That whole area was part of Jordan prior to 1967. In fact, one can even see the partially built palace of the king of Jordan nearby. When Jordan attacked Israel in '67, Israel occupied the empty land. When Israel and Jordan signed their peace accords, Jordan formally renounced all claims to these lands. They are neither illegal, occupied nor stolen.
UN warns Turkey against calling buffer a 'safe zone' unless guarantees civilians' safety (Reuters)
from the article: Israel approves construction of 1,500 homes in East Jerusalem