Norstar Holdings in 2025: Value rose inside G City, but cash is still not free at the parent

Getting to Know the Company

At first glance Norstar looks like just another income-producing real-estate story with consolidated profit, assets in Europe and Brazil, and rental cash flow. That is the wrong read. Norstar is first and foremost a listed holdco sitting above G City. So the key question here is not how much net operating income, NOI, the group generated, but how much of the value created inside G City can actually move up to the parent in time.

What is working now? Inside G City there is real movement. Same-property NOI rose by 6.3%, the value of investment property and investment property under development increased by ILS 674 million, the Orion deal moved three Polish assets into the public market, and the CTY move is expected to add about ILS 640 million to G City's equity and about ILS 330 million to Norstar's equity. At the group level the liquidity picture is not broken either: as of December 31, 2025, the group had about ILS 4.0 billion of liquidity and signed unused credit lines.

What is still unresolved? At the parent the room remains tight. Group net profit rose to ILS 331 million, but Norstar shareholders were still left with a loss attributable to them of ILS 23 million. In the separate financial statements, year-end cash and cash equivalents were only ILS 2 million. At the company and wholly owned subsidiaries level, net financial obligations stood at about ILS 602 million. And the most important figure is this one: Norstar's standalone equity is ILS 1.305 billion, only ILS 55 million above the restriction that blocks cash dividends below ILS 1.25 billion.

That is also why the market does not read Norstar as a plain "asset story". In early April 2026 the equity market value was only about ILS 518.8 million, and short interest as a percentage of float had risen to 5.42% with an SIR of 7.46, meaning more than seven days to cover. That is not immediate panic, but it is a clear market message: the value inside the group is recognized, the accessibility of that value to Norstar shareholders still is not.

One more point matters early because it is easy to miss. The CTY transaction looks positive on paper, but it sits one level below Norstar. In other words, even when value is created inside G City, it does not automatically become free cash at Norstar. So 2025 is not a year of "problem solved". It is a year in which group value kept rising while the parent-level bottleneck remained active.

The quick economic map looks like this:

That chart sets the right angle. Norstar is not short of value on paper. It is short of a clean path between that value and free cash at the parent.

Events and Triggers

The CTY move creates value, but it also raises the proof threshold

This is the core event of the cycle. In November 2025 G City bought 14,188,052 CTY shares, or about 7.7% of the share capital, for EUR 4 per share and a total of about EUR 56.75 million. It then continued buying in the market and raised its holding to about 59.1% by year-end 2025. In March 2026 the tender offer was completed, with 50,076,363 additional shares tendered, about 27.3% of the share capital, for about EUR 190 million. After the tender, G City's stake in CTY rose to about 86.4%.

At first glance this looks like a clean case of buying an asset cheaply. Part of that is true. The original transaction price reflected a discount of about 44% to CTY's equity as of September 30, 2025. The expected impact is also meaningful: about ILS 640 million added to G City's equity, about ILS 330 million added to Norstar's equity, and about ILS 38 million added to G City's 2026 FFO, funds from operations. After offsetting special dividends declared by CTY, the net economic cost of the tender is estimated at only EUR 26 million.

But that is only half the story. The same move is also expected to increase consolidated leverage at both Norstar and G City by 2.7%. So the deal does create value, but it also raises the execution bar. For the market to give it full credit, it will need to see CTY actually follow through on the February 2026 plan to sell non-core assets totaling about EUR 1 billion over 24 months.

The Orion deal shows that value can move upstream, but not without friction

In December 2025 G City completed the disposal of three income-producing properties in Poland through Orion at a total value of about EUR 456 million. G City distributed all Orion shares as an in-kind dividend to its shareholders. Norstar, as a G City shareholder, received about 11.2 million Orion shares worth about ILS 38 million. Norstar then distributed 9 million Orion shares to its own shareholders at a total value of about ILS 27 million.

This matters because it shows that value does not always stay trapped below the parent. Here is a concrete case where an asset moved out of G City, into the public market, and part of that value reached Norstar shareholders. But even here there was friction. G City recorded a capital loss of about ILS 53 million on the investment based on the first-trading-day share price, and G City remained tied to Orion through asset-management services, a EUR 25 million loan, a foreign-currency hedge guarantee, and a non-compete agreement. This is more accessible value, but not value that has fully detached.

The parent kept managing debt, but it still did not change the picture

During 2025 Norstar raised about ILS 120 million nominal in Series 14 bonds, secured by pledged G City shares, while repurchasing about ILS 17 million nominal of its own bonds for about ILS 20 million. In addition, in December 2025 it fully redeemed the remaining Series 12 balance, about ILS 51.9 million nominal, at a payment of about ILS 60.7 million. That improved the near-term maturity profile, but it did not make the parent comfortable.

