Ashtrom Rental Housing: The Value Is Real, but How Much of It Is Liquid?

The main article on Ashtrom Group identified two value pockets that stand out quickly inside the group: Ashtrom Properties and Ashtrom Rental Housing. This follow-up isolates the second one and asks a narrower, but more useful question: does roughly ILS 4.5 billion of rental-housing asset value already represent a layer of value that can be converted relatively quickly into cash, or is it still mostly value that depends on construction, financing, lease-up, and time?

The short answer is that the value is real, but the monetization pipe is still narrow. There are already 1,126 operating units at 100% occupancy, weighted NOI of ILS 95.7 million on the rental units, and management FFO of ILS 52.2 million. But at the same time, the segment’s base FFO remains negative ILS 38.8 million, the presentation shows net financial debt of ILS 2.4 billion, the annual report separately shows shareholder loans of ILS 1.459 billion, and 2,154 units inside the 3,280-unit story are still not stabilized income-producing assets.

Put differently, the value has already been created, but not all of it has passed through the bridge layer yet. One part of the platform already behaves like income-producing real estate. Another part still behaves like a project.

That chart is the right starting point. A 3,280-unit headline sounds like a very large platform that is already fully on its feet. In practice, only 1,126 units are already operating, and another 176 are in lease-up. Everything else, 979 units under construction and 999 in planning, still sits on the side of the story that requires more investment, more financing, more execution, and only then cash.

Where the Value Already Works

It is important to start with what is already working, otherwise the thesis becomes too skeptical. Ashtrom Rental Housing already owns four active projects in Haifa, the Gdana compound in Tel Aviv, the Mishtala project, and Kiryat Hayovel. At year-end 2025, those operating projects showed 100% occupancy, asset value of ILS 3.144 billion, average residential leverage of 48%, and an average linked interest rate of 2.77%. In the presentation, the breakdown for the operating projects shows 2025 NOI of ILS 10 million at Neot Peres, ILS 29 million at Gdana, ILS 18 million at Mishtala, and ILS 34 million at Kiryat Hayovel.

That is not a trivial base. In the financial statements, the rental-housing units carry fair value of ILS 3.239 billion and weighted NOI of ILS 95.7 million. So there is a real income-producing core here, not just a distant development narrative.

The problem begins one layer lower, exactly where an investor has to ask how much of that NOI is already clearing the financing layer. In the rental-housing segment, base FFO ended at negative ILS 38.8 million. Only after adding back ILS 35.9 million of CPI linkage on debt principal and ILS 55.1 million of intercompany interest expense does the figure become ILS 52.2 million under management’s approach.

That is the core point. The issue is not whether NOI exists. It does. The issue is how much of it already translates into a relatively clean cash-yielding layer. On that point, the segment is still not clean.

The comparison to Ashtrom Properties matters for exactly that reason. In 2025, Ashtrom Properties produces NOI of ILS 247.8 million and FFO of ILS 55.1 million even before management adjustments, or ILS 93.0 million under management’s approach. In rental housing, that same bridge has not yet crossed the financing layer with the same cleanliness. So even if both segments create value, they do not create the same degree of liquidity at the same point in time.

This is also where the capital layer matters. In the annual report, the segment shows equity of ILS 566.6 million excluding shareholder loans, and separately shareholder loans of ILS 1.459 billion. That detail matters because shareholder loans can, in time, also become a route for value to move upward. But as of year-end 2025 they mainly show that shareholder capital still sits inside the segment as internal financing, not as cash that has already been upstreamed.

A Large Part of the Value Is Still Stuck in the Bridge Period

To understand why the move from asset value to liquid value is still incomplete, the ILS 4.5 billion needs to be split into layers. The annual report shows ILS 3.144 billion of operating buildings in Israel, ILS 848.9 million of buildings under construction, ILS 51.3 million of investment land, and ILS 495.0 million of payments on account for investment property. In the presentation, the construction layer alone is shown as 1,155 housing units, asset value of ILS 1.344 billion, expected remaining investment of ILS 1.406 billion, and net cumulative impairment of ILS 371 million.

