BIG 2025: Operations are strong, but 2026 will test funding, delivery, and cash conversion

Getting to Know the Company

BIG exits 2025 as a stronger operating company, but also as a more complex one to read properly. A quick glance at the headline numbers looks excellent: rental, management, and other revenue rose to NIS 2.73 billion, net income reached NIS 1.97 billion, occupancy stayed around 100% in Israel and rose to 99% in Europe, and the company brought several projects into operation in Israel and abroad. That is the easy part of the story.

The harder part is that BIG is no longer just an Israeli open-air shopping-center landlord. It is now a platform with several layers: BIG-branded commercial centers in Israel and Europe, a heavy development pipeline, and a 79.9% stake in AFI Properties that adds offices, rental housing, and a much larger Central and Eastern European footprint. Anyone who still reads the company as a straightforward retail landlord is missing what 2026 is really about.

What is clearly working right now is the commercial core. Occupancy is still exceptionally high, average rents are moving up, tenant turnover keeps growing, and the projects that opened in 2025 suggest real demand rather than a purely appraisal-driven story. What is still not clean is the move from operating value to shareholder-accessible value: the gap between accounting profit and cash remains wide, absolute debt is still up, and an important part of the story sits inside AFI, minority interests, and assets that are still absorbing capital.

That is why BIG's active bottleneck today is not demand and not occupancy. It is funding through a transition period. 2025 already proved that management can open assets and lift NOI. 2026 now has to prove that, after higher debt, heavy investment, and a still meaningful maturity profile, the company can turn that step-up into cash, financing flexibility, and the next wave of deliveries without diluting the quality of the equity story.

Four points are worth locking in up front:

• Profit is much larger than cash. Net income was NIS 1.97 billion, but operating cash flow was only NIS 889 million, largely because NIS 1.42 billion came from fair-value gains on investment property and investment property under development.
• The decline in property under development does not mean the pipeline eased. Investment property under development fell from NIS 4.78 billion to NIS 3.70 billion mainly because NIS 2.60 billion was reclassified into yielding investment property after projects opened. At the same time, the company still spent NIS 1.93 billion on investment property and projects under development.
• Covenants are not tight, maturities still matter. BIG is meeting all financial covenants and net debt to debt-plus-equity improved to 59.0%, but total debt still rose to NIS 25.4 billion and short-term bank and bond maturities together stand at NIS 5.69 billion.
• The commercial core looks stronger than the macro headlines suggest. Average rent is higher, occupancy is effectively full, and management's presentation showed same-property NOI growth of 5.0% in Israel and 7.3% in Europe for BIG's own centers.

The economic map looks like this:

The important point is that BIG's moat is still commercial, but the stock is no longer priced only on that moat. If you try to understand the company only through property yield or a single FFO line, you miss the bigger question: how quickly can this operating value fund itself and the next development cycle?

Events and Triggers

First trigger: 2025 was a real delivery year, not just a year of promises. During the year, BIG opened the centers in Migdal Ha'emek, Or Akiva, and Gedera, and BIG Fashion Glilot opened on February 27, 2025. AFI also completed the additional office building in Airport City, Belgrade, AFI Home in Bucharest, AFI Home Metro Zachod in Warsaw, and Building B in Towarowa 22. That is the main reason investment property under development fell while yielding property jumped to NIS 31.20 billion.

Second trigger: after the balance-sheet date, the funding layer that the story needed also arrived. In February 2026, BIG issued a new secured bond series for NIS 1.0 billion at a stated annual rate of 2.37%, backed by collateral tied to BIG Fashion Ashdod. Both S&P Maalot reports frame the proceeds the same way: mainly refinancing existing financial debt and supporting ongoing operations. That matters. The raise was not there to widen strategic ambition. It was there first to stabilize the transition period.

Third trigger: the company explicitly says that, excluding AFI, it has a standalone working-capital deficit of roughly NIS 1.42 billion, while the consolidated deficit stands at roughly NIS 3.12 billion. Management explains that much of this comes from current classification of maturing bonds and commercial paper, but the deeper message is that even a strong company starts 2026 with active balance-sheet work to do.

Fourth trigger: BIG still owns 79.9% of AFI Properties after a share sale completed in November 2025 reduced the stake from around 89% to below 80%. That helped capital resources during a funding-heavy period, but it also increases the importance of minority interests and sharpens the question of how much of AFI's value can actually move upstream. This is not an operating problem. It is a value-access problem.

