Sonol Nadlan in 2025: The Balance Sheet Is Clean, Now It Has to Prove Value Beyond Sonol Israel

Getting to Know the Company

At first glance, Sonol Nadlan can look like a small income-producing real-estate company with 33 assets, 100% occupancy, and net profit that rose to NIS 49.3 million. That is too shallow a read. In practice, this is a nearly pure listed real-estate wrapper around assets carved out of the broader Sonol group: the company has no employees, 30 of its 33 assets are leased to Sonol Israel, and 97% of 2025 revenue came from that one related-party tenant.

What is working right now is clear. 2025 was a capital-structure cleanup year. In August, the company issued public bonds with net proceeds of NIS 177.5 million, and in October it issued shares with net proceeds of about NIS 119.6 million. That money repaid the parent loan, lifted equity to NIS 837.1 million, and left the company with NIS 117.7 million of cash and money-market funds against gross debt of NIS 214.2 million. This is not a stressed starting point.

That is also the central distortion in the story. The financing cleanup did not make the business more diversified. The revenue engine is still overwhelmingly Sonol Israel, while a large part of the upside the market is being asked to underwrite sits in Haifa, especially in the logistics compound, where the valuation already reflects a stronger future use than the current NOI.

That is why the story matters now. On April 3, 2026, the market cap was about NIS 561 million, roughly 33% below equity. The two Haifa assets alone are valued at NIS 305.3 million, more than half the market cap. In simple terms, the market is no longer asking whether the balance sheet can be stabilized. It is asking whether there is accessible value here beyond a long lease with the controlling shareholder.

What a superficial reader can easily miss is that the 2025 numbers tell two different stories. On one hand, there was modest improvement in the recurring base: same-property NOI rose to NIS 52.1 million and FFO under the Securities Authority approach rose to NIS 32.4 million. On the other hand, this is still not a structural step-up. Revenue rose to NIS 54.5 million mainly because of CPI-linked rent and solar income added from July 2025, not because the company already proved a truly broader profit base.

Four points worth keeping from the start:

• 2025 solved the capital structure, not the revenue concentration. 97% of revenue still depends on Sonol Israel.
• More than half of annual net profit was recorded in the fourth quarter, which included NIS 21.2 million of revaluation and a reversal in net financing cost.
• A 100% occupancy headline is a contractual portfolio figure, but the Haifa logistics asset itself runs at 34% average occupancy and NIS 2.8 million of annual NOI.
• Five stations already sit at EBITDAR-to-rent coverage of 1.2 or less, representing NIS 6.2 million of annual rent. That is not a crisis, but it is not a wide cushion either.

That chart matters because it puts 2025 in the right place. There was improvement, but it was measured. This was not the year the company opened a new engine. It was the year the balance sheet changed much faster than the business.

This is the number that organizes the whole read. Anyone seeing 33 assets and assuming a diversified income portfolio is missing that the economics still rest almost entirely on one relationship.

Events and Triggers

2025 was the year parent debt was replaced by public capital

The biggest event of the year was not a single property transaction. It was a funding-layer reset. In August 2025, the company raised public debt with net proceeds of NIS 177.5 million, and in the fourth quarter it completed a share issuance with net proceeds of roughly NIS 119.6 million. Most of that money went to repaying the parent loan and intercompany balances with Sonol Israel.

The first trigger: the company moved from a structure where the main debt layer sat with the controlling shareholder into one where the public and the banks fund a company with far higher equity, wider covenant headroom, and better transparency. That is a real improvement.

But the other side: the issuance itself did not create a new economic base. It cleaned up the layer above the business, not the business itself. That is why, even after the financing reset, the market will keep focusing not only on leverage but also on tenant quality, Haifa, and whether the company can create value outside the existing Sonol lease structure.

Haifa moved from an interesting asset story to the center of the thesis

The company has two very material assets in Hof Shemen: the tank farm and the logistics compound. The tank farm already sits on clearer economics. Its 2025 NOI rose to NIS 8.6 million, it is fully leased, and it is valued at NIS 147.24 million. That is a value layer supported by active current use.