What is more interesting is what happened after year-end. The immediate reports from January and February 2026 show that the company kept buying Series 13 bonds in the market. In total it repurchased about ILS 1.69 million nominal for total consideration of about ILS 1.75 million. Management is still clearly choosing active debt management. That signals some improvement in capital discipline, but it also underlines that the surplus at the parent is still too small for a genuinely large move.

The rating withdrawal and the document-disclosure request are not the heart of the story, but they are not pure noise either

After the early redemption of Series 12, Midroog and S&P Maalot stopped rating the issuer and that series. This was not a stress event. It was the mechanical outcome of redeeming the rated instrument and no longer remaining in an actively rated issuer framework. Still, it also reminds the market that the parent is now left with secured bond series and without an active public rating layer that accompanies the issuer story.

In January 2026 a request for document disclosure and review was also filed as a preliminary step toward a derivative action, relating to allegations about the controlling shareholder's private US residential real-estate activity up to 2018. The company says the allegations are baseless. At this stage it does not change the thesis, but it does leave some governance noise around the stock.

Efficiency, Profitability and Competition

What actually improved inside the group

At the G City level, 2025 was better than the NOI headline alone suggests. Net operating income, NOI, fell to ILS 1.617 billion from ILS 1.734 billion, a 6.7% decline. But that decline was affected by currency movements and sold assets, while same-property NOI actually rose by 6.3%. In other words, the economics of the existing assets improved even as the asset base changed.

On top of that came another layer of profit. Fair-value gains on investment property and investment property under development rose to ILS 674 million, versus only ILS 38 million in 2024. That is what lifted operating profit to ILS 1.857 billion from ILS 1.220 billion. On one hand, this means the improvement is real. On the other hand, it also means the bottom line leaned more on accounting real-estate value than on a sharp jump in cash or in reported NOI.

That chart matters because it prevents a double mistake. Anyone looking only at operating profit could think the operating business accelerated sharply. Anyone looking only at reported NOI could think the business weakened. The truth sits in between: the existing assets got better, but part of the strong year came from deals, valuations, and a changed asset base.

Why Norstar shareholders still did not get a clean read-through

This is where the story really sits. The group ended 2025 with ILS 331 million of net profit. But non-controlling interests took ILS 354 million of that, leaving Norstar shareholders with a loss attributable to them of ILS 23 million. Put differently, the year looks much better at the group level than at the parent-shareholder level.

That is not accidental. The main value engines, Israel, Europe, Brazil, the US, and now CTY, all sit inside G City and below Norstar. So even when the CTY move creates value, and even when G City's own capital moves create gains inside the structure, none of that automatically becomes cash or clean attributable profit at the Norstar parent.

This is probably the most important chart in the article. It explains exactly why Norstar is not just another real-estate company. It is a holdco judged on conversion. Profit is being created inside the group. Norstar shareholders still are not receiving it in a clean way.

The market is pricing the holdco structure, not just asset quality

That is also why it is hard to talk about "competition" here in the classic sense of mall against mall or asset against asset. Norstar's real competition is its own discount. It has to convince the market that the improvement at G City, the CTY move, and the asset sales will eventually become upstream cash, debt reduction, or distribution capacity, not just value that rises one layer lower in the chain.

That is exactly why short interest increased even as the group improved its results. The market probably is not arguing that the assets lack value. It is testing whether Norstar shareholders will really be able to access that value.

Cash Flow, Debt and Capital Structure

Here the right frame is the parent's all-in cash flexibility

The right frame for analyzing Norstar is not G City's consolidated operating cash flow. It is the parent-level all-in cash flexibility of Norstar and its wholly owned subsidiaries. That is the test that determines whether group value becomes real room to maneuver at the parent.

On that test, the picture is sharp. As of December 31, 2025, the parent and wholly owned subsidiaries had ILS 642 million of financial obligations, including ILS 611 million of bonds and obligations to financial institutions and another ILS 31 million of other financial liabilities. Against that there were only ILS 40 million of financial assets. So net financial obligations stood at ILS 602 million.

In the separate financial statements the picture is even sharper. Norstar's own cash and cash equivalents fell to only ILS 2 million. This is not an immediate solvency problem, because the company still has indirect access to liquidity through G City and the wholly owned subsidiaries, but it absolutely is a headroom problem.

