Mivne 2025: The Portfolio Improved, but 2026 Must Prove It Can Fund Lease-Up, Development, and Distribution

Getting To Know The Company

At first glance, Mivne looks like a large, diversified, fairly predictable income-producing real-estate company. That is only partly true. On one side, this is a broad Israeli portfolio of 551 income-producing assets, 1.61 million square meters, and roughly 3,090 tenants, with a strong base in industry, logistics, and retail. On the other, 36% of the value of the Israeli income-producing portfolio still sits in offices, where occupancy is only 83%. That is why the core story of 2025 is not simply portfolio size. It is the gap between the part of the business that already throws off stable cash and the part that is supposed to justify the next step-up in value.

What is working now is clear enough. Industry and logistics, which account for 40% of portfolio value in Israel, closed the year at 96.8% occupancy and generated NOI of NIS 357.6 million. Retail, 19% of value, ended the year at 92.1% occupancy and NOI of NIS 149.3 million. Tenant diversification is also broad, and during 2025 the group did not have a single tenant that represented 10% or more of consolidated revenue. That is a high-quality base for a company that is trying to carry lease-up, development, and an active debt-market profile at the same time.

What can mislead a superficial reader is that the annual numbers look cleaner than the underlying economics really are. Net profit rose to NIS 693 million, investment-property fair-value gains jumped to NIS 483 million, and the company adopted a 2026 distribution policy of up to 50% of annual AFFO. Yet that same company ends the year with offices still the least clean leg of the portfolio, with Solalim still needing to move from occupancy permits to actual NOI, and with the all-in cash picture still relying on consistent access to refinancing.

That is why 2026 looks less like a clean breakout year and more like a bridge year with a lease-up and capital-allocation test. If Mivne can prove that the new deliveries, especially at Solalim, convert into recurring income without pushing net debt to CAP above the internal ceiling the company set for itself, the market reading can improve. If not, it will remain a company with good assets but an open gap between accounting value and accessible cash value.

One more early screen matters here. At a closing price of NIS 13.01 per share on April 3, 2026, versus EPRA NAV of NIS 15.6 per share at year-end 2025, the market is neither pricing distress nor giving full credit. There is a discount, but not a distressed one. Short-interest data tells a similar story: short float stood at just 0.18% at the end of March 2026, below the sector average of 0.55%. In other words, the market is not building an aggressive bearish case. It is mostly waiting for proof.

Events And Triggers

The events of 2025 and early 2026 matter more than usual here because they move Mivne from construction risk into lease-up and financing risk. That is a material change in the nature of the story.

Solalim Moved From Construction To Delivery

The first trigger: Solalim. On March 26, 2025, the company, together with its partner in the residential portion, signed an agreement to sell 47 apartments in the project to Megurit for total consideration of about NIS 190.4 million including VAT, with Mivne’s share at about NIS 143 million. That matters because it turned part of the project from inventory that still needed to be sold into cash with a contractual anchor.

The second trigger: construction risk fell sharply. On March 2, 2026, the residential buildings in the project received their completion certificate, and on March 16, 2026, the office buildings received theirs. That does not mean the project is done creating execution pressure. It does mean the pressure shifts from “will it be completed” to “how quickly will it turn into revenue and cash.”

The third trigger: the anchor office lease expanded. During 2025, tenants Fattal Workspace and Switch Up expanded their agreement so that the total leased premises reached roughly 35.8 thousand square meters and 266 parking spaces, with average annual rent and management fees of about NIS 66 million plus VAT during the initial lease term. That is a meaningful anchor, but not one that closes the whole story. The project is larger than that, and full contribution still depends on actual occupancy and revenue recognition.

Growth Engines Took Shape, But So Did Capital Demands

The fourth trigger: the company continued to widen its project pipeline. In the science and high-tech park in Haifa, completion certificates were received in the first quarter of 2026, and the investor presentation states that an agreement was signed with Rafael for about 6,000 square meters. In the director’s report, the project is presented as a 14,000 square meter asset, with Mivne holding 50%, estimated remaining construction cost of NIS 17 million, and expected NOI of NIS 12 million at full occupancy. That supports 2026, but the full impact still does not land in cash the day the certificate arrives.

The fifth trigger: in data centers, Mivne now has a real strategic option. The transaction with DLR and Med1 was completed in November 2025, the land in Petah Tikva was sold to the new partnership for NIS 90 million, and Mivne’s share of the expected cost to complete the first phase is estimated at NIS 148 million. That could eventually change the growth profile of the company, but in the near term it is more capital consuming than NOI generating.

