Eckerstein Real Estate: Stable NOI, but How Much of the Value Is Actually Accessible to Shareholders

What This Follow-up Is Actually Testing

The main article argued that Eckerstein ended 2025 with an operating business in Israel that still looked resilient, but with weaker cash conversion and a real-estate layer that no longer offered the same accounting tailwind it did in 2024. This follow-up isolates only the property layer and asks one question: how much of the value is already supported by NOI and active leases, and how much still depends on leasing, zoning, funding, or eventual monetization.

That question matters because the presentation leads with a large headline number: a real-estate layer worth ILS 1.036 billion. But the first filter is immediate. ILS 477 million is presented as investment property, while another ILS 559 million sits in property, plant, and equipment. In other words, more than half of the real-estate value shown to the market is not an income-property base that can be read as value moving quickly toward shareholders. It is operating real estate that serves factories, headquarters, and the day-to-day business.

Even within the ILS 476.5 million of investment property, not all of the value is backed by rent that is running today. In its own weighted cap-rate calculation, the company deducts ILS 1.6 million for non-income-producing land in Romania, ILS 27.6 million for vacant-area value, and ILS 71.4 million for rights that are not leased. After those deductions, only ILS 375.9 million of investment property is attributed to leased space. That is the core point. Value has been created, but a meaningful part of it is not yet value supported by current NOI.

What the NOI Actually Supports

The good news is that the rental layer did not break. Third-party revenue from investment property barely moved and came in at ILS 31.1 million. NOI reached ILS 24.0 million, down just 1.7% from 2024. On a first pass, that is exactly the kind of picture investors like to see: a relatively steady income base without an outright collapse in the property platform.

But that stability is sitting on a softer base than it used to. In the company’s office-use occupancy disclosure, occupancy fell to 83.9% at December 31, 2025, from 88.7% a year earlier and 92.1% in 2023. The board report also says that 5,225 square meters of office space were still being marketed at year-end, and it explicitly ties the NOI erosion mainly to office lease expirations. That means NOI is still holding, but it is no longer being generated on the same occupancy base.

The accounting response to that erosion is already visible. In 2025 the company recorded a fair-value loss of ILS 15.6 million on investment property, versus a gain of ILS 61.7 million in 2024. Almost all of the negative swing came from office use. In the company’s own fair-value split, 99.6% of the loss came from offices, while retail added ILS 2.7 million. That matters. The property layer did not weaken because the entire portfolio deteriorated. The weakness sits exactly where most of the value is concentrated.

The analytical implication is straightforward: NOI provides a floor, but it no longer explains the full value on its own. When the company itself removes roughly ILS 101 million from the base used to derive the weighted cap rate, it is effectively telling the reader that a meaningful part of the value still waits for something else to happen.

Eckerstein Towers: A High-quality Asset, but Not All of the Value Sits in the Current Run-rate

Eckerstein Towers remains the strongest asset in this layer. On a 100% basis, the project ended 2025 with ILS 49.1 million of revenue and ILS 37.4 million of NOI. Average occupancy was 90.1%, and year-end office occupancy stood at 87.4%, while retail was fully occupied. This is not a weak asset, and that helps explain why the company’s share in the towers was still carried at ILS 305.4 million even after the negative fair-value move.

Still, the valuation is not a mechanical translation of current leasing alone. The year-end 2025 valuation uses representative occupancy of 97.5%, higher than the actual occupancy seen during the year. It also uses average rent assumptions of ILS 97.6 per square meter in offices and ILS 121.6 per square meter in retail, with capitalization rates ranging from 5.75% to 6.7%. In other words, part of the value is built on a more stabilized state than what the asset was actually delivering in 2025.

There is another value layer here that the company itself isolates. In the towers’ yield table, out of a total fair value of ILS 731.3 million on a 100% basis, ILS 59.6 million is attributed to rights that are excluded from the yield calculation. That already says the towers are not only a current NOI asset. They are also a planning asset.

That planning layer is even somewhat better for Eckerstein than the existing ownership split. Under the agreement with the partner, the company is entitled to 47% of the additional building rights, versus 42% of the current rights. The plan being advanced with the partner contemplates two new buildings totaling about 65 thousand square meters, mainly employment space, plus about 160 housing units of roughly 50 square meters each. The presentation frames the same point more simply: about 55 thousand square meters of additional mixed-use area, with the company entitled to 47% of the future rights.

But this is exactly where the story needs to stop before it becomes too clean. The detailed zoning path for the towers is still subject to planning approvals. The company and its partner are expected to commit roughly 4,250 square meters to public use, and there is also a tax and levy layer: under the Metro law, if a building permit request is submitted by the end of 2030, the Metro betterment tax would be 20%, in addition to a 40% betterment levy. That comes before execution cost, before financing, and before the question of what kind of office market this project will eventually be marketed into.

