Mishorim in 2025: Operating Profit Rebounded, but 2026 Is Still a Liquidity Test

Getting To Know The Company

At first glance, Mishorim looks like a foreign real-estate platform that is coming back into shape. That is only partly true. On one hand, the direct portfolio in Israel and the U.S. stayed reasonably stable, a new German leg was added, and consolidated operating profit nearly doubled to ILS 83.6 million. On the other hand, the loss attributable to shareholders deepened to ILS 143.8 million, because the part that really determines the quality of the thesis is not only property NOI. It is the liquidity chain that runs through Skyline, the seller loans, the refinancing calendar, and the ability to move cash up to the parent.

What is actually working now? The direct real-estate portfolio. In Israel, same-property NOI rose to ILS 30.0 million from ILS 28.3 million, up 6%. In the U.S., reported NOI fell to ILS 70.4 million from ILS 73.7 million, but the company explicitly says that without FX effects it would have shown about 2% year-over-year growth and only a marginal same-property NOI decline. That does not read like a portfolio that is breaking down. It reads like a direct portfolio that is holding up while the drag sits elsewhere.

What is still not clean? Mostly Skyline. The annual report states at the outset that Skyline no longer holds hotel or resort assets in Canada and now mainly holds vendor take-back loans, a capital note, and negligible development activity. At the same time, the audited report contains an emphasis-of-matter paragraph on Skyline’s financial position. In plain terms, part of the value inside Mishorim is no longer an operating hotel or a rent-producing center. It is value that still has to pass through collection, sale, refinancing, or monetization.

That is why Mishorim needs to be read first as a holding structure with a direct real-estate leg, not only as a straightforward income-producing property company. At the beginning of April 2026, the equity market value was only about ILS 158 million, while the three listed bond series together traded around ILS 485 million. The latest recorded daily trading volume in the stock was also only about ILS 8.8 thousand. That is an important screen: paper value may exist, but actual accessibility is being judged here through the balance sheet and the debt stack much more than through a broad, liquid equity story.

The short economic map looks like this:

That chart already resets the frame. Consolidated external revenue fell to ILS 340.9 million from ILS 467.6 million, a 27% decline. A shallow read would conclude that the operating base shrank sharply. That is too flat. Most of the decline came from the continued shrinkage of Skyline after the hotel sales, not from the direct portfolio.

Events And Triggers

The events around the report matter here almost more than the year itself, because they show what management is trying to fix. This is not just a story of another asset and another tenant. It is a story of portfolio rotation, debt extension, monetizations, and an effort to turn theoretical value into cash.

Skyline Is Delaying, Selling, And Trying To Stabilize

The first trigger: at the end of December 2025, the Skyline loan agreement was amended so that repayment will occur when Skyline decides to repay, and Mishorim waived any right to demand immediate repayment. That move strengthens Skyline’s capital structure, but it also says something very simple: the group did not want to add another layer of cash pressure on the subsidiary right now.

The second trigger: in February 2026, agreements were signed to sell the Courtyard Ithaca and Courtyard Fort Myers hotels for $7.25 million and $9.25 million, respectively. That is constructive because it may reduce renovation needs and support liquidity. But it also says that the path to a cleaner balance sheet still runs through asset sales, not through a quick recovery in the hotel business.

The third trigger: in March 2026, the company signed an agreement to sell about 36 dunams of land out of The Grove in Tampa for $7.95 million. This is a good example of the difference between created value and accessible value. On paper, the land was already inside the asset’s value. In practice, only a closed sale turns part of it into usable cash.

At The Same Time, Not Everything Closed

The fourth trigger: in February 2026, the potential buyer of Wakefield chose to withdraw before completing due diligence, and the deposit was returned. That matters because it reminds readers that the monetizations the company is building on are not automatic. An asset can look healthy in the report and still fail to produce a completed transaction.

The fifth trigger: in January 2026, a local partner of the company in the U.S. signed to acquire Whitehall Plaza in Pennsylvania for $18 million, with Mishorim expected to step into 50% of the asset upon closing in the second quarter of 2026. So alongside sales and cleanup attempts, the group is still buying. That may improve the portfolio, but it also increases execution and financing load.

Germany Adds A Leg, Not A Full Solution

The German leg is a material event in its own right. Mishorim acquired the OBI asset in Germany in July 2025. The asset is fully occupied, generated ILS 3.255 million of NOI in a partial year, and is expected to produce around ILS 15 million annually. At the same time, a German bank loan of EUR 40 million was taken for five years. This improves the earnings base, but it also adds leverage. It strengthens the portfolio, not the full funding picture by itself.

Efficiency, Profitability And Competition

The core insight of 2025 is that the direct operations look better than the consolidated headline. What weakened is not the quality of every Mishorim asset. What weakened is the quality of translating those assets into accessible cash through the group as a whole.

