Levinstein Properties 2025: NOI rose, but 2026 will be decided by lease-up, refinancing, and turning value into cash

Company Overview

Levinstein Properties is not just another income-producing real estate company. It is a focused Israeli platform, heavily exposed to office assets, with a handful of high-quality central assets alongside a development pipeline and land with substantial planning value. Since January 2025 it is no longer a publicly traded equity company, but a privately held subsidiary fully owned by Levinstein Engineering, while the only public security left is the debt. That changes the right lens. The story is not an equity multiple. It is how quickly recorded value and signed leases turn into NOI, cash, and funding flexibility.

What is working today is clear enough. Rental and maintenance income rose to NIS 86.3 million, NOI reached NIS 86.0 million, FFO under the Securities Authority method rose to NIS 41.9 million, and net profit came in at NIS 62.8 million. Same-property NOI rose to NIS 85.9 million, and the company explicitly says the main driver was leasing vacant space in Levinstein Tower. In other words, the core portfolio still produces stable income, and the company ended 2025 with NIS 1.374 billion of equity, a 56% equity-to-assets ratio, and 30% LTV.

But that is exactly where a superficial reading gets too comfortable. Two assets completed at the end of 2025, Kfar Saba and Be'er Sheva, were already transferred into investment property at a combined value of NIS 283.7 million, while their operating contribution is still negligible. Kfar Saba generated only NIS 230 thousand of revenue and NIS 65 thousand of NOI in 2025, while Be'er Sheva generated no operating income at all. At the same time, the old central bus station land in Tel Aviv is already carried at NIS 749.2 million, but it still depends on planning, repartition, permits, and delay assumptions.

That is why 2026 looks less like a harvest year and more like a bridge year. Value has already been created on paper, and part of the legacy portfolio has genuinely improved, but the active bottleneck is the move from accounting value and signed leases into accessible value. That has to happen while year-end cash stands at only NIS 3.2 million, the current ratio has fallen to 2%, and undiscounted financial obligations of NIS 643.3 million sit inside the next 12 months. This is not an immediate covenant crisis, because there is still headroom and available credit. It is, however, a year of refinancing, lease-up, and capital discipline.

The Economic Map Right Now

These two charts capture the gap. There is a real recurring base here, and it did improve. But the 2025 jump in property value came almost entirely from offices and parking, meaning exactly the assets that now need to prove occupancy, rent levels, and monetization.

Events and Triggers

The first trigger: early 2025 changed how the company should be read. From January 21, 2025 Levinstein Properties became a private company, but its bond series and commercial paper remained public. Put simply, asset value still matters, but it is now judged first through debt service, refinancing ability, and whether cash can move upward without eroding flexibility.

The second trigger: two late-2025 projects moved from construction into full balance-sheet value. That sounds positive, and over time it may well be. In the near term the meaning is more complicated: the portfolio got bigger, but the NOI has not yet arrived. In Kfar Saba the retail component is already signed and operating, but the office component is still mostly empty. In Be'er Sheva, a government lease has been signed, but the building had still not been occupied by the reporting date. This is exactly the tension between value created and value already accessible.

That chart is the core point. The value is already in the balance sheet, but the actual NOI still is not.

The third trigger: Pardesia is now close to becoming the next asset to cross from construction into yield. The company owns half of a site in Pardesia and is developing a logistics building of about 14,800 sqm, with the company's share at about 7,400 sqm. By the end of 2025 engineering progress had reached 88%. Roughly 95% of the space is intended for the project partner for a 15-year period plus an option for about 10 additional years, and completion is expected in the second quarter of 2026. This is the cleanest positive operating trigger inside the 2026 setup because it rests on a near-finished project rather than a long-dated thesis.

The fourth trigger: the old central bus station land moved one step further in planning, but not to the finish line. In Complex 1 the detailed plan is already in force, plot 101 already has an approved design plan and submitted permit applications, and plot 100 also has an approved design plan with permit preparation underway. In Complexes 2 and 3 the picture is less clean. Updated repartition tables were published in August 2025, the company and its partner filed objections in September 2025, and by the reporting date no hearing had yet been held. In other words, even in 2025 the value increase came mainly from a shorter delay period in one plot in Complex 1, while the reductions for musha ownership actually increased in Complexes 2 and 3.

