Sano: What the warehouse and real-estate build-out is really supposed to earn
Sano's capital-allocation test actually breaks into three different return engines: operating savings from the automated warehouses, rental yield from the Emek Hefer project, and a fair-value gap that still is not cash. With no real financing pressure, the key question is no longer whether Sano can build, but what exactly these assets are supposed to earn and when.
What This Follow-Up Is Isolating
The main article already framed capital allocation as Sano's next real test. This continuation narrows the lens to a more surgical question: what is the current wave of warehouses and real estate actually supposed to earn, and in what form.
This is not one investment with one return profile. The filings point to three distinct return engines. The first is an automated warehouse in Hod Hasharon with capacity of roughly 15 thousand pallets. Construction started in 2021 and the updated completion target is during 2026. The second is the income-producing Emek Hefer logistics project, developed together with unrelated third parties, with about 71 thousand square meters of built area and an estimated cost of roughly NIS 380 million excluding land, now delayed to the second half of 2026. The third is another automated warehouse in Emek Hefer with capacity of 50 thousand pallets, expected cost of roughly NIS 320 million excluding planning costs and fees, completion expected in April 2027, and a stated purpose of replacing third-party storage services for finished goods and raw materials.
Lumping all three into one generic real-estate story is the wrong read. The automated warehouses are supposed to earn an operating return, not a property return. The Emek Hefer rental project is supposed to earn rent and, eventually, appraised value. If those channels are blended together, the real return test disappears.
What matters is that Sano has already committed a meaningful amount of capital while still withholding the most important number for an investor: how much each of these engines is meant to earn. The selected project descriptions and notes provide size, capacity, cost and timing. They do not provide a target return, an expected rental-income figure, or a quantified annual saving from replacing outside storage. That is why 2026 and 2027 are not just completion years. They are proof years.
| Project | What the filings say | What kind of return it should create | What is still missing |
|---|---|---|---|
| Hod Hasharon automated warehouse | Roughly 15 thousand pallets, project started in 2021, completion during 2026 | Operating efficiency, capacity and logistics improvement | No savings estimate or return target |
| Emek Hefer income-producing project | Two-story logistics center of roughly 71 thousand sqm, estimated cost of roughly NIS 380 million excluding land, completion in H2 2026 | Rental income and value creation versus cost | No disclosure of expected rent, occupancy or target yield |
| Emek Hefer automated warehouse | 50 thousand pallets, expected cost of NIS 320 million excluding planning and fees, funded from own resources, completion in April 2027 | Replacement of third-party storage, operating savings and logistics flexibility | No quantified saving target |
Where The Money Already Sits
Even without a full project-by-project bridge, the accounts make the capital bias clear. In 2025 Sano bought NIS 189.5 million of property, plant and equipment, and roughly NIS 163.1 million of that went into land and buildings. In 2024 the company bought NIS 182.7 million of property, plant and equipment, and roughly NIS 147.5 million of that went into land and buildings. At the same time, investment property increased by another NIS 22.8 million in 2025 after a NIS 45.8 million increase in 2024.
Those numbers do not allocate every shekel to a specific project, but they do say something sharp about priorities: most of Sano's capital spending over the last two years has gone into land, buildings and logistics infrastructure, not into ordinary manufacturing equipment and not into a side financial move.
That is the point where the story needs discipline. Heavy logistics spending can be a very good allocation decision, but only if it genuinely replaces outside cost, unlocks a bottleneck, or builds a high-yield asset. Large capital spending is not the return. It is only the precondition for a return.
In the Emek Hefer automated warehouse case, Sano explicitly states what the benefit is supposed to be: replacing third-party storage services for finished goods and raw materials. That wording matters because it says the payback should come through supply-chain economics, not through a revenue spike. Investors should not look for a classic top-line growth engine there. They should look for lower outside-storage costs, better inventory flow and possibly more flexibility inside the distribution network.
The Emek Hefer income-producing project is a different economic animal. There the return is supposed to come from leasing to third parties, so the right test is different as well: rent, occupancy and yield on cost and land.
