Melisron: How Much Of The Office Pipeline Is Already Contracted, And How Much Still Depends On Execution
Melisron's office arm already generates NIS 421 million of owner-share NOI, and the company presents another NIS 174 million of expected office NOI from development. But on a conservative read, less than half of that pipeline currently carries a clear contractual anchor, while the rest still depends on construction, leasing and delivery.
The main article argued that Melisron is still funded by the malls, but that the next phase of the story will be decided by offices, residential development and cash conversion. This follow-up isolates one narrower question: how much of the next leg in office NOI is already supported by signed demand, and how much still sits on execution, leasing and timing assumptions.
This is no longer a side issue. Melisron's office arm ended 2025 with NIS 421 million of owner-share NOI, up from NIS 364 million in 2024. In the company's presentation, offices are already shown as a 484,000 sqm managed platform, with 96.9% occupancy, a 3.9-year average lease term, and NIS 7 billion of income-producing asset value on the company's share. In NOI terms, offices are no longer a sidecar to the malls. They are already large enough to move the group's economics.
At the same time, Melisron presents 124,330 sqm of office projects in development, with expected NOI of NIS 174 million on the company's share. That is a large number: relative to the existing NIS 421 million office NOI base, it implies potential upside of more than 40%. But that figure is not one homogeneous backlog. Part of it already has contracts or at least reasonably strong contractual visibility. Another part still depends on buildout, marketing and delivery.
Less Than Half Of The Pipeline Has A Clear Contract Anchor Today
The conservative way to read the office pipeline is not through full-stabilized NOI, but through what the company itself is already willing to include in its nearer-term NOI bridge. Landmark B is the clearest example. In the project table, it is presented with 48,860 sqm of office space, NIS 99 million of NOI at full occupancy, a net book value of NIS 917 million, and remaining construction cost of NIS 431 million. But management's wording is more careful: a binding lease was signed for roughly half of the space, while the rest is still in signing stages. The presentation stays careful as well. In the group NOI bridge, Melisron attributes only NIS 50 million to Landmark B, not the full NIS 99 million.
That is not a technical inconsistency. It is an economic distinction. Melisron is effectively saying that the tower's full theoretical NOI does not yet belong entirely in the nearer-visibility layer. The conservative reading is that only about half of the tower's full contribution is far enough underwritten to enter the first step of the bridge, while the rest still depends on turning those signing stages into final contracts, delivering the building and reaching full occupancy.
The cleanest contractual anchor in the office pipeline is Ofer Yokneam. Management says an agreement was signed with NVIDIA to lease the entire new building the company plans to build there, covering about 29,000 sqm. In the planning-stage project table, the building is shown with estimated NOI of NIS 22-24 million, estimated cost of NIS 270-280 million, construction start expected in 2026 and completion in 2028. This is no longer just a marketing story. Demand is signed. But here too, there is still no NOI in the cash flow yet. What remains open is execution: development progress, cost control and timing until delivery.
On a conservative read, these are the two central contract-backed anchors in the office pipeline: the NIS 50 million that Melisron itself includes in the nearer NOI bridge for Landmark B, and another NIS 22-24 million at Ofer Yokneam where the full area is already signed. In other words, roughly NIS 72-74 million of future office NOI currently enjoys a relatively clear contractual anchor. Against a total office pipeline of NIS 174 million, that means less than half of the picture is currently signed at a level that can fairly be called near-visibility.
| Project | What is already underwritten | Future NOI attributable to Melisron | What is still open |
|---|---|---|---|
| Landmark B | Binding lease on roughly half the space, remainder still in signing stages | NIS 99 million at full occupancy, but only NIS 50 million enters the nearer NOI bridge | Signing the balance, delivery and lease-up |
| Ofer Yokneam | Full-building lease signed with NVIDIA | NIS 22-24 million | Construction start in 2026, completion in 2028, execution and cost |
The Gray Zone Is Larger Than The Headline Suggests
The more problematic layer is not necessarily the projects with no demand, but the places where the company presents one number that bundles together very different underwriting quality. In the NOI bridge, Melisron assigns NIS 64 million to Ofer Yavne, the Ofer Nof HaGalil expansion and Ofer Rehovot. On the surface, that looks like another advanced step after Landmark B. In practice, it is a blended bucket.
