Melisron in 2025: The Malls Stay Strong, but the Cash Is Working Harder

Getting To Know The Company

At first glance, Melisron can still look like a large mall landlord. That read is now too narrow. The malls and retail assets are still the base engine of the group, but by 2025 the real picture is broader: regional and neighborhood retail assets that continue to anchor NOI, an office arm that already generates NIS 421 million of NOI attributable to the company, and a residential platform through Aviv Melisron that has moved from side activity to a real development machine that consumes capital, inventory, and management attention.

What is working now? Quite a lot. Rental and management income rose to NIS 2.154 billion, NOI attributable to shareholders rose to NIS 1.614 billion, and AFFO rose to NIS 1.234 billion. The malls held NIS 10.4 billion of tenant sales, mall occupancy stayed at 99%, and the office portfolio showed a sharp improvement in both NOI and occupancy. The capital structure also looks better: LTV fell to 40.4%, debt to CAP fell to 50.3%, and the company had about NIS 1.6 billion of cash and readily marketable short-term financial assets, alongside roughly NIS 0.5 billion of unused committed credit lines.

But the story is no longer as clean as that of a classic income-producing real-estate company. The active bottleneck is not asset quality in the retail portfolio, and it is not access to debt markets. The bottleneck is how much cash is really left after the group funds office growth, residential land and construction, dividends, and debt maturities at the same time. Put differently, Melisron still produces a great deal of cash, but it is already harder to read that cash generation without separating the legacy income-producing portfolio from the newer development layer.

That is also what a superficial read can miss. Net profit jumped to NIS 1.912 billion, but that does not mean the group generated a similar amount for shareholders in cash. Roughly NIS 1.4 billion of the picture came from investment-property fair-value gains. That is not a fake number, but it is an accounting number. The more conservative reading runs through NOI, AFFO, and cash flow after actual capital uses. Based on the April 3, 2026 closing price, market value stood at about NIS 19.1 billion. This is no longer a smaller stock with a practical liquidity constraint. The market is not asking whether the company is high quality. It is asking which engine will really define 2026 and 2027.

Four things that do not jump off the page on a first read:

• Net profit looks stronger than the recurring economics. Behind NIS 1.912 billion of net profit stand NIS 1.614 billion of NOI attributable to shareholders and NIS 1.234 billion of AFFO. The gap comes mainly from revaluations.
• Offices are no longer marginal. Their share of NOI rose to 27%, and office NOI attributable to the company jumped to NIS 421 million. This is already a real engine, not a sidecar to the malls.
• Operating cash flow looks very different before and after residential land inventory. Before purchases and investments in land inventory, operating cash flow was NIS 1.172 billion. After NIS 878 million of land-inventory investment, only NIS 294 million remained.
• Residential adds optionality, but for now it also absorbs capital. Residential activity ended 2025 with NIS 172 million of revenue, an operating loss of NIS 24 million, and NIS 3.517 billion of assets. In company materials, Aviv Melisron is presented with 79% net debt to CAP.

The short economic map of the group looks like this:

Events And Triggers

Kanyon Hazahav Is A Step Change, Not Just Another Asset Purchase

The most material 2025 capital-allocation event is the September 2025 agreement to acquire between 51% and 70% of the rights in Kanyon Hazahav in Rishon LeZion. The first stage is priced at about NIS 818 million for 51% of the rights, plus VAT and purchase tax, with an additional consideration mechanism for roughly 7,000 square meters that are being converted to retail use, and with a five-year option to acquire another 9%. This is not just another tactical purchase. It could increase the company’s control over one of the more meaningful retail assets in Israel while adding another heavy capital use exactly when residential and development already take up more space on the balance sheet.

The upside is clear: if the deal closes, Melisron strengthens the retail arm, increases operating control, and gains fuller exposure to the management of the mall. The less comfortable side matters just as much: as of the report date, Competition Authority approval had still not been received, the final percentage to be acquired was not closed, and the final financing structure was also not closed. So this is a material trigger, but not yet something that can be modeled as though it is already done.

Offices Have Moved From Stabilization To A Real Trigger Stack

If there is one area that can change the market’s reading of Melisron over the next two years, it is offices. In 2025 office NOI rose to NIS 421 million from NIS 364 million in 2024, and the office share of total NOI rose to 27%. That is no longer a side number. A key part of that increase came from a NIS 43 million contribution from the continued lease-up of Landmark A in Tel Aviv.

From here, the story shifts from stabilization to delivery, leasing, and occupancy. The company presents 124,330 square meters of office projects in planning and construction, with expected NOI of NIS 174 million and NIS 910 million of assets under construction, attributable to the company. In the projects already closer to delivery, it presents NIS 122 million of expected NOI from its share in five projects, including Landmark B, Ofer Yavne, Ofer Nof HaGalil, and Ofer Rehovot.

