Encore Properties 2025: NOI Is Up, But 2026 Will Be Tested in Cash, FX, and Refinancing

Getting To Know The Company

Encore Properties is not a typical U.S. real estate equity story. It is a TASE-listed bond issuer that sits on top of a U.S. portfolio of multifamily housing, grocery-anchored retail, hotels, and VA assets leased to U.S. government bodies. That changes the right lens immediately. The key question is not simply whether asset values and NOI moved up, but how much of that improvement actually reaches the public-company layer in time to service shekel debt, and how much still depends on refinancing, FX, and owner support.

What is working right now is visible enough. NOI rose in 2025 to $30.6 million from $25.6 million, operating cash flow rose to $26.6 million from $17.1 million, and investment property plus fixed assets increased to $508.5 million from $367.7 million. At the same time, the company expanded its retail portfolio, bought preferred-equity positions in four residential assets, and extended debt duration across several core residential properties out to 2030.

But this is still not a clean story. Equity rose to $170.3 million even though total comprehensive loss in 2025 was $34.7 million. The gap was closed through a $32 million owner injection and the conversion of an $11.1 million shareholder loan into equity. Cash also looked stronger at year-end, but it was built alongside $147.2 million of investing outflow and $157.8 million of financing inflow. In other words, the business produced better operating cash, but 2025 still did not prove that the new growth path can fund itself without an open debt market and without owner support.

That is the real story, because 2026 already looks less like a breakout year and more like a bridge-and-proof year. On the front edge sit $54.8 million of current bonds, mainly Series D due in July 2026, plus another $25.0 million of current loans, mainly Northpoint Center due in August 2026. Against that, year-end cash and cash equivalents were $44.8 million, with another $2.2 million of restricted cash. So the question is no longer whether Encore knows how to buy assets and grow NOI. The question is whether it can translate that into a calmer liquidity and refinancing profile at the public-company layer.

Five findings that matter right up front:

• Equity improved, but not because earnings improved. Equity rose by $20.8 million while the company recorded a $34.7 million comprehensive loss, mainly because of owner support and debt-to-equity conversion.
• NOI rose, but FFO deteriorated. Management FFO fell to negative $3.9 million, partly because of $15.1 million of FX expense and a one-off write-off of asset-management fees.
• The cash build was also a financing event. Operating cash improved, but the year also included $147.2 million of investing outflow against $157.8 million of financing inflow.
• Future NOI growth is not all current signed rent. The $39 million stabilized NOI target depends partly on full receipt of preferred-equity returns and on full income from the two newly acquired retail centers.
• Diversification does not remove the friction. Retail was the cleanest earnings engine in 2025, but residential and equity-accounted holdings erased much of that through valuation pressure and equity-method losses.

The Economic Map

Events And Triggers

Acquisitions expanded the story, but not at the same quality layer

The first trigger: in April 2025 Encore completed the acquisition of Northpoint Center and Cowesett Center with $18.3 million of equity investment. This was the biggest step-up in the company’s retail segment, and it is why retail value rose to $153.1 million and retail NOI jumped to $9.1 million from $5.0 million. That is a real positive. It increases exposure to grocery-anchored centers and adds a relatively defensive rent engine.

But there is still obvious friction. Northpoint ended 2025 at 77% occupancy and carries a loan maturing in August 2026, so the positive case still requires both leasing progress and refinancing. The company has already signed a lease with Uncharted for roughly 15 thousand square feet starting in February 2026, which should lift occupancy there to about 82%, but this is still not a fully matured asset. The $6.5 million stabilized NOI target for the two retail centers is therefore a forward number, not rent that was already fully in place during 2025.

The second trigger: during the second half of the year the company bought preferred-equity layers in three residential assets, Lower Broadway, Narcoossee, and Chandler, and later added an $11.3 million preferred-equity position in Montana as part of refinancing. In aggregate, this is $58.5 million of preferred investments carrying preferred returns of 11% to 15%, sometimes with future promote rights as well. Economically that is smart. It gives the company payment priority and expected cash return ahead of the ordinary equity holders.