The Fair-Value Gap Is An Option, Not Cash
This is where one of the most interesting gaps in the story sits. Sano carries its investment property at cost. At the end of 2025 the depreciated cost of the Emek Hefer income-producing project stood at NIS 220.8 million, while its fair value was estimated at NIS 280.1 million. At the end of 2024 the numbers were NIS 198.0 million of cost versus NIS 226.1 million of fair value.
In other words, the fair-value gap almost doubled within a year, from roughly NIS 28.1 million to roughly NIS 59.3 million.
But this is exactly where analytical discipline matters. This is still not cash earnings, and not even proven property-level operating income yet. The project is still under construction, and the 2025 fair value was based on an external appraiser using a discounted cash flow method with assumptions on occupancy and rent per square meter. In 2024, by contrast, fair value was based on the 2021 sale transaction because there was no comparable transaction data in the area.
That means the larger gap reflects additional investment in the project, but also a shift in methodology. It is therefore not right to read the NIS 59.3 million gap as if that return has already been locked in. For now it is an appraisal-based value option on a project that still has to reach completion, leasing and occupancy.
That is the core point. If Sano completes the project on time, leases it at terms that support the appraiser's assumptions, and converts that gap into recurring rent or eventual monetization, the value is real. If not, the gap remains mostly a nice appraisal number in the report.
The Right Cash Frame: All-In Cash Flexibility
To judge whether Sano is taking financing risk here, the stricter cash frame is the relevant one, not a normalized pre-capex number. The correct frame here is all-in cash flexibility, meaning how much cash was left after the period's actual cash uses.
In 2025 Sano generated NIS 270.3 million from operating activities. In the same year it used a net NIS 249.0 million for investing activities, paid NIS 64.6 million in dividends to shareholders, repaid NIS 15.7 million of lease liabilities and paid another NIS 1.9 million of dividends to non-controlling interests. Before FX effects, the full cash picture was negative by roughly NIS 60.8 million.
That does not read like a financing-stress story. Sano still ended 2025 with NIS 294.6 million of cash and cash equivalents, and the cash-flow statement does not show new debt financing carrying the move. More than that, the large Emek Hefer automated warehouse is explicitly described as a project to be funded from the company's own resources.
But the point should not be softened too much either. The absence of financing pressure does not mean the move has already succeeded. It means Sano has bought itself time to prove the return. Once a company can pay for the build-out from its own balance sheet, the investor stops asking whether there will be a raise or a refinancing and starts asking whether the capital will actually earn.
So the bottleneck here is not financing. It is return measurement. That is a big distinction. In a leveraged company the first question would be balance-sheet risk. In Sano the first question is whether the logistics and real-estate build-out will become visible returns within two to three years, rather than just more expensive assets on paper.
The Management Shift Sharpens The Direction Of Travel
At the end of December 2025 Sano announced that, following Yuval Landesberg's request to focus on the company's business development and entry into new activity areas, Liran Nesimi, then deputy CEO, would become CEO on April 1, 2026, while Landesberg would move to deputy CEO focused on business development.
That filing does not change the 2025 numbers, but it does change how the capital-allocation story should be read. If Sano chooses to split day-to-day management from business development and entry into new activities, it is effectively saying that capital allocation and expansion now require dedicated management attention.
That is why the warehouse and real-estate wave is not only an engineering or accounting test. It is also a management test. Sano will have to show that this separation produces discipline: one leadership lane that executes, and another that makes sure the new investments actually produce returns rather than just a larger asset base.
Conclusion
The right question around Sano's warehouse and real-estate push is not whether there is generic value here. There is already paper value, and the balance sheet can carry the interim period. The real question is what type of value each engine is meant to create, and how quickly that value becomes measurable.
In the automated warehouses, the return should come through savings, efficiency and reduced dependence on outside storage. In the Emek Hefer income-producing project, the return should come through rent, occupancy and the conversion of fair value into real earning power. Until those two channels are supported by disclosed savings figures or disclosed rent figures, Sano remains in a stage where the investment is already committed but the return is still mostly being narrated forward.
That is exactly what makes 2026 and 2027 the real return test for capital allocation at Sano. Not because cash is scarce, and not because financing pressure is acute, but because the cash has already gone out and now it has to start working.
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