Capital Markets Stayed Open, And The Board Turned That Into An Equity Story

The sixth trigger: debt issuance. During 2025 the company raised NIS 390.3 million par value in Series 26 bonds in April and another NIS 905.2 million par value through an expansion of the same series in October, alongside NIS 300 million in commercial paper maturing in April 2026. This is not a technical footnote. It is evidence that the market is still willing to fund Mivne’s investment plan.

The seventh trigger: the company turned that market access into distribution policy. After a NIS 70 million dividend in March 2025 and a NIS 194.1 million buyback, the board approved an additional NIS 100 million dividend in March 2026 and a new 2026 distribution policy of up to 50% of annual AFFO, whether through dividends or buybacks, as long as net debt to CAP does not rise above about 50%.

That is exactly where the tension sits. A move like that signals confidence, but it also raises the bar for discipline. Once the company is building, leasing up, repaying debt, and distributing capital at the same time, even a modest delay in occupancy or timing becomes more relevant.

Efficiency, Profitability, And Competition

The easy read on 2025 is that Mivne delivered a good year. The more accurate read is that operations improved, but the improvement was carried by specific parts of the portfolio while other parts still need work.

NOI Improved, But Not In A Broad And Clean Way

Total NOI rose in 2025 to NIS 858 million from NIS 853 million in 2024, and NOI in Israel increased to NIS 817 million from NIS 796 million. Same Property NOI in Israel rose to NIS 811 million from NIS 790 million. Those are good numbers, but the NOI bridge matters: NIS 31.7 million came from CPI linkage, NIS 23.1 million from new leases and higher rent on renewals, and only NIS 1.2 million from net acquired or sold assets. Against that, NIS 33.9 million was lost to vacancies and higher expenses.

So this is not a broad-based acceleration from every corner of the portfolio. It is improvement, but one that still depends heavily on inflation-linked rents, lease renewals, and operating discipline, while real leakage remains on occupancy and expense pressure.

The AFFO Headline Is Misleading

The easy headline is that AFFO fell 3.7% to NIS 613.1 million. That is only half true. In the FFO calculation table, the company explicitly states that 2024 included NIS 69.7 million of tax and financing effects from prior years. That item disappears in 2025. So anyone reading the AFFO decline as a clean operational deterioration is missing the core point: at the NOI level, the Same Property NOI level, and the leasing level, 2025 actually looks better.

Net profit also needs to be read carefully. It rose to NIS 692.8 million from NIS 555.4 million, but a major part of that came from NIS 483.3 million of fair-value gains on investment property. The company itself explains that most of the increase in property value during the period came from CPI and higher real rents. In other words, this is mostly accounting value created by the environment and by rent levels, not a cash jump that has already settled in the bank.

The Quality Gap Sits In Offices

If there is one point the market can easily miss, it is the mix. Offices are 36% of portfolio value in Israel, but only 83% occupied. That is not a side number. It is the number that separates a stable income-producing real-estate story from one where a material part of the value still needs time and money to turn fully productive.

The contrast is sharp. Industry and logistics, 40% of value, operate at 96.8% occupancy. Retail, 19% of value, is at 92.1%. Rental housing is smaller, but also at 96.8%. In other words, the stable parts of the portfolio are already doing the heavy lifting. The weakness is concentrated in offices, precisely where the company is building the next generation of assets.

Midroog’s rating report sharpens that point. It describes a local office market that has become more segmented, with more resilient demand in the Tel Aviv core and in high-quality, well-connected properties, versus greater difficulty in surrounding areas and in weaker assets. That matters for Mivne not because its office assets are necessarily weak, but because the company’s meaningful office exposure keeps it more sensitive to a market where occupancy is not automatic.

Q4 Was More Grounded Than The Full-Year Headline

Another point that does not jump off the first page: in the fourth quarter of 2025, fair-value change turned negative, at minus NIS 10 million, versus plus NIS 74 million in the comparable quarter. At the same time, fourth-quarter net profit was basically flat, NIS 141 million versus NIS 139 million. That is an important clue. The engine that lifted the bottom line in 2025 was already less generous by year-end. If so, 2026 will need to come less from revaluation and more from occupancy, rent, and the conversion of completed projects into NOI.

Cash Flow, Debt, And Capital Structure

To understand Mivne properly, you need to hold two cash pictures at the same time. The first is the recurring cash-generation power of the existing business. The second is the all-in cash picture after every real use of cash during the year. Both are valid. The mistake is to mix them together.

Normalized Cash Generation

If you look at the existing business, Mivne still produces strong numbers. AFFO under management’s approach came in at NIS 613.1 million. Maintenance capex, as explicitly disclosed by the company, was about NIS 117 million. So in a normalized framework, before growth capex, buybacks, dividends, and debt principal repayments, the company still has meaningful recurring cash-generation room.

