Jerusalem Property Developers Find Themselves Mired in a Gold Mine

Two veteran partners launched the Jerusalem of Gold complex years ago, but building has slowed. Some sources attribute this to a dispute between the younger generations on both sides.

The first phase of the prestigious Jerusalem of Gold apartment complex has been standing for a year and a half, but four years since being put on the market about half its 89 units still remain unsold. The project, whose ownership is divided equally between insurance and banking magnate Shlomo Eliahu and builder Mordechai Shechter, has been beset by delays. According to market sources, the project became bogged down after the two tycoons brought the young scions of their family onto the scene: Moshe Gralnik, Eliahu's son-in-law, responsible for the Eliahu group's real estate operations, and Yoram Shechter, Mordechai Shechter's son.

Shlomo Eliahu and Mordechai Shechter began their collaboration in the 1980s when they built the Gan Ha'ir residential tower and shopping plaza behind Tel Aviv's city hall where the city zoo once stood. The tower was, and remains, one of the city's most prestigious undertakings. The pair still own commercial space in the complex.

Their next venture was the purchase of Jerusalem's 152-room Mt. Zion Hotel in 1996 from Shaul Eisenberg for $10 million. In 2008 they applied to the planning authorities for permission to expand the hotel to 400 rooms at a $55 million investment. Approval was granted but work hasn't begun.

"Although we aren't too leveraged, we are still having difficulty at the moment obtaining financing," Yoram Shechter explains. "This doesn't mean we won't pursue the project; we simply haven't found a reason to go ahead at the moment."

Jerusalem of Gold, the pair's third and newest venture together, originated in the mid-1990s when they bought a six-dunam (1-1/2 acre ) parcel of land situated between downtown's Hillel Street and Independence Park for about NIS 25 million. The project was approved, surmounting large-scale opposition from several quarters. Two structures slated for preservation were on the site: One was demolished while the other is now sandwiched between the compound's partially constructed buildings and serves as the builders' offices.

The second phase of the project, calling for a 25-story residential tower containing 120 units, hasn't progressed any further than the foundations over a two-year period.

Jerusalem of Gold is one the city's most exclusive projects. Along with its distinctive architectural styling and rich decor, it offers a wide-range of amenities: conference rooms, a play area for children, a residents' club, a billiards room, swimming pool, a fitness room and spa, as well as a prayer hall and mikvot (ritual baths ) on site.

The builders claim it put the brakes on the project deliberately. "It hasn't all been sold because we haven't released everything onto the market," explains Yoram Shechter. "We preferred stepping up the marketing after the work is finished so people could see what they're buying, and know what they're getting into. The project includes so many aspects at hotel standards, so why should we hurry to sell? Our company has a different style of marketing. If I wanted to sell all the project quickly I wouldn't have any problem. It's all a matter of decision making."

It may be a matter of decision making, but by whom? Jerusalem real estate sources are talking about a dispute between the partners. Eliahu wants nothing to do with Yoram Shechter, and Mordechai Shechter wants nothing to do with Gralnik, they claim.

"It's come to the point where everything requiring a decision, whether to show a model apartment, negotiate a sale, or complete an advanced sale, every little thing sparks an argument," say the sources.

"There are certainly disagreements there," says another local real estate expert. "It's natural after over 30 years of partnership between Mordechai and Shlomo: The younger generation enters the picture and there are differences, because they don't always see eye-to-eye. They now own a gold mine after buying the land ridiculously cheap. They recouped their investment in the project long ago and, while they both want to profit, each sees a different way to go about it getting it."

Denials from both sides

When asked why they don't intervene in the dispute, the elder Shechter and Eliahu insisted there is none - merely some minor disagreements.

"I can't deny there's an argument," says Yoram Shechter. "These aren't communication problems though, but partnership issues that can be thrashed out and settled. There was an argument recently, but it wasn't connected in any way to Jerusalem of Gold.

"It's true we don't compromise on price, because the level of our product is several notches higher than the standards of other projects in the city," he continues. "That's what we think and it's our professional approach. There is consensus here. The goods are too superior to be subject to price pressure. Besides, Jerusalem hasn't any land for building on. At this point we've sold over 60% over the 89 units."

According to Shechter, three closings were executed in the last few months alone and another is making headway. "I'm not in a contest to see how many units I can sell, and we've long covered our construction costs," he adds.

"We have no problem marketing the Jerusalem of Gold project," was Moshe Gralnik's response. "Unlike others, we don't need to compromise on price. All this talk about a dispute is spurious, probably supposed to serve someone else's purpose. In any business there are disagreements - among us too, but they haven't led us to stopping or delaying projects. On the contrary, in the last year and a half we have continued excavating the site for the tower.

"Would anyone continue pursuing the project if there were a problem? It doesn't make sense. What we've done until now demonstrates, more than anything, [that we've been] working cooperatively. We're a small group of people and everything is done in its own time - whether it's continued marketing, embarking on the project or expanding Mt. Zion Hotel. We aren't pressed for time. It's a mistake to conclude from this that the situation is problematic."

Emil Salman