Rent It: The external management layer is still eating into share-level value
The main article showed that Rent It's rental engine is already working. This follow-up shows that the listed company itself still has almost no internal management base, while a NIS 5.62 million management layer is paid based on asset scale and NOI, and even management's adjusted FFO remains negative.
What This Follow-Up Is Isolating
The main article already established that Rent It's rental engine is working. In 2025, NOI rose to NIS 20.7 million, and the core question is no longer whether the assets can generate rent. This follow-up isolates what sits above that engine: the external management layer, and the way it captures value before that value reaches the share.
The sharp read starts with four points:
- The public company itself is almost empty. It directly employs one bookkeeping employee, while the CEO, CFO, chair, and management services sit with the management company.
- The public-market transition did not internalize management. It ended formal control, but it still left the management company with the right to appoint a number of directors equal to a board majority minus one.
- The compensation formula pays on scale and NOI before it pays on share-level value. The amended agreement gives the manager 0.45% of relevant asset value after deducting cash, cash equivalents, and tradable securities, plus 2.5% of NOI, alongside a quarterly equity component.
- Even the friendlier adjusted view is still negative for shareholders. FFO under the Securities Authority approach was negative NIS 15.0 million, and even under management's own approach it remained negative NIS 8.2 million.
This chart is not a full accounting bridge. It shows proportion. Rent It already generates real NOI, but the management layer is not a minor overhead line around a mature business. It is part of the reason shareholders still do not see clean economics.
This Is Not Just a Governance Footnote
It is easy to read the management agreement as a governance issue only. That is a mistake. At Rent It, it is already a real economic layer.
The company directly employs one bookkeeping employee. It also has a service agreement with a property manager. That is the direct internal base. The CEO, Sharon Tusiya-Cohen, also serves as CEO of the management company and as a director of the company. CFO Omri Tal is employed by the management company. Chair Aharon Fogel also provides his services through the management company. The company itself also states that it has a certain dependence on Sharon Tusiya-Cohen as a key person.
| Layer | How it sits in practice | Why it matters |
|---|---|---|
| Direct company base | One bookkeeping employee and a property manager under a service agreement | The listed company itself has almost no internal management base |
| Senior management | CEO, CFO, and chair employed through the management company | The real managerial and strategic center of gravity sits outside the listed entity |
| Key-person dependence | The company states that it has a certain dependence on Sharon Tusiya-Cohen | The risk is concentrated in both the contract and one management figure |
What makes this sharper is one of the company's own explanations for the change in general and administrative expense: after the CFO replacement, the CFO's salary is paid only at the management company. In other words, part of the management cost did not disappear. It changed address. For shareholders, that matters because under an external model the full economic management layer has to be measured, not just the payroll that still sits directly at the listed company.
The Compensation Formula Pays the Manager Before It Cleans Up Shareholder Economics
In July 2025, close to the share listing, the company agreed on a material amendment to the management agreement. Formally, the management company's control ended when the shares were listed. In practice, the new agreement did not create an internally managed REIT. It created a more explicit external model with a still-strong governance position.
| Component | What the agreement says | Economic meaning |
|---|---|---|
| Fixed component | 0.45% of company asset value after deducting cash, cash equivalents, and tradable securities | The manager gets paid on platform size before value reaches the share |
| Variable component | 2.5% of company NOI, meaning 0.625% per quarter | Even operating improvement at the asset level first translates into payment to the manager |
| Equity component | Quarterly share grants at an annual rate of 0.06% of net company assets, rising linearly up to 0.1% when market cap moves from 80% to 100% of equity | If the market starts rewarding the stock closer to equity value, the manager's equity pay rate rises |
| Governance and term | Right to appoint a board majority minus one, term through March 15, 2031 with automatic seven-year renewals, and an extra 12 months of fees if the company ends the key person's tenure | This is not an easy-to-remove operating fee line but a deep contractual layer |
That is the core of the thesis. External management is not automatically a flaw in a young platform. The question is the price and the order of priority. In Rent It's agreement, the price sits on assets, on NOI, and on shares, while ordinary shareholders are still waiting to see positive FFO.
The 2025 Numbers Show Why This Layer Is Already Heavy
In 2025, the income statement recorded NIS 5.311 million of management fees to the management company, plus another NIS 309 thousand of share-based management compensation. Together, that is a NIS 5.62 million management layer recognized in the accounts.
This is no longer the notional benefit of the setup period. In 2024 the company still recorded NIS 531 thousand of notional management fees. In 2025 that line went to zero, and what appears instead is a real charge: cash management fees rose to NIS 5.311 million, up 52% from NIS 3.494 million in the prior year. That is exactly what the agreement is designed to do. As assets grow and NOI rises, the manager's invoice grows as well.
The proportion is stark. Against NOI of NIS 20.702 million, cash management fees alone were equal to 25.7% of NOI. Once the equity component is added, the management layer recognized in the accounts reaches 27.1% of NOI and about 23.9% of rental and management income, which totaled NIS 23.48 million. That is not a detail that can sit in the margin.
But the real test is not the expense line by itself. The real test is what remains after it at the shareholder layer. Here the filing is clear. FFO under the Securities Authority approach was negative NIS 14.98 million. Management's own approach adds back NIS 6.509 million of non-cash CPI linkage expense on debt principal, plus the NIS 309 thousand of share-based management compensation. Even after those adjustments, FFO remained negative NIS 8.162 million.
That is the heart of the story. The management layer is not sitting on top of a REIT that has already crossed into clean positive economics. It sits inside a model where even the more management-friendly read still does not show surplus value for shareholders. So the relevant question is no longer whether external management is defensible in principle. It is whether shareholders are already getting economics that cover it. As of year-end 2025, the answer is still no.
What Has to Change Before This Stops Eating Share-Level Value
For this reading to improve, it is not enough for the portfolio to get bigger. More has to remain at the share level after that growth.
Three things matter from here:
- Positive FFO after the actual management layer. Not only after neutralizing fair-value gains, and not only after friendlier add-backs, but after the management fees the contract really charges.
- A meaningful decline in the management layer as a share of NOI. If Netanya and the next assets join, the question is whether management cost becomes more tolerable as a percentage of NOI, or simply keeps climbing with the asset base.
- A simpler alignment structure with shareholders. That could come through a contractual change, through future internalization, or through clear proof that the current agreement no longer absorbs most of the operating leverage.
Bottom line: in Rent It as of 2025, the external management layer is not a legal footnote. It is an economic mechanism that takes a slice of assets, a slice of NOI, and an equity slice while FFO for shareholders is still negative. Until that equation flips, the external management layer is still eating into share-level value.
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