Prashkovsky: Between Fair-Value Gains and NOI, Earnings Quality in the Rental Arm
Follow-up to the main article: Prashkovsky's rental arm ended 2025 with just NIS 28.2 million of NOI across the two relevant Israeli recurring-property segments, against NIS 137.3 million of fair-value gains. Ben Shemen alone drove almost all of that jump, so 2025 still looks more like a year of proving value than a year of recurring earnings.
Where the Gap Really Sits
The main article argued that Prashkovsky's 2025 problem is not a shortage of value, but the distance between value and cash. This follow-up isolates the place where that gap is sharpest: the rental arm, or more precisely the axis management presents under the combined heading of rental housing and income-producing assets. In 2025 that platform produced a meaningful accounting value layer, but the NOI layer, net operating income from income-producing assets, remained thin.
What is already working? Israeli commercial investment property generated NIS 13.8 million of NOI in 2025, Israeli rental housing generated NIS 14.4 million, and after the balance-sheet date Ben Shemen began moving from construction site to leased asset. What is still not clean? Those same two arms recorded NIS 137.3 million of fair-value gains. In other words, the revaluation layer was almost 5 times the current NOI base, and about 87% of the operating profit of the two arms combined.
That matters now because the March 2026 investor presentation invites the reader to look far ahead: 4,177 rental units, 144,499 square meters of income-producing property, expected annual NOI of NIS 475 million, and expected value of NIS 12.7 billion. That is a legitimate strategic frame. It is not 2025 earnings quality. Anyone who connects the presentation directly to the annual report risks reading the rental arm as if it were already a mature recurring-profit engine. It is not there yet.
| Layer | Israeli commercial investment property | Israeli rental housing | Combined |
|---|---|---|---|
| 2025 operating revenue | NIS 17.1 million | NIS 17.6 million | NIS 34.7 million |
| 2025 NOI | NIS 13.8 million | NIS 14.4 million | NIS 28.2 million |
| 2025 fair-value gains | NIS 9.3 million | NIS 128.0 million | NIS 137.3 million |
| 2025 operating profit | NIS 16.9 million | NIS 141.1 million | NIS 157.9 million |
| Fair-value gains to NOI | 0.7x | 8.9x | 4.9x |
The table and chart make the point quickly. In commercial property there is already a more reasonable balance between NOI and fair-value gains. In rental housing the story is very different. There, profit still comes mainly from what the assets are expected to become, not from what they already earn today.
2025 Was a Revaluation Year, Not a Stabilization Year
The quality gap becomes even clearer when the Israeli rental-housing segment is viewed over time. In 2023 that arm produced NIS 10.7 million of NOI and NIS 12.3 million of fair-value gains. In 2024 NOI rose to NIS 13.8 million, but fair-value gains already jumped to NIS 61.5 million. In 2025 NOI rose again, but only to NIS 14.4 million, while fair-value gains doubled again to NIS 128.0 million. Put more simply, NOI improved, but nowhere near fast enough to explain the way operating profit surged.
This requires precision. It does not mean the company is flattering the numbers. In build-to-rent, especially at construction and early lease-up stages, it is normal for appraisal value to lead NOI. The problem is different: if a reader sees NIS 141.1 million of operating profit in this segment, the natural impression is that there is already a large recurring-earnings engine here. That is still not the case. In 2025 almost all of the step-up came from valuation, not from a materially thicker recurring rent layer.
The Israeli commercial segment actually shows what a more mature profile looks like. There, NOI rose 10.7% to NIS 13.8 million, while fair-value gains fell to NIS 9.3 million from NIS 120.2 million in 2024. So commercial property in 2025 looked more like an operating-income year and less like an accounting jump. Rental housing was the opposite.
That is why the consolidated line of NIS 153.0 million of fair-value gains on investment property is not enough on its own. At the group level, the number looks strong. At the earnings-quality level, it hides the difference between a segment that already sits on visible NOI and a segment that still depends mainly on what should happen after completion, lease-up, and stabilization.
Ben Shemen Explains Almost All of the Gap
If one asset has to be singled out as the clearest explanation for rental-arm earnings quality in 2025, it is Ben Shemen. By year-end, cumulative investment in the project stood at NIS 412.8 million. Carrying value had risen to NIS 578.1 million, and the appraisal set value at NIS 602.4 million before deducting the remaining costs to completion. In 2025 alone, the project recorded a fair-value gain of NIS 122.6 million.