But this is also exactly where a superficial read can go wrong. This is not plain vanilla NOI. Part of the move to $39 million of stabilized NOI depends on receiving the full return from the preferred-equity investments. That may be highly attractive economically, but it is a different layer of value than ordinary ownership of a stabilized rent-producing asset. Anyone reading the future NOI target without separating current rent from preferred-equity return is reading only part of the story.

The third trigger: in September 2025 Encore refinanced East 3434, Redlands, The Russell, and Montana. In all four cases the company replaced older loans with new loans out to 2030, and in most of them also reduced exposure to floating rates in favor of fixed rates around 5.33%. The investor presentation frames this as a maturity extension and lower average financing cost, and that is a real improvement.

But here too there was a price. Across the three consolidated assets, the company and its partners had to inject another $31.9 million to complete repayment of the old loans, and in Montana the refinancing also required an additional loan with an 11% return or whatever return the limited partners receive, whichever is higher. So the refinancing improved the maturity profile, but it did not create free cash. It bought time through another capital injection.

Efficiency, Profitability, And Competition

Who actually created the earnings

If 2025 is broken down by profit engine, a sharp gap appears between the headline numbers and the underlying economics. The retail segment produced a positive segment result of $10.9 million, versus a $18.7 million loss in residential and a $5.8 million loss in offices. Hotels added $1.1 million, but not enough to offset the weakness in residential and in the equity-accounted holdings.

The important point is that the weakness did not come from universally soft operating performance. Consolidated NOI in investment property rose to $16.9 million, company-share NOI rose to $15.6 million, and the hotels still held EBITDA of $6.6 million. The problem appeared above the NOI line: residential fair-value pressure, equity-method losses in affiliates, and FX expense on the shekel bonds.

That is why the right distinction here is between asset-level profit and public-company profit. At the asset level, retail and the more stable parts of residential did move in the right direction. At the public-company level, that progress was blocked by three layers: a $14.3 million loss from equity-accounted companies, $15.1 million of FX expense, and financing costs that climbed to $39.2 million from $15.9 million.

Diversification helps, but it does not clean up the picture

Management is right to emphasize sector and geographic diversification, at least up to a point. By year-end 2025 Encore had 32 assets, 31 of them income producing, spread across 19 U.S. states with 91% average occupancy. This is a genuinely broad portfolio. The company is not hostage to one property.

But diversification by itself does not eliminate friction. Retail held 87% average occupancy and Same Property NOI rose 7%, yet the two newly acquired centers are still in the lease-up phase. Multifamily occupancy was 92%, but part of the next leg of upside sits in preferred-equity returns rather than in plain rent already moving up the chain. Hotel occupancy was 72%, so that business remains more cyclical and more exposed than grocery-anchored retail or long-leased VA assets.

The valuation disclosures tell the same uneven story. Average cap rate assumptions in commercial and office investment property rose to 8.96% from 8.80%, while multifamily cap rates stayed flat at 4.75%. Even so, retail recorded a $7.2 million valuation gain while residential recorded a $7.2 million valuation decline. So 2025 was not a broad-based rerating of the whole portfolio. It was a year in which some assets improved while others were still under pressure.

FFO already tells a less comfortable story

This is one of the numbers a reader can easily miss if they stop at NOI. Based on the company’s own reconciliation, management FFO moved to negative $3.9 million from positive $3.8 million in 2024. The main reasons were $15.1 million of FX expense, a one-off $1.165 million write-off in asset-management fees, and weaker company share of FFO from equity-accounted holdings.

That matters. When NOI rises but FFO turns negative, the bottleneck is sitting above the assets rather than inside them. The right way to read Encore today is therefore not “the assets improved, so the story is fixed,” but “the assets improved, while financing, FX, and structure are still delaying the translation into cleaner public-company economics.”

