Carr Properties Corporation [Washington DC] - Execution of Definitive Agreements between Alony Hetz and JPM

Alony-Hetz Properties and Investments Ltd. ("the Company"):

1. Overview:

Further to the Company´s report dated December 23, 2012 (reference no. 2012-01-316752) with regard to signing a non-binding MOU with regard to investment in Carr Properties (hereinafter: "CP") in Washington,DC USA and to the Company´s report dated March 17, 2013 (reference no. 2013-01-006385) with regard to signing an extension of the exclusivity period, the Company hereby announces that late on Thu. May 2, 2013, the parties signed multiple binding agreements, whereby upon closing of the transaction, a joint venture named Carr Properties Corporation (hereinafter: "CARR") would own a subsidiary (which be wholly controlled, and approximately 90% owned, by CARR), into which Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. (hereinafter: "SSPF") and other partners will transfer in full their holdings in companies which own interests in office buildings in the metropolitan Washington, DC area, including property management companies ("the detailed agreements"). The detailed agreements are subject to the satisfaction of certain conditions precedent, including obtaining required consents.

CARR will be engaged, directly and indirectly, in investment in rental property, including management and maintenance of office buildings it owns in the metropolitan Washington, DC area, as well as in acquisition and development of land for rent in that area.

CARR will have a full internal management staff with many years´ experience in the Washington, DC real estate market; it´s President and Chief Business Executive would be Mr. Oliver Carr III, who has been at the helm of CP for the past decade. Upon closing, Mr. Nathan Hetz, company´s CEO, will be appointed as the chairman of the board of CARR.

Upon closing of the transaction, the Company will hold an approximately 50% interest in CARR, identical to the holding stake of SSPF, in exchange for investment of USD 300 million (NIS 1.1 billion), which has been determined based on CARR shareholders´ equity upon its incorporation ("the investment").

Upon signing the detailed agreements, the Company deposited USD 10 million in escrow. The detailed agreements include provisions with regard to this deposit and as to a mutually agreed payment (breakup cost) should the transaction not be completed.

2. Business environment:

The Washington, DC office property market has been one of the most stable in the USA since the early 1980s. The geography of the metropolitan Washington, DC market includes the District of Columbia, northern Virginia and southern Maryland ("the market").

Based on a review dated April 2013, prepared by Jones Lang LaSalle, as of March 2013, total office rental space in the Washington, DC area was 30 million m² - being the second largest office property market in North America. The vacancy rate in this market was 15.5% (compared to 17% for the entire American office property market).

The volume of construction starts for office space in this market is at 2% of current rental property area. Total transactions in this office property market in 2012 (purchase / sale of office space) amounted to USD 5 billion.

As of March 2013, the average annual rental price in this market was USD 36 per square foot (compared to USD 29 per square foot in the entire American office market). About 23% of total rented office space in this market is rented to federal government agencies. The unemployment rate in Washington, DC is the lowest of 40 major US cities - at 5.8% as of March 2013 (compared to 7.7% on average for the USA).

3. Data highlights:

Pursuant to the detailed agreements, upon closing of the transaction CARR would own, in whole or in part, 20 office buildings with total rentable space of 350 thousand m² ,valued at USD 1.1 billion which CARR´s share is 230 thousand m² and USD 714 million, respectively. These properties are leased to hundreds of tenants for various terms, which in 2012 yielded net operating income (NOI) amounting to USD 68 million which CARR´s share in the NOI is USD 45 million. As of the end of 2012, the vacancy rate is 15.5%.

In addition, upon the closing date CARR would own 2 office buildings that are under construction, with total rental space of 32 thousand m², valued USD 150 million. CARR would also own 2 plots of land to be developed.

Below are highlights of CARR´s financial information from its pro-forma financial statements for the year ended December 31, 2012, prepared in conformity with International Financial Reporting Standards (IFRS), including provisions of IAS 40, whereby rental property is stated at fair value. Moreover, these financial statements were prepared under the assumption that CARR would be incorporated in 2012.

4. Company projections and intentions with regard to the transaction:

Based on CARR´s business plan, its strategy and shareholders´ equity (pro-forma) after the aforementioned investment by the Company, the parties expect that the initial capitalization of CARR is sufficient to permit CARR to achieve in coming years, through acquisition and development of additional real estate, assets valued of approximately USD 1.5 billion, by focusing on the office space sector in the metropolitan Washington, DC area.

It is anticipated that CARR will be a Real Estate Investment Trust (REIT). The Company expects an average annual dividend yield of 6% throughout the first coming years.

The Company intends to finance the investment in CARR, amounting to USD 300 million (NIS 1.1 billion) from its own resources, by partial utilization of long-term bank borrowing facilities available to the Company and by rising of equity / debt as needed. For information about the Company´s borrowing facilities, see the Company´s 2012 annual report published on March 18, 2013 (reference no. 2013-01-008017).

The parties expect the transaction closing, (which is subject to customary adjustments and closing conditions, including obtaining multiple approvals from third parties, such as joint venture partners, banks and ground lessors) to take place in the third quarter of 2013.

The information in this immediate report with regard to projected future assets of CARR, obtaining financing sources for increasing CARR assets, dividend yield, closing date of the transaction and likelihood of obtaining all approvals for closing of this transaction, constitutes forward-looking information as defined in Section 32a of the Securities Act, 1968 and its materialization is uncertain and is outside of the Company´s control.

The Company will report any developments with regard to the aforementioned transaction.

Sincerely yours,
Alony-Hetz Properties and Investments Ltd.

By: Nathan Hetz, CEO
Moti Barzilay, VP, Business Development