual tree protective shields.
-Pruning of trees.
-And whatever else is necessary to achieve the highest quality product.
C) It is understood that for the first four (4) years there is no expected income from olives produced by olive trees. After the four (4) year period, olives will be harvested every late autumn season. Those olives will be brought to an olive press and made into high quality cold pressed oil. The freshly pressed oil will be stored in large containers for a few months to allow unnecessary sediments to settle and then the oil will be bottled in different sizes and sold to quality conscious consumers by Management. Management will continue to do all that is necessary and pay all expenses and labor to ensure the best possible annual results.
D) Distribution of Income: Management will be responsible for 100% of maintenance expenses, labor, and marketing of the final product. In return, Management will receive 75% of gross sales and the buyer(s) [owners] will receive 25% of gross sales.
Purchase Options and Legal Expenses
For calculation purposes, all prices are based on Dunam(s) or fractions of a dunam. All sizes are proportionately the same with the exception of legal and registration fees which are proportionately higher for very small purchases and proportionately lower for larger purchasers.
The following are the complete 4 year package prices:
1 Dunam base price (1,000 metres) 41,500NIS
18% Value Added Tax 7,470NIS
6% Purchase tax 2,938NIS
Set up and Management (4 years) (incl. VAT) 28,000 NIS incl. VAT
Legal, Notarization, Registration, Trust Account 2,900 NIS incl. VAT
Total: 82,808 NIS for purchase of 1 dunam
1/2 Dunam base price (500 metres) 20,750NIS
18% Value Added Tax 3,735NIS
6% Purchase tax 1,469NIS
Set up and Management (4 years) (incl. VAT) 14,500 NIS incl. VAT
Legal, Notarization, Registration, Trust Account 2,500 NIS incl. VAT
Total: 42,954 NIS for purchase of 1/2 dunam
This management part of the contract will automatically renew at the end of each four (4) year period. There will be no additional Start up fees after the initial (4) four year period. Should the buyer(s) decide to terminate this contract by a consensus of at least 51% ownership of the property, Management will continue to manage the property until the end of that harvest season.
If Management chooses to cease managing the property, it must find a suitable replacement to manage the property at the same price rates or less.
This agreement is signed as a binding agreement between the parties.
Size of Purchase _____________________________________________
Total cost including VAT ________________________________________
Balance Due After Legally Witnessed and Stamped ___________________
The Pros and Cons of Investing in Galilee Olive Oil
1) The Negatives
In most cases, lands which we are taking over to manage are not olive orchards and need to be developed. Due to the religious restrictions of not being able to harvest the fruit for up to 4 years, the buyer of a property will not see any income at all during this period. Furthermore, the next few years will see income but not very much as the trees need to grow for 8 or 9 years to really start putting up impressive yields of olives per tree.
2) The Positives
Every Jewish purchase of land in the Galilee is helping to strengthen Jewish sovereignty in Northern Israel by making less land available to those who wish to take it from the Jewish People.
Our management uses Jewish labor (Avoda Ivrit) exclusively. This has many benefits including creating jobs in the region and getting Jewish youths to go back to our roots and develop a real appreciation for the Land of Israel. Also, by working the land we are discouraging Arab thieves and bullies from illegally occupying these lands.
More young Jews working in the fields will encourage more young Jews to live in the Galilee which is sorely needed to stem the demographic takeover by the so-called Arab Israelis.
While it is true that the initial rate of return on investment is very low, once the trees are mature, they can produce large annual amounts of top quality olives. Olive oil has been proven beyond a doubt to have many health benefits and each year consumption grows steadily. Over time, it is safe to say that this type of investment will be a steady income producing asset even though the returns may not be the most impressive.
The property is being bought without any loans, liens, or any debt whatsoever. Olives are amongst the sturdiest trees and can withstand severe water shortages (although yields would suffer).
It is not the objective to purchase these types of lands for speculative purposes. However, there is always the long shot that a road may need to be built or a neighborhood of housing or industry expanded whereby compensation far and above the much cheaper agricultural rates have been paid in past similar situations.
Another higher return possibility:
Currently all estimates are based on domestic Israeli sales only. In general, our highest quality made in Israel Suri Olive Oil would easily sell for good money if exported to the right markets.
3) How It Works
The current properties available are without productive orchards and need to be developed. There are some other types of fruit trees on the properties that need to be removed because they are not productive.
The buyer(s) pays for the land and the taxes connected to its purchase. Charges are a one time fixed price for Set up and four (4) years of management. The start up and management agreements above list all of the services and supplies that are used by Management to setup and develop the Olive orchard for the first four (4) years.
In most cases the buyer(s) is receiving 25% of the sale price. Management is receiving 75% of sales. The following is what Management is responsible for after the initial four (4) year period:
-Water management: Watering as necessary. Repairing and/or replacing all piping and irrigation material as needed. Management pays for water use.
-Regular spraying against infestations
-Clearing the orchard of weeds, etc.
-Annual pruning of trees after harvest.
-Clearing the land after harvest.
-Insuring the trees.
-Picking the olives during harvest season using Jewish only labor.
-Transporting the olives to the Jewish owned press to make oil.
-Storing large jugs of oil for a few months until all the unnecessary sediments settle.
-Bottling of oil in different consumer friendly sizes.
-Labeling each bottle.
-Selling and marketing of bottled oils.
There are many variables that determine how much oil and what quality of oil will be produced from an olive orchard. We will use examples using a dunam (1,000 meters of land):
-More rain in the rainy season means less water is to be used in the non-rainy season.
-Less rain and hotter than usual summer weather means more water will be used.
-Olives that are picked at the end of the season are fatter and juicier with more oil.
-Olives that are given too much water produce lower quality oil.
-Properly managed trees will produce much more olives after 8, 9 years than after 4 or 5 years.
-In Israel, there is a pattern of one very good year for olives followed by one weaker year for olives.
-Better care and proper nourishment will yield bigger, more numerous, olives.
Following the first four (4) years, it is religiously acceptable to harvest the fruit from the trees. However as mentioned above, because the trees are still young at that age, the volume of olives will not be that high. For example, a full grown tree can produce anywhere from 50 to 120 kilos of olives in a year, while a four (4) year old tree will produce a fraction of that.
For illustration purposes let’s take examples of full grown trees with different volumes of olives and different ratios of olive/olive oil:
A) -50 kg per tree yielding 20% oil:
50 x 28 trees per dunam = 1400 kilos x 20% =280 liters of oil. Today’s high quality boutique Suri olive sells for NIS 40 per liter. 280 x 40 = 11,200 and now divide it by 3.65 (dollars) and you have $3,068 x .25 (buyer’s percentage) =$767 to the buyer(s) for a dunam.
If the buyer paid for all included NIS 65,000 divided by 3.65 = $17,808, this would mean a 4.3% return for the buyer of 1 dunam.
B) 100kg per tree yielding 30% oil:
100kg x 28 = 2,800 kilos x 30% =840 liters of oil x NIS 40 per kilo = NIS 33,600 divided by 3.65 =$9,205 x .25 = $2,301 to the buyer of a dunam.
Same purchase price as A means a yield of 12.9%.
Over the first few years, this certainly isn’t an attractive investment. However, if you take the benefits of what the work is doing for Israel and the Jewish People and combine it to when the trees are more mature, you should have an important income producing asset.
For more information and details, contact us.