Gabai Menivim Follow-up: Sky Center Between Appraisal Value and Cash

The main article already framed Sky Center as Gabai Menivim's clearest value asset, but also as the sharpest example of value running ahead of cash. This follow-up isolates that gap. At the end of 2025, Sky Center was appraised at NIS 195.8 million in its current state, NIS 226.6 million in present value, and NIS 241.3 million as completed and stabilized, while only 26% of the area was leased and signed annual rent stood at just NIS 4.0 million.

That is the core issue. The appraisal is not only telling the reader what the asset is worth. It is also showing what still has to happen before that value can turn into cash: finish construction, absorb more cost, sign more tenants, and convert the office component through a monetization path that works in the real market. Precisely because Sky Center is the clearest asset in the filings, it is also the best microscope for the company's bigger question: how much of the value on paper is actually accessible.

The Value Is Real, But It Is Not Cash Yet

The headline number in the appraisal is NIS 241.3 million, the value of the project as completed and income producing. But the number that matters for analysis is the path back down to NIS 195.8 million, the value in its current state at year-end 2025. The appraiser breaks that distance into three concrete frictions: a 0.94 delay-to-income factor, NIS 0.5 million of supermarket fit-out adjustments, and roughly NIS 30.3 million of remaining costs attributed to the company. This is not an abstract argument about cap rates. It is the task list that still stands between full value and usable value.

That chart explains why the biggest number is also the most dangerous one to read too casually. NIS 241.3 million is the value of a finished, occupied, income-producing asset. NIS 195.8 million is the value of an asset that still needs time, capital, and execution. Anyone who reads the project through the top line alone is skipping over the fact that the appraisal itself is already deducting the price of time.

It is also hard to argue from the annual report that the value has already arrived. Cumulative cost at Sky Center reached NIS 230.1 million by the end of 2025, book value stood at NIS 210.3 million, and fair value in its current state stood at NIS 195.8 million. In other words, even after another NIS 50.8 million of 2025 investment, Sky Center still ended the year with an NIS 8.4 million revaluation loss. At group level it still shows up as a drag within fair-value adjustments, not as a project that is already releasing comfortable accounting value.

There is another nuance here. The annual-asset table presents NIS 47.5 million of investment still to be spent, while the appraisal presents NIS 47.5 million as remaining project cost in total and only NIS 30.3 million as the portion attributed to the company. That is not a technical footnote. It means that even inside the same evidence set, the reader has to distinguish between total build cost and the cost layer from which the company is supposed to derive value and cash. Blending those layers produces a cleaner picture than the documents support.

Most of the Appraisal Still Rests on What Has Not Been Proven

To understand how much of the value is already backed by contracts and how much still sits on assumptions, the reader has to open the valuation calculation itself. Of the NIS 241.3 million completed-and-stabilized value, only NIS 60.5 million comes from two components already backed by signed leases: the underground supermarket at NIS 50.8 million and leased upper retail at NIS 9.7 million. Everything else, roughly NIS 180.8 million, rests on vacant space, terraces, and parking that still have to become income.

The split is not subtle. The appraisal lays it out directly:

In plain terms, most of Sky Center's value is still not backed by signed NOI. It is backed by modeled NOI. That does not automatically make the appraisal aggressive. It does mean the value still depends on market proof. That is exactly why the leasing disclosure in the annual report matters more than the headline appraisal value: by the end of 2025 only 26% of the area had been leased cumulatively, and only 3% of the area was added during 2025 itself.

That chart shows exactly where the gap sits. Engineering completion is already at 75.6%. Leasing is still at 26% cumulatively. And the pace during 2025 itself was only 3%. So even if the project meets the construction schedule, the commercial question does not solve itself. It only moves closer to the moment of truth.

The same gap appears through income. Signed contracts at the end of 2025 imply NIS 3.958 million of annual rent after completion. The completed-and-stabilized appraisal implies NIS 16.614 million per year. So only about 24% of the annual income embedded in the model is already signed, while roughly NIS 12.7 million still has to come through leasing, occupancy, fit-out grace periods, and execution. Anyone talking about NIS 241.3 million without talking about NIS 3.958 million is reading only half the page.

The Appraisal Measures NOI, But the Company's Monetization Path Also Runs Through Office Sales

This is where the most interesting gap sits. The appraisal defines Sky Center as a mixed retail and employment project intended to serve as an income-producing asset leased to different tenants, and it therefore uses an income-capitalization framework inside a residual-value approach. Under that framework, the vacant office component receives NIS 66.9 million of value based on NIS 4.68 million of annual income and a 7% cap rate.