Cash Flow, Debt, And Capital Structure

Cash flow

Cash framing discipline matters here. On a normalized / maintenance cash generation basis, the business did improve. Operating cash flow rose to $26.6 million from $17.1 million. That supports the argument that the underlying portfolio is producing more operating cash than before.

But on an all-in cash flexibility basis, which is the more relevant frame for Encore right now, the picture is more complicated. In the same year the company spent $147.2 million on investing activity, mainly acquisitions, equity-accounted investments, preferred-equity positions, and restricted-cash changes. Against that it generated $157.8 million of financing inflow, including new bonds, new loans, and the $32 million owner injection. So the increase in cash was not driven only by internally generated cash. It also reflected balance-sheet expansion and external capital support.

In plain terms, cash generation improved, but overall flexibility is still financing-dependent. That distinction is critical. If one looks only at the $26.6 million of operating cash flow, it is easy to think the company has moved into self-funded mode. If one looks at the full picture, 2025 still reads as a portfolio-building and refinancing year that leaned on debt markets and owners.

Debt and covenants

The debt schedule is the main reason the market will not stop at the NOI headline this year. At year-end 2025 the company had $54.8 million of current bonds, mainly Series D due in a single payment in July 2026, plus another $25.0 million of current loans, mainly Northpoint Center due in August 2026. The company says there is no warning sign and that it intends to refinance Northpoint. That is reasonable, but it is also exactly where the test sits.

The good news is that Encore is not close to breaching covenants. It remains in compliance on Series C, D, and E, and the presentation shows net debt to net CAP at 66.5% against a maximum 80% threshold in Series D and E. In addition, Series D LTV against the pledged assets stood at 67%, and Northpoint LTV stood at 64%.

The less comfortable point is that the cushion is not wide enough to make 2026 a quiet year. Total bond debt on the balance sheet stood at $192.0 million, including $117.1 million of noncurrent Series E, $20.2 million of noncurrent and $10.0 million of current Series C, and $44.8 million of current Series D. From the market’s perspective, this is not a structure read mainly through net asset value. It is read through refinancing access, debt-market openness, and the ability to preserve liquidity.

FX is not a footnote

The currency exposure is material. The business is fully dollar-based, but the bonds are shekel-denominated. At year-end 2025 net bond debt including accrued interest stood at $198.8 million, while cash and restricted cash denominated in shekels stood at only $0.9 million. As of year-end 2025 the company did not maintain a standing hedge program.

The implication is straightforward: the public-company layer carries a built-in currency mismatch. A 5% move in the dollar-shekel rate changes total comprehensive income by about $9.9 million. In 2025 the company already recorded $15.1 million of FX expense, versus only $0.3 million of FX income in 2024. So even if the U.S. assets themselves are stable, the public-company bottom line can move sharply because of the shekel.

Forward Look

First finding: 2026 is a bridge year. The company has already built a broader portfolio, extended duration in parts of the residential book, and added a preferred-equity layer that increases return potential. But before anyone can talk about a breakout year, Encore has to clear two far more practical checkpoints: refinancing Northpoint and addressing the Series D maturity.

Second finding: the $39 million stabilized NOI target matters, but it is still not the same thing as cash already in hand. Part of that number depends on full income from Northpoint and Cowesett, and part depends on full receipt of preferred-equity returns. So 2026 will be judged not only on whether NOI approaches $39 million, but also on where that NOI actually sits: signed rent, preferred return, or still-unfinished value creation.

Third finding: management is not entering 2026 with another large acquisition narrative. The company says there are currently no specific new projects it intends to invest in. That is an important signal. Encore is not entering the year with another expansion pitch, but with a more cautious message that favors liquidity, selectivity, and improving what has already been bought.

Fourth finding: the rate backdrop helps less than it may seem. The company itself notes that a rate-cut trend has recently begun in the U.S. and globally, which of course is generally supportive for real estate and refinancing. But 2025 already showed that even in that kind of environment, financing cost and FX can still erase most of the operating improvement at the bottom line.

