Harrison II: How Much Value Actually Leaves the Project and How Much Stays in Trust
As of December 31, 2025, Harrison II carried USD 159 million on the condo side and another USD 161 million on the rental and commercial side. But Series V cash already flows first into early redemptions and interest, while the February 2026 Series H amendment makes clear that full net sale proceeds must go into trust before anything can move higher in the structure.
What This Follow-up Is Isolating
The main article established the core point: Harrison II is where Spencer has already created value, but not the same value is accessible at the group level. This follow-up isolates the waterfall itself. The question here is not how much Harrison II is worth on paper. The question is where cash first runs through Series V, where it gets trapped inside Series H, and what can actually move above the collateral stack.
The easiest mistake is to add up the December 31, 2025 appraisal numbers and treat Harrison II as one future cash pot of roughly USD 320 million: USD 159 million for the remaining condo inventory, plus USD 161 million for the rental and commercial side. That is the wrong read. Harrison II is not one pool of cash. It is two separate collateral silos with two very different waterfalls.
On the condo side, the remaining inventory is not worth the USD 202 million gross sellout value in free cash terms. It is worth USD 159 million on an As Is basis. That means time, selling costs, and discounting already remove roughly USD 43 million before the Series V deed even gets involved. On the rental side, the commercial units are the piece closest to monetization, but in February 2026 the company needed a deed amendment just to sell them, and only on the condition that all net proceeds stay first in the trust account and go to early redemption with no surplus release.
The result is that Harrison II is already proving value creation, but the path from value to accessible cash is split into two distinct channels: on the Series V side, value is already becoming sales, trust-account balances, early redemptions, and partial releases; on the Series H side, the commercial value is still being converted first into balance-sheet repair for that specific debt layer.
| Layer | Anchor date | Amount | Who sits on the cash first | Why it is still not free cash |
|---|---|---|---|---|
| Remaining condo inventory | December 31, 2025 | USD 159 million As Is | Series V | This is present value of the remaining sellout, not gross proceeds, and the deed waterfall still comes first |
| Gross condo sellout of the remainder | December 31, 2025 | USD 202 million | No one, this is only the top-of-funnel number | Selling costs, carry, and discounting reduce it before the debt layer |
| Rental portion | December 31, 2025 | USD 142 million As Is | Series H | This is asset value for a not-yet-stabilized property, not a cash balance |
| Commercial units under contract | December 31, 2025 | USD 19 million | Series H | From February 2026 onward, their net proceeds are explicitly trapped for early redemption |
That chart matters because it separates three layers that are easy to blur together. USD 159 million of condo value is not the same thing as USD 159 million of accessible cash. USD 19 million of commercial units under contract is not USD 19 million that can simply be released.
Series V: The Condo Side Is Already Becoming Cash, but Not Free Cash
On the Series V side, there is already real conversion of value into cash. By December 31, 2025, 98 condo units had sold for aggregate proceeds of USD 163.3 million, and 106 units remained, including 26 units under contract. By the time the annual report was published on March 26, 2026, the picture had already moved another step: 90 units had been delivered during 2025 for about USD 152 million, one additional condo was delivered in early 2026 for about USD 1.3 million, and 14 sale agreements remained outstanding for about USD 26 million. These are not contradictory numbers. They are two different dates along the same monetization path.
What matters more is the first destination of the cash. From the original issuance of Series V through near the annual-report publication date, 99 condo units had been delivered for about USD 165 million. Of that amount, about USD 156 million had either been released to the asset company or used for early redemption and interest payments. At the same time, about USD 12.3 million was still sitting in the Series V trust account near the report date, and 105 of the original 204 units were still pledged. Even on the side where cash is already coming in, it does not meet the group’s free cash box first.
That chart sharpens what is easy to miss on first read. The condo side is not only creating value. It is already de-leveraging debt in practice. During 2025 the company executed four partial early redemptions totaling NIS 232.6 million par, taking Series V outstanding principal down from NIS 600 million to NIS 367.4 million. That is already a move from appraisal value to balance-sheet action.
But even here, it is worth stopping before calling it “cash that has been freed.” The appraisal for the remaining 106 units shows gross retail value of USD 202.1 million versus As Is value of USD 159.4 million. That gap is not cosmetic. It reflects sales commissions, carry, legal and transfer costs, unit carry, required developer profit, and discounting over the projected sales periods. In other words, even the unsold balance is not economically equivalent to its gross sellout number before the Series V waterfall even begins.
