Landmark 2025: When tower B value turns into rent and cash
AFI Properties already carries Tower B at ILS 458.5 million on the company's share at the end of 2025, but the move into rent and cash still depends on three costly steps: full office signing, completion and occupancy with TI budgets and free rent, and monetization of the 116 apartments that sit outside the appraisal.
What This Follow-up Is Isolating
The main article already made the broader point: for AFI Properties, 2026 will be judged through lease-up and refinancing rather than through another fair-value headline. This follow-up isolates Landmark, and specifically Tower B, because this is where the line between booked value and real rent collection becomes visible. By the end of 2025, the company already carried its share in Tower B at ILS 458.5 million, after a 2025 revaluation gain of ILS 91.4 million. That is a real number, but it does not yet mean the tower is already contributing the same economic weight in cash flow.
The interesting part is that Tower B’s value is not built on obviously stretched assumptions. The appraiser did not reduce the base office cap rate, which stayed at 6%, even while explicitly noting a cumulative 0.5% rate cut and stronger demand around the asset. At the same time, the valuation already deducts ILS 204.3 million of tenant allowances, applies a 0.87 delay and risk factor, and subtracts another ILS 226.5 million of remaining construction cost. In other words, the friction is already embedded in the value. The open question is not whether enough caution sits inside the valuation. It is how quickly that caution can be replaced by signed leases, occupancy and collections.
One more point needs to be clarified early: Tower B does not turn into cash through one single channel. The office and retail component becomes rent only after full signing, fit-out, occupancy and free-rent burnoff. The residential component is not included in the appraisal at all, and is supposed to become cash through the sale of 116 apartments and the voucher arrangement signed in December 2025. Anyone reading Tower B as one clean asset that will convert at one pace is flattening the real economics.
What Is Already In Value, And What Is Not
The starting point is straightforward. At year-end 2025, AFI’s share in Landmark A was valued at ILS 2.019 billion, with 100% occupancy, 25 tenants, and average rent of ILS 170 per sqm per month. AFI’s share in Tower B was valued at ILS 458.5 million. On the full-project basis used in the appraisal, Landmark A stands at ILS 4.038 billion and Tower B at ILS 917 million. Most of Landmark’s value is already sitting in the stabilized tower, but phase B is clearly no longer just an option.
What matters is how Tower B’s value is constructed. The appraisal uses expected annual income of ILS 98.6 million for Tower B, based on 46,975 sqm of offices and 1,884 sqm of retail, and applies a weighted cap rate of 6.52%. From there, it does not jump directly to value. It deducts tenant allowances, applies the delay and risk factor, and subtracts the remaining construction cost. That is how the current value of ILS 917 million is reached, or ILS 458.5 million on the company’s share.
This is the core point. Tower B’s value already reflects the fact that the tower is not complete, tenants are not yet paying, and the landlord still has real cash outlays ahead. From here, the debate over Landmark is much less a valuation debate than an execution debate.
Construction progress supports that reading. By the end of 2025, budget completion had reached 50%, versus 21% at the end of 2024, while the expected completion date for Tower B remained 2026. The company-share cumulative investment cost rose to ILS 335 million and fair value rose to ILS 458.5 million. So AFI has already recognized part of the value before the tower has started producing rent. The next step is to convert that recognition into operating reality.
Pre-leasing Quality: The Issue Is Conversion, Not The Headline Rent
At first glance, the commercial setup in Tower B looks strong. As of the valuation date, heads of terms had been signed for all office space in Tower B, including the upper retail floor. The assumed office rent is ILS 169 per sqm per month, and the lease term is supposed to be 5.5 years with a 5-year option.
But this is exactly where value and current rent diverge. Heads of terms are not full lease agreements. In addition, tenants are expected to receive fit-out budgets, with the landlord contribution built around an assumed minimum lease duration of 126 months, and a 6-month free-rent period starting from occupancy or completion of works. That means AFI does not only need to close signatures. It also needs to fund the move-in, and then wait until rent actually starts.