That is the decisive figure: Ben Shemen alone accounts for about 95.8% of the entire fair-value gain recorded by the Israeli rental-housing segment in 2025. So when the segment reports NIS 128.0 million of fair-value gains, it is in practice talking almost entirely about one project sitting exactly at the transition point between construction, lease-up, and valuation.
That chart shows why profit quality is weaker than a headline read suggests. The capital has been invested and the value has been recognized, but NOI has not gone through the same process yet. By the date the report was approved, 155 housing units had been leased for annual rent of about NIS 9.5 million, and about 880 square meters of commercial space had been leased for about NIS 1.1 million a year. Residential income generation began in the first quarter of 2026, while commercial income was expected to begin in the second quarter. That is already real evidence that the project is moving from appraisal to income. But it is still not the same thing as a stabilized NOI layer.
The valuation sensitivity also shows how much the story still sits in assumptions. In the year-end 2025 appraisal, a 0.5 percentage-point increase in the discount rate lowers value to NIS 568.5 million, while a 0.5 percentage-point decrease raises it to NIS 638.8 million. A 5% change in average rents moves value to a range of NIS 591.9 million to NIS 612.8 million.
The point is not that the appraisal is weak or detached. On the contrary, the company discloses clear assumptions: representative NOI of about NIS 20.1 million, a 5.25% discount rate for the apartments, 6.5% to 7.25% for the commercial space, 1% annual rent growth, and 1.5% annual apartment-price growth. That is a reasonable economic model for this kind of project. But as long as Ben Shemen has not yet reached stabilized income, the valuation is still a preface to recurring profit, not a substitute for it.
What the Presentation Sells, and What the Report Still Does Not Confirm
The investor presentation does what such a presentation is supposed to do: it ties the future project map into one story about a rental and income-producing platform. At the group level it speaks about 4,177 rental units, 144,499 square meters of income-producing property, expected annual NOI of NIS 475 million, and expected value of NIS 12.7 billion. Once the tables are opened, it is clear where that number comes from: NIS 364.2 million of expected NOI from rental-housing projects and NIS 110.6 million from income-producing assets.
But that is exactly the point. Most of that figure sits in projects that are still under construction, in planning, or waiting for future lease-up, with timelines that in some cases run out to 2031. In Be'er Yaakov, Rehovot, Ganei Azar, the Elef complex, and Sde Dov, the projects still have to pass through construction, financing, lease-up, and stabilization. The presentation therefore provides a long-duration value map. It does not prove current earnings quality.
The gap is extremely sharp: NIS 28.2 million of actual NOI in 2025 versus NIS 474.8 million of expected annual NOI in the presentation. That is a 16.8 times gap. The company is not hiding this. It is showing it explicitly by grouping active, under-construction, and planned assets together. So the mistake is not in the presentation. The mistake is in the reading. Anyone taking NIS 475 million as if it already shows up in 2025 earnings quality is missing the transition stage.
In that sense, Prashkovsky's rental arm is not a fully formed NOI engine that simply has not yet been recognized by the market. It is a platform being built through three stages at once: valuation, financing, and lease-up. As long as the valuation stage remains much larger than the lease-up stage, profit will look stronger than the recurring cash flow beneath it.
Bottom Line
The rental-arm thesis does not break here. Quite the opposite, there is already a real base. Ramla is active, Ben Shemen moved into the leasing stage after year-end, and the presentation shows a broad project inventory that could eventually produce a meaningful NOI layer. This is not a weak story. It is an early one.
That is why 2025 earnings quality has to be read carefully. In accounting terms, the arm created meaningful value. In recurring-profit terms, it is still far thinner than the headline suggests. As long as Ben Shemen and the rest of the projects do not move from appraisal value to stabilized NOI, most of the profit in this arm will remain profit from an intermediate stage.
What the market should look for now is relatively clear. First, how much of the rent already signed at Ben Shemen actually enters the P&L and turns value into recurring income. Then, whether Ben Shemen remains a one-off exception or becomes a template that repeats in Be'er Yaakov, Ganei Azar, and Sde Dov. Only after that will it make sense to start treating the NIS 475 million in the presentation as a target moving from promise into earnings.
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