In the under-construction project table, Ofer Yavne is shown with 24,300 sqm, expected NOI of NIS 32 million, and an 88% marketing or leasing rate. But the footnote matters: that percentage includes commercial space backed not only by binding agreements, but also by commercial understandings covering 17,000 sqm. In other words, even this advanced-looking project is not fully hard-contracted. Ofer Nof HaGalil is shown with 21,000 sqm, expected NOI of NIS 36 million, and an 81% marketing or leasing rate, so it appears further advanced. Ofer Rehovot, by contrast, is shown with 11,000 sqm of office space, expected NOI of NIS 10 million, estimated cost of NIS 121 million, and a 0% marketing rate.
That is the key point. When the company groups Yavne, Nof HaGalil and Rehovot into one NIS 64 million bridge line, it produces a smoother growth bridge than the underlying quality of each component really supports. Yavne still includes commercial understandings, Nof HaGalil is more advanced, and Rehovot is still an unleased office addition. So the bucket does support the thesis that group NOI can keep rising, but it does not prove that all of that contribution is already signed.
Beyond the advanced construction layer, the longer-dated option pool remains meaningful. Ofer Lincoln in Tel Aviv is presented with 28,000 sqm of office space, expected NOI of NIS 56-60 million, construction start expected in 2026 and completion in 2030. Ofer Carmel is presented with 18,000 sqm of office space, expected NOI of NIS 19-21 million, construction start in 2026 and completion in 2029. In both cases, zoning is approved, but no signed tenant is disclosed. That is a pipeline that can create value, but for now it is much more planning-driven than contract-driven.
That leads to the right way to split the office story: one layer already rests on signed or near-signed demand, a second layer rests on advanced projects whose certainty varies asset by asset, and a third layer is genuine long-dated development optionality. Reading the full NIS 174 million of expected office NOI as if it were nearly occupied inventory is too aggressive.
Even The Existing Office Base Looks Cleaner In The Headline Than In Raw Reality
There is another reason not to read the office story only through the headline 97% occupancy figure. The annual report note says the weighted office occupancy rate excludes two meaningful assets: a 15,000 sqm building in Ofer WEST, of which Melisron's share is 11,000 sqm, which had been leased to IBM and is now slated for a major renovation expected to finish by the end of 2026, and Building F in Ofer Nof HaGalil, a newly completed 5,000 sqm building whose occupancy currently stands at 25%.
The implication cuts both ways. On one hand, the 97% office occupancy figure is an adjusted number, not a raw snapshot of every office sqm in the portfolio. On the other hand, it also hides embedded upside that will come not from a new greenfield development, but from upgrading and re-leasing existing space. The presentation even quantifies part of that upside: the former IBM building renovation at Ofer WEST is shown with estimated cost of about NIS 50 million and expected NOI of about NIS 14 million at full occupancy.
That matters because it is the difference between a strong office base and a fully finished one. Melisron's office base is clearly stronger than it was a year ago: average office rent rose from NIS 78 to NIS 82 per sqm, office NOI increased by NIS 57 million, and management describes renewed demand in the Tel Aviv office market after the 2023-2024 slowdown. But part of the growth story for the next two years still runs through renovation, lease-up and reactivation of existing space, not only through new development.
Bottom Line
Melisron's office arm is already too large to call an option. It generates NIS 421 million of owner-share NOI, and in the group's broader thesis it is supposed to add another meaningful layer of NOI over the coming years. But the right way to read that pipeline is not "NIS 174 million on the way." It is a split between what already rests on signed demand, what rests on advanced but not fully hard-contracted projects, and what still rests mainly on planning and execution.
The good news is that there are real anchors. Landmark B is well beyond the stage of an empty rendering, and Ofer Yokneam already has a full-building tenant. The less comfortable part is that the next layer is more mixed: Yavne still includes commercial understandings, Rehovot is still at 0% marketing, and the larger upside from Lincoln and Carmel remains planning-stage pipeline for now.
So the real test for 2026 through 2028 will not be whether Melisron can show future NOI on paper. It will be whether it can move that future NOI step by step from three different categories into the only category the market is truly willing to pay for: signed leases in delivered assets that are already generating rent.
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