The logistics compound is a different story. On one hand, it carries the higher valuation, NIS 158.05 million. On the other, annual NOI is only NIS 2.8 million, average occupancy is 34%, and the valuation itself explicitly states that the existing lease for the logistics portion was not taken into account because it reflects interim use rather than highest and best use. That is a material point. A meaningful part of the value already sits on future logistics economics, not current rent.

The company is pursuing a two-stage plan there that could eventually deliver roughly 24 thousand square meters of logistics buildings, with stage A targeted for 2028. But as of year-end 2025, the building permit had not yet been obtained, and the dedicated property table does not show signed leases for the added space. In other words, the value is getting ahead of the cash flow.

New optionality exists, but it is not in the base yet

On November 18, 2025, the company signed a framework agreement for energy-storage sites across eight locations. If every option is exercised, annual rent could eventually reach about NIS 7 million. That is interesting optionality, but still only optionality: the option period is five years, and until project-specific lease agreements are signed there is no revenue stream here that should be treated as part of the current base.

The same is true for smaller post-balance-sheet items. The Beitan Aharon deal, completed on March 1, 2026, includes NIS 6.6 million of consideration and annual use fees of NIS 480 thousand. That can add a specific layer, but it cannot change the understanding of the company on its own.

The planning cooperation around the Danya station in Haifa points in the same direction. It matters as a sign that the company is trying to extract more from its land rights, but it is still not NOI.

Efficiency, Profitability, and Competition

The recurring base improved, but it did not change the structure of the story

At a surface level, 2025 looks strong: revenue rose 4.7%, operating profit rose 14.6%, and net profit rose 23.3%. But anyone stopping at the bottom line misses the mechanism.

What improved in the recurring business was narrower, but more real. Same-property NOI rose 3.2% to NIS 52.1 million, and FFO under the Securities Authority approach rose 14.2% to NIS 32.4 million. That is progress, but it still came mainly from indexation, from existing leases, and from solar income added in July. It does not prove that the company has already built an alternative tenant layer or a genuinely independent growth engine.

2025 earnings are skewed toward the fourth quarter

Another key point is earnings quality. In the fourth quarter, revenue rose to NIS 14.1 million, operating profit jumped to NIS 33.7 million, and the company recorded NIS 21.2 million of investment-property revaluation. At the same time, net financing cost flipped into financing income. The result was NIS 26.7 million of net profit in a single quarter, more than half the full-year total.

That is exactly where the distinction between a strong year and a recurring run-rate matters. There is no accounting issue here, but there is a yearly headline that looks cleaner than the recurring layer beneath it.

That chart sharpens why the market should not read NIS 49.3 million as if it were a clean annual earnings run-rate. A meaningful part of the jump came from timing and valuation, not from a new NOI ramp.

Full occupancy is a contractual fact, not broad demand proof

The company reports 100% occupancy at the portfolio level, but in the same report it makes clear that occupancy in parts of the portfolio is calculated based on lease agreements with Sonol Israel. That explains how the company can simultaneously report 100% portfolio occupancy and a Haifa logistics asset with 34% average occupancy.

This is not an error. It is simply a different economic reality. As long as Sonol leases the wrapper, the portfolio looks full. But if the question is how much value can be created outside the existing lease structure, the relevant focus is Haifa, the unused rights, and the ability to sign new cash flows in the future.

Even inside Sonol there is no huge coverage cushion

The company says the average EBITDAR-to-rent ratio across the leased assets runs in a range of 1.5 to 1.7. That is acceptable, but not exceptionally comfortable. The more important detail is the tail: three stations sit in the 1.0 to 1.2 range with NIS 3.979 million of rent, and two stations are below 1.0 with NIS 2.2 million of rent.

The practical implication is not immediate stress. But it does connect directly to the 2022 framework agreement, under which Sonol Israel may from 2030 return up to five stations that show negative operating profit for three consecutive years. That is why the quality of station-level coverage already matters, even if the risk is not near-term.

From a competitive standpoint, this is not a company fighting neighboring landlords for office tenants. Its real competition is time, permitting, and feasibility: can the land actually move from fuel use and interim use into logistics, retail, or mixed-use economics that create incremental value?

