Africa Israel Investments

Africa-Israel developed into a diversified group with six companies listed on the Tel Aviv Stock Exchange by 2007, alongside extensive property interests in Israel and overseas.[2] Its highly leveraged investments during the late stages of the U.S. property boom left it exposed when real-estate values fell, leading to a large debt restructuring beginning in 2009.[4][5]

Financial difficulties later returned, and a second debt settlement transferred the company to Lapidoth Capital and Altshuler Shaham. The alternative sale was approved in November 2019 and completed in early 2020, after which the company was delisted.[6][7]

Africa-Israel was founded in 1934 by a group of South African Jews. Its early history was connected to South African Jewish investment and expertise in the developing Jewish community in the Land of Israel; historical accounts also identify the conglomerate under the earlier name African Palestine Investments.[2][11] The company bought land on which Savion was founded, and its Savionim brand later became associated with the residential neighborhood it built.[2]

Jacob Geri joined African Palestine Investments and became its chairman in 1956. An account of his career identifies the establishment of Savyon as his most important industrial achievement and describes it as Israel’s first garden-city.[12] African Palestine Investments also participated in the Palestine Cold Storage and Supply Company and was among the projects sponsored by South African Zionists in Israel.[13]

Leviev acquired control of Africa-Israel Investments in 1996.[3] A separate account places his acquisition of an 80% stake from Bank Leumi in early 1997, at a reported company valuation of $400 million. Bank Leumi sold him a further 15.8% stake in February 2006, when the company was valued at NIS 7.1 billion.[2] At the time he acquired control, Africa-Israel was described as one of Israel’s largest companies, with holdings and assets valued at more than $1 billion.[3]

Leviev’s acquisition occurred as he expanded into Eastern Europe during the 1990s, when the former Soviet Union was opening to foreign investment.[3] Africa-Israel’s market capitalization reportedly reached $7 billion, or NIS 28 billion, by April 2007.[2]

The company’s business extended well beyond residential property. A 2007 account listed interests in housing, shopping malls, the Trans-Israel Highway and other build-operate-transfer projects, tourism, telecommunications and media, energy, fashion, steel, and ceramics.[1] Africa-Israel had six companies listed on the Tel Aviv Stock Exchange: Africa-Israel Properties, Africa-Israel Housing, Africa Israel Hotels, Danya Cebus, Packer Steels and Metals, and Negev Ceramics.[2]

Its overseas portfolio included substantial activity in Russia. AFI Real Estate Development operated there and was involved in 21 residential, shopping-mall, and office projects, mainly in and around Moscow.[1] The company also expanded in the United States, buying the former New York Times building in Manhattan for $525 million in April 2007. That year, AFI Development’s London Stock Exchange initial public offering was described as the largest ever by an Israeli company at the time.[2]

Africa-Israel’s late-stage U.S. property investments were highly leveraged and included speculative purchases of undeveloped land and attempts to convert office buildings into condominiums. Much of the buying was financed through bonds issued in Israel, and the company’s debt reached NIS 7.8 billion by the end of 2009.[4] Several U.S. projects later produced substantial losses. The Clock Tower building in Manhattan, bought for $200 million in 2007, was sold to Tommy Hilfiger for $170 million after tens of millions of dollars had been spent on a condominium conversion. The company also sold floors in the former New York Times building to Blackstone for $160 million, shelved a Phoenix project, and wrote off a $100 million investment in a Las Vegas hotel project.[4]

Falling property values during the global financial crisis placed Africa-Israel under severe financial pressure. In 2009, the company reported losses of about $1.4 billion since the beginning of 2008 and debt of about $5.5 billion; the losses were linked largely to U.S. real-estate investments and, to a lesser extent, Russia. Its Tel Aviv Stock Exchange shares fell sharply as the company warned it might have difficulty meeting debt payments and sought to restructure its obligations.[5]

By November 2009, Africa-Israel said uncertainty over the proposed restructuring and its approval raised “significant doubts” about its ability to continue as a going concern. It was negotiating with bondholders over NIS 7.4 billion of debt and had failed to pay NIS 557 million in principal on a bond series not covered by the proposed arrangement. Its third-quarter net loss was NIS 348 million, compared with NIS 2.1 billion a year earlier.[14]

