The man who won too much

You've probably never heard of Sergei Goldenberg of Ramat Gan, and for good reason. He is not a business power broker or real estate mogul, though the following story takes place in that arena. He is not a top officer in a company, yet Sergei Goldenberg now wields quite a bit of influence in Mishmar David real estate.

A recent Internet advertisement invited the general public to join a group of buyers applying to build houses in the community of Mishmar David, in the coastal plain. The ad failed to state, however, that the real estate company behind the invitation did not own the lots being sold.

The ad also neglected to mention that the price of the lots is 35% higher than it had been a month ago.

The story began in October, when the Israel Lands Administration published the official list of winners in a tender for 48 building lots zoned for independent construction in Mishmar David. The plots range in size from 350 to 500 square meters, with building rights for 150 to 250 square meters.

The community, a former kibbutz near Kibbutz Hulda, has become popular among Israelis dreaming of a house with a garden at a reasonable price.

Indeed, the tender attracted a record 1,500 bids.

The small fraction that won tenders included a few people who won more than one lot, most of them apparently investors, who purchased half the plots.

One resident of Ramat Gan, Sergei Goldenberg, outdid them all, winning 11 lots with a total cost of NIS 8 million (including groundwork and infrastructure).

Did Goldenberg want to build 11 houses for himself in Mishmar David? He says he originally planned to win only a single tender.

"I have bid on several ILA tenders in the past, and never won anything," says Goldenberg. "This time I submitted 19 bids and was surprised when I won 11, and now I'm trying to sell them, in order not to lose the guarantees I had to provide with each bid, which could amount to NIS 300,000."

It turns out, however, that Sergei Goldenberg is not just some guy who made a mistake. A probe by TheMarker revealed that he works for Mekorot Shlita, a real estate company controlled by Roni Ben Yehuda, and that the company has real estate interests in several locales, including in the vicinity of Mishmar David.

Many Israelis know Mekorot Shlita from the reality TV program "The Block," which was filmed in one of the company's projects in Tel Aviv.

Mekorot Shlita representatives were behind the Internet ad, which announced the "formation of a group to build nine houses in Mishmar David for NIS 1.72 million each," with an option to buy only the land, for NIS 980,000.

When contacted by phone, the representatives defined themselves as colleagues of Goldenberg's who are trying to "help a friend in need," They explained, without mentioning that they work for Mekorot Shlita, that their friend got stuck with a large number of lots and they are helping him sell the land onwards.

Another fact these colleagues omit is that Goldenberg won the lots at an average price of NIS 722,000, or about 26% less than the new asking price. If Goldenberg's friends manage to sell the lots, they will be collecting NIS 8.8 million (for themselves or the company), considerably more than the NIS 6.5 million Goldenberg committed to paying the ILA for the lots.

If the buyers purchase finished houses at NIS 1.72 million, Mekorot Shlita will profit both from the improvement of the land and the execution of the construction. In both cases, the company will earn a handsome return without digging into its own coffers to pay the ILA, as the buyers will effectively step into the shoes of the tender winner.

For every lot that Goldenberg won for Mekorot Shlita, there are dozens of interested buyers, and it is no wonder they are feeling frustrated at what is happening.

"I don't know if this is legal or not," said Ziv, one of the unlucky bidders, "but it's pure profiteering. How can the state allow this, and make prices rise?"

The ILA and a taxation lawyer confirmed that what Goldenberg did was legal.

Sources at Mekorot Shlita strenuously deny any intent to create an unfair advantage, and reiterate Goldenberg's version of events - that his windfall was the result of a mistake.

"The guy wanted one lot, so he submitted bids on several tenders. He was surprised that he won so many," said Ben Yehuda. "He asked us to help him and after examining the situation decided we could help him and reap the fruits of his winnings, so now we're selling the lots. We are trying to sell either the lots or finished houses. There is no foul play here, only someone who made a mistake that we found out about after the fact, and now perhaps we can gain from it."

The other bidders who lost those tenders are not convinced, and the ILA is not happy about the situation either. ILA Marketing Vice President Ronen Cohen-Shor says he is unaware of Mekorot Shlita's involvement in the tender.

"There is no illegal activity here," said Cohen-Shor, "but if a real estate company is involved [in the tender], I will ask for the tender regulations to be amended such that a single entity cannot win more than two or three lots in every tender for independent construction."