In Israel, consolidated NOI was almost flat at ILS 30.9 million versus ILS 31.0 million, but same-property NOI rose to ILS 30.0 million from ILS 28.3 million. That means the sale of Binyamina offset operating improvement in the remaining assets, especially Haifa. In the U.S., reported NOI fell to ILS 70.4 million from ILS 73.7 million, but the company states explicitly that most of the decline came from about a 10% move in the average dollar-shekel exchange rate. Without FX, the U.S. picture was much steadier.

That matters competitively as well. The report describes the U.S. open-air retail-center market as a segment that still benefits from high occupancy, limited new supply, and a better position than closed malls or offices. Mishorim’s own figures support that frame: The Grove at 99% occupancy, Tallahassee at 100%, Horizon Park at 100%, Willowbrook at 97%, Wakefield at 98%. Competition is not the immediate problem of the direct portfolio.

The problem begins once the analysis moves from NOI to earnings and equity. Revenue fell 27%, yet operating profit rose to ILS 83.6 million from ILS 41.8 million. How does that happen? Mainly through an improvement in Israeli revaluation, relative stability in the U.S., the addition of Germany, and a much smaller capital-loss line than in 2024. But the story flips later in the chain: net financing expense jumped to ILS 216.2 million from ILS 153.2 million, and the report says that the main increase came from expected credit-loss provisions on Skyline seller loans.

This is exactly where caution is also needed around non IFRS measures. On the expanded-solo basis, the company presents AFFO of ILS 33.4 million versus regulatory FFO of only ILS 11.0 million.

That gap does not come from some hidden operating boom. It comes mainly from management excluding non-cash financing and tax items, and in 2025 there were also ILS 21.8 million of FX and indexation differences. That is legitimate as an operating lens, but it should not be confused with total cash flexibility. AFFO is not the same thing as cash left at the parent.

Germany is another point that matters more than it seems at first glance. The new asset contributed ILS 3.3 million of NOI, but the German segment also recorded a fair-value decline of ILS 16.1 million in the same year, largely because of transaction-cost effects. In other words, 2025 in Germany is not a profit year. It is the setup year of a new leg. Its real value will be judged in 2026 and 2027, not on the first partial-year read.

Cash Flow, Debt And Capital Structure

Mishorim is exactly the kind of company where it is essential to separate normalized property cash generation from all-in cash flexibility. If that distinction is lost, it becomes very easy to read NOI, AFFO, and revaluations as if they automatically translate into liquidity. They do not.

The All-In Cash Picture Remains Tight

On the consolidated basis, 2025 showed negative operating cash flow of about ILS 7 million, compared with positive operating cash flow of about ILS 24 million in 2024. Investing cash flow was negative by about ILS 107 million, mainly because of U.S. and German acquisitions, and financing cash flow was positive by about ILS 106 million. That combination means the asset base is still not funding all of the year’s real uses on its own.

Those numbers tell a very sharp story. Cash fell from ILS 231 million to ILS 204 million. Deposits fell from ILS 129 million to ILS 48 million. Equity attributable to shareholders fell from ILS 659 million to ILS 516 million. Loans to foreign buyers fell from ILS 232 million to ILS 94 million, not because all of them were collected cleanly, but mainly because of heavy credit-loss provisions.

The separate-company report shows another important shift: the investment in Skyline fell to ILS 108.6 million from ILS 243.0 million, and at the same time a new ILS 70.1 million loan to Skyline appeared. That is a clear sign that part of the support of the Skyline layer has already moved from equity value into more direct parent-level funding exposure.

The Negative Working Capital Did Not Appear By Accident

The company ended the year with negative working capital of ILS 142 million on the consolidated basis, and explained that this mainly resulted from several U.S. loans due in 2026 being reclassified to short term. More specifically, in the cash-flow forecast the company assumes refinancing of non-recourse loans at Willowbrook of $22 million, Battle Bridge of $4 million, and WestLand Park of $4 million during 2026. Management believes it can refinance those loans without injecting equity. That is a reasonable assumption, but it is still an assumption.

At the same time, Mishorim’s own bond covenants are not in a red zone. The adjusted equity figure stands at ILS 659 million against minimum requirements of ILS 270 million to ILS 320 million, the equity-to-assets ratio is 26% versus floors of 22% to 25%, and debt coverage stands at 13 to 14 versus ceilings of 22 to 23. So this is not a covenant story about something breaking tomorrow morning. It is a story about a thesis that still needs an unbroken sequence of execution.

Management’s Own Forecast Admits That

The most important section in the report is the 24-month forecast cash flow. When the two forecast years are combined, the picture is very clear: the company is building on about ILS 36.3 million of operating cash flow, ILS 90 million of Israeli bank financing, ILS 140 million of additional bond issuance, ILS 35 million from an Israeli asset sale, and about ILS 54.0 million of management fees and distributions from held companies. Against that, it plans for about ILS 99.6 million of loan repayment, ILS 24.0 million of loan interest, ILS 181.5 million of bond principal repayment, ILS 37.0 million of bond interest, plus additional investments and shareholder loans.

That bridge matters because it separates a value thesis from a liquidity thesis. Even under management’s own 24-month framework, the picture is not closed by cash generation from the existing assets alone. It is closed through more debt, monetizations, and upstream cash from held companies. That is not a distress read, but it is also not a clean self-funding read.