The fifth trigger: capital allocation did not become more conservative despite the bridge year. In February 2025 the company distributed NIS 14.4 million, in August 2025 it distributed another NIS 10.8 million, and after the balance-sheet date it approved an additional NIS 14.4 million distribution to be paid in April 2026. That is not automatically wrong. It does mean management is signaling confidence while entering a year that still requires lease-up, refinancing, and patience.

Efficiency, Profitability, and Competition

The main insight in 2025 is that the operating improvement is real, but it came from the legacy portfolio much more than from the new assets. A reader who looks through net profit or through balance-sheet value may miss that the actual NOI increase was driven mainly by absorption of vacant space in Levinstein Tower.

What really drove NOI

NOI rose to NIS 86.0 million from NIS 83.0 million in 2024 and NIS 81.2 million in 2023. Same-property NOI also rose to NIS 85.9 million. The company states explicitly that the main reason was leasing space that had previously been vacant in Levinstein Tower. That matters because it means the improvement came from an existing core asset, not from optimistic assumptions around late-stage projects.

Levinstein Tower itself explains the story well. In 2025 its value rose to NIS 441.4 million, revenue reached NIS 31.4 million, and NOI reached NIS 27.5 million. Average office occupancy during the year was 90%, but year-end office occupancy had already reached 100%. That is why the company managed to lift NOI without relying on Kfar Saba and Be'er Sheva. Across the two Tel Aviv towers together, Levinstein Tower and Discount Tower, average rent rose to NIS 164 per sqm per month from NIS 154 in 2024.

What net profit hides

Net profit of NIS 62.8 million looks strong. It was also roughly 19% above 2024. But it does not represent a comparable step-up in profit quality. Out of that number, NIS 33.2 million came from revaluation of investment property and investment property under construction, and another NIS 9.1 million came from the company's share of profit from an associate. The fourth quarter makes the point even more sharply: rent and maintenance income reached NIS 22.0 million, almost the same as in the prior quarters, yet net profit jumped to NIS 29.4 million mainly because of a NIS 33.2 million revaluation gain.

The implication is two-sided. The recurring operating line is genuinely stable. But anyone who looks only at the bottom line gets a year that appears much cleaner than the cash flow and actual occupancy really support.

Competition, demand, and hi-tech exposure

The company is not operating in an empty market. Forty-two percent of rental income still comes from tenants in the hi-tech sector, down modestly from 43% in 2024 and 45% in 2023, but still a very high share. At the same time, the company itself warns about hundreds of thousands of sqm of new office supply expected in greater Tel Aviv. That is not an immediate threat to the 2025 numbers, because occupancy stayed high and rents in the company's own assets did not fall. It is a direct risk to the next rounds of renewals, especially when two tenants in Levinstein Tower alone account for 59% of that asset's income, one in banking and one in hi-tech.

It is important to test the other side as well. As of end-2025, the company still owns strong Tel Aviv assets that continue to absorb space, and average achieved rents even moved higher. So this is not a collapsing competition story. But the improvement in Levinstein Tower does not remove the fact that a large part of the current earnings base sits exactly where supply is expected to increase.

The associate in Yokneam is also a reminder that the market is not moving in one straight line. The company's share of the revaluation loss there was NIS 6.5 million, and the company explains that the reason was lower actual rent following the decline in the dollar exchange rate. Not every office asset is moving in the same direction.

Cash Flow, Debt, and Capital Structure

To understand 2025 properly, the right move is to shift from NOI and FFO into an all-in cash-flexibility frame, meaning how much cash is left after actual uses of cash. That picture is less comfortable.

Cash flow after all the real uses

Cash generated from operating activity fell to NIS 34.0 million from NIS 42.9 million in 2024. The company explains that the decline was mainly due to rental payments that had already been collected at the end of 2024 on account of 2025. So this is not necessarily a sign that the operating engine itself weakened. Even so, once the analysis moves into the full cash picture, the year looks much tighter.

Investing cash flow came in at negative NIS 113.0 million. Out of that, NIS 9.3 million went into existing investment property and NIS 105.0 million into investment property under construction. Financing cash flow contributed positive NIS 70.1 million, but that depended on a NIS 149.3 million increase in short-term bank credit and on NIS 20 million of new commercial paper, while the company also repaid NIS 74.7 million of bonds and distributed NIS 25.2 million of dividends. The final result was an NIS 8.9 million decline in cash and cash equivalents, from NIS 12.1 million to NIS 3.2 million.

