Sella Capital: The All-In Economics of Kfar Saba HaYeruka After Tax, Funding, and Mix

What Remains of the 7%

The main article already made the broader point: Sella Capital enters 2026 with NOI still rising, but with per-share FFO under pressure and with a bridge year that still depends on execution. This follow-up isolates only the Kfar Saba HaYeruka acquisition, because that is where the gap between the headline and the actual economics is especially sharp.

The number the company puts in front is 7%. That is correct only against a purchase price of NIS 580 million and expected annual net NOI of NIS 40.5 million at full occupancy. But the same disclosure set also says two more things: the company expects to pay NIS 42 million of purchase tax and transaction costs, and the funding is still not fixed, with payment to come from own sources, credit lines or securities issuance. Once those two layers are included, the deal still looks reasonable, but it no longer looks generous.

There is also an important caution point here. The purchase price is stated as NIS 580 million plus VAT according to law, but the disclosure does not yet provide enough detail to determine the final economic treatment of VAT. So the cleanest and most conservative bridge is built only on the clearly disclosed extra cost, NIS 42 million of purchase tax and transaction costs. Even that step alone changes the read materially.

That is the core read. The gap between 7% and about 6.5% does not sound dramatic if one looks only at percentage points, but it does change how the deal should be framed. This is no longer an acquisition with a very thick cushion over funding cost. It is an acquisition that adds a reasonable NOI layer at a price that still has to work to justify itself.

Funding: Still Positive, Much Less Generous

The company has not yet locked in the funding mix in the disclosures. It only says the payment will be financed from own sources, credit lines or securities issuance. That means it is too early to write a precise FFO-per-share contribution from Kfar Saba. What can be done, and what matters more at this stage, is to test the deal against the funding costs the company itself presents.

In the March 2026 investor presentation, Sella shows a weighted debt cost of 2.03% and a marginal debt cost for 6.68-year duration of 2.72%. On that basis, without pretending to know the final funding mix, the math already looks narrower.

In shekel terms, annual interest on NIS 622 million at a 2.03% debt cost equals about NIS 12.6 million. At 2.72%, it already rises to about NIS 16.9 million. Against NIS 40.5 million of NOI, that leaves about NIS 27.9 million or about NIS 23.6 million respectively, before management costs, before any equity layer friction, and before any impact from share issuance.

That is exactly what the headline hides. A 7% property yield is not a 7% shareholder yield. Even before the equity layer, and even before the question of whether further issuance is needed, a meaningful portion of the number is already absorbed by purchase tax, transaction costs and funding. So the right read is not that the deal is weak. The right read is that it is a lot less fat than the first number suggests.

Mix: A Real Improvement, Not a Reinvention

Kfar Saba HaYeruka does improve one thing in the portfolio. This is not a pure office asset. According to the disclosures, it includes 19.5 thousand square meters of retail, 16.2 thousand square meters of office, storage space and 855 parking spaces, within total built area of about 75 thousand square meters. In other words, the acquisition adds a more mixed-use layer than a single office box would.

But the right way to read that improvement is still with proportion. At year-end 2025, Sella's income-producing portfolio stood at NIS 5.976 billion, with 51% of value attributed to offices and 26% to retail. So Kfar Saba can clearly soften the office weight at the margin, but it does not turn Sella overnight from an office-heavy REIT into a retail REIT.

The implication is that mix improves at the edge, not in identity. That matters because if the deal were being sold as a move that breaks Sella's office dependence, it would need to be judged against a different standard. It does not do that. It adds a mixed-use asset, with a more visible retail layer, to a portfolio that still remains mainly office-weighted.

What This Means for 2026 and for Per-Share Economics

The most important sentence in the presentation is not actually in the deal line itself, but in the combination of the deal and the guidance. The company includes completion of the NIS 580 million acquisition in its 2026 assumptions. At the same time, it guides to NOI of NIS 376 million to NIS 382 million, but to FFO per share of only 100 agorot to 105 agorot, versus 109.7 agorot actually delivered in 2025.

That does not mean Kfar Saba is weak. It does mean the acquisition already sits inside the bridge year and still is not enough on its own to turn 2026 into a per-share acceleration year. More than that, the 2027 estimate still stands at only 107 agorot to 110 agorot per share, roughly around the 2025 level, and that already assumes 75% average occupancy at Beit Mani and 50% average occupancy in Mizrahi Tefahot's space at Moshe Aviv Tower.

The last chart uses guidance midpoints only for illustration, but the message does not depend on the midpoint. The reasonable inference is that Kfar Saba helps NOI and helps mix, but does not by itself change the shareholder equation. For the deal to move from a solid addition to a genuinely accretive per-share step, it would need either very favorable funding, better-than-expected operating contribution, or both.

That also explains why the acquisition should be read through all-in economics rather than through asset yield alone. In a REIT that funds acquisitions through own sources, credit and capital-markets issuance, the question is not only whether the asset was acquired at a yield above debt cost. The question is what remains after all the layers between the asset's NOI and the listed shareholder's FFO per share.

Conclusion

Bottom line: Kfar Saba HaYeruka looks less rich once everything already disclosed is included. The 7% becomes about 6.5% after NIS 42 million of purchase tax and transaction costs. The spread over debt cost remains positive, but it is no longer unusual. And the mix does improve, but not enough to erase the portfolio's office weighting.

That can still be the right move. A mixed-use asset, 93% occupied, with full NOI of NIS 40.5 million can fit well inside Sella's platform. But the correct reading is of a reinforcing move, not of a move that solves the full economic equation of 2026 on its own.

In other words, Kfar Saba looks better at the portfolio level than at the headline level. And because Sella already embeds completion of the acquisition into its 2026 assumptions while still guiding to lower FFO per share than in 2025, the real test remains the same one: not whether NOI rises, but how much of it actually makes it all the way through to the share.