Megido and Sale Structures: How Much of 2025 Demand Was Funded by Customer Financing
Megido's 2025 sales mix was not built on plain cash terms. The company sold 341 units under regulated linear schedules for subsidized buyers, while the 149 free-market units were mostly backed by contractor loans and otherwise usually 20/80 or 15/85 structures. That may not hit reported profit immediately, but it already shows up on the balance sheet: contract assets jumped to NIS 140.1 million and net contract working capital expanded by another NIS 44.2 million.
What This Follow-Up Is Isolating
The main article already established the core gap: Megido's 2025 looked much stronger in sales than in cash conversion. This follow-up isolates the layer underneath that gap, the actual payment structures behind the 490 units sold during 2025, and how those structures are already visible in the balance sheet and cash-flow bridge.
The key point is that not every sales structure carries the same economics. Megido sold 341 units to subsidized buyers under a linear payment path. The other 149 units, the free-market bucket, sat on a very different structure: most included contractor loans, and the remainder usually used 20/80 or 15/85 terms. Those are not the same concession, but they do point in the same cash-conversion direction: a larger part of the consideration is pushed forward in time.
That is also the distinction that matters here. Demand in 2025 was not low quality because buyers disappeared. It was structured demand, supported by payment terms that kept cash further behind accounting recognition. The company says these arrangements do not have a material effect on results because they are effectively an alternative to a price discount. That may be fair at the unit-profit level. It does not change the fact that year-end closed with much more recognized revenue still sitting outside the cash balance.
That chart does not measure the exact interest subsidy. It shows something simpler and still decisive: every part of the sales volume that Megido explicitly breaks out in the report already sits on payment structures that are different from the old plain-progress collection model.
Two Tracks, Two Different Economics
It is important not to blend the two types of sales into one category. The sales to eligible buyers in the Price Target program are not contractor loans. Under that program, the buyer pays up to 7% at signing, a second payment within 45 days of the permit if no permit existed at signing, the remaining payments are spread evenly until 90%, and the final 10% is paid at delivery and receipt of Form 4. This is a regulated payment schedule, not a financing campaign designed by Megido itself.
But from the developer's perspective, that track still does not create especially front-loaded collections. It spreads the cash receipts across the project life and, in some projects, leaves limited room to bring cash in materially faster. So 341 units under a linear schedule are not the same thing as cash sales, even if they are not contractor-loan sales.
The free-market structure is more aggressive. Megido describes a payment pattern in which the buyer usually pays about 20% upfront, another 50% to 60% is funded through a contractor loan, and the remainder is paid around three months before the contractual delivery date. In the annual marketing disclosure, the company adds that of the 149 free-market units sold in 2025, most included contractor loans and the rest usually used 20/80 or 15/85 structures. In most agreements, mortgage interest was subsidized, and the remaining balance was not indexed to the construction-input index or to other indices.
That is a different economic story. Here the developer is not only spreading collections. It is also helping the customer finance the period between signing and delivery. In the company's own description, the contractor loan usually represents 30% to 40% of the apartment price, and the company prepays the mortgage interest. In other words, part of 2025 free-market demand rested not only on the apartment itself or the project location, but also on the developer carrying part of the interim financing burden.
| Track | Known 2025 volume | Main payment pattern | Economic implication |
|---|---|---|---|
| Price Target, linear schedule | 341 units | Up to 7% at signing, another payment after permit if needed, the balance spread evenly to 90%, and 10% at delivery | Collections are spread and regulated, not contractor-loan financing but also not front-loaded cash collection |
| Free market with contractor loans | Most of the 149 units | Roughly 20% down, up to 50% to 60% via contractor loan, balance around 3 months before delivery | Interest subsidy and material payment deferral to the customer |
| Free market on 20/80 or 15/85 | The remainder of the 149 units, usually | A small share at signing and most of the cash near delivery | Revenue can move ahead of cash while the developer carries the interim period |
The report does not disclose exactly how many of the 149 free-market units were contractor loans and how many were 20/80 or 15/85 deals. It also does not separately quantify the cost of the interest subsidy or the loss of indexation. So it is impossible to put a precise shekel price on each marketing tool from this filing alone. But it is possible to say with confidence that 2025 free-market demand was sold under financing support and deferred consideration, not under normal collection terms.
Accounting Lets Revenue Move Ahead Of Cash
Megido's accounting policy explains why this gap does not have to hit the profit and loss statement immediately. The company recognizes revenue from apartment and commercial-space sales over time, based on the overall progress of the project. That means a sale can enter revenue while the cash curve still lags behind it.
