Rami Levy Real Estate: Rent Supports the Present, but the Valuation Already Needs the Pipeline to Deliver the Future

Company Overview

At first glance, Rami Levy Real Estate looks like a real estate company with clear momentum: total NOI rose to NIS 106.6 million, management FFO rose to NIS 59.8 million, and net profit attributable to shareholders jumped to NIS 245 million. That is only half the story. The company is no longer just a yielding portfolio of supermarkets and neighborhood commercial centers. It has become a hybrid property platform, with the income-producing portfolio funding the present while the development, land, and urban renewal pipeline is supposed to create the next leg of value.

What is working now is fairly clear. The recurring rental engine kept improving: same-property NOI rose to NIS 69.8 million from NIS 61.5 million in 2024, and the company presents 34 active income-producing assets and roughly 150 thousand square meters of operating investment property, alongside 27 additional assets under construction or held as investment land. Even the concentration around the anchor tenant, Rami Levy Shikma Marketing, currently looks more like a stabilizer than an immediate credit problem. The chain accounts for 37% of consolidated revenue in 2025 and 46% of rental revenue only, but based on the company’s own disclosure the aggregate coverage ratio is above 2 and occupancy cost is only 3%.

What is still not clean is earnings quality and the gap between value on paper and value that is already accessible to shareholders. Out of NIS 245 million of net profit, a large portion came from investment property revaluations, gains on the securities portfolio, and profits from investees. That does not make the profit fake, but it does mean the market is not looking at a plain vanilla yield vehicle. With a market cap of roughly NIS 3.1 billion against equity of NIS 2.23 billion and annual FFO of around NIS 60 million, the valuation already assumes confidence not only in assets that produce rent today, but in projects, rights, and development economics that still have to prove themselves.

That is also the active bottleneck. 2025 proves that the company knows how to run a stronger income-producing base, but to justify the broader reading it now needs to show that the pipeline really converts into revenue, NOI, and cash, rather than staying mostly in the world of appraisals, plans, and 2030 targets. In that sense, 2026 through 2028 currently look less like harvest years and more like proof years.

The economic map looks like this:

This chart is the core of the thesis. NOI and FFO rose at a healthy pace. Net profit moved much faster. Anyone reading the company through the bottom line alone will get a cleaner picture of recurring economics than the business actually deserves.

Events And Triggers

The income-producing engine genuinely improved

The good news is not only accounting-driven. Same-property NOI rose to NIS 69.8 million in 2025 from NIS 61.5 million in 2024, and consolidated NOI rose to NIS 71.4 million. In other words, even before giving credit to the future pipeline, the existing yielding base improved in real operational terms. That matters because the company enters 2026 from a stronger operating base rather than from weakness disguised by revaluations.

Residential development finally entered the P&L, but it still does not define the year

2025 is the first year in which residential activity clearly enters the income statement: revenue from apartment sales reached NIS 25 million and cost of apartments sold was NIS 16 million. The development arm has therefore started to generate accounting recognition, but still nowhere near the scale required to replace recurring rent as the central profit engine. Put differently, the market is already looking at development, while the reported results still rely mostly on rental activity.

The company looks different after the balance sheet date

Two post-balance-sheet events materially change how the balance sheet should be read. First, in January 2026 the company repaid balances with the parent company, with Rami Levy, and with related parties in the amount of about NIS 237 million. Second, on January 20, 2026 the company completed its IPO, issuing 12.1 million shares and 6.06 million listed warrants for gross proceeds of about NIS 520.6 million. If all warrants are exercised, the company would receive another roughly NIS 377 million.

That point matters because at December 31, 2025 working capital was negative by about NIS 27.8 million and cash flow from operating activity was negative by NIS 35.2 million. Anyone stopping there misses the fact that the company moved into the public market almost immediately afterward with a much larger liquidity buffer and a cleaner balance-sheet structure.

Governance also shifted into public-company mode

Following the IPO, the company advanced the appointment of external and independent directors, and on March 23, 2026 it also reported the appointment of Yair Kasperius as an independent director. This is not a financial trigger by itself, but it is part of the shift from a private-family platform to a public company that now has to prove capital allocation discipline and execution in front of the market.

Efficiency, Profitability, And Competition

What really drove the 2025 result

Revenue rose to NIS 122 million in 2025 from NIS 84 million in 2024, and gross profit rose to NIS 83 million from NIS 64 million. On the surface, that looks like a sharp jump. In practice, it needs to be broken into three separate engines:

1. Ongoing rental activity, which kept improving, with rental revenue of NIS 97 million versus NIS 84 million.
2. Initial residential revenue of NIS 25 million, still small relative to the size of the development story.
3. A much stronger operating and net profit line, also supported by NIS 149 million of fair-value gains on investment property and NIS 31 million of profit from investees and partnerships.

So there is real operational improvement here, but net profit on its own is not a clean proxy for recurring cash earnings.