Fifth trigger: there is also a possible equity boost, but it is not certain. According to management's presentation, Series 7 options with a NIS 573 exercise price and June 2026 maturity could generate around NIS 411 million of cash if fully exercised. The annual report shows that 131,998 options were already exercised in 2025, bringing in roughly NIS 75.6 million. The market will watch this as well, but it is a booster at most, not a substitute for an open debt market.

The key point is that BIG enters 2026 with several pieces of genuinely good news, but also with timing that forces it to manage delivery, leasing, debt markets, AFI, and liquidity discipline all at once. This is not just another good year. It is an execution-load story.

Efficiency, Profitability, and Competition

The core 2025 story is real operating improvement, not just appraisal inflation. Rental, management, and other revenue rose 18.2% to NIS 2.73 billion, while property operating expenses grew more slowly, taking the profit from that activity to NIS 2.03 billion. Total gross profit reached NIS 2.02 billion, and operating income reached NIS 3.29 billion. That is no longer just a balance-sheet story. The operating machine is producing more.

Pricing power is still there

The asset-level indicators back that up. Average rent per square meter in BIG's Israeli assets rose from NIS 124 to NIS 130, and in Europe from EUR 18 to EUR 19. Average occupancy stayed around 100% in Israel and improved from 98% to 99% in Europe. In management's presentation, which uses company-share and effective-consolidation style figures rather than pure IFRS lines, same-property NOI in BIG centers rose 5.0% in Israel and 7.3% in Europe. That matters because it says the improvement did not come only from opening new assets.

The lease data also looks healthy. In BIG's Israeli centers, renewed contracts in 2025 came with rent increases of 5.4% including anchor tenants and 5.7% excluding them. New contracts came with a 50% increase. That is a strong sign that BIG still has real negotiating power with tenants, built on location, traffic, and the quality of the format.

The competitive edge is real, but it does not cancel the macro

Midroog describes BIG as a leading player in open-air commercial centers in Israel, Serbia, and Poland, with a tenant mix that is more defensive than closed malls with heavier fashion exposure. That is the right framing. Open, accessible, usually anchored by food and pharmacy chains, and positioned near traffic routes or city edges, this is a format that is less vulnerable to fashion swings and more connected to everyday spending.

But it is not a moat that cancels the economy. Interest rates are still relatively high, inflation still matters, and Midroog explicitly points to pressure on private consumption. BIG's advantage is therefore not immunity. It is a better ability to hold occupancy, keep rent moving, and preserve tenant economics in a tougher environment.

It is not only BIG, and that is exactly the problem

This is where the complexity layer enters. In management's presentation, on the company's-share basis, group NOI reached NIS 1.954 billion and AFFO crossed the NIS 1 billion threshold for the first time, at NIS 1.015 billion. Those are strong numbers, but they are not plain IFRS lines. They are management's preferred economic read through company-share exposure, AFI, and the broader asset platform. They are useful for direction, but less useful for answering how much cash is really available at the listed-company level.

That is the real point. BIG is showing genuine operating strength, but investors need to avoid confusing a high-quality NOI engine with a simple corporate structure. As the platform grows, it also becomes less linear to analyze.

Cash Flow, Debt, and Capital Structure

I prefer an all-in cash flexibility lens here, because that is the real 2026 story. If you stop at FFO or NOI, you get a picture that is too flattering. If you ask how much cash is left after the period's actual cash uses, the transition looks much more demanding.

Operating cash flow was NIS 889 million in 2025. That is a decent number, but it is far below net income of NIS 1.97 billion. The main reason is easy to see: NIS 1.42 billion came from positive fair-value movements in investment property and projects under development. In other words, a large part of the improvement is real, but it is still not cash.

From there the picture gets much tighter. Cash invested in investment property and investment property under development totaled NIS 1.93 billion in 2025. Even before the NIS 200 million dividend, NIS 10.7 million of lease payments, NIS 1.69 billion of bond repayments, and NIS 2.76 billion of long-term loan repayments, the operating cash flow was not enough to fund the growth pace. The company bridged that through capital markets, new loans, minority capital, and cash already on hand.

The balance sheet is still strong, but the strength is no longer free

To BIG's credit, equity rose to NIS 15.70 billion, net debt to debt-plus-equity improved to 59.02%, and the company is meeting all covenants. This is not a covenant-stress case. Anyone looking for a near-term breach story will not find it in this report.

But balance-sheet strength does not mean funding stops being central. Total debt rose to NIS 25.40 billion from NIS 24.24 billion a year earlier. Current bank and other maturities are NIS 3.49 billion, and current bond maturities are NIS 2.20 billion. So even with wide accounting headroom, 2026 still carries heavy refinancing and liquidity work.