Wallabout’s 2025 cash-flow statement, the asset company for the condo side, shows the same point from another angle. In 2025 it generated USD 125.1 million of operating cash flow, mainly because condo inventory fell by USD 105.8 million. But against that, financing cash flow was negative USD 124.9 million, including USD 144.8 million of related-party loan repayment and USD 63.7 million of net distributions to owners, partly offset by USD 83.5 million of related-party loan inflow. Year-end cash was only USD 159 thousand.
| Wallabout, condo side | 2025 | What it means |
|---|---|---|
| Operating cash flow | USD 125.1 million | Closings are already generating real cash |
| Financing cash flow | Negative USD 124.9 million | Almost all of that cash is immediately absorbed by the financing waterfall and internal capital movements |
| Net distributions to owners | USD 63.7 million | There is some route for release, but only after the deed mechanics take their share |
| Year-end cash | USD 0.159 million | The asset company does not end the year sitting on a waiting pile of cash |
The message is straightforward: on the Series V side, Harrison II already proves that the project can convert condos into cash, but that cash first behaves as redemption, interest, and controlled movement inside the structure. It does not emerge as one clean block of free liquidity.
Series H: The Commercial Side Opens Only If the Cash Does Not Leave
If the condo side is the story of monetization already underway, the Series H side is still the story of a property in transition. As of December 31, 2025, the rental portion of Harrison II was appraised at USD 142 million As Is, with another USD 19 million assigned to commercial condo units already under contract. But at the same date, Series H LTV stood at 77.8%, above the 77.5% rate step-up trigger. The actual coupon had already risen to 6.89% from a 6.39% base rate, and the margin to the 80% hard covenant remained narrow.
That is exactly the background for the February 18, 2026 presentation. The company said the asset company had two signed sale agreements for commercial condo units totaling about USD 11.5 million, plus negotiations for another unit at about USD 5.75 million. The presentation itself framed the total expected proceeds as about 13% of Series H. That is clearly material, but far from a full solution.
The problem was mechanical: the LTV gate did not allow the sale to go through. The company therefore asked to amend the deed. In the amendment text, which was approved on February 26, 2026, the company committed that the full net sale proceeds, after deducting the additional portion designated for improvements under the transaction terms, would be deposited directly into the trust account. It also committed that the full net proceeds would be used for partial early redemption no later than the end of the quarter following the quarter in which the transaction closed. And the most important sentence is the short one: no surplus from such a transaction will be released to the company.
That means the Series H amendment did not open a release valve. It only opened a path to sell while bypassing the old transaction-level LTV blockage. The company got a way to realize existing commercial value, but in exchange it accepted that this monetization would not create immediate excess liquidity at the group level. For Series H holders that is perfectly rational. For the broader Spencer structure it is further proof that Harrison II value is still working first as repair capital for the specific secured layer.
The cash profile of Harrison Plaza, the Series H asset company, points in the same direction. In 2025 it recorded USD 3.0 million of rental revenue and USD 2.3 million of gross profit, but operating cash flow was negative USD 9.9 million, investing cash flow was negative USD 1.2 million, and only positive financing cash flow of USD 10.45 million allowed it to finish the year with USD 337 thousand of cash. It also paid USD 6.9 million of cash interest during the year. All of that comes before the affordable residential units begin occupancy, which is only expected in the second half of 2026.
In plain language, the Series H side is still not at the stage where it generates a surplus. It is at the stage where each commercial monetization is judged first by how much debt it can retire and how quickly it can move the series away from the 77.5% to 80% pressure zone.
Two Asset Companies, Two Cash Pictures
The sharpest way to understand Harrison II is not through headline asset value, but through the two asset companies that hold the two project silos.
This is the most important chart in this continuation. The Series V side proves that the project can generate cash when condos close. The Series H side proves that the project still needs financing to get through the transition period before stabilization. Together they explain why Harrison II cannot be treated as one unified source of liquidity.
On the Wallabout side, cash is generated and then almost immediately disappears back into the system. On the Harrison Plaza side, cash is not yet being generated at the level required for release, which is why the upcoming commercial sales are defined not as a liquidity event but as forced debt reduction in economic terms. That is the difference between value created and value accessible.
There is also a subtler point here. Series V already shows that a partial release path can exist, otherwise Wallabout would not have recorded USD 63.7 million of net owner distributions in 2025. So it is not correct to say that every dollar in Harrison II is trapped forever. But it is just as wrong to take all of Harrison II’s value and treat it as though it sits in one Spencer cash box. The filings show the opposite: some cash is used to retire debt, some sits inside a dedicated account, and some can move upward only after the relevant series waterfall has already taken its share.
Bottom Line
Harrison II is no longer a story about whether value exists. It is a story about where that value stops on the way out. On the Series V side there are already condo sales, partial releases, and early redemptions, but even there the unsold balance is far from gross cash and the incoming cash still runs through the series first. On the Series H side, the rental and commercial value is real, but the most monetizable piece was converted in February 2026 into a mechanism for early redemption with no surplus release.
So anyone looking at USD 320 million of Harrison II value and seeing one future group-level cash pool is missing the mechanism that actually drives Spencer’s credit story. For now, Harrison II is more of a de-leveraging machine than a free-cash pipe. If residential occupancy begins on schedule, Series H LTV moves away from the pressure zone, and the condo side keeps reducing the remaining inventory at a reasonable pace, more of that created value may eventually become accessible. The 2025 and early 2026 documents do not show that yet. They show the waterfall working.
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