Put simply, FFO says the company still has a reasonable operating engine. The all-in cash picture says 2025 still depended on short-term funding, open debt markets, and pushing part of the real test into 2026.

Debt looks manageable, the timing looks much less comfortable

The good news is that there is no covenant crisis here. The company remained in compliance with all bond and loan tests. Adjusted equity is far above minimum thresholds, debt-to-CAP remains well below the 70% ceiling, LTV on the central bus station financing stands at 13% versus a 60% limit, and within the secured line on the main encumbered assets, NOI on pledged properties was NIS 50 million against a NIS 37 million minimum while asset value stood at NIS 737 million against a NIS 600 million minimum.

There is also collateral headroom. The company reports a NIS 370 million credit line against pledged assets worth about NIS 737 million, of which NIS 298 million was unused at year-end 2025. It also has an additional unused NIS 100 million bank line secured by the central bus station land, and income-producing real estate worth about NIS 555 million that is not encumbered.

The issue is not covenant compliance. It is the rollover year. As of December 31, 2025 the company had NIS 553.5 million of current credit from banks and others, total current liabilities of NIS 621.3 million, and a current ratio of only 2%. In undiscounted terms, financial obligations within the next 12 months total NIS 643.3 million.

Management itself flags two obvious points: a NIS 100 million loan on the central bus station land due in December 2026, and the Kfar Saba loan due in September 2026. Management's position is that these loans will be renewed. That is a reasonable expectation, but until it actually happens, it remains a central part of the thesis.

Capital allocation stayed aggressive

This is where the yellow flag sits. The company increased annual management fees paid to the parent after a May 2024 amendment lifted the fixed annual fee to NIS 11.5 million, and actual management fees in 2025 reached NIS 11.8 million versus NIS 10.4 million in 2024 and NIS 8.6 million in 2023. At the same time, distributions continued. The fact that the company and one subsidiary employ only five people for management and maintenance services, while the parent provides the broader management, advisory, and support layer, reinforces that the company is not operating as a fully standalone platform. That is not automatically a flaw. But for bondholders it is an obvious monitoring point: how much cash stays in their layer, and how much moves upward.

Outlook

Before getting into 2026, four findings need to be locked in because they are easy to miss on a first pass:

• First finding: the 2025 NOI improvement came mainly from Levinstein Tower and the legacy portfolio, not from Kfar Saba and Be'er Sheva.
• Second finding: Kfar Saba and Be'er Sheva have already lifted property value, but have barely lifted actual NOI so far.
• Third finding: the old central bus station adds huge balance-sheet value, but that value is still highly sensitive to delay, musha ownership complexity, and planning progress.
• Fourth finding: 2026 can look better, but only if lease-up and refinancing arrive before cash erodes again.

2026 is a bridge year, not a breakout year

The company gives the market a fairly clear direction. It estimates that NOI from income-producing real estate will reach about NIS 95 million in 2026, including the company's share of an associate, assuming occupancy in the current yielding assets remains similar and rents do not change materially. Under completion of Pardesia and full occupancy in Be'er Sheva and Kfar Saba, the company is already pointing to about NIS 116 million.

This is a forecast worth using, but it needs to be read correctly. NIS 95 million is a base case of stability in the existing book plus partial contribution from the newer assets. NIS 116 million is not a base case. It is a scenario in which several things go right at once: Pardesia has to be completed, Kfar Saba has to lease up meaningfully on the office side rather than just in retail, and Be'er Sheva has to move from a signed contract into an actually occupied and functioning building.

That chart matters because it shows how much of 2026 rests on a bridge. There is real upside embedded here, but it is not yet cash in the bank.

What has to happen for the read to improve

The first checkpoint is Kfar Saba. By the reporting date retail was already at 100% occupancy, but offices were only 14% occupied and total occupancy, including retail, stood at 23%. Without a meaningful rise in office occupancy, the NIS 123.5 million valuation will continue to look ahead of the actual NOI.