Cash Flow, Debt, and Capital Structure

all-in cash flexibility: 2025 was far more comfortable than the old structure

On an all-in cash flexibility basis, 2025 was a strong year. Net cash from operating activity rose to NIS 42.1 million. Investing cash outflow was only NIS 6.6 million, helped by NIS 9 million from the sale of the Transportation Haifa station. That was followed by positive financing cash flow of NIS 81.45 million, as the offerings more than offset repayments.

That matters because it shows the company did not just improve its balance sheet on paper. It also exited 2025 with real liquidity and without near-term funding strain. The company explicitly says it does not expect liquidity difficulties from ongoing operations.

That bridge captures the simple story of 2025. Debt did not disappear, but it now sits against real liquidity and much higher equity. For a company that until recently leaned on a parent loan, that is a meaningful reset.

Covenants are far away, but that does not answer the shareholder-value question

The bond covenant package includes two main tests: minimum equity of NIS 340 million and an equity-to-net-balance-sheet ratio of at least 25%. At the end of 2025, the company stood at NIS 837.1 million of equity and a 77% ratio. Dividend restrictions, which among other things require at least NIS 470 million of equity and at least 29% equity-to-balance-sheet, are also far from current numbers. So covenants are not the story right now.

That is also where it is easy to misread the situation. Wide covenant headroom is not a thesis. It is just time. The market still has to decide what the company will do with that time. If Haifa advances, if some of the land rights become signed projects, and if new NOI layers emerge beyond Sonol, the market may close part of the gap to book value. If not, even a relatively clean balance sheet can continue to trade at a discount.

A small post-balance-sheet dividend is a signal, not a game changer

On March 22, 2026, the board approved a NIS 4 million dividend. That signals greater comfort with the new structure, but at this scale it is not yet a material shareholder-return engine. It בעיקר shows that the company is no longer in defensive mode.

Outlook

Four takeaways that matter for 2026 and 2027:

• 2025 cleaned up the funding layer much faster than it changed the economics of the tenants and assets.
• Haifa is now a value test, not just an anchor asset. In the logistics compound especially, valuation is ahead of current NOI.
• The company’s rights story is broad, but more dated than the headline of "106 thousand square meters of additional rights" suggests. The company itself says there is no expectation for construction starts next year across most assets.
• New optionality, such as energy storage, may become interesting, but it still does not belong in the base case.

2026 and 2027 are proof years, not breakout years

The right way to frame the next two years is as proof years. Not a reset year, because the balance sheet has already improved materially. And not a breakout year, because most of the future value has not yet moved from planning or appraisal into cash flow.

That is especially true because of the gap between the broad rights story and the actual timing. The company talks about roughly 106 thousand additional square meters of future rights, and in its dedicated table it reports 80,567 square meters of approved unused building rights. But in the property schedule it also makes clear that, other than the Mishmar Hashiva project, there is no expectation for construction starts in the coming year. That is not a contradiction. It is a reminder that planning rights are not NOI.

Haifa has to move from appraiser logic to operating logic

The tank farm already sits in a relatively understandable place: NIS 147.24 million of value against NIS 8.6 million of NOI. That is not risk-free, but at least the valuation is supported by current use.

The logistics compound is the opposite. The appraiser uses a comparison approach for vacant industrial land aimed at logistics development, explicitly states that the current lease reflects interim use, and adds value for possible rezoning of open-public-space land. That is a legitimate way to value the asset, but it should be read correctly by shareholders: part of that value still depends on permits, relocation, execution, and the future Haifa logistics market.

This may be the most important chart in the article. It shows that the market is not just being asked to believe in another gas-station property with indexed rent. It is being asked to believe that a partially occupied logistics asset, with no permit yet in place, will in time justify a NIS 158 million valuation.

Even the new optionality still needs proof

The energy-storage framework could eventually open a meaningful new layer of rent. But as long as it remains a five-year option structure, without exercised project leases and without actual rent entering the base, the right way to read it is as optionality rather than core thesis.

The same applies to smaller items such as Beitan Aharon or the planning cooperation around the Danya station. They strengthen the sense that the company is trying to create more value out of its land base. They are just too small for now to change the relationship between market cap and equity on their own.