This is where it helps to separate two kinds of strength. There is accounting strength, and BIG clearly has it. There is also practical financing strength, which depends on an open debt market, collateral capacity, unpledged assets, AFI shares, and a continued flow of NOI. That is still a strong position, but it is no longer a frictionless one.

What is on hand, and what is really available

At year-end 2025, cash and cash equivalents stood at NIS 2.68 billion. Excluding AFI, management presents a picture of NIS 1.069 billion of cash, NIS 600 million of signed and available credit lines, roughly NIS 5.7 billion of uncollateralized assets of which NIS 5.4 billion are income-producing, and around NIS 5.6 billion of unpledged AFI shares. The annual report separately notes a NIS 600 million credit facility available through June 2026 against part of the AFI shareholding, alongside 23.9 million marketable AFI shares valued at NIS 5.588 billion as of year-end.

That is a real buffer. But it is not a free buffer. In 2026 the market will care not only whether the resources exist, but also at what price they are raised, against which collateral, and how much room remains afterward.

Inflation and FX did not disappear

The risk structure matters too. NIS 11.71 billion of financial instruments are exposed to CPI linkage, so inflation lifts rental revenue but also finance expense. In addition, only 58.32% of loans were at fixed rates at the end of 2025. The company does have some hedging in place, including a swap that converted NIS debt into EUR debt in a EUR 55 million amount, while AFI executed currency transactions against roughly EUR 385 million of NIS liabilities. That helps at the margin, but it does not remove the exposure. The drop in the foreign-currency translation reserve to negative NIS 599.6 million is a reminder that FX still matters.

Guidance and What Comes Next

2026 looks like a transition year with a proof test inside it. It is no longer the initial step-up year that 2025 was, but it is also not yet the maturity year for Petah Tikva and much of the longer pipeline. In practice that means BIG has to do several things at once: deliver, stabilize, lease, refinance, and prove that the assets opened in 2025 really convert appraisal gains and higher NOI into stronger cash generation.

Four non-obvious findings should shape the forward read:

• Part of the step-up has already been harvested. NIS 2.60 billion moved from projects under development into yielding investment property, so part of the improvement is already in the numbers. 2026 will be judged less on opening and more on full-year monetization.
• The main flagship project is still far away. BIG Fashion Petah Tikva Phase A still requires NIS 1.344 billion of construction cost, against projected NOI of NIS 164 million and an expected launch in 2029.
• Ashkelon is smaller, but still capital-heavy. BIG's share in BIG Fashion Ashkelon is 50%, the remaining construction cost is NIS 414 million, and projected NOI is NIS 40 million, with expected launch in 2028.
• Europe is the next medium-term growth engine. The European development pipeline still carries EUR 248.6 million of remaining construction cost and EUR 25.1 million of projected NOI for 2026 through 2029.

What has to happen in Israel

The company now has to take 2025 out of the report and put it into cash. Glilot, Or Akiva, Gedera, and Migdal Ha'emek are already open. The question is no longer whether BIG can launch them. It is what their full-year contribution will look like, how quickly they stabilize, and whether rent quality stays high once the initial excitement of the opening becomes a normal operating year.

At the same time, Petah Tikva and Ashkelon remain the main market checkpoints farther out. Petah Tikva looks like a true flagship, with 40 thousand square meters of offices, 65 thousand of commercial space, and already high marketing rates at year-end 2025. But that is still marketing, not NOI. Ashkelon is smaller, yet it still carries a large remaining construction bill relative to where the project stands. In other words, BIG is still building part of its end-of-decade NOI today.

What has to happen in Europe

The European pipeline looks credible. Poland alone carries EUR 163.7 million of remaining cost across several projects with EUR 16.1 million of projected NOI, while Serbia and Montenegro add another EUR 84.9 million of remaining cost and EUR 9.0 million of projected NOI. That is a meaningful engine, but it also means BIG's European story will remain a staggered realization story, not a one-quarter breakout.

And this is where growth quality matters. Europe does add real value, but it also lengthens the story, increases FX exposure, and brings sovereign risk into the frame. That does not invalidate the engine. It simply means the engine arrives with more conditions attached.

The right label for 2026

If the year needs a label, it is a transition year with a financing test. BIG has already shown there is demand for its new assets and that it has pricing power. What it has not yet shown is that the combination of 2025 openings, the 2026 to 2029 pipeline, AFI, and a larger debt load also produces a cleaner cash-flow and flexibility picture.

