Reit 1 in 2025: Funding Opened Up, but the Proof Still Runs Through Infinity Park

Getting To Know The Company

Reit 1 is the first and largest REIT in Israel, but that label is not the right way to read 2025. The right way is to start from the company’s economic structure. This is a large income-producing real-estate platform with 58 assets, about 751 thousand sqm, and roughly ILS 9.3 billion of fair value, spread across offices, retail, industry and logistics, nursing hospitals, parking, and a small hotel layer. What is working now is not one star asset but a broad portfolio that is still producing rising NOI, even after a meaningful drop from Migdal Hayovel. What keeps the read from becoming fully clean is that the next leg of the story still depends on the most sensitive part of the market: offices.

A superficial read can miss two things. First, Reit 1’s main issue is not access to capital. During 2025 and early 2026 the company raised debt and equity at scale, retained its ilAA stable issuer rating, and reported about ILS 1.2 billion of signed available credit lines, cash, and financial assets as of the publication date. Second, the problem is not a broad office-rent collapse either. The active bottleneck is the leasing pace at Infinity Park in Ra’anana. That means 2026 is shaping up as an execution year rather than a financing-survival year.

That is also why the stock sits in a telling place. The latest closing price was ILS 22.50, almost on top of equity per share of ILS 22.87. Short interest stood at just 0.58% of float, almost exactly in line with the sector average of 0.55%. In other words, the market is not pricing an acute solvency event. It is waiting to see whether the embedded value built in recent years, especially in Ra’anana, can really turn into recurring income.

Four points matter before going any further:

• The NOI growth was broader than the headline. Total NOI rose 8.9% to ILS 524.8 million even though Migdal Hayovel fell to ILS 21.6 million from ILS 39.5 million after the sale to the state.
• The office issue is mostly about occupancy, not price. At Infinity Park, average rent in leases signed during 2025 was ILS 102 per sqm per month, above the actual average of ILS 96.
• Adjusted FFO rose, but this was not a self-funding year. At the parent-company level, operating cash flow was ILS 275.1 million against ILS 579.8 million of investing outflows and ILS 169.1 million of dividends paid.
• 2026 is an execution year. Guidance calls for NOI of ILS 535-545 million and adjusted FFO of ILS 369-379 million, while still assuming Infinity contribution broadly similar to 2025 rather than full occupancy economics.

Reit 1’s economic map looks like this:

That chart makes the central point clear. Reit 1 is still primarily an office story. That is why even though retail, logistics, and parking are performing well, the Infinity question cannot stay a side note.

Events And Triggers

Infinity Park moved from construction to proof

This is the key event. Infinity Park is the company’s single most material asset, with fair value of ILS 1.32 billion at the company’s share, average occupancy of 52% in 2025, and actual NOI of ILS 43.9 million. This is no longer a land story or a partially built tower story. The tower was completed in August 2023, the main upgrade works in the campus and plaza were largely completed in June 2025, and the park itself was completed in December 2025. The center of gravity has shifted from physical completion to economic absorption.

The important point is that the data does not indicate a heavy pricing concession just to fill space. The opposite is closer to the truth. Actual average rent was ILS 96 per sqm per month including parking, while leases signed during 2025 averaged ILS 102. At the publication date, leasing stood at about 79% in Infinity Tower and about 45% in Infinity Campus and Plaza. That suggests the active bottleneck is leasing speed, especially in the upgraded layer, rather than a broader price collapse.

The gap to potential is still large. Representative NOI used in the valuation was ILS 59.9 million, while the company estimates annual NOI of ILS 80-85 million after full occupancy. That is why 2026 will determine whether Infinity becomes an asset that actually lifts NOI and FFO or remains mostly a story of embedded value.

2025 and early 2026 solved the immediate capital-access question

In March 2025 the company expanded Series Z by ILS 300 million par and received roughly ILS 336 million gross. In July 2025 it issued the new Series H with ILS 140 million par and roughly ILS 151.5 million gross proceeds. In August 2025 it completed a private placement of 5.15 million shares for about ILS 120 million. In January 2026, after the balance-sheet date, it expanded Series H again by ILS 310.062 million par for about ILS 355.3 million of gross proceeds.

The important point is not only the amount. It is the signal. The January 2026 Series H expansion drew 50 orders, all from classified investors under early commitments, and the bonds were issued without discount. That does not make Reit 1 immune to changes in the bond market, but it does show that at the start of 2026 the market was still willing to fund it on reasonable terms. That is exactly why the right 2026 discussion should run more through execution and less through immediate refinancing fear.

The rating backdrop supports that read. The investor presentation shows an ilAA stable issuer rating and ilAA bond ratings, alongside weighted debt cost of 2.19% indexed and marginal debt cost of about 2.7% indexed. As long as the spread between asset yield and debt cost stays wide, the growth mechanism still works. The implied weighted cap rate on the income-producing assets stands at 6.55%, well above weighted debt cost.

The next growth layer is already being built, but most of it is still future-dated

Reit 1 is not relying only on Ra’anana. In November 2025 it bought 45% of a private company holding the Yigal Alon site in Tel Aviv for about ILS 126.7 million plus VAT. In January 2026 that private company signed a new lease agreement with the municipality and paid capitalized lease fees of about ILS 324 million. The plan is to build a project with about 54 thousand sqm of above-ground employment and commercial space and another 12 thousand sqm of underground commercial and parking space. This is a meaningful project, but it is still far from current NOI.

