Fulton: The Gap Between a Billion-Dollar Valuation and an NOI Base That Is Still Not Stabilized

What This Follow-up Is Isolating

The main article made the broader point: in 2025 Spencer created value faster than it converted that value into accessible cash. Fulton is where that point becomes sharpest. This is no longer a side asset inside the platform. It is a property that ends the year at fair value of USD 1.038 billion, records USD 153.9 million of revaluation gains, and pushes Spencer into a very different balance-sheet scale. But the current income base is still much smaller than the number written against it.

The number that matters most here is not the billion-dollar mark. It is the gap. In 2025 Fulton generated USD 9.0 million of revenue and only USD 7.287 million of NOI, with average occupancy of 34.5% in residential and 55% in commercial. In the same year the asset reported net profit of USD 136.7 million, which means most of the earnings contribution was valuation-led rather than driven by a stabilized operating base. That does not mean the value is fictional. It means Fulton is still first a leasing, financing, and timing story, and only later a clean cash-yielding story.

That is also the core risk. For this valuation to start looking like a real income asset, three things need to happen almost together: lease-up has to keep moving, tenant concessions cannot consume too much of the early years, and refinancing has to close before the current bridge becomes pressure. As long as one of those three steps remains open, Fulton stays closer to a heavily financed promise than to a fully stabilized NOI engine.

A Billion-Dollar Valuation on an NOI Base Still Halfway There

The most important gap in Fulton is the one between what was recorded in 2025 and what is already embedded in the valuation model. The operating table shows 2025 NOI of USD 7.287 million. The valuation table, by contrast, relies on representative NOI of USD 12.244 million before tax benefits, 95% residential occupancy, 90% commercial occupancy, and a 5.25% cap rate. On top of that, the valuation separately includes present value of USD 262.1 million for the a421 tax benefits. In other words, Fulton’s carrying value is not just a multiple on current NOI. It already assumes a property that is further along in occupancy, rent capture, and tax-benefit realization.

Those two charts are not saying the valuation is wrong. They are saying something more precise: Fulton’s valuation already sits in a post-stabilization world, while Fulton’s 2025 NOI still sits in a pre-stabilization one. The gap between USD 7.3 million and USD 12.2 million is not just a matter of a few more leases. It reflects time, occupancy, commercial space that is not yet paying full economics, and a tax structure the market still has to credit.

There is another layer many readers may miss. The USD 12.244 million representative NOI before tax benefits is about 68% above 2025 NOI, but even that is not the sole support for value. The tax benefits themselves add another USD 262.1 million of present value. Fulton is therefore not being carried like a plain stabilized apartment building. It is being carried as a lease-up asset with a very meaningful tax-benefit tail.

That also explains why the mark moved so sharply before income fully arrived. In 2025 the property reported USD 136.7 million of net profit on only USD 7.3 million of NOI. The balance sheet got the upgrade before operating cash flow fully caught up. That is the gap. Anyone reading Fulton only through the USD 1.038 billion line misses the fact that the property is still on the way to the level of income that is supposed to support it.

Leasing Is Advancing, but the First Income Is Being Bought

The good news at Fulton is real. By the report date the company had already received temporary certificates of occupancy for 1,050 units in May and June 2025, and for the remaining 52 units in November 2025. By the same date it had signed 486 leases for free-market residential units out of 770 units, and agreements for 53,707 commercial square feet out of 98,357 square feet. This is not theoretical marketing. The lease-up is already underway in practice.

But this is exactly where it makes sense to stop before jumping straight to stabilized NOI. The commercial side is moving through transactions that come with an entry cost. Aldi is already in place on about 21,000 square feet at initial annual rent of about USD 1.34 million for the first five years, after roughly USD 5 million of tenant-improvement work that has already been completed. LA Fitness signed in June 2025 for about 32.4 thousand square feet at initial annual rent of about USD 1.92 million, but also with up to USD 10 million of TI and capital work, of which about USD 5 million had already been spent, plus 8 months of free rent. On top of that there is a non-binding memorandum of understanding with a major grocery chain for about 3,000 square feet, initial annual rent of about USD 660 thousand, and 6 months of free rent.

That table sharpens an important point: Fulton is progressing, but it is progressing in a model where the landlord pays first. That is perfectly normal for a newly delivered asset. It also means that what looks like strong leasing momentum does not immediately turn into the same jump in NOI. As long as TI, free-rent periods, and occupancy costs are still running, the link between a signed lease and accessible cash remains partial.

