Israel's Business Barons Lost NIS 60b Over Last Seven Months

Lev Leviev lost $2.25 billion this year, but he isn't alone in watching a fortune evaporate as markets roil.

When Arcadi Gaydamak bought Ocif Investments & Development in May 2007, he declared that he'd turn the real estate company into a "second Africa Israel." The gap between the two companies' market caps did indeed narrow, but not because of anything Gaydamak did. In fact, since he bought Ocif, its market value tumbled by 90%, but so did that of Lev Leviev's empire, Africa Israel. Its very advantages during the boom years, including massive leverage and exposure to Russia, the U.S. and Britain, have played against it as the credit crisis unfolds, and the markets freeze over.

Leviev has personally lost $2.25 billion this year, but he isn't alone in watching a fortune evaporate as the markets roil. The richest 35 tycoons in Israel, according to figures given in TheMarker Magazine of June 2008, have lost a combined $15.5 billion or roughly NIS 60 billion based on what they had in March 2008.

Israeli stocks peaked at the end of 2007 after a five-year bull run, during which equities increased sixfold in dollar terms. The recession of 2000-2002 turned into years of rapid growth driven by low interest rates. Companies borrowed heavily from banks and investors, mainly in order to buy real estate. Leviev; Yitzhak Tshuva; Eliezer Fishman; Poju Zabludowicz - they all increased their already expansive property portfolios even more.

At the end of March, Sammy Ofer, Idan Ofer and Eyal Ofer were worth a combined $5 billion-$5.5 billion. They're now worth somewhere between $1.75 billion to $2.25 billion, having lost 60% of their fortune - $3.25 billion in value. The Ofers are invested in real estate but their main source of wealth is the Israel Corporation, which controls Israel Chemicals (ICL), Tower Semiconductor and Zim, among other things. ICL's market capitalization has shrunk from more than NIS 100 billion to NIS 43 billion as the price of potash fell and the price of shipping collapsed, eradicating one of ICL's main advantages against the competition. Zim is cutting routes as the global shipping industry implodes and Tower is perennially in the red.

Arcadi Gaydamak was estimated to be worth between $1.5 billion to $2 billion at the end of March. Now he's believed to be worth about $1.25 billion. The Russian-born businessman spent years in Israel without attracting attention but three years ago he leaped into the public eye with a flurry of acquisitions and political forays (despite his lack of Hebrew). Gaydamak bought four public companies, which did not prosper, tarnishing his image. But while his local operations cleared up some of the fog regarding his business acumen, still, almost nothing remains known about his private businesses.

Yitzhak Tshuva has also become a household name after coming from nowhere and turning into a self-made billionaire, a fortune fueled by buying Delek Group from under the nose of the Recanati family. At the end of March, he was personally worth $2.2 billion to $2.6 billion. Now he's worth between $1 billion to $1,4 billion, having lost half his fortune, on paper at least. While he owns a sprawling energy group and other concerns, he's also heavily invested in real estate - he became a well-known name in New York circles too after buying Manhattan's Plaza Hotel for $625 million, and spending another $400 million on renovations.

Delek Group had been quite the favorite among investors. But when the price of energy started to pull back and stock markets began to collapse, Delek Group stock did, too. From March, the value of Tshuva's stake in the company has fallen by $600 million.

As for Poju Zabludowicz, from a personal value of $1. billion to $2 billion in March, the Finnish-Jewish, London-based businessman is now believed to be worth about $900 million after making a bad bet on Las Vegas. His company, Tamares, is also heavily invested in property, and hotels. Among other things Tamares bought a lot of land in Las Vegas over the last decade. That land is now worth less.