Israel’s Cinderella Property Developer Takes a Fall

Inbal Or has helped build a couple dozen apartment projects in the Tel Aviv area. She’s now under house arrest for tax irregularities.

Israeli real estate star Inbal Or.
Eyal Toueg

Tidhar Tzur, a lawyer, wasn’t surprised about the tax-irregularity suspicions against Inbal Or, one of Israel’s most glamorous businesswomen. Or specializes in purchasing groups – people who pool their resources to develop an apartment project.

“About four years ago, I cross-examined her for a long time over a complaint that employees had filed against her. In one situation, she stood before the judge, and, in answering a question I had asked her, replied: ‘I don’t understand what you said,’ as she consulted a notebook,” Tzur said.

“I asked her again and again and she responded ‘I don’t understand. Ask again,’ until the judge reprimanded her: ‘Stop texting on your phone while he’s cross-examining you. Where do you think you are?’ She simply put the phone into the notebook and fiddled with it during the cross-examination.”

That case includes court quotes from Or such as: “Bonuses are an invention of employees to consume money from the company.” At one point, she asked for a five-minute break to make a phone call.

But now, for the time being, she’ll be making her calls from home. As of last week, the only trace of Or at her company’s 21st-floor offices at Tel Aviv’s Azrieli Center were pictures of her on the walls.

Until March 8, she can be found at home on Shostakovich Street in the north Tel Aviv neighborhood of Ramat Aviv. She’s under house arrest after she and her company’s chief financial officer, Dror Giladi, were detained after a Tax Authority investigation into possible tax irregularities worth tens of millions of shekels.

The authority based the house arrest on concerns that she would obstruct the investigation and that she had not been cooperating. She had not reported for questioning and had not produced requested documents, the authority said.

At a closed-door hearing last week at the authority, Or reportedly denied any wrongdoing and suggested that she take a lie-detector test. “I manage 18 companies. I’m stunned. I’m not lying. Everything’s the truth,” she said.

“I’ve been running the business for 11 years. I have 1,000 clients and 27 projects, and they’re not letting me talk to the bank. I’ve built the business with my 10 fingers. It never occurred to me that I’d be standing here.”

She reportedly accused the authorities of “murdering” her before checking their facts. Or is suspected of failing to report income and of falsifying expenses. Her lawyers call any transgression an honest mistake.

One suspicion is that, among the many companies through which the Inbal Or Group operates, some transactions were never reported to the Tax Authority,  hiding tens of millions of shekels in revenue.

For the most part, Or hasn’t been selling actual apartments, she has been organizing purchasing groups and receiving a percentage. The suspicions have nothing to do with her clients, just the extent to which taxes were paid on the company’s income.

Inbal Or at Tax Authority offices, February 2016.
Emil Salman

Still, last month, after years when she was considered Israel’s purchasing-group queen, Or announced she would become a plain old project developer. She cited friction within purchasing groups that became a hot media topic.

For its part, Or City Real Estate told TheMarker the advantage of joining a purchasing group is reflected in the price, and the group’s clients have enjoyed significant appreciation in the value of their property, even if in some cases costs have risen.

Born in the business

It may be no wonder if Or hasn’t found the time for buyer complaints or disgruntled employees. She has been busy building her empire. In Tel Aviv and suburban Ramat Gan she has been involved in dozens of high-rise apartment towers.

Few developers under 40 have the 39-year-old Or’s résumé. Born in Be’er Sheva, hers is a nearly perfect Cinderella story.

In previous interviews, she has told how a crane accident sidelined her father from the construction business and she was forced to sell books door to door while in high school. She said her childhood sweetheart to whom she was engaged was killed in an accident, after which she set out to conquer Tel Aviv.

Right after completing her army service, she got into real estate brokering and marketing. In 2005, at the age of 28, she established Or City Real Estate and began organizing groups of private developers. As far back as 2007, she said she ultimately wanted to shift from organizing purchasing groups to becoming a real estate developer.

The offices of Inbal Or's Or City, February 2016.
Ofer Vaknin

It could be she didn’t do it earlier because she couldn’t secure enough funding. Early on, Or linked up with developers such as the brothers Ido and Yitzhak Hagag, and quickly became a symbol of Israel’s real estate bubble. Or was leading the way for members of purchasing groups who wanted to snap up new residential construction and get in on climbing real estate prices.

In 2009, Or began organizing group after group of purchasers of high-rise construction in the Tel Aviv area, particularly in Givatayim, Ramat Gan and Tel Aviv itself. In the process, her company went from 80 housing units for that year to nearly 600 for 2010.

Stylist on board

Migdal Hatze’irim (Tower of the Young) on the Ramat Gan-Tel Aviv border was a springboard for Or when in February 2010 she acquired an option on a plot for 280 million shekels ($72 million). She announced plans with the Hagags to develop two towers with a total of 450 units at a cost of 850 million shekels.

A marketing fair promoting the project was an impressive PR event; Or was the symbol. She was frequently interviewed in the media and pushed to sell units to celebrities.

The media exposure worked, and she began a raft of projects for purchasing groups, with nearly 30 such projects under her belt at this point. They benefited from her marketing skills and moxie to obtain building sites. In many projects, she also bought units herself, usually on more desirable floors.

At just over 30, Or was living in a luxury north Tel Aviv apartment and driving a Mercedes worth about half a million shekels (which she later swapped for a no less fancy BMW). She had an au pair, a stylist and a maid, and at the office she employed her former husband, Udi Greenfeld, her brother Haim and her sister Shir. She also had aspirations for larger projects.

But sometimes her forays into truly grandiose projects met setbacks. That was the case with Migdal Hatze’irim, when in 2011 the Hagag brothers took over when she couldn’t sell enough units.

Sure enough, on February 15, the Tel Aviv municipality halted work on Migdal Hatze’irim, not for the first time. This time it was for exceeding the terms of the building permit. The project got underway in 2010 and was slated for completion in 2015.

In 2011, Or agreed to buy a shell company traded on the Tel Aviv Stock Exchange with the intension to take Or City public. But the plans never got off the ground and she was fined hundreds of thousands of shekels for not following through on the acquisition.

Four years later she got on the Tel Aviv exchange through another shell company, Inventec, but it’s doubtful the move helped her because Inventec’s operations are still dormant.

Complaints from residents and members of her purchasing groups reflect an ability to sell apartments but overoptimism on project costs and completion dates. Also, some residents have been disappointed after failing to read the fine print in their contracts; they believed the PR.

Or herself has probably suffered from delays at her projects, because she had her company retain rights, often in the form of brokerage and developer’s fees based on progress. Or there have been delays in taking possession of apartments that her company bought in the projects.

In its statement, Or City Real Estate added: “A purchasing group is not right for every purchase because it leaves the decision-making to a group board rather than the hands of the project manager.”