But the annual report describes a different monetization path: the company intends to sell the office areas, except for the first-floor office area that is meant to be used as retail after obtaining a special-use permit. That is not a semantic distinction. It is a monetization distinction. Future NOI requires leasing, occupancy, and time. Office sales require demand, absorption, and real pricing. Both routes can create value, but they do not create cash at the same pace and they do not carry the same risk.

The transaction already completed in 2025 proves there is a cash path, but also how long the road still is. The company sold roughly 1,288 sqm of offices and 16 parking spaces for NIS 15.1 million. That matters because it converts part of the project from appraisal logic into a real cash transaction. But it is still small relative to the 6,506 sqm of office area shown in the appraisal as vacant, and to the NIS 66.9 million of value attributed there to vacant offices alone. Put differently, the first sale proves feasibility. It does not yet prove pace.

The paradox is that the appraisal itself already hints at the issue. To support office value it uses office-sale comparison data and market evidence from the Petah Tikva area, yet the core pricing still remains that of a finished income-producing project. So the reader has to hold two paths in mind at once: the appraisal asks what the project is worth if it is completed and operating, while the company is asking how much of it can be sold along the way. The distance between those two questions is exactly the distance between value on paper and cash in the bank.

The Project Facility Buys Time, But It Also Tells You What Is Still Unproven

Sky Center does not stand alone against the market. It sits on a dedicated project facility. At the end of 2025, the principal balance of that specific loan stood at NIS 96.2 million, at prime plus 1.5%, and principal is due on December 31, 2026. The original credit framework was about NIS 290 million, split across land acquisition, VAT financing, construction financing, and Sales Law guarantee lines. In November 2025, an amendment expanded the cash-credit lines for land and construction.

That is the positive side. There is financing, and it was even expanded. But the other side matters more for analysis: the amendment was signed because one of the original conditions precedent had not been fully met. The company had not achieved the required early-sale threshold of at least NIS 55 million. As a result, it was agreed that as of the balance-sheet date the company would not be required to inject additional equity into the project. In other words, the lender gave the project more time precisely because the project had not yet produced the level of de-risking that the original structure expected.

That is a different kind of yellow flag. It does not mean the financing is failing today. It means the market still has not done the work for the project that it was supposed to have done by the end of 2025. So the facility should not be read as proof that the gap is closed. It should be read as proof that there is still a bridge to cross. Once that is kept in view, it becomes easier to understand why Sky Center is both the most promising asset in the report and the one that is easiest to load with too much certainty.

What Has to Happen for the Gap to Truly Close

The first trigger is completion, not headlines. As long as Sky Center does not actually move to construction completion in the third quarter of 2026, the whole value thesis remains time dependent. The appraiser is already deducting the delay-to-income factor. Any further slippage simply widens the gap.

The second trigger is leasing, not just valuation. At the end of 2025, signed rent stood at NIS 4.0 million per year. To move toward the NIS 16.6 million embedded in the completed case, the company has to lift the signed share of vacant space materially, especially in upper retail and the office layers.

The third trigger is proof of office monetization. The 2025 sale shows the offices are not just a spreadsheet line. But to close the gap between NIS 66.9 million of value for vacant office space and accessible cash, the reader needs to see either continued sales or a clear shift toward actual leasing. Without that, the monetization strategy remains stuck between two models.

The fourth trigger is financing flexibility through end-2026. The current facility buys time, and the company is in compliance with the key covenants at period end. But the very need to amend the early-sale condition means the project is not yet carrying itself. So any slowdown in leasing or office sales can come back through the financing layer well before it comes back through the appraisal.

Conclusion

Sky Center is the asset that best explains the main article's core argument: there is value inside Gabai Menivim, but the path from value to cash is still incomplete. The NIS 241.3 million appraisal is not fantasy, but it is the value of a finished income-producing asset. At the end of 2025 the asset was not there yet. It was at NIS 195.8 million in its current state, with an annual revaluation loss, with only 26% of area signed, with NIS 4.0 million of signed rent against NIS 16.6 million embedded in the model, and with a facility that already needed an amendment because early sales did not reach the original target.

So the right question for 2026 is not whether Sky Center is "worth more." That is already on the page. The real question is what portion of that value will turn, in time, into leases, sales, and cash. That is where the project's reading will either tighten or open back up.