Kroso Real Estate Cancels Contract With Contractor Neta Lipschitz Over Project Halt

Kroso Real Estate has informed the stock exchange that it has terminated its agreements with Neta Lipschitz, the main contractor for its project in Jerusalem, citing a fundamental breach of contract. The project, Yuval Ha'Tzaira, is a "pinui-binui" (demolition and reconstruction) initiative in the Kiryat HaYovel neighborhood, involving the replacement of 67 old apartments with 226 new ones, alongside commercial and public spaces. Kroso Real Estate holds a 50% stake in the project company, partnered with Kadmat HaYovel.

According to the report, Neta Lipschitz unilaterally halted work on the project in recent weeks, despite ongoing discussions to resolve the issue. On September 24, the contractor informed the project company of its inability to continue, leading to an eviction notice being issued by the project company on September 26. This stoppage follows a June 2026 agreement that included a price increase for the contractor and updated timelines, which had already reduced the project's projected profitability to approximately 12% by mid-year.

Industry sources attribute the work stoppage primarily to a significant labor shortage. Neta Lipschitz reportedly relied heavily on Palestinian workers, and following the events of October 7 and the subsequent restrictions on employing them, a severe lack of manpower ensued, causing delays of about six to seven months. The contractor required time to recruit and train new staff, impacting the project's progress.

Kroso Real Estate reportedly attempted to assist the contractor, including by increasing payments, which negatively affected the project's profitability. Despite these efforts, the contractor ultimately stated it could not continue. Neta Lipschitz is a long-standing Jerusalem-based construction and development firm managed by Yaakov Lipschitz.

With approximately 80% of the engineering work completed, Kroso Real Estate has begun seeking alternative contractors to finish the project. Several contractors have expressed initial interest. Kroso Real Estate is currently unable to estimate the impact of changing contractors on the project's timeline.