That is exactly why the 2026 distribution move sounds reasonable at the headline level. If you look only at the income-producing core, Mivne is not a company fighting for its last shekel. On the contrary, it enters 2026 with a broad enough operating base to contemplate both distributions and continued investment.

The All-In Cash Flexibility Picture Is Less Clean

This is where the picture changes. Cash flow from operations was NIS 840 million, which is strong. But in the same year the company invested NIS 708 million in investment property, development property, and fixed assets, paid NIS 70 million in dividends, bought back NIS 194 million of stock, repaid NIS 676 million of bonds, and repaid NIS 330 million of loans and other long-term liabilities. Put simply, cash generated by the assets alone was not enough to fund all the year’s uses.

What closed the gap? The capital markets. The company raised NIS 1.347 billion through bonds, NIS 300 million through commercial paper, and another NIS 192 million of short-term debt, ending with net financing inflow of NIS 367 million. Cash rose to NIS 1.279 billion from NIS 799 million at the start of the year, but it rose through meaningful debt issuance, not just through internally generated cash.

That is not an indictment of the company. It is the difference between an income-producing real-estate company that generates cash and an income-producing real-estate company that is also building, upgrading, returning capital, and repaying debt. Mivne is doing all of those things at once. That is why its financing flexibility is real, but it is not free.

Leverage Is Not Stretched, But It Is Not Trivial Either

At the balance-sheet level, Mivne still has room. Net debt to CAP stood at 46.8% at year-end 2025, below the roughly 50% ceiling embedded in the distribution policy. At the publication date, the company reported about NIS 2.2 billion of cash and unused credit lines. The investor presentation also shows NIS 11.3 billion of unencumbered assets. Those are not distress numbers.

Covenant room is wide as well. Financial debt to net balance sheet stood at 41.6%, versus limits of 70% to 73% in parts of the debt stack. Net financial debt to gross profit stood at 8.3, versus caps of 13 to 15. Equity to net balance sheet stood at 45.3%, versus minimum levels of 17% to 22%. That is comfortable headroom.

But the other side also needs to be said. Comfortable covenants do not make the maturity ladder irrelevant. Principal repayments already reach NIS 1.825 billion in 2026, followed by NIS 1.285 billion in 2027 and NIS 1.413 billion in 2028. The company has good market access, and its rating remains stable, but anyone embracing the new distribution narrative is also assuming that debt markets stay open and friendly in the years ahead.

Outlook

This is the section that really defines the Mivne read. Not the 2025 numbers by themselves, but what has to happen from here for the improvement to become an operating fact rather than an accounting fact.

Finding one: the AFFO headline is weaker than the underlying economics. The drop to NIS 613 million looks soft, but it sits against a 2024 base that included NIS 69.7 million of prior-year tax and financing effects. At the NOI level, Same Property NOI level, and leasing level, 2025 was actually better.

Finding two: 2025 was not a year of heroic revaluation. The company itself says most of the increase in property value came from CPI and real rent increases. The fourth quarter even turned negative on fair value. So if the market gives more credit in 2026, that credit will need to come from execution, not from wider valuation assumptions.

Finding three: Solalim is no longer sitting at the construction-risk stage. The residential buildings, parking garage, and office towers all received completion certificates. What remains open now is the absorption test: how quickly leasing closes, how quickly revenue is recognized, and how far the project really lifts the company’s office mix.

Finding four: the new distribution policy makes 2026 a year of discipline. Once the company says it wants to distribute up to 50% of AFFO while continuing to develop, it is effectively telling the market to judge it not only by asset value, but by the ability to execute without eating through its balance-sheet buffer.

2026 Is A Delivery And Lease-Up Year

The company guides to NOI of NIS 930 million to NIS 950 million in 2026, versus NIS 858 million in 2025. That is 8% to 11% growth. AFFO guidance is NIS 650 million to NIS 670 million, versus NIS 613 million in 2025, or 6% to 9% growth. These are reasonable targets, not overly aggressive ones, but they are not numbers that arrive automatically either.

It matters what sits behind them. Guidance is based on CPI known as of December 31, 2025, no property sales, no new acquisitions, no material change in the operating environment, and renewal of most leases expiring during 2026. In other words, this is guidance that mostly requires internal execution: lease-up, occupancy retention, on-time delivery, and capital discipline.

Why This Is Not A Clean Breakout Year

If you look at Solalim alone, the potential is substantial. In the director’s report, the income-producing component of the project is shown at fair value of NIS 1.571 billion, 96% complete, with 62% of the property already covered by binding lease agreements, and expected NOI of NIS 109 million to NIS 115 million at full occupancy. Those are numbers for an asset that can reshape the company’s office story.