What is interesting is that the market is already getting some proof of demand. In February 2026 the company signed an agreement with NVIDIA to lease the entire new building planned at Ofer Yokneam, about 29 thousand square meters. At the same time, according to management, roughly half the area in Landmark B has already been leased under a binding contract, and the rest is in advanced signing stages. This is still not NOI in the bank, but it is already well beyond a generic pipeline story.

Tenant Support Is A Near-Term Test, Not A Thesis Change

In the shorter headline layer, the market will also look at the effect of Operation Roaring Lion and the support given to tenants. The company said the malls were closed, apart from essential businesses, until March 5, 2026, and company materials say March rent charges were deferred for tenants. That is not the kind of point that breaks the thesis, but it does affect cash timing and the reading of the first quarter.

The reason this does not immediately turn into a red flag is that 2025 already showed meaningful operating resilience. Despite 12 days of closures at the company’s malls, annual tenant sales held the 2024 peak level at about NIS 10.4 billion, and were roughly 11% above 2023. So the near-term question is less whether retail activity broke and more how quickly the return to normal translates back into rent, sales, and normal collection timing.

Not Every Report Around The Cycle Changes The Thesis

It is worth separating signal from noise. The internal mergers reported in January 2026 between wholly owned subsidiaries were meant to simplify the holding structure and consolidate real-estate activity under one company. That is a sensible managerial move, but it does not change the economics of the group. The March 2026 appointment of director Rona Angel is also a legitimate governance event, but not a thesis driver. The material story still runs through Kanyon Hazahav, the office pipeline, and the capital structure.

Efficiency, Profitability, And Competition

Melisron’s 2025 operating story is strong, but it is not a story of euphoric consumer demand. Rental and management income rose 5.7% to NIS 2.154 billion. Same-property NOI rose to NIS 1.565 billion from NIS 1.482 billion, and NOI attributable to shareholders rose 6.9% to NIS 1.614 billion. That means the improvement came from continued lease-up, from additional assets and projects, and from real economic repricing in lease contracts.

The important point is where it came from. Average monthly rent per square meter rose from NIS 168 to NIS 173 in retail assets and from NIS 78 to NIS 82 in offices. At the same time, mall occupancy stayed at 99% and office occupancy rose from 93% to 97%. In addition, company materials show an average real increase of 8% across new leases, options, and renewals in 2025. In retail, the real increase was 5% on renewals and options and 24% on new leases for spaces vacant more than a year. In offices, it was 3% and 11%, respectively. That is a good sign that the improvement did not rely only on inflation, but also on pricing power.

The Malls Remain The Core Engine, But Without Euphoria

It is easy to look at the malls and imagine a very hot demand year. That is not the precise read. On one hand, sales remained very high, regional malls alone generate 50% of NOI, and occupancy rates across regional, neighborhood, and urban malls run between 98.4% and 99.8%. On the other hand, 2025 sales did not break out above 2024. They simply held a peak level.

That matters, because it means the NOI improvement does not rely only on more consumer traffic and more baskets. It also relies on active portfolio management, on new leases at higher rents, and on continuing upgrades to existing assets. The strength of the malls in 2025 therefore looks more like a story of pricing power, location quality, and management discipline than a one-off demand spike.

Offices Have Become A Real Group-Level Mover

The increase in office NOI to NIS 421 million from NIS 364 million in 2024 is one of the key numbers in the report. It says offices are no longer just balancing the malls. They are starting to add a real growth layer. The problem is that this number also needs to be read carefully.

The 97% office occupancy figure looks almost perfect, but it excludes a 15,000 square meter building at Ofer WEST, previously leased to IBM, that is undergoing a major renovation expected to finish only at the end of 2026. It also excludes Building F at Ofer Nof HaGalil, which was only recently completed and is currently 25% occupied. So the real picture cuts in two directions: on the one hand, the company has already shown strong leasing ability. On the other, there are still spaces that need renovation, leasing, and absorption before the full potential turns into actual income.

Headline Profit Jumped, But Earnings Quality Still Runs Through Appraisals

Net profit of NIS 1.912 billion invites an overly celebratory read. In practice, 2025 included roughly NIS 1.423 billion of net fair-value gains on investment property. The company explains that the appraisals were updated based on current lease contracts, CPI effects, leasing progress in projects under construction, and a return of inflation toward the Bank of Israel target range alongside lower interest rates, which also allowed the 2022 market-risk reserve embedded in the old valuation framework to be reversed.

