Rami Levy Real Estate: How Much of 2025 Profit Is Actually Recurring
Rami Levy Real Estate reported NIS 245 million of net profit in 2025, but the bridge to FFO and cash flow shows that a large share came from property revaluations, securities gains, and investee profits. Even after management's fair-value financing adjustment, AFFO reaches only NIS 62.4 million and operating cash flow remains negative.
The main article focused on the gap between today's NOI and the development pipeline the market is already capitalizing. Before pushing further into that question, there is a more basic one to isolate: how much of the exceptional 2025 profit actually came from the rental engine, and how much came from revaluations, the securities book, and equity-accounted holdings.
This is not a semantic distinction. In 2025, income from investment property rose to NIS 97.3 million and NOI reached NIS 106.6 million. The core business did improve. But net profit rose much faster, to NIS 245.0 million. This follow-up narrows in on that bridge, then checks what is left once the profit line is pushed through FFO and through cash.
- First finding: NIS 245.0 million of net profit shrinks to NIS 58.7 million of regulator-style FFO, NIS 59.8 million of management FFO, and only NIS 62.4 million even after the AFFO-style add-back.
- Second finding: Two items alone, the NIS 149.4 million upward revaluation of investment property and the NIS 82.5 million gain on marketable securities, explain almost the entire distance between headline profit and recurring earnings.
- Third finding: Equity-accounted investees added NIS 30.8 million to earnings, but the cash-flow statement backs that line out in full, and operating cash flow still ended 2025 at negative NIS 35.2 million.
The Profit-to-FFO Bridge
| Layer | 2025, NIS million | What it really captures |
|---|---|---|
| Net profit | 245.0 | Full IFRS result, including revaluations, securities, and investees |
| Regulator-style FFO | 58.7 | Recurring earnings after stripping out most valuation and investment effects |
| Management FFO | 59.8 | The same picture, plus limited management adjustments |
| AFFO | 62.4 | After adding back the NIS 2.6 million fair-value gap on the controlling-shareholder loan |
| Operating cash flow | (35.2) | Actual operating cash generated in 2025 |
This is the core of the issue. Net profit was up 54.6% versus 2024, but management FFO rose only 14.7%. Even after the AFFO-style adjustment, which adds back the gap between the financing cost booked under fair-value accounting and the actual cost of the controlling-shareholder loan, the result is only NIS 62.4 million. That is roughly one quarter of reported net profit.
The gap does not come from one small accounting quirk. It is built on two very large layers. The first is the NIS 149.4 million upward revaluation of investment property. The second is the NIS 82.5 million gain on marketable securities. Together that is NIS 231.9 million before tax. FFO adds back NIS 52.7 million of tax effects tied to those adjustments, but even after tax, and even after smaller items, recurring earnings remain far below the headline number.
That does not mean 2025 profit was fictitious. The revaluations say the assets are worth more, and the securities portfolio did appreciate. But that is precisely the point: accounting value creation, operating earning power, and cash that actually comes back to shareholders are not the same thing. 2025 created value, but only a minority of that value behaved like recurring earnings.
The Finance Line Looks Strong Only Because of the Securities Book
The most misleading line item is finance income. On first read, it looks as if financing stopped being a burden and became a profit engine: 2025 ended with NIS 53.9 million of net finance income, versus only NIS 9.2 million in 2024. But the right read is almost the opposite. Finance expense itself rose to NIS 31.8 million, up from NIS 18.0 million a year earlier.
Management says this explicitly at the board-report level: finance expense increased because of higher interest expense on the parent-company loan and because borrowing costs were no longer capitalized in the Vision project once permits were obtained. In other words, funding did not become cheaper in 2025.
What flipped the line positive was mainly the NIS 82.5 million gain on marketable securities. That is a capital-markets item, not evidence that the income-producing portfolio suddenly became easier to finance. By year-end, the listed securities portfolio stood at NIS 225.9 million, up from NIS 148.0 million at the end of 2024, and the fair-value sensitivity table shows that a 10% move in market prices would create roughly NIS 22.6 million of profit or loss. That is a material swing relative to the company's recurring earnings base.
So 2025 contains two different stories. One is that the underlying real-estate engine did improve. The other is that the bottom line was also heavily shaped by capital-markets exposure. If those stories are blended together, too much of the profit will be attributed to rental economics that did not actually produce it.
Equity-Accounted Profit Supports Earnings, Not Cash
The second layer that widens the gap between profit and cash is the investee line. In 2025, the company recorded NIS 30.8 million as its share of profit from associates and joint ventures. Management attributes the increase mainly to Mega Or Rami Levy, and the investments note shows that Mega Or Rami Levy alone contributed NIS 22.1 million, roughly 72% of the entire line.
The more important message sits in the bridges. In the FFO bridge, NIS 10.5 million is removed as adjustments relating to associates and joint ventures. That means even the company itself is saying that not everything inside the investee-profit line should be treated as recurring earnings.
The cash-flow statement is even clearer. In the reconciliation to operating cash flow, the full NIS 30.8 million is deducted from the cash bridge. So in 2025 this line supported reported earnings, but it did not fund operating cash flow in the same period.
That distinction matters in a company like this. Investee profit can still be high quality, especially when it comes from income-producing real estate, but it still sits one layer above the reporting company's operating cash. Again, the point is to separate value recognized in earnings from value that has already passed through cash.
Cash Conversion Still Has Not Arrived
This is where the all-in cash flexibility test matters. If the question is how much profit really "comes back," FFO is not enough. The report explicitly states that FFO does not show the cash held by the company or its ability to distribute it. The last filter has to be cash flow.
In 2025, operating cash flow remained negative NIS 35.2 million. That was better than the negative NIS 54.8 million of 2024, but it was still not a year in which reported profit converted into cash. The board points to investment in apartments under construction as the main reason, and the operating cash-flow appendix quantifies that as a NIS 71.3 million increase in land and housing inventory. Receivables also rose by NIS 17.0 million, and only part of that was offset by a NIS 10.2 million increase in suppliers and service providers.
The wider picture is even cleaner. In 2025, the company generated negative NIS 35.2 million of operating cash flow, negative NIS 138.5 million of investing cash flow, and positive NIS 187.6 million of financing cash flow. Put differently, the year's cash movement was ultimately carried by financing inflows, not by reported profit.
That is not automatically a flaw. A real-estate company with an active development pipeline can look like this in transition years. But it is exactly why NIS 245 million cannot be treated as profit that naturally returns to shareholders without asking three separate questions: how much survives the FFO bridge, how much passes through cash, and how much remains tied up in inventory, valuation gains, or investee earnings.
Bottom Line
Rami Levy Real Estate did post real improvement in the core income-producing portfolio in 2025. Rental income rose, NOI rose, and FFO moved in the right direction. But that is not the full story behind NIS 245 million of net profit. Most of the jump at the bottom line came from property revaluations, securities gains, and investee profit, and only a minority behaved like recurring earnings or cash.
That is the point the market can miss on first read. If the lens stays on net profit, 2025 looks like a breakout year. If the lens moves through FFO, AFFO, and cash conversion, the picture becomes more restrained: the income-producing engine is improving, but earnings quality has not yet completed the move from marks to cash.
That also defines the 2026 test. For 2025 profit to earn a higher quality reading in hindsight, the company will need to show that NOI and FFO keep growing without similar support from revaluations and market gains, that residential inventory starts releasing cash, and that more of the earnings from associates eventually show up as cash rather than only as an equity-accounted line.
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