Anonymous investors sought 400% profit on church land deal — report

A group of anonymous investors that bought the rights to some of Jerusalem’s most prestigious real estate from the Greek Orthodox Church had offered to lengthen the existing leases on the land — in return for building rights worth $100 million, five times the value of its investment.

The proposal appears in a document about the controversial sale of the church land to a group called Nayot Komemiyut that was prepared by a legal adviser to the holder of the leases, the KKL-JNF Jewish National Fund, presented to the organization’s board of directors in December 2014, and obtained by the Calcalist business daily and reported Sunday.

The church sold rights to 570 dunams (140 acres) of Jerusalem land to the investors in 2011 for $20 million. The identity of only one of them is known — the Ben David family of Jerusalem.

The plots include large swaths of the upscale neighborhood of Talbieh, in central Jerusalem, as well as the neighborhood of Nayot, extending into large parts of the Valley of the Cross, a rare tract of undeveloped land in the center of the capital revered as the place where – according to Christian tradition – the wood was taken to make the crucifix for Jesus. It also includes much of the Israel Museum and well-known hotels such as the Inbal and the Dan Panorama.

KKL held – and still holds – three leases to this land signed with the Greek Orthodox Church in 1951 and 1952, each for 99 years. KKL subleases this land to more than 1,000 Jerusalemites whose homes are situated on this land.  The organization can build on this land, but nobody else can.

A view of Marcus Street in Talbieh, one of the Jerusalem neighborhoods with a large number of Greek Orthodox Patriarchate-owned properties (Courtesy Eiferman Realty)

The 2011 sale gave Nayot Komemiyut the right to negotiate extending the leases with KKL once they run out in some 30 years.

Sunday’s report revealed the price that the new owners demanded for those extensions.

Senior KKL figures are quoted as having told Calcalist that the investors initially sought $100 million in cash to extend the leases, but later asked for that amount in building rights instead later on.

In the document obtained by Calcalist, lawyer Yaron Elhanani, who represented the KKL in dealings with the church, said the investors’ price for building rights was “without any reasonable proportion to the price Nayot Komemiyut was supposed to pay to the patriarchate [the $20 million].”

Elhanani spelled out four possible responses for the KKL to consider: renegotiating the leases — an option limited by Nayot Komemiyut’s high price and what he said was its refusal to  provide information and documents; making a unilateral offer which would lead to arbitration; putting pressure on the government to expropriate the land, even though Elhanani was not certain that this could be done from a legal point of view and had the downside of requiring the state to pay significant compensation to the investors; and doing nothing.

Calcalist quoted senior sources at KKL as saying that Meir Spiegler, then the director general, tried to steer the board in the direction of the arbitration option. His idea was to negotiate, using the sum of $20 million as the starting point.

The same conclusion was reached at a 2015 meeting held in the offices of deputy attorney general Erez Kamenitz with the participation, among others, of Spiegler, Alex Hefetz – head of KKL’s daughter organization, Himenuta, the legal counsel for the Israel Lands Authority, Yaakov Quint and representatives from the land registry and the justice ministry.

Greek Orthodox Patriarch of Jerusalem Theophilos III (C) speaks during a press conference in the Jordanian capital Amman on August 12, 2017. (AFP Photo/Khalil Mazraawi)

But the KKL board rejected the proposal for fear of being hoodwinked again after a fraudulent attempt by two Israelis, that came to light in 2000, to extend the same leases on KKL’s behalf for 999 years with an upfront payment of $20 million. The fraudsters were later jailed.

In discussions that took place on the eve of KKL elections, some felt it was best to wait for the results, and some said they wanted to get the government to shoulder the lease renewal costs.

In the end, nothing was done.

Avraham Aberman, a partner at Ephraim Abramson law offices who represents the investors, told The Times of Israel in July that the church offered KKL the right to extend the leases even before the investors entered the scene – a claim that KKL sources denied.

A statement on behalf of Nayot Komemiyut published Sunday by Calcalist said no negotiations had taken place with KKL during the last four years, and that even when there were discussion “no specific sums were ever discussed.”

The option for extending the lease was in the KKL’s hands but so far, it had not exercised the option to do so, the statement added.

In the meantime, more than 1,000 homeowners whose properties stand on land sold by the church face massive uncertainty.

If the leases are not renewed, the homeowners who have not sold by their end risk being forced to leave their homes or to pay to extend the leases or even to rent their own homes. But the uncertainty has caused a drop in the value of their properties, making it difficult for those who wish to sell.

Representatives of 1,065 homeowners met Sunday with Justice Minister Ayelet Shaked, who has established a committee under Erez Kamenitz to provide recommendations in the coming months on the best way to safeguard homeowners’ rights. That committee will hold its first hearing next month.

In a separate move, Knesset member Rachel Azaria (Kulanu) is seeking to advance legislation that will allow the state to confiscate large tracts of lands that have been sold. Her bill relates to land currently occupied by residential buildings, whose owners are leaseholders or sub-leaseholders. The confiscation would take effect from January 1, 2018, and the private investors would be compensated.

Kulanu MK Rachel Azaria outside the Old City walls in Jerusalem, March 23, 2015. (Hadas Parush/Flash90)

KKL has taken on former Beersheba District Court Judge Joseph (Sefi) Elon as a special legal adviser on the subject of the church lands.

In a statement, the KKL said, “The sale of patriarchate land in Talbieh and Nayot is a national problem, whose solution lies in cooperation between the justice ministry, the ILA and KKL, which are holding working meetings on the subject.”

The legal transfer of full rights to the lands in Nayot and Talbieh is currently stuck at the Jerusalem Municipality, which  appears to be playing for time until state authorities decide what to do.

The church, one of the country’s largest private landowners, owns about 100,000 dunams (24,000 acres) of land around Israel — 0.5 percent of the acreage managed by the Israel Lands Authority. Some of its land is in sensitive areas such as city centers and antiquities sites.

There have been several controversial sales of church land to anonymous buyers in recent months.