That does not mean the revaluations are illegitimate. It does mean one has to separate economic value created on paper from cash already received or AFFO already produced. That is exactly why the cleaner way to read Melisron in 2025 runs through NOI, AFFO, and the occupancy ramp in the projects, rather than through net profit alone.

Cash Flow, Debt, And Capital Structure

If one looks only at the balance sheet and the debt market, it is easy to conclude that Melisron is fully comfortable. In many ways that is true. But to understand 2025, one has to hold two different cash pictures at the same time and not confuse them.

The normalized cash generation view: before purchases and investments in land inventory, operating activity generated NIS 1.172 billion. That picture mainly describes the cash quality of the existing income-producing portfolio, and it is close to the NIS 1.214 billion of operating cash flow excluding residential activity that the company presents separately. In plain terms, the legacy income-producing business still generates meaningful cash.

The all-in cash flexibility view: here the story changes. After NIS 878 million of purchases and investments in land inventory, net operating cash flow fell to NIS 294 million. Net investment activity consumed another NIS 535 million, and financing provided NIS 574 million net, but that figure itself includes NIS 360 million of dividends paid, NIS 1.548 billion of bond issuance, and NIS 1.878 billion of bond repayments. The end result is a NIS 333 million increase in cash and cash equivalents to NIS 1.195 billion. In other words, the company is not under pressure, but it is also not living only on internally generated cash. It is already financing the next growth phase with a mix of core cash flow and debt-market access.

The Balance Sheet Is Stronger, But Strength Has To Be Read At The Right Layer

On leverage, 2025 actually looks good. LTV, with Aviv Melisron treated as an investment account, fell to 40.4% from 42.7% at the end of 2024. Expanded consolidated debt to CAP fell to 50.3% from 51.8%. Weighted effective debt cost rose slightly to 2.48%, but remained low in relative terms. Debt duration stands at 3.4 years. S&P Maalot raised the issuer rating to ilAA in February 2025 and affirmed it in February 2026.

On liquidity, this is not a picture of stress either. As of December 31, 2025 the group had NIS 1.195 billion of cash and cash equivalents and another NIS 394 million of short-term financial assets. The company also cites about NIS 0.5 billion of unused committed bank lines and roughly NIS 12.2 billion of unencumbered assets. Anyone looking for a near-covenant story or an immediate funding wall will not find it here.

But again there is another side. By the end of 2026 the company needs to repay about NIS 1.95 billion of principal, or about NIS 1.281 billion excluding commercial paper. That is not an alarming number for a company of this size, but it does explain why open market access, a high rating, and the ability to extend duration remain important. In other words, Melisron’s balance-sheet strength is real, but it is meant to serve a group that keeps developing and expanding, not one that has moved into harvest mode.

What Actually Reaches Shareholders, And What Still Sits In The Middle

That is a critical question in Melisron 2025. The malls and offices produce NOI and AFFO. But residential activity, project investment, and the potential Kanyon Hazahav acquisition require capital now in order to create value later. So part of the improvement is already real economic value, but not all of it is yet accessible to shareholders as free cash.

That is also why the key question is not only how much value was created, but how much flexibility remained after those uses. At the end of 2025, Melisron still sits in a comfortable place. But it already operates with more capital layers, more inventory, and more projects that depend on execution. It is a higher-quality group, but also a less simple one.

Forward View

Four tests will define 2026 and 2027:

• The first test is offices. Not whether demand exists, but how quickly it becomes signed, occupied, recognized NOI.
• The second test is residential. Not whether the pipeline is large, but whether the growth in inventory and projects begins to show up in profitability and cash.
• The third test is capital allocation. If Kanyon Hazahav closes, the market will immediately test whether the move improves the platform or simply makes capital use heavier.
• The fourth test is the market read of the next few quarters. After tenant support and March 2026 rent deferral, the market will want to see a fast return to normal collection and tenant-sales patterns.

The right label for the coming year is a transition year with a strong proof component. The malls no longer have much to prove. They mainly need to keep supplying stability, pricing power, and resilience in tenant sales. The real proof is required in the engines that explain the next phase of Melisron.

What Has To Happen In Offices

The company already has a meaningful office base, but the next move is expected to come from projects. Landmark B, Ofer Yavne, Ofer Nof HaGalil, Ofer Rehovot, and later Yokneam can lift NOI and AFFO at a faster pace than the malls alone can produce. In company materials, the future potential of AFFO from income-producing assets, excluding residential activity, rises from an annualized Q4 2025 base of NIS 1.284 billion to NIS 1.558 billion after future development.

But the market will not simply accept that. It will look for signed leases, deliveries, and occupancy. That is the difference between project potential and durable NOI.