That maturity profile is not dramatic in group terms, but it does matter in parent-company terms. 2026 looks manageable with only ILS 47 million. 2027 and 2028 already sit at ILS 212 million and ILS 234 million. So the real question for 2026 is not whether Norstar survives. It is whether the company uses the next year to widen its margin before two much heavier maturity years arrive.

The group's liquidity does not all belong to the parent

This is the gap that cannot be blurred. At the full-group level, as of December 31, 2025, Norstar and its consolidated subsidiaries had about ILS 4.0 billion of liquidity and signed unused credit lines, including about ILS 2.4 billion of cash and short-term investments and about ILS 1.6 billion of credit lines. But only about ILS 0.1 billion of that sat at Norstar and its wholly owned subsidiaries.

This is exactly the difference between existing value and accessible value. The group can present a very solid liquidity cushion while the parent still faces an open question on real flexibility. Anyone looking only at the ILS 4.0 billion misses the layer that matters most for Norstar shareholders.

Bond covenant headroom is comfortable, but cash-dividend headroom is not

For bondholders, the picture is reasonable. As of December 31, 2025, Norstar met all bond covenants: equity excluding non-controlling interests stood at ILS 1.305 billion versus a minimum of ILS 1.0 billion, and net interest-bearing debt to consolidated assets stood at 65.1% versus a ceiling of 82.5%.

But for equity holders, a different number matters more. Norstar undertook not to pay a cash dividend as long as its equity is below ILS 1.25 billion, or if the distribution would push it below that level. That leaves only ILS 55 million of headroom. This is not a bond problem. It is an equity-access problem.

That is precisely why the market remains skeptical. To distribute cash cleanly, Norstar has to preserve equity value and avoid eating into the narrow cushion above the restriction. So even if G City's asset value keeps rising, the path to cash at the Norstar shareholder level remains narrow.

The debt market is signaling caution, not stress

It is important not to overstate this. At the end of 2025, the market value of Series 13 bonds was about ILS 391.4 million versus a carrying amount of ILS 420 million. Series 14 stood at about ILS 111.5 million versus a carrying amount of ILS 119 million. In other words, the market is not pricing an acute event, but it is assigning a cautious discount to the parent layer.

The continued repurchases in January and February 2026 send the same message. If management is buying Series 13 around ILS 1.03 to ILS 1.06 per ILS 1 nominal, it is effectively saying this debt is still an important capital-management tool. But it also means the company prefers to chip away at debt carefully, step by step, rather than operating with a cushion that allows something bigger.

Consolidated cash flow is better than the parent's cash flow, and that is exactly the point

At the group level, cash flow from operating activities was ILS 588 million. But the same group also funded net property investment and disposal activity of about ILS 730 million in 2025, repaid debt and credit lines on a net basis by about ILS 1.778 billion, paid ILS 73 million of dividends and ILS 161 million of interest on hybrid bonds, and executed ILS 440 million of transactions with non-controlling interests.

That means even at the group level there is no "excess cash" story. There are good assets, an ability to generate cash, and access to financing. But the system still has to refinance, sell, distribute carefully, and decide where cash stays. That is why the Norstar thesis still has to be a conversion thesis, not a value thesis alone.

Outlook

Finding one: 2026 is a bridge year at the parent, not because of immediate default risk but because of the structure of access to value. Norstar does not need to prove this year that its assets are good. It needs to prove that the value created below it can become cash, further debt reduction, or at least wider headroom.

Finding two: G City's new dividend policy can help, but on its own it does not clean up the story. In March 2026 G City approved a quarterly dividend policy of ILS 0.16 per share. Based on the 92.7 million G City shares held by Norstar, that implies about ILS 14.8 million per quarter, or about ILS 59 million on an annualized basis. That almost covers the parent's 2026 maturity of ILS 47 million by itself, but it does not make the thesis clean if the company keeps repurchasing bonds or wants room for cash dividends at the Norstar level.

Finding three: The CTY move will pass the test only if it moves from equity uplift to cash flow. Management has already given the headline numbers, ILS 330 million of added equity for Norstar, ILS 38 million of added FFO for G City, and a net economic cost of EUR 26 million after special dividends. But over the next 2 to 4 quarters the market will want to see something simpler: does CTY actually start selling non-core assets and releasing pressure, or does the move remain mainly an accounting value-creation story?

Finding four: The parent is signaling through actions, not just through language. When Norstar keeps repurchasing Series 13 bonds in January and February 2026, it is effectively saying that debt management is still the more immediate priority than aggressive distributions. That is a positive signal on discipline, but it is also a hint that management knows its room to maneuver remains limited.