The main tenant is both moat and concentration

Rami Levy Shikma Marketing is a critical anchor tenant. Operationally, that is an asset. The company benefits from a tenant that is essential to the Israeli economy, remains active in emergency periods, and is spread across 28 leased properties, 20 of them consolidated and 8 held through investees. On the company’s share basis, this represents NIS 64 million of rent and management revenue and 129 thousand square meters of leased area.

But it is also a clear concentration. When revenue from a single tenant reaches 37% of consolidated revenue, or 46% of rental revenue only, the stability of the company is tightly linked to one chain and to food retail. At this stage it still looks like a manageable concentration because disclosed occupancy cost is only 3% and the aggregate coverage ratio is above 2, but it is a structural dependency that cannot be stripped out of the story.

The portfolio is still heavily commercial

The presentation makes the company look diversified, but the fair-value mix is a reminder that the portfolio still leans heavily toward retail and shopping centers. That works well right now, especially with food retail as the dominant anchor. It also means the expansion into offices, hospitality, logistics, and residential still has not fundamentally changed the center of gravity of the asset base.

There is also value that is not in appraisals, but it is not in shareholders’ pockets yet

The company has roughly 10.3 thousand square meters of unused building rights in income-producing assets, and it states that no value was assigned to those rights in the appraisals. That is interesting because it creates upside that is not fully reflected in book value. On the other hand, the company also says explicitly that realizing those rights depends on economic feasibility, levies, planning, and approvals. So this is optionality, not liquid value.

Cash Flow, Debt, And Capital Structure

Net profit does not tell the cash story

For the cash discussion, the right lens here is all-in cash flexibility. The question is not how much FFO the company can report, but how much cash remains after real project spending, working-capital needs, and other actual uses of cash. On that basis, 2025 was an investment year, not a harvest year.

Cash flow from operating activity was negative NIS 35.2 million. The company itself explains that the main reason was investment in residential inventory under construction. Investing cash flow was negative NIS 138.5 million, mainly because of acquisitions and investment in investment property. The gap was funded by positive financing cash flow of NIS 187.6 million. This is not the picture of a distressed company, but it is the picture of a business in a heavy investment phase.

This is the chart that brings the company back down to earth. FFO is not just much lower than net profit. It also shows that two of the biggest drivers of the 2025 headline result, property revaluation and securities gains, should not be read as full recurring earnings power.

The financing line improved, but not because the properties suddenly became more profitable

Finance income reached NIS 85.7 million in 2025 versus NIS 27.1 million in 2024. The main reason was an NIS 82.5 million gain on the securities portfolio, compared with NIS 23.4 million in 2024. That helped the bottom line a lot, but it does not mean the real estate business itself suddenly became dramatically more profitable.

On the other side, finance expenses rose to NIS 31.8 million, including NIS 22.0 million of bank interest, NIS 5.7 million of interest on loans from related and affiliated parties, and the effect of stopping the capitalization of part of finance costs in the Vision project after permits were received. So here again the picture is two-sided: treasury assets and liquidity generated finance income, while the pace of development also increased financing friction.

The balance sheet looks conservative, and even more so after the IPO

At December 31, 2025 the company had NIS 3.29 billion of assets, including NIS 1.96 billion of investment property, NIS 409 million of land and apartments inventory, NIS 603 million of investments in investees and partnerships, and NIS 258 million of cash and investments. Equity attributable to shareholders stood at NIS 2.231 billion. On the other side, financial liabilities stood at about NIS 829 million, including NIS 611 million of bank debt.

The company itself states that leverage as a share of the balance sheet stood at 25% including owner current accounts and minority loans, and 19% excluding those items. It also states that it had no financing agreement that qualifies as material credit at the company level. Average and effective interest on bank debt was around 6.0% to 6.1%.

The important point here is not only that leverage is relatively low, but also that the company is not relying on one dramatic refinancing event to make it through the next year. That is a real advantage. It still does not change the fact that, at the current growth pace, capital has to work hard to turn the long pipeline into actual earnings.

Forward View

Four things an investor can easily miss on first read

1. 2025 is not a rent-only peak year. It combines real operational improvement with fair-value gains, securities gains, and investee profits.
2. The story has already moved from present to future. The market is looking at the development pipeline much more than at current FFO.
3. Residential sales are being supported by aggressive payment structures. Most sales in 2025 and through the report date used 80/20, 85/15, contractor loans, or balloon-type financing.
4. The December 2025 balance sheet is already partly outdated. The IPO and the repayment of balances to the controlling shareholder materially changed liquidity very soon afterward.

The NOI pipeline is the core of the story, but it is still a forecast

Management presents an NOI path that rises from NIS 107 million in 2025 to NIS 114 million in 2026, NIS 131 million in 2027, NIS 166 million in 2028, NIS 211 million in 2029, and NIS 235 million in 2030. It also presents 13 development projects through 2030 with a total cost of NIS 656 million, of which NIS 190 million has already been invested and NIS 466 million remains to completion, alongside an expected NOI contribution of about NIS 54 million.