That means a material share of the value still sits in assets that the group must complete, lease, and stabilize. That is exactly the difference between value and liquidity.

Neve Ayalon is the best example of the question itself. At year-end 2025, the balance sheet still carried ILS 463.8 million for rental apartments and another ILS 31.2 million for commercial space in the project. Only after the balance-sheet date was construction completed, the partnership paid the remaining roughly ILS 131 million of cost, and by the financial-statement approval date lease contracts had already been signed for 164 units.

That is meaningful progress, and it may become one of the nearest positive proof points in the whole segment. But it also illustrates the problem. Until the project completes construction, crosses lease-up, builds an operating rent history, and stabilizes financially, the value does not yet behave like accessible value. It behaves like an almost-finished investment.

Shikun Harofim Adds Option Value, Not Liquidity

If Neve Ayalon is an almost-ready project, Shikun Harofim sits at the opposite end of the spectrum. Here the company already won the tender in December 2025 for a project of 999 rental units, of which 600 are for medical staff and 399 are under the Dira Lehaskir format, alongside 190 units for sale and about 23 thousand square meters of commercial and office space. Expected investment stands at ILS 2.18 billion to ILS 2.2 billion, and project completion is only expected in 2031 to 2032.

That is a very large number, and it helps explain why the segment’s potential is easy to like. But two details matter because they cut directly into the bridge from value to liquidity.

The first is accounting and financing. As of December 31, 2025, in the table of payments on account for investment property, Shikun Harofim still appeared at zero. In the annual report’s project-financing table, no financing had yet been disclosed for it. Only in the March 2026 presentation was the update added that, after the balance-sheet date, a bank financing agreement had been signed for the land acquisition.

The second is legal. On February 10, 2026, the group reported that the Tel Aviv Administrative Court had ordered the company to be joined as a respondent in an administrative petition concerning the land subject to the tender. According to the petition, heirs of historical right-holders in the land claim a right of restitution, a preemptive right to purchase, or an alternative monetary remedy, and argue that marketing the land to third parties through the tender was unlawful. The company itself said that at this stage it cannot assess the petition’s chances, and emphasized that it is not a party to the underlying dispute but was joined only because it is the tender winner.

It is impossible to know today whether that petition will delay the project or eventually fade away. But one simpler conclusion is already clear: the most ambitious part of the 3,280-unit story is not a liquidity layer. It is an option layer. It sits before execution, before yield, and almost immediately after the tender win it also picked up a legal-friction layer.

The Practical Read on Value

The thesis of this follow-up is not that Ashtrom’s rental-housing value is inflated. Quite the opposite. There is a real operating portfolio here, real NOI, full occupancy across four projects, and a fifth project that crossed from construction into lease-up after the balance sheet. The issue is different: not every shekel of value inside the segment has already passed through all the stages needed to become value that is relatively accessible to group shareholders.

That is why it is not enough to look only at roughly ILS 4.5 billion of asset value against ILS 2.4 billion of net financial debt and conclude that the value is almost ready for extraction. The reader still has to move through FFO quality, through ILS 1.406 billion that still has to be invested into projects under construction, through Neve Ayalon that is only just beginning to prove itself as a stabilized asset, and through Shikun Harofim, which still sits at the level of planning, initial financing, and a petition.

The implication is that the segment can, over time, become a more realized-value engine, and perhaps also a route through which part of the shareholder loans is repaid upward. But as of year-end 2025, it is still closer to a platform under construction than to a liquid platform. That is not a criticism of asset quality. It is a judgment about the stage those assets are still in.

What would need to happen for that reading to improve? Neve Ayalon would need to move from investment to stable income, base FFO would need to stop being negative, the construction layer would need to advance without imposing more financing strain, and Shikun Harofim would need to move from a planning-stage option to a project that is cleaner both legally and financially. Until then, the value exists, but not all of it is liquid.