There is also a smaller but still important structural friction. Eckerstein owns only 42% of the existing asset, and the actual management and marketing are carried out through the partner under the management and assignment arrangements. That is not an operational problem when both sides are aligned, but it does mean monetization is not a unilateral decision by one shareholder.

That makes Eckerstein Towers a classic created-value versus accessible-value case. There is a real income asset here, there is real NOI here, and there is a real development option. But a meaningful part of the upside still depends on a return to stabilized occupancy, on zoning progress, and on a monetization route that remains far from shareholder cash today.

Beit Eckerstein: The Upside Exists, but It Already Requires a Leap Into a New Project

If the towers are a current asset with an embedded option, Beit Eckerstein is almost the inverse: an existing asset whose real appeal increasingly comes from the future project that can eventually replace it.

At the end of 2025, Beit Eckerstein was still an older office building in Herzliya Pituach, with 29.5% of the building used by the group itself and only 63.9% occupancy in the portion leased to third parties. The report also says that 1,466 square meters of office space were being marketed. That is not a starting point that supports reading the value as pure current NOI.

What carries the story here is the planning layer. In February 2026, a plan was published with legal effect that allows a 28,344 square meter mixed-use building on the site, including 24,299 square meters of offices, 750 square meters of retail, and 2,350 square meters of residential use that can be converted into office space. In the company presentation, this is already framed as a new tower, and for good reason.

The gap between current value and future value is already partly embedded in the numbers. The company says the unused building rights at Beit Eckerstein were valued at ILS 43.4 million, and that amount is already included in the property value. At the same time, the fair value of the part classified as investment property stood at ILS 104 million at the end of 2025, while the appraisal for the property and the rights under an assumption of clean title and clean rights stood at ILS 131.5 million.

The key point is not only that a gap exists, but what kind of gap it is. A meaningful part of the planning upside is already inside the valuation, but turning all of it into accessible value requires a completely different phase: vacating the current use, demolition, execution, financing, and re-leasing or remarketing a much larger project. This is no longer just the NOI of an older office building. It is already a development story.

The report effectively says so. The company states that it periodically examines raising additional funding for projects with significant capital needs, and it explicitly cites Beit Eckerstein as an example. In the presentation, real-estate cash stands at ILS 17 million. That is not enough to turn Beit Eckerstein from a planning option into accessible value without a clear financing move.

It is also important to look at the recognition pace. Beit Eckerstein contributed only a small positive revaluation of ILS 0.8 million in 2025, after ILS 38.9 million in 2024. In other words, much of the first valuation jump has already been recognized, while execution still lies ahead. That is exactly the kind of value that looks comfortable on the balance sheet long before it becomes comfortable for shareholders.

What Still Blocks the Value From Reaching Shareholders

The good news is that this is not a story of assets mortgaged to the limit. Beit Eckerstein has no asset-specific debt. There are no liens on the group’s rights in Eckerstein Towers. Ackerstein Zvi’s bank credit is also unsecured. So this is not a distressed property layer.

But that still falls short of shareholder-accessible value. Ackerstein Zvi has committed to the banks not to create liens and not to sell assets outside the ordinary course of business without prior written approval. Dividend distribution is also subject to bank consent and the required preconditions. So even without aggressive asset-level leverage, there is still a banking-control layer over how value can be extracted from the property portfolio.

That brings the test back to the right place. The question is not whether there is good real estate here. There is. The question is not whether planning value has been created. It has. The real question is how much of that value is already backed by leased space, how much depends on a return to higher occupancy, how much has already been recognized before execution, and how much capital will still be required to turn Beit Eckerstein or the towers’ additional rights into something that can actually be monetized.

Conclusion

Eckerstein’s property layer is not the problem in the group, but it can no longer be treated as a simple valuation cushion either. NOI is still holding up, the main assets are not under aggressive asset-level leverage, and there is real upgrade optionality in both the towers and Beit Eckerstein. On the other hand, office occupancy has weakened, the fair-value swing turned negative, and roughly one fifth of investment-property value is not currently backed by leased space.

The conclusion is therefore sharp: Eckerstein has created real-estate value, but not all of it is yet accessible to shareholders. In the towers, part of the value rests on stabilized occupancy and future rights that still need to move through a planning and tax path. In Beit Eckerstein, part of the upside is already in the valuation, but realizing it requires a capital-heavy future project. Until the company closes vacant space, lays out a clear funding route, and moves the planning rights closer to execution, part of this value should still be treated as created value rather than value that already offers real shareholder comfort.