That leads to a simple conclusion. 2026 will be judged on three concrete goals. First, Northpoint has to progress in leasing and reach refinancing without another unusual capital need. Second, Series D has to be rolled or repaid without reopening the liquidity question. Third, operating cash flow has to remain strong even without repeating another acquisition-heavy year funded through the market.

If those three things happen, the market can read 2025 as the base of a real improvement. If not, 2025 will look more like a good year of portfolio building and debt management, and less like the year that moved Encore onto a cleaner public-company path.

Risks

Financing risk remains visible

The most immediate risk is still financing. The company ended 2025 with negative working capital of $40.9 million, driven mainly by current bonds and current loans. The board says there is no warning sign, but the market will not stop at that statement. The real test ends only when Northpoint and Series D move out of the short-term zone without a financing event.

FX is both an accounting risk and an economic risk

Currency moves already proved in 2025 that they can change the story materially. The exposure is not covered by a standing hedge layer, so the shekel can keep creating large volatility in total comprehensive income. This is not just accounting noise. It is a shekel debt stack being serviced from a dollar economy.

Value quality still depends on structure and partners

In part of the portfolio the company sits through equity-accounted holdings or through preferred-equity layers. That creates value, but it also creates complexity. In residential and offices, equity-method losses and value declines showed that asset value does not always flow quickly or cleanly into the public-company layer. Anyone looking for a simple and liquid value story still does not fully get that here.

Related-party and external-management friction

The asset companies operate with management agreements involving entities controlled by the controlling shareholders, generally at 3% to 4% of revenue and sometimes with incentive fees or accounting-service fees as well. The company says those terms are market-standard, but readers still need to understand that this structure adds another layer of expense and embedded conflict, even if it is common in the sector.

Old real-estate risks did not disappear

Beyond that, the usual portfolio risks remain: prolonged vacancy, credit cost, competition, extreme weather, hotel exposure, and U.S. regulatory risk. The company ranks most of them as small to medium in impact, but the combination matters precisely because of the capital structure. When a public shekel debt layer sits on top of the portfolio, even a modest asset-level issue can become meaningful at the company layer.

Conclusions

Encore finished 2025 with a broader portfolio, higher NOI, and stronger operating cash flow. That is the part supporting the thesis. The main blocker is that the improvement still has not reached the public-company layer in a clean way: equity also grew because of owner support, FFO weakened, and 2026 is already loaded with refinancing and FX tests. That is why the short-to-medium-term market reading will be driven less by appraised asset value and more by Northpoint, Series D, and the ability to preserve liquidity without another capital event.

Current thesis: Encore now looks better at the asset level than at the public-company level, which makes 2026 a proof year for whether higher NOI can also become cleaner liquidity and more comfortable debt.

What changed: the company deepened the retail book, bought preferred-equity layers with payment priority, extended duration in several residential assets, and improved operating cash flow. On the other hand, the comprehensive loss, the FX hit, and the need for owner support showed that the improvement still does not flow through cleanly to the public layer.

The counter-thesis: one can fairly argue that the market is still too harsh on Encore, because this is now a more diversified portfolio with $47 million of cash and restricted cash, net debt to net CAP of 66.5%, and a property base that can produce $39 million of stabilized NOI. That is a serious argument. It strengthens if 2026 passes quietly on the financing side, and weakens if liquidity once again requires extra capital or another large refinancing move.

What could change the market reading over the short to medium term: lease-up and income realization at Northpoint, smooth handling of Series D, maintaining operating cash flow without another jump in debt, and proof that stabilized NOI is actually becoming more accessible cash.

Why this matters: Encore has already shown that it can expand a portfolio and lift NOI. What it now has to prove is something different, that the improvement can actually reach the layer that serves creditors and public-company economics without getting stuck in FX, refinancing, and structural complexity.