What Has To Happen In Residential

In residential, 2026 is meant to be the acceleration year. Management says it expects 13 projects under execution in 2026, representing about 2,400 units. At the same time, as of the approval date of the financial statements, Aviv Melisron had a project pipeline of 12,510 units in various planning stages, with developer units expected to stand at about 7,400. Within that pipeline, 6,051 units are in advanced planning stages and have signature rates above 67%.

Those numbers are impressive, but they do not tell the whole story. Most buyer contracts during the reporting period were done in 20:80 or 85:15 structures or through contractor loans. In 2025 the company sold 118 units under those structures, and says the effect on the finance line is still not material. That is an important formulation. It says the friction is not large yet, but it also says investors should track whether the scope of those sales grows and whether residential cash quality remains clean.

What Has To Happen In Capital Allocation

Melisron now operates with three competing capital pockets: preserving and expanding income-producing assets, office development, and residential activity. So far it shows it can hold all three without breaking the balance sheet. But 2026 will test whether it can also stay disciplined.

If Kanyon Hazahav closes, it could add a high-quality and well-managed asset to the portfolio. If office leasing continues at the current pace, offices can increase NOI quickly. If residential starts producing more recognized profitability and less just land and inventory, the market will get a real third engine. But when all those moves arrive together, they also require capital. So the question for the coming year is not whether Melisron can create value. It is whether it can prioritize that value correctly.

Risks

The Residential Quality Risk Sits In Terms And Cash Conversion, Not In Demand Alone

Residential activity can become a meaningful engine over time. For now it still sits in a phase where the gap between economic pipeline and actual cash is wide. Sales under 20:80, 85:15, and contractor-loan structures are not unusual for the sector, but they do create a quality-of-growth question. When the company says the effect on financing is still not material, that is exactly the point where tracking should begin, not where concern should end.

The Office Execution Risk Sits In Space That Has Not Yet Become Full Income

The market can get excited about NVIDIA, Landmark, and the projects under construction, and with reason. But until the buildings are completed, occupied, and through their early ramp, this is still an execution layer. Even the high office-occupancy number excludes assets still under renovation or in early occupancy. So the office improvement looks credible, but not yet fully closed.

Accounting Risk Does Not Mean The Revaluation Is Wrong, It Means The Bottom Line Is More Volatile Than The Cash Box

In 2025 revaluations strongly supported the bottom line. That can continue if NOI keeps rising and the rate backdrop stays constructive. It can also reverse if market conditions shift, if leasing slows, or if projects under construction take longer to market. So anyone reading Melisron only through net profit is taking an unnecessary interpretation risk.

Funding Risk Is Not Acute Right Now, But It Remains Central To The Screen

This is not a close-covenant story. The company sits with very wide room against its financial covenants, with NIS 13.8 billion of equity and a 54% equity-to-balance-sheet ratio. But that does not mean financing has stopped mattering. On the contrary. A group that keeps developing, buying, building, and paying dividends depends on an open debt market and a reasonable cost of capital. Any sharp change in rates, market access, or the mix of capital uses will affect what is left after growth.

Conclusions

Melisron ends 2025 as a stronger company, but also as a more complex one. The malls remain a high-quality anchor, the office arm has moved from a secondary engine to a real growth driver, and the balance sheet still gives the company room to keep developing. At the same time, the residential layer is now too large to treat as a side option, and it is pulling the discussion away from stable rental income toward questions of inventory, funding, and cash timing.

Current thesis: Melisron still rests on strong malls, but the pricing of the next few years will run through proof that offices and residential create not only accounting value, but also cash and capital flexibility.

What has changed versus the older reading? This is no longer just a mall company with some offices attached. It is a group in which the malls are funding a structural transition: a larger office layer, a broader residential platform, and more capital that has to work before it can come back to shareholders.

The strongest counter-thesis: the market may still be too conservative. The company holds an almost fully occupied mall base, an office platform that is beginning to mature, a high rating, strong access to debt markets, and a very large residential pipeline. If those moves mature without disruption, 2025 may later read like a very successful transition year.

What could change the market interpretation over the near to medium term? Three things: the pace of leasing and occupancy in offices, the collection and tenant-sales picture after the March 2026 rent deferral, and the way the company finances and prioritizes its next transactions and projects.

Why does this matter? Because Melisron is no longer judged only on asset quality. It is judged on the ability to transfer value from asset, through project, into the cash-flow statement and to shareholders without eroding flexibility on the way.

Over the next 2 to 4 quarters, the thesis strengthens if office NOI keeps climbing, more space is signed in Landmark and the new projects, mall tenant sales remain stable, and residential starts to show it can grow without absorbing too much cash. It weakens if residential inventory keeps growing faster than it turns into sales and cash, if large transactions demand even more funding without a clear NOI contribution, or if the collection picture starts to crack.