Jewish residents of a luxury apartment complex in the middle of the east Jerusalem Arab neighborhood of Jebl Mukaber were shocked when it was announced last week that the company building the project, Digal Ltd., was in so much financial trouble that its’ bondholders agreed to sell the firm’s NIS 55 million debt to a company owned by a Palestinian-American businessman.

The company also owes NIS 70m. or more to Bank Leumi.

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Digal’s main project, Nof Zion, is slated to have almost 400 apartments, plus a synagogue, hotel, shopping center, country club and nursery school. The first phase, with 91 apartments, has already been completed and residents moved in two years ago.

Many of them moved to the neighborhood to make a political statement about Jewish sovereignty, and are now faced with the discomforting idea that a Palestinian businessman might start selling the rest of the units to Arab families. The project has already received the necessary approvals from the Interior Ministry, although it is waiting for the final construction permit, which is largely a technicality, from the municipality.

“It’s the opposite of what they promised, and it’s a breach of our contract,” said resident Motti Mintzer, who is leading the residents in an effort to buy the land from Digal.

“They said we’re buying our residence unit in a Jewish community with a big synagogue, 24/7 guards, and now we may find ourselves in the middle of a Palestinian community, cut off from main Jerusalem.”

Digal Ltd. fell into hard times after failing to sell as many apartments as they had hoped. Part of the problem, critics say, is that the company tried too hard to market the apartments to overseas Jews rather than the local national religious community. The luxury apartments were not affordable for Israelis, leading Digal to significantly lower the prices.

“They wanted ideological people, but ideological people don’t always have money,” said Hagit Ofran, from Peace Now.

The hostile takeover was negotiated by Dov Weisglass, who was director of Ariel Sharon’s bureau when Sharon was prime minister, who represented a Cypriot company, Techsal Trading Ltd.

Techsal, owned by a Palestinian businessman who also has an American passport, wanted to buy Digal’s NIS 55m. debt at the price of 60 agarot on the shekel. Bondholders accepted the offer on December 7 and are now entering into negotiations.

Bemunah Ltd., a company that builds national religious housing projects, immediately launched an appeal to Jewish investors around the world to invest in a company that would buy the land for the second stage of the Nof Zion project for NIS 48m. Buying the remaining land will enable the project to move forward without any input from Techsal.

A week later, Bemunah has already raised half of the NIS 48m., with investments from NIS 320,000 to NIS 5m.

“It was clear to us that on one side there’s a nationalistic mission, and on the other side, it’s a profitable endeavor that people would buy it,” said Bemunah’s Ronen Weil, who is heading the Nof Zion acquisition project.

After Bemunah raises the capital, it will enter into negotiations with Digal to buy the land. Digal did not return repeated phone calls requesting comment.

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