The accounting note also explicitly states that when the contractual payment schedule does not match the pace of progress, for example when a material part of the consideration is pushed to the end of the project as in 20/80 deals, the company adjusts the promised consideration for the time value of money. In other words, the filing itself acknowledges that time is part of the economics of the sale, not just a technical line in the collection schedule.
But from the outside investor's point of view, that accounting adjustment does not solve the cash question. It only governs how revenue is recorded. Cash can still arrive later, and the balance sheet already shows that this is exactly what happened in 2025.
At year-end 2025, contract assets stood at NIS 140.1 million, up from NIS 79.8 million at the end of 2024. The company directly explains that increase as the gap between construction progress and collections, a gap driven by payment schedules that were agreed in advance in the sales contracts. That is not an external interpretation. It is the company's own explanation of the balance-sheet movement.
On the other side, contract liabilities rose only to NIS 85.8 million from NIS 67.7 million. The explanation is similar, the mismatch between completion and collections. But the numbers show clearly that the receivable side of the contract equation grew much faster than the advance-payment side.
That chart is the center of this continuation. It does not say every rise in contract assets is automatically a problem. In a residential developer, project timing and delivery stages always matter. It does say that in 2025 the accounting step forward was much faster than the cash step.
If the three relevant balances are combined, contract assets, apartment-buyer receivables, and contract liabilities, the picture becomes sharper. At the end of 2024, Megido's net contract working-capital position stood at about NIS 37.7 million. At the end of 2025, it had already reached about NIS 82.0 million. That is an increase of about NIS 44.2 million in one year.
That number needs to be handled fairly. It does not prove that all NIS 44.2 million came only from contractor loans. It does prove that Megido ended 2025 carrying much more recognized revenue that had still not closed into cash, and that the year's payment structures pushed the contract balance sheet in exactly that direction.
This Is Not The Whole Cash-Flow Story, But It Is The Demand-Quality Story
To avoid overstating the case, two things have to be separated. The first is sales quality. The second is the company's total cash flow. They are not the same issue.
In the cash-flow statement, Megido reports NIS 151.0 million of cash generated from operations before land purchases. Only after NIS 172.4 million of land purchases and land inventory investment does total operating cash flow fall to negative NIS 21.3 million. In other words, what pushed total operating cash flow into negative territory in 2025 was first of all land expansion and the aggressive buildout of the development pipeline.
But that does not clear the sales structures. It only puts them in the right place. The payment structures are not the only explanation for the negative operating cash flow, but they are the explanation for why the 2025 sales engine looks better in revenue than in cash. That is exactly what the jump in contract assets shows, and why the contract gap widened much faster than contract liabilities.
There is also an important nuance against the company's argument that these financing arrangements are just an alternative to a price discount and therefore do not materially affect results. That may be fair in one dimension: the company chose to give up price or financing support, and either route can be a way to close the deal. But at the cash level the difference is material. A price discount cuts unit profit. A contractor loan or a 20/80 structure delays the moment when the consideration actually reaches the cash balance. Those two routes can be substitutes in sales language, but they are not the same thing in working-capital terms.
That is also the right way to read the gap between the headline and the more skeptical read. Megido did not suffer from a lack of demand in 2025. It sold plenty. The real question is how much of that demand was willing to close without the company carrying part of the interim period. The filing does not give a precise number for that. It does give enough evidence to establish the direction: in the free market, most of the sales used contractor loans, and the rest usually used 20/80 or 15/85.
What Needs To Happen Next
If this concern is going to ease, it will not be because of another sales headline alone. Three concrete things need to happen.
The first is contract assets need to stop outrunning contract liabilities. If 2026 shows deliveries and collections that push that line backward, the right conclusion will be that 2025 sale structures were mainly a temporary cash deferral rather than a structural deterioration in demand quality.
The second is the free-market deals signed in 2025 need to convert into cash close to delivery, without a spike in cancellations and without further slippage of the consideration curve. The 2025 report does not disclose any unusual cancellation rate, so the current checkpoint is not cancellations as such. It is the cash-conversion pace of those already recognized sales.
The third is the company needs to avoid deepening these financing structures even further in order to preserve free-market sales pace. If 2026 still relies to a similar degree on contractor loans, 20/80, or 15/85, then 2025 will start to look less like a one-year adjustment and more like a new normal for a weaker market with softer collection terms.
The bottom line of this continuation is simple. Megido proved in 2025 that it can generate demand. It has not yet proved that this demand reaches the cash balance at the same speed. 341 units on a linear schedule and 149 free-market units, mostly on contractor loans and otherwise usually 20/80 or 15/85, create exactly that kind of gap. The balance sheet already shows it. The next step is to see whether 2026 closes it.
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