The same logic applies on the residential side. The figure of 486 leases out of 770 free-market units already looks like critical mass, but 2025 itself still ended with average residential occupancy of just 34.5%. That does not contradict the report-date leasing figure. It simply means the property received approvals, entered the market, and accumulated leases relatively late in the year, so 2025 NOI still cannot reflect the picture visible at the start of 2026.

Refinancing Is the Real Test of the Valuation

At Fulton, lease-up and funding are linked. In April 2025 the company completed refinancing at the asset level for about USD 555 million, for roughly two years with two 12-month extension options, at SOFR plus 4%, with an effective floor of 7.75%. At December 31, 2025 the balance-sheet figures at the asset showed USD 430 million of senior debt and USD 120.779 million of mezzanine debt, or about USD 550.8 million in total.

This is not long-duration, low-pressure financing. The report explicitly defines it as a bridge loan for the lease-up period or for a sale. Even the extension tests tell the same story. For the first extension the property needs full TCO, debt yield of at least 6.5%, DSCR of at least 1.05, and LTV no higher than 70%. For the second extension debt yield rises to 7.5%. The market does not need to guess what Fulton has to become. The debt documents themselves say the bridge is designed for a property on the way to stabilization, not for one that can remain half leased for a long time.

That is exactly what makes the next financing negotiation the key proof point. As of the report date, the asset company was in advanced negotiations for new financing of about USD 765 million, for two years with a 12-month extension option, at SOFR plus 2.85%. On paper that would be a clear financing improvement. But it was still not signed, and at this stage there was no certainty that it would close or on what final terms. More than that, under the current negotiation terms the controlling shareholder and the company’s partners in the asset are expected to provide carry and bad-boy guarantees. That detail matters. If the next lender still wants sponsor support of that kind, it is effectively saying the property is clearly advancing, but not yet able to stand fully on its own.

There is a positive side here. Fulton was in compliance with its existing covenants at year-end, and the debt is non-recourse. But the less comfortable side is that the billion-dollar valuation still has to pass a simpler market test: can a property with only USD 7.3 million of 2025 NOI and average occupancy of 34.5% and 55% be refinanced into a larger, cheaper facility without leaning again on sponsor guarantees. Until that answer sits inside a signed facility agreement, Fulton remains an asset whose valuation has not yet fully proved itself in financing terms.

Even After Stabilization, Fulton Does Not Instantly Become Clean Equity Cash

There is one more layer worth understanding: the path of cash above the asset itself. On December 22, 2025 the company and its partners amended the operating agreement so that management of the project would pass to the company upon completion and commencement of occupancy. That strengthens operating control, but it does not automatically turn Fulton into a simple distribution pipe.

The reason is the order of claims. The operating agreement says distributions from the partnership can only be made after all obligations of the partnership have been repaid and after repayment of the company’s loan to the partners. On the same date the company also entered into an agreement to lend USD 50 million to its partners in the Fulton project, at 10% interest, due February 28, 2027, secured by a first-ranking lien on one partner’s rights in 25% of the partnership. As of December 31, 2025 the outstanding balance was USD 37.5 million, and the remaining USD 12.5 million was advanced after the balance-sheet date.

At first glance this is just a financing arrangement with good security. In practice it says something deeper about Fulton’s cash path. Even if the asset stabilizes well, the first dollars it throws off do not necessarily show up immediately as clean equity distributions. First there is debt at the property level, then obligations of the partnership, and then the partner loan Spencer itself provided. For Spencer that is not only a constraint but also a layer of protection, because repayment of that loan comes back to the company. But for valuation analysis it is a critical distinction: Fulton’s economic value and the pace at which Fulton becomes clean distributable equity are not the same thing.

Put differently, Fulton can improve Spencer’s liquidity before it becomes a simple free-cash JV. If early improvement first repays the partner loan, that still helps Spencer. But it also means the path from a billion-dollar value mark to clean excess equity at the group level runs through several stations rather than one jump.

Bottom Line

Fulton is the asset most likely to make readers blur the line between value and income base. The annual report gives it a USD 1.038 billion fair-value tag, and that number is not absurd in the simple sense. This is a large project, with 1,102 units, 98 thousand square feet of commercial area, a long tax-benefit tail, lease-up that is genuinely moving, and negotiations for larger financing. But at the end of 2025 NOI is still only USD 7.3 million, the commercial side is ramping through TI and free-rent economics, and the next refinancing is not yet closed.

So the thesis in this continuation is straightforward: Fulton is already large enough to lift the whole Spencer story, but it is still not stabilized enough to carry that billion-dollar mark on current operating evidence alone. What has to happen now is not another revaluation. It is closure of the gap between signed leases and NOI, between NOI and financing, and between financing and cash that can move up the structure. Until that happens, Fulton is the key asset, but also the biggest yellow flag.