Outlook And Forward View

Before looking into 2026, 5 findings need to be fixed in place:

1. The direct portfolio recovered more than the headline suggests. Israel and the U.S. do not look like the main problem, especially after stripping out FX noise.
2. The drag sits in Skyline. That is where the credit-loss charges, hotel covenant issues, working-capital strain, and renovation needs sit.
3. Germany adds a leg, not a full solution. OBI may contribute around ILS 15 million of annual income, but it is not meant to solve the group funding question on its own.
4. Monetizations can improve the picture, but they are not automatic. Wakefield already showed that a sale can fall apart even when the property itself looks solid.
5. The parent still relies on the debt market. The official forecast itself includes additional bond issuance and bank financing.

That leads to the natural conclusion: 2026 looks like a bridge year with a liquidity test, not like a clean breakout year.

What could improve the reading? First, closing the transactions that opened after the balance-sheet date. If the Tampa land sale closes, if the Fort Myers and Ithaca sales are completed, and if the U.S. refinancings are done without equity injections, the thesis becomes cleaner. That would not turn Mishorim into a simple property company, but it would reduce pressure materially.

What else has to happen? The direct leg needs to keep holding. Israel needs to preserve its better same-property NOI trend, the U.S. needs to get through 2026 without operational slippage and without expensive refinancing, and Germany needs to move from a transaction year into an income year.

But each strategic move has to be tested on both sides. Asset sales are good for liquidity, but they also shrink the NOI base. Buying Whitehall may create value, but it also increases financing burden. Extending the Skyline loan strengthens the subsidiary, but it also pushes out the moment when the issue has to be fully resolved. So 2026 is not just a year of “what gets sold.” It is a year of “what gets sold, what gets refinanced, and what actually climbs to the parent.”

Risks

The central Mishorim risk is not a sudden collapse in occupancy across the direct portfolio. The central risk is that the weaker link, Skyline, will require more time, more credit, and more compromises than the market would like to assume.

The audited report makes that unusually explicit. Skyline ended 2025 with negative working capital of CAD 56.6 million, versus positive working capital of CAD 7.5 million a year earlier. The reason is not only accounting classification. It is the combination of troubled seller loans and debt that was reclassified to short term.

On the seller-loan side, the picture is difficult. Freed’s VTB loans stand at only CAD 15.8 million net of expected credit losses, after Skyline recorded a CAD 41 million provision during 2025 and total allowance reached CAD 43 million. At Port McNicoll, the remaining balance is CAD 17.9 million net of provisions, with total allowance already at CAD 9.5 million. These are no longer financial assets that can honestly be read as “almost cash.”

The hotel side also remains open. Cleveland Autograph loans of CAD 52.4 million were classified as short term after a DSCR breach in mid-2025, even though Skyline still stood at 1.53 at year-end 2025 under the amended calculation. The report itself says there is a possibility that Skyline may fail the DSCR test as of March 31, 2026, which is why one of management’s explicit plans is to seek another waiver or refinance the loan. That is a real warning signal.

And if the Courtyard sales do not close, renovation risk remains. The report estimates required renovation cost at Fort Myers and Ithaca at about CAD 6.4 million, and if costs run above plan or franchise extensions are not obtained, there could also be cross-default exposure on related loan agreements of about CAD 19 million.

Conclusions

Mishorim does not end 2025 as a broken company. Its direct real-estate leg looks reasonably sound, its own covenants are not tight, and it added a new German income leg. But it also does not end 2025 as a clean story. The weaker part of the thesis sits in Skyline, the seller loans, the refinancing calendar, and the question of how much of the underlying value can truly become accessible cash.

So the core thesis today is not whether good assets exist. They do. The question is whether 2026 can shorten the distance between NOI, asset value, and AFFO on one side, and real parent-level liquidity on the other.

Current thesis: Mishorim ended 2025 with real improvement in operating profit and in the direct portfolio, but 2026 still stands or falls on whether Skyline and the monetization track can turn value into accessible cash.

What changed: The focus moved even further away from “how are the direct assets performing” and toward “how quickly can the group refinance, sell, collect, and stop consuming more capital.”

Counter-thesis: It is possible to argue that this reading is too cautious, because the direct assets in Israel and the U.S. are still holding, Mishorim’s own covenants remain comfortable, and 2026 already opened with several events that can support liquidity.

What could change the market reading over the short to medium term: completion of the Tampa land sale, closing of the two Courtyard transactions, successful U.S. refinancing without equity injections, and any sign of actual collection on the seller loans.

Why this matters: This is a company where the gap between asset value and accessible value is unusually large. If an investor misses that distinction, they can read NOI and AFFO as a full solution when they are only part of the story.

Over the next 2 to 4 quarters, what has to happen is simple but not easy: close monetizations, refinance debt, keep the direct portfolio stable, and stop letting Skyline define the quality of the group’s capital. What would weaken the thesis is another delay, another material provision, or a situation where monetizations close more slowly than the debt calendar.