A restructuring plan reached with bondholder representatives in October 2009 included a NIS 850 million rights offering, of which controlling shareholder Lev Leviev was to contribute NIS 750 million. The plan also proposed converting NIS 1.4 billion of debt into 32.9% of the company’s shares, converting NIS 1.2 billion into shares in subsidiaries AFI Development and Africa-Israel Properties, issuing new bond series for other portions of the debt, and paying bondholders NIS 550 million in cash. The agreement still required approvals, including from banks and holders of a particular bond series.[15]

A later retrospective described the 2009 restructuring as covering NIS 7.4 billion of bond debt. It estimated that, four years after completion, bondholders had received value equivalent to about 90 agorot per shekel based on market prices of the settlement components. It characterized the package as combining cash, shares, and rescheduled debt, and reported that Leviev contributed NIS 782 million in a June 2008 rights offering and a further NIS 764 million as part of the settlement, including installments in 2010. The retrospective described the arrangement as a formative event in Israel’s bond market and the largest debt settlement of its kind.[16]

Under the restructuring plan, Leviev agreed to inject NIS 750 million to retain control.[15] In November 2010, Africa-Israel agreed to sell its 74.47% stake in Africa-Israel Residences to Danya Cebus for NIS 647.9 million in cash. The transaction was expected to generate corresponding net cash flow for Africa-Israel, although it still required approval from Danya Cebus shareholders.[17]

Financial problems persisted. Africa-Israel reported a net loss of NIS 844 million in 2014, with the loss attributed to the economic crisis in Russia and NIS 858 million in asset-value reductions in the fourth quarter, chiefly for residential projects at different stages of planning and construction.[18] It recorded a loss of NIS 1.75 billion in 2015 and a second-quarter 2016 loss of NIS 163 million, largely linked to losses at AFI Development. Its accountants expressed significant doubt about its ability to continue as a going concern, while Leviev faced difficulty repaying bondholders about NIS 3 billion.[19]

A proposed sale to companies controlled by Moti Ben-Moshe was approved by bondholders but was not completed; the arrangement was cancelled by a court in February 2019.[7] In November 2019, the Tel Aviv District Court approved a second debt settlement under which the company was to be sold in its entirety to Lapidoth Capital and Altshuler Shaham Provident and Pension. With NIS 2.3 billion owed to bondholders, the buyers were to pay NIS 861.5 million and bondholders were also to receive company cash, for a reported total of NIS 1.349 billion. Bondholders would waive the remainder, and the buyers would delist the company.[6]

The alternative sale was completed in early 2020, with Lapidoth Capital acquiring 80% and Altshuler Shaham Gemel acquiring 20%. The group included Danya Cebus and Africa Israel Residences. Later legal disputes between Ben-Moshe’s companies and bondholders concerned deposits and claims connected to the cancelled transaction.[7]

Africa-Israel and subsidiary Danya Cebus faced criticism and investment restrictions related to construction in East Jerusalem and West Bank settlements. In 2009, the British embassy in Israel froze plans to lease a floor in a high-rise office tower owned by Africa-Israel after seeking information about the company’s settlement activities.[8]

Norway’s Government Pension Fund excluded Africa-Israel and Danya Cebus in 2010 following an ethics-council recommendation concerning settlement construction. A report at the time said the fund, managed by Norway’s Central Bank, held about US$1.2 million in Africa-Israel shares and had total assets of US$450 billion. The Norwegian finance minister was quoted as saying the exclusion reflected the council’s assessment that the companies were contributing to, or responsible for, “grossly unethical activity.”[9]

The exclusion timeline was not permanent or uniform across later accounts. Norway’s finance ministry said in 2013 that the fund could invest in the companies again after a review found that they and their subsidiaries were no longer involved in settlement construction and had no plans to resume it.[20] An INSS article says an August 2013 decision rescinded a 2010 ban, but reports that the companies were excluded again following a recommendation citing an “unacceptable risk” that construction activity in East Jerusalem contributed to serious rights violations in situations of war or conflict. It also says Danske Bank announced the following day that it would withdraw from Africa-Israel, Danya Cebus, and Bank Hapoalim for the same reasons.[21] A later FDD article gives Danya Cebus’s divestment year as 2013 but does not mention Africa-Israel or specify the rationale.[22]

In 2014, Africa-Israel announced that it would not take part in new construction tenders beyond the Green Line. At the same time, it announced plans to expand projects in central and western Jerusalem, involving 935 housing units and NIS 2.4 billion of investment. Ynet reported that the policy change was believed to reflect political and security developments and international protests; company sources also said construction in those areas was not economically viable.[10]