This is an ambitious path, and it depends on execution, permits, leasing, marketing, and the conversion of land and construction projects into income-producing assets. It is not a linear continuation of 2025. It is more than a doubling of NOI in five years.

The income-producing portfolio provides a floor, not the whole ceiling

On one hand, there is a decent base of signed lease income. Without assuming tenant options, the consolidated assets alone support fixed lease income of about NIS 72.2 million in 2026, NIS 66.0 million in 2027, NIS 68.1 million in 2028, NIS 38.6 million in 2029, and NIS 106.2 million from 2030 onward. That is a solid floor, but it is not high enough on its own to explain the company’s path to 2030, especially because the table excludes equity-accounted assets even while it also excludes future development growth.

So the existing portfolio gives visibility, but it does not tell the full growth story management wants the market to believe.

On the residential side the pipeline is large, but the gap between potential and recognition is still huge

The company presents 483 housing units under construction and marketing, plus a large additional inventory in permitting and planning. In the presentation it states that expected gross profit for projects already under execution, on the company’s share basis, is NIS 589 million, of which NIS 580 million has not yet been recognized. That is an extraordinary figure relative to the NIS 25 million of apartment-sale revenue recognized in 2025.

That means the large development profit is still ahead, if it materializes. For now it is future profit, not reported profit, and certainly not cash already sitting in the company’s accounts.

Residential sales terms need to be read with caution

The company states explicitly that most sales in 2025 and through the report date were carried out through customized payment terms, contractor loans, 80/20 and 85/15 structures, and sometimes balloon loans where the company bears the interest cost. The company adds that, in its view, this does not materially affect financing scope or total revenue, partly because leverage is low.

That is not a red flag by itself, but it does mean sales pace cannot be read as clean cash conversion. Anyone buying into the residential story needs to watch not only units sold, but also collections, revenue recognition, financing costs absorbed by the company, and whether these support structures remain necessary in 2026 and 2027.

What kind of year comes next

That is why 2026 currently looks like a bridge year with a proof burden, not a clean breakout year. For the story to improve, the company has to deliver three things at once: continued growth in yielding NOI, residential sales that translate into revenue and a reasonable pace of collections, and planning and execution progress that shortens the distance between the development pipeline and actual reported results.

Risks

Concentration to a related-party tenant

Dependence on Rami Levy Shikma Marketing is comfortable as long as the tenant remains strong. It would look different if retail conditions weakened, if the chain pushed for different terms, or if non-food-retail exposure remained too small a share of the portfolio. At this stage it is more moat than immediate weakness, but concentration of this magnitude always deserves a structural discount in the analytical reading.

Earnings quality is weaker than the headline suggests

NIS 149.4 million of property revaluation and NIS 82.5 million of securities gains are legitimate contributors to profit, but they are not substitutes for cash generated by the asset base. If 2026 brings weaker revaluation support or weaker capital-market conditions, the gap between net profit and FFO could quickly return to the center of the debate.

Development is long duration and execution risk is real

The company holds an impressive pipeline of residential, mixed-use, and urban renewal projects. But a large share still depends on rezoning, permits, tenant or resident signatures, execution, and sales pace. Even in Vision, the company is already pursuing a zoning change to turn part of the office space into rental housing. That may create value, but it also delays certainty.

Rates, inflation, and market terms still matter

The company states that the rate environment remained high through 2025, even after the cut to 4.25% in November, and that construction-cost inflation and indexation can affect project profitability. This matters even more because the company is already using flexible customer financing structures, so macro pressure on apartment demand or construction costs will hit exactly the layer that is supposed to justify today’s valuation.

Conclusions

Rami Levy Real Estate exits 2025 as a better operating company, with a stronger yielding base, a cleaner funding profile, and much better liquidity after the IPO. But it should no longer be read like a standard income-producing real estate company. The market is valuing a multi-year development and conversion story, not only the cash flow of the current portfolio. That supports the thesis as long as execution progresses, and it is also the central blockage because without that delivery the 2025 bottom line looks cleaner than it really is.

Current thesis in one line: the yielding portfolio is strong enough to carry the transition period, but most of the value the market is paying for still sits in projects and rights that have to turn into recurring income and real cash over the next few years.

What changed versus the old way of looking at the company is the shift from a family-owned rental platform with a strong tenant base to a public company asking to be valued on a future growth path. The strongest counter-thesis is that the market is already paying too early for that path, while recurring earnings remain small relative to valuation and the residential story still depends on financing-heavy sales terms.

What could change the market reading over the short to medium term is actual delivery: leasing and completion in the development portfolio, sales and collections in residential projects, and the ability to show that 2026 and 2027 bring NOI and FFO growth even without unusual help from revaluations and the securities portfolio. Why does this matter? Because this is the line between a company that owns good assets and a platform that can also convert development into durable, accessible value for shareholders.

Over the next 2 to 4 quarters the checkpoints are clear: existing NOI needs to keep growing, development needs to progress without stretching working capital too hard, and the capital raised in January 2026 has to translate into faster execution rather than merely more time.