The second checkpoint is Be'er Sheva. Here the anchor is cleaner, because the contract with the Government Housing Administration has already been signed, for 7,100 sqm, 10 years plus 5 annual options, with annual rent and management income of about NIS 9.3 million, of which the company's share is about NIS 4.6 million. But even here, the real 2026 test is not the contract itself. It is whether fit-out and occupancy turn that signed deal into recurring income.

The third checkpoint is Pardesia. If the asset is in fact completed in the second quarter of 2026, it could become the cleanest operating trigger in the coming year because it rests on a pre-leased logistics project rather than on open-ended planning optionality.

The fourth checkpoint is financing. Any NOI improvement will be read much more positively if it arrives alongside actual renewal of the central bus station loan, renewal of the Kfar Saba loan, and orderly management of the short-term credit and commercial paper layer.

Risks

The first risk is lease-up after value has already been booked. In Kfar Saba and Be'er Sheva, value is already recorded but recurring NOI has not yet arrived. Any delay in marketing, fit-out, tenant entry, or rent level will widen the gap between accounting value and operating reality.

The second risk is the Tel Aviv office market and the company's hi-tech exposure. The company benefited in 2025 from higher average rents across its two Tel Aviv towers and from improved occupancy in Levinstein Tower. At the same time, it explicitly warns about hundreds of thousands of sqm of additional office supply in greater Tel Aviv, while 42% of rental income still comes from hi-tech tenants. If demand softens, it will hit exactly the assets that are currently carrying the story.

The third risk is a crowded refinancing year. Covenants look comfortable, but the cash balance is tiny and current debt is large. When NIS 643.3 million of undiscounted financial obligations sit inside the next 12 months, 2026 will not be judged only on NOI. It will also be judged on access to funding.

The fourth risk is the central bus station land remains highly time-sensitive. The valuation shows that a 5% move in built-sqm value changes the company's share by about NIS 47 million in either direction, while one less year of delay adds about NIS 38 million and one more year of delay subtracts about NIS 45 million. This is not an asset currently providing a cash-flow anchor. It is an asset currently providing a value anchor.

The fifth risk is capital-allocation friction with the parent. Management fees have risen, dividends continued, and the company operates within a structure where a large part of the management layer is supplied by the parent. As long as operating cash flow, lease-up, and refinancing progress together, that can be lived with. If one of those elements stalls, the question of how much cash is really staying at the debt level becomes much sharper.

The sixth risk is execution in Pardesia under an imperfect construction backdrop. The company itself flags labor shortages and higher construction costs following the war, even if it says these have not had a material impact on operations to date. In a logistics project already at 88% completion, a further delay would be enough to push part of the 2026 improvement outward.

Conclusions

Levinstein Properties exited 2025 with a better operating picture than the one it entered the year with. NOI rose, FFO improved, Levinstein Tower filled up, two new projects were completed, and Pardesia is already close to the finish line. But this is still not a report from a company that has fully crossed into a harvest phase. It is a report from a company that has created a lot of value and still needs to prove that the value is becoming accessible.

Current thesis in one line: 2025 proved that Levinstein Properties has a strong recurring asset base, but 2026 will be decided much more by lease-up, refinancing, and turning value into cash than by another round of revaluation gains.

What changed versus the older read: the company now has more completed assets and less construction still on paper, but it also has a wider gap between value that has already been recognized and NOI that has not yet arrived.

Counter-thesis: it is possible that this reading is too cautious because the company still has a high equity base, low LTV, unused credit lines, better recurring NOI in the legacy book, a meaningful government lease in Be'er Sheva, and a near-complete logistics asset in Pardesia. On that view, 2026 could start looking much cleaner by the second half.

What could change the market read in the short to medium term: real lease-up in Kfar Saba and Be'er Sheva, timely completion of Pardesia, and actual renewal of the central bus station and Kfar Saba loans.

Why this matters: because in Levinstein Properties' case, the interesting gap is not between market price and NAV. It is between value that has already been created and value that can actually be used to service debt, distribute cash, or expand financial flexibility.

What must happen over the next 2 to 4 quarters: Kfar Saba needs to lease its offices, Be'er Sheva needs to turn a signed contract into revenue, Pardesia needs to open on time, and the company needs to get through 2026 without financing becoming the dominant story. Delays in any of those areas would weaken the thesis.