What has to happen in practice

For the thesis to strengthen over the next 2 to 4 quarters, four things have to happen together. First, there needs to be visible progress in Haifa: a permit, lease agreements, a financing framework, or any real anchor that moves the logistics site from appraiser scenario to business scenario. Second, FFO and same-property NOI need to stay stable or improve without leaning on another unusually strong quarter of valuation gains. Third, some of the rights inventory needs to move into signed and funded projects. Fourth, the company needs to begin showing real economic diversification, even if gradual, beyond one related-party tenant.

If that does not happen, 2025 will be remembered mainly as the year the company cleaned up the balance sheet without changing enough of the reason for the discount.

Risks

Tenant concentration is both the cushion and the risk

97% of revenue comes from Sonol Israel. In the short term, that stabilizes the portfolio. Over time, it also locks the company into deep dependence on one related-party tenant, on the fuel sector, and on the operating health of the broader Sonol group.

That is exactly why the detail on the five weak stations matters. It does not mean the lease structure is in immediate danger. It does mean the key question is not just lease tenor, but also the underlying operating quality of the assets at the tenant level.

Haifa holds most of the upside and part of the execution friction

The logistics compound carries permitting risk, legacy land-contamination history in the area formerly leased to Gadot, dependence on relocation and change of use, and a valuation that already leans on stronger future logistics economics than the current use provides. Under the lease, Sonol Israel is meant to bear remediation costs, and its estimate stands at NIS 2 million to NIS 2.5 million. Even so, for shareholders this remains a reminder that monetizing Haifa will not be a frictionless process.

Planning and execution can easily take longer

The company operates in an environment where labor shortages, rates, regulation, and long planning cycles can delay projects even when land and rights exist. That matters especially here because a large share of the future value sits in planning-led enhancement, not in a pipeline of large new acquisitions.

Accounting value is not automatically accessible value

This may be the most important risk for investors. The company has already created accounting value and removed funding pressure, but shareholders need more than that. They need to see how land value, future rights, and Haifa appraisals turn over time into NOI, FFO, or monetization. Until that happens, the discount to book can remain justified.

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Conclusions

Sonol Nadlan exits 2025 as a cleaner balance-sheet company, but not as a more diversified economic company. What supports the thesis is a stronger capital structure, wide covenant headroom, existing assets that do generate NOI, and a platform that can try to enhance land and rights. What blocks a cleaner read is near-total dependence on Sonol Israel, and the fact that a large part of the upside already sits in Haifa on future value rather than current cash flow.

In the short to medium term, the market is likely to focus less on the success of the 2025 funding round itself and more on whether the company begins proving value beyond the related-party tenant. That is what will decide whether 2025 was only a capital-cleanup year, or also the beginning of closing the gap between market value and book value.

Current thesis in one line: Sonol Nadlan solved the funding layer in 2025, and now it has to prove that Haifa and the future rights base can create accessible value beyond a long lease with Sonol Israel.

What changed versus the older company read: the focus moved from “how do you finance the carve-out” to “how do you monetize value outside the controlling shareholder lease structure.” The balance sheet already looks more orderly, so the focus has shifted to asset quality and monetization ability.

Strongest counter-thesis: the company deserves to trade at a discount because it is still mainly a listed real-estate wrapper around one related-party tenant, while the largest upside in Haifa and in the rights base still depends on future planning and development scenarios that have not yet been proven.

What could change the market reading in the short to medium term: real progress in the Haifa logistics compound, any evidence of new permits or signed economics, and continued stable FFO even without help from unusually strong quarters.

Why this matters: this is exactly where investors have to separate value on paper from value that actually reaches shareholders. If the company cannot turn Haifa and the rights inventory into NOI, FFO, or monetizations, the discount can remain even with a stronger balance sheet.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen is a combination of real Haifa progress, continued FFO and same-property NOI resilience, and the first visible translation of rights into signed deals or funded development. What would weaken it is another year in which Haifa valuation advances faster than operating proof, or any sign that coverage on the weaker stations continues to erode.