Israel Salt Industries Ltd., owned by Shari Arison, has suffered a blow. A comprehensive opinion by Israel Land Authority legal adviser Adv. Yaakov Kvint, states that there should be drastic reduction in the value of the residential building rights promised to the company's previous owners, the Dankner family, when the land was rezoned for residences. The opinion concurs with the positions of the State Prosecutor and State Comptroller, that the building rights promised to the Dankners were extraordinary and unreasonable.
The value of the building rights promised to the Dankners were based on defining the land as "urban land". The value of the salt pools land was the collateral received by Bank Leumi (TASE: LUMI) when it financed the Dankner family's share of the controlling interest in Bank Hapoalim (TASE: POLI), and was estimated at $200 million, against a $358 million loan.
The Atlit land covers 2,300 dunam (575 acres) and the land in Eilat covers 700 dunam (175 acres). Under the Israel Land Authority decision in 2003, when it was chaired by Ehud Olmert, the land could be considered as urban land, and Salt Industries was therefore granted especially high building rights: 50% for the land in Atlit, and 30% for the land in Eilat.
Olmert signed twice
Dan Dankner is now on trial in the Holyland affair. In one of the secondary matters in the case, called the Salt Industries matter, Dankner is accused of bribing former Israel Land Authority director Yaakov Efrati to promote the interests of Salt Industries, which the Dankners owned at the time.
The indictment states that Dankner gave Meir Rabin, an aide to the state's witness in the case, SD, NIS 1.1 million on behalf of Salt Industries. The money was to be given to Efrati, Rabin's uncle. The money was transferred through the use of false accounting to camouflage the bribe. Efrati is charged with taking NIS 45,000 of the bribe money.
The prosecution claims that in exchange for the bribe, Efrati promoted a land settlement for Salt Industries, involving rezoning of the land in Atlit and Eilat from salt production to residences, tourism, and commerce, and granting of land rights after the rezoning. Dankner denies the charges against him.
In view of the negative opinions by the State Prosecutor and the State Comptroller, the 2003 Israel Land Authority decision had only one signature: that of then-Minister of Industry, Trade and Labor Ehud Olmert, who was responsible for the authority, while the second signature needed to put make the decision valid, by the minister of finance, was never obtained. In 2006, when Olmert was appointed acting prime minister and minister of finance, he again signed the 2003 decision, to provide the second signature. When "Globes" exposed Olmert's double signature, he withdrew his signature as minister of finance.
Rights to 200 dunam
In his written opinion, Kvint reviewed the planning history of the land, the rent paid on it, the amount of land leased, and the degree to which it was used. Historical contracts for the salt pools have the character of industrial or agricultural land, and the rent paid on it was low and within the range of prices for industrial or agricultural land.
According to the opinion, it is necessary to distinguish between the bulk of the land, which "was extensively and clearly used in in a way that did not resemble an ordinary industrial enterprise". It adds that the rents were "substantially lower than payments for industrial zoning", and that the areas leased were minimally used for building needs.
On the basis of the opinion, it is possible to conclude that this was an extreme case, and "it is not possible to classify Salt Industries' land as urban land". The opinion states that only a tiny part of the land was intensively used, for which extra rights could be awarded, and that on most of the land few rights could be granted.
Kvint recommends that the Israel Land Authority Council should accept the special decision in the matter of the salt pools. He says that the land should be returned to the Israel Land Authority and the residential building rights should be delivered in exchange for permit fees. He recommends that the "compensation rate for the rezoning in the decision should be higher than the compensation to a party for the return of agricultural land held under an agricultural contract." The compensation rate for agricultural land returned to the state is NIS 60,000 per dunam (NIS 240,000 per acre), and is subject to the extent of the tenant farmer's cooperation.
According to the opinion, instead of the residential building rights promised to Danker - 50% in Atlit and 30% in Eilat - Salt Industries should be granted building rights to 200 dunam (50 acres) of the land, amounting to 10% of the land's residential building rights.
Published by Globes [online], Israel business news - www.globes-online.com - on January 3, 2013
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