But that is exactly where caution matters. Full-year 2026 guidance adds only NIS 72 million to NIS 92 million of NOI versus 2025. If one project alone can eventually produce more than NIS 100 million of annual NOI, it is obvious that not all of that will flow through immediately this year. So 2026 is an entry year, not an end state.

The same logic applies to the Haifa science park and to the broader growth pipeline. Those projects are real. They are just not fully in the cash register yet.

What Has To Happen Next

The first requirement is occupancy. Not only at Solalim, but across the wider office portfolio. The company does not need to turn offices into the strongest leg of the portfolio overnight. It does need to show that the gap between 83% office occupancy and 96% in industry and logistics starts to narrow.

The second requirement is cash translation. If 2026 ends with NOI and AFFO within guidance, while the company keeps net debt to CAP below the roughly 50% internal ceiling, that would be the signal that the model really works.

The third requirement is keeping near-term growth engines distinct from longer-dated option value. The data center project in Petah Tikva, Sde Dov, Yigal Alon, and Kiryat Shehakim may all turn out to be strong projects. But anyone loading the entire future-value story into 2026 in one go is probably getting ahead of the evidence.

Risks

The risk in Mivne is not one single tail event. It is the overlap between several operating tests.

Offices Remain The Main Risk

As long as 36% of the Israeli income-producing portfolio value sits in offices at 83% occupancy, the company remains exposed to a slower office-market recovery than the headline story would like. That matters even more when the improvement case depends on new office assets, where any delay in lease-up or generous tenant-improvement packages can defer the move into NOI.

The Distribution Policy Raises The Discipline Test

A policy of distributing up to 50% of AFFO sounds shareholder friendly, but it also raises the market’s sensitivity to any stumble. If occupancy is delayed, if growth capex stays elevated, or if the debt market becomes less attractive, that flexibility will be less comfortable than the headline makes it sound.

The Balance Sheet Is Partially Hedged To Inflation, Not Immune To Noise

The company has roughly NIS 9.7 billion of financial liabilities, of which about NIS 8.5 billion are CPI linked. Management argues that most Israeli rental contracts are CPI linked as well, so the asset base provides a long-term hedge. That is a reasonable claim, but it does not eliminate the accounting and cash-flow noise created by CPI changes, nor the fact that the way AFFO is presented remains quite sensitive to the inflation path.

Large Projects Also Bring External Bottlenecks

In the development pipeline, more than one thing can slow the thesis. The company itself says construction costs were pressured in 2025 by a 5.3% increase in the construction-input index, higher raw-material costs, and the consequences of the Turkish export boycott on construction materials. At Sde Dov, the company was already instructed in February 2026, along with other lot owners in the area, to conduct soil sampling following information regarding PFAS compounds. These are not necessarily thesis-breaking events, but they are reminders that Mivne’s pipeline does not operate in a vacuum.

There Is Also Governance Noise

In March 2026 the company received a pre-derivative demand letter regarding its former CEO, David Zvida, and a private company he owns, related to an alleged business opportunity taken privately. This is not central to the thesis, but it could still turn into governance and headline noise if it develops further.

Conclusions

Mivne exits 2025 stronger at the portfolio level, but not cleaner at the story level. The stable parts of the business are working well, construction risk at Solalim has fallen, and the capital market still gives the company oxygen. The main bottleneck remains the ability to convert all of that into recurring income without re-stretching the balance sheet. That is exactly what the market will measure over the next 2 to 4 quarters.

Current thesis: Mivne enters 2026 with a better portfolio and less construction risk, but it still needs to prove that the upgrade can turn into NOI, AFFO, and capital flexibility without pushing leverage back up.

What changed: the center of risk moved from “will the projects be completed” to “how fast will they lease up, and how much room will remain after that for distributions, new development, and refinancing.”

Counter-thesis: it is possible the market is still too harsh. This is, after all, a very diversified portfolio, with wide covenant headroom, a stable rating, NIS 11.3 billion of unencumbered assets, and new projects that have already moved through a meaningful part of the execution-risk curve.

What could change the market reading in the short to medium term: lease-up pace at Solalim, delivery against 2026 guidance, actual distributions under the new policy, and any evidence that offices are starting to move from a quality gap into an NOI engine.

Why this matters: Mivne is sitting right on the line between real-estate value on paper and recurring cash value that reaches shareholders. If 2026 provides that proof, the market reading can change. If not, even a large and diversified portfolio is likely to keep trading with a question mark.

Over the next 2 to 4 quarters, the checklist is simple but not easy: faster office lease-up, conversion of completed projects into productive assets, and keeping leverage below the internal threshold the company has set. What would weaken the thesis is slower occupancy, overly aggressive use of the balance sheet to support distributions, or the first sign that office-market weakness is eroding guidance before the new projects have time to pay back the capital invested in them.