That leads to the central line for the coming year: 2026 needs to be a proof year for the parent, not a proof year for the assets. The assets already look good enough. What is still unresolved is whether they can become free cash at Norstar.

What must happen over the next 2 to 4 quarters

First, G City has to show that the new dividend policy holds and that CTY actually begins executing the EUR 1 billion disposal plan. Second, Norstar has to keep managing debt without eating further into the cushion above the cash-dividend restriction. Third, the market will want to see profit created inside G City start to show up as parent-level flexibility, not only as equity-account changes and valuation gains.

What would improve the read, and what would weaken it

The read improves if G City keeps paying dividends, if CTY starts selling non-core assets at a visible pace, and if the parent shows consistent debt reduction without a further erosion in equity headroom. The read weakens if the CTY move adds accounting value but remains cash-heavy, if G City dividends come in below the declared pace, or if the equity cushion above ILS 1.25 billion keeps shrinking.

Risks

The central risk is value that stays one floor down

This risk needs to be called by name. Norstar can keep showing rising asset value, valuation gains, and successful transactions at G City, but as long as the parent is left with low cash, ILS 602 million of net financial debt, and only ILS 55 million of cash-dividend headroom, part of that value remains theoretical for shareholders.

The CTY move may prove accounting-positive and cash-heavy

The bullish case is clear: a large discount, added equity, added FFO, and a modest net economic cost. But on the other side sit a 2.7% increase in consolidated leverage, a need to dispose of non-core assets, and sensitivity to whether CTY executes as planned. What is good for the value layer can still weigh on the financing layer.

Currency exposure still moves equity

In 2025 the group recorded an other comprehensive loss of ILS 276 million, mainly from translation adjustments on foreign operations. This is not cosmetic. When the parent relies on foreign assets and on equity that is translated into shekels, currency moves can strengthen or erode equity cushions even without a sharp change in the underlying business.

Governance noise and legal overhang

The document-disclosure request filed in January 2026 is still far from a certain material event, and the company fully rejects it. Still, in a structure where investors are already scrutinizing value accessibility, any added governance noise makes it harder for the market to grant fast credit.

Short Sellers' Position

The data here no longer looks trivial. Short interest as a percentage of float rose from 1.65% in mid-November 2025 to 5.42% by late March 2026. SIR rose over the same period from 1.64 to 7.46. Against a sector average of 2.45% short float and 3.220 on SIR, Norstar is already trading in clear skepticism territory.

The most reasonable interpretation is that short sellers are not attacking a Finnish retail property or a Brazilian mall here. They are attacking the structure. Rising short interest alongside improving group results says the market is focused on whether value can move up to the parent, not on whether G City knows how to run assets.

That is also what makes the stock more sensitive to parent-level triggers than to accounting triggers at G City. If cash starts moving up, the short case can get stuck. If it does not, even a good year at G City may not be enough.

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Conclusions

Norstar ends 2025 with good news inside the group and an open test at the parent. G City created value through better same-property performance, asset sales, and the CTY move. Orion proved that some value can travel all the way up to Norstar shareholders. But the stock still gets stuck on the same point: the parent holds more value than the market is paying for, and still has not proven that this value is free enough.

Current thesis: Norstar is a story of value being created inside G City faster than it becomes cash and flexibility at the parent.

What changed versus the prior read? The year is no longer resting only on hopes for asset sales. There is now a real CTY move, a new G City dividend policy, and an Orion transaction that already moved value outward. On the other hand, the cash and dividend restriction at the parent remained tight, and short sellers are already identifying that gap.

The strongest counter-thesis is that the market may be overdoing the discount. If G City begins paying a regular quarterly dividend, if CTY really does sell EUR 1 billion of assets, and if the parent continues reducing debt, Norstar's current market cap could end up looking too low even after allowing for the holdco structure.

What could change the market's interpretation in the short to medium term? The pace of G City dividends, the first CTY asset sales, and Norstar's ability to keep equity above the dividend threshold without losing liquidity. Those are the three signals that matter most, more than consolidated profit on its own.

Why does this matter? Because in a holdco, spotting value is not enough. The real question is how much of that value actually reaches the top, how quickly, and at what financing cost on the way.

Over the next 2 to 4 quarters the thesis strengthens if G City turns its dividend policy into a steady flow, if CTY begins selling non-core assets at a convincing pace, and if Norstar widens the cushion above the ILS 1.25 billion threshold. It weakens if the CTY move remains mostly accounting-based, if the equity cushion erodes, or if the parent keeps living on careful debt management without proving real value accessibility.