What would strengthen the thesis over the next 2 to 4 quarters is a combination of three things: full-year contribution from the 2025 openings, continued leasing and rent growth, and refinancing that extends the runway without eating into the economics of the NOI engine. What would weaken it is not necessarily a sudden occupancy drop. It would be a situation where growth continues to look strong mainly on paper while cash still trails behind.

Risks

The first risk is valuation and interest-rate risk. A 0.5% increase in WACC would reduce the value of BIG, BIG Europe, and AFI properties together by NIS 1.90 billion. That is a large number, and it is a reminder that the company benefits from revaluations when the market is supportive, but it is also exposed to a meaningful reversal if rates stay high or valuation yields move up.

The second risk is that funding may be available, but its price and structure matter as much as its existence. The commercial paper, the secured bond series, the new pledges, and the facility against AFI shares all show BIG can raise liquidity. They also show that funding is part of the thesis, not a technical footnote.

The clearest external warning signal here comes from Midroog: commercial paper Series 3 gives investors the right to demand immediate repayment with 14 business days' notice, which is why the company committed to maintain available signed credit lines and or liquidity that are not below the outstanding amount of that paper. This is not a solvency crisis signal. It is, however, a very direct reminder that liquidity discipline is an operating requirement, not a nice-to-have.

The third risk is currency and geography. The group is exposed mainly to the euro, and translation losses in OCI reached NIS 317.1 million in 2025. Midroog also explicitly points to Serbian sovereign risk. BIG hedges part of the exposure, but not all of the economic meaning of it. Anyone accepting Europe as the next growth leg also has to accept higher external volatility.

The fourth risk is that the consumer weakens just as the company leans on new openings. Yes, BIG's format is more defensive than a closed mall, but tenant turnover, occupancy-cost ratios, and tenants' willingness to absorb higher rents are still linked to private consumption. If rates stay high or the consumer softens, BIG's format will help, but it will not eliminate the pressure.

The fifth risk is value capture. AFI adds value, scale, and diversification. It also adds minority interests, office exposure, rental housing, and a more complex corporate structure. So not every extra shekel of group NOI, and not every fair-value gain, translates one-for-one into the same thing for BIG's common shareholders.

Short Interest Read

The short data adds a useful layer because it does not point to extreme pessimism, but rather to lingering caution. Short interest stood at 1.32% of float in late March 2026, versus a sector average of 0.55%. SIR stood at 3.94 days, versus a sector average of 1.56 days. That is not an aggressive short setup, but it is not indifference either.

The direction matters more than the absolute level. In early February, short float reached 1.82% and SIR reached 8.24. Since then both have come down. The reasonable read is that part of the funding fear eased after the issuance path became clearer, but the market is still applying a complexity discount to 2026. In other words, the short data is not shouting "collapse". It is quietly saying "still not clean."

Conclusions

BIG ends 2025 with a very strong operating core. Occupancy is high, rents are moving up, the newly opened assets look healthy, and NOI continues to improve even on a same-property basis. The main constraint is not asset quality. It is the shift from a strong operating year into a period where the company still has to fund, stabilize, and deliver more. That is exactly what will shape market interpretation in 2026.

Current thesis: BIG proved in 2025 that the platform can keep compounding commercial real-estate value, but 2026 will test whether that growth can also be converted into cash and financing flexibility without leaning too heavily on an accommodating capital market.

What has changed versus the simpler historical read is that BIG is no longer judged only on existing assets and occupancy. It is now judged on the combination of 2025 openings, the AFI stake, major projects that are still years away from full maturity, and a debt stack that requires active management. That makes the company more interesting, but also less clean.

Counter-thesis: one could argue that the funding debate is overstated because BIG still controls high-quality assets, retains strong market access, holds meaningful value in unpledged assets and AFI shares, and therefore funding is more of a temporary nuisance than a real constraint on the story.

What could change the market reading in the short to medium term is a combination of full-year contribution from Glilot, Or Akiva, Gedera, and Migdal Ha'emek, continued rental improvement, and a cash picture that starts catching up with revaluation gains and NOI. If that happens, the story begins to shift from a heavy development platform toward a harvesting phase. If it does not, the market will keep assigning more weight to debt and structural complexity.

Why does this matter? Because BIG is now at the point where the key question is no longer whether value is being created, but how much of that value is actually fundable, accessible, and ultimately convertible into shareholder economics.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen is straightforward: full contribution from the 2025 openings, continued NOI improvement from existing assets, funding that extends the runway without eating away the economics, and steady execution in Petah Tikva and Ashkelon. What would weaken it is also straightforward: cash flow that still lags badly, more debt without a matching NOI step-up, or early signs that consumers and tenants are softening just as the development load stays high.