That chart shows why the problem in Tower B is not obviously aggressive pricing. In Tower A, which is already operating, average rent in 2025 stood at ILS 170 per sqm per month, and leases signed during the year stood at ILS 176 per sqm. The valuation also cites three recent Tower A deals totaling about 13,600 sqm at roughly ILS 180 per sqm per month including allowances, plus earlier deals in a range of ILS 182 to ILS 189. So ILS 169 in Tower B does not look detached from the market.
The weaker point is retail. The 1,884 sqm of retail in Tower B was valued at ILS 150 per sqm per month, but at the valuation date it was still classified as vacant. That does not necessarily mean there is a pricing problem, but it does mean there is still a timing problem. The market can live with office space that is already near signature. It is much less generous to ground-floor retail that is still waiting for tenants inside a project that is still under construction.
So the quality of the pre-leasing in Landmark looks reasonable, and even fairly strong. This is not a thesis built on inflated rents. It is a thesis built on whether what already looks commercially advanced can turn into signed leases, work on site and then effective revenue.
Where The Cash Starts
To understand when value becomes cash, the economics have to be split into two separate channels:
| Channel | What already exists at end-2025 | What is still missing | Why it matters |
|---|---|---|---|
| Offices | All 46,975 sqm of Tower B office area is covered by heads of terms at ILS 169 per sqm per month | Signed leases, completion of works, occupancy, end of free-rent, move from tenant allowances to collections | This is the path that should turn the tower’s value into actual NOI |
| Retail | 1,884 sqm of Tower B retail was valued at ILS 150 per sqm per month | Actual leasing of the ground-floor retail layer | Even if offices progress well, an unfilled retail layer still leaves a gap inside the valuation story |
| Residential | The plan allows up to 116 apartments, and the residential element is excluded from the appraised asset | Apartment sale contracts, Sale Law guarantees and cash collection | This is where part of phase B’s cash conversion should come from, but not through NOI |
| Financing | In December 2025, AFI signed a voucher arrangement with Sale Law guarantees of up to ILS 240 million until February 28, 2028, and the Tower B construction facility was reduced by ILS 72 million from ILS 370 million to ILS 298 million | Continued apartment sales and further reduction of construction-financing burden | This is the point where apartment sales already start changing the financing structure before offices produce rent |
That table matters because it shows that Tower B’s value is not supposed to roll into one single cash-conversion line. One part should become NOI, and another part should become apartment-sale cash. That is exactly why the voucher arrangement matters more than it seems at first glance.
The appraisal is explicit that the appraised asset does not include the residential component. So the ILS 917 million value assigned to Tower B reflects the offices, retail and parking, not the 116 apartments. Once AFI and its partner signed the December 2025 non-accompanied voucher arrangement for apartment sales, with Sale Law guarantees of up to ILS 240 million, a separate monetization channel was opened. In the same event, the Tower B construction facility was reduced by ILS 72 million, from ILS 370 million to ILS 298 million. Part of the move from value to cash has therefore already started, but it started on the residential and financing side, not on the NOI side.
The debt side is still not fully clean either. At year-end 2025, the loan balance attributed to Tower B stood at about ILS 185 million, and the effective interest rate stood at 6.7%. That is not an unusual burden for a project at this stage, but it is a reminder that Tower B’s value is not yet free and clear. Until the offices start paying and apartment sales move forward, part of the value remains tied to execution, timing and cost of money.
Focused Conclusion
If the question is whether Tower B’s value rests on detached assumptions, the answer leans toward no. The assumed rent in Tower B is not above what Tower A has already achieved, the base cap rate was not cut despite lower rates, and the appraisal already deducts allowances, delay and remaining cost.
But if the question is whether that value has already become rent and cash, the answer is still no. The offices still have to move from heads of terms to executed leases, from occupancy to the end of free rent, and from the end of free rent to collections. Retail still needs tenants. And residential, which is the complementary cash channel for phase B, will advance through apartment sale contracts and the voucher arrangement rather than through NOI.
That is why Landmark in 2026 will not be judged mainly on whether the appraiser was right. It will be judged on four much simpler checkpoints: how much of the office paper turned into signed leases, when tenants actually moved in, how quickly the retail layer was filled, and how much of the residential component started to reduce bank construction finance. That is where Tower B value starts to look like rent and cash, rather than only like a defensible number in the report.
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