In December 2025 the company signed to acquire 50% of a retail center in the Agamim neighborhood in Netanya. Project completion is expected in the second half of 2026, while delivery to the company is expected only in the first quarter of 2027. In February 2026 it also signed to acquire the partner’s remaining interest in the SOHO retail center in Netanya, taking ownership to 100% from March 2026. Consideration was about ILS 145.6 million plus VAT, of which ILS 125.6 million in cash and ILS 20 million in shares at ILS 27.85 per share.

The bottom line is simple. There is a real growth pipeline, and it is diversified. But it will not make 2026 on its own. The coming year will still be determined mainly by extracting more NOI from the existing portfolio, led by Infinity.

That chart reinforces the same read. There was a short wave in February, but it faded quickly. The stock is not being treated as a structural distress case. The market is looking for proof, not breakdown.

Efficiency, Profitability, And Competition

The main 2025 operating insight is that the core business looked stronger than the office headline might suggest. Total NOI rose to ILS 524.8 million from ILS 481.8 million, while same-property NOI rose to ILS 490.2 million from ILS 447.7 million, a 9.5% increase. That is a strong pace for a large income-producing platform, especially in a year when part of Migdal Hayovel left the system.

The best way to see this is to split the increase into buckets. Infinity contributed more, Migdal Hayovel contributed less, and the rest of the portfolio still carried the year.

That chart matters because it breaks a possible false conclusion. It is easy to look at Infinity and conclude that the office story is holding back the whole company. In practice, 2025 showed that the broad portfolio could still generate growth and even offset a sharp drop from another major asset. Infinity is the bottleneck for the next stage, not the only explanation for the current one.

Offices did not collapse, but the picture is not clean

The office market was described as relatively stable in occupancy and rent levels during 2025, but with more moderate demand and longer negotiations since 2023 because of new supply. That is not a comfortable backdrop, but it is also not a forced pricing-crash environment. So the fact that Infinity’s new leases averaged ILS 102 per sqm while the actual average rent stood at ILS 96 matters. Pricing is holding. What remains unresolved is how fast upgraded space turns into occupied space.

At the same time, Reit 1’s advantage is that offices are not the whole story. Retail makes up 23% of asset value, industry and logistics 20%, and nursing hospitals plus parking add more relatively stable income layers. So even if offices remain the decisive sector, they are not the entire system.

Not every profit number means the same thing

This is where it makes sense to slow down. Reit 1 ended 2025 with FFO under the ISA approach of ILS 200.3 million and adjusted FFO of ILS 366.8 million. The large gap is not a mistake. It is a measurement choice. Adjusted FFO adds back layers such as share-based payment, development and planning expenses, indexation on principal debt, lease-related indexation, and adjustments relating to equity-method companies. That is useful for understanding the operating earnings power of the real estate. It is not a full cash picture.

The management layer also deserves attention. G&A was about ILS 60 million. Within that, management fees to the management company were ILS 36.8 million and share-based payment was ILS 15.6 million. That is not criticism by itself. It does mean investors should remember that Reit 1 is externally managed, so part of shareholder economics structurally runs through an external compensation layer.

That chart captures the 2025 paradox. NOI and adjusted FFO keep rising, but ISA FFO remains much lower. The reason is not that the real estate stopped working. The reason is that translating operating income into common-shareholder economics runs through financing, indexation, equity-method exposure, and a management layer that cannot be ignored.

Cash Flow, Debt, And Capital Structure

The real cash picture

If Reit 1 is viewed through an all-in cash-flexibility lens at the parent-company level, the picture is less shiny than adjusted FFO but still far from stressed. In 2025 operating cash flow was ILS 275.1 million. Against that, investing activity consumed ILS 579.8 million, and dividends paid were ILS 169.1 million. That means that even in a good operating year, internally generated cash did not fund both growth and distributions. Capital markets and banks filled the gap.

That is the key cash-discipline point here. Reit 1 is not a pressured company, but it is also not sitting in 2025 on a machine that can self-fund accelerated growth and a broad payout at the same time. As long as it continues to add investments, upgrades, and new deals, external capital remains an active part of the model.

Debt is cheaper than asset yield, and covenants are not the problem

There is also a good reason the company can operate this way. Equity attributable to owners stands at about ILS 4.6 billion, the equity-to-balance-sheet ratio is about 47%, weighted debt duration is about 3.9 years, and weighted debt cost is about 2.19% indexed. Against that sits an implied weighted cap rate of 6.55% on the income-producing assets. That spread is the economic core of the model.

The covenants are also comfortably away from the edge. In its main credit agreements the company committed, among other things, to minimum equity of ILS 500 million to ILS 1.1 billion, net financial debt to NOI not above 11, and net financial debt to investment-property value not above 60%. At year-end 2025 the company was in compliance with all of them. So the real issue is not whether covenants break tomorrow morning. It is how quickly the development and upgrade layer starts justifying the use of capital and debt.

The working-capital deficit is not the central problem, but it does say something

The company ended 2025 with current assets of about ILS 454 million against current liabilities of about ILS 1.722 billion. The board said the working-capital deficit does not indicate a liquidity problem, citing cash, credit lines, capital-market access, and the scale of unencumbered assets. That is a reasonable position. But even if one accepts it, the deficit still says something important: Reit 1 runs a dynamic balance sheet that relies on rolling financing and market access, not on passive excess cash.

The composition makes that clear: about ILS 661 million of short-term bank credit, about ILS 471 million of current maturities of bonds and long-term loans, and ILS 450 million of commercial paper. That is not unusual for a large REIT model. It is also not a reason to become indifferent to the bond market.

Outlook

The title of 2026 is proof year. Not financing year, not crisis year, and not a full harvest year either. Proof year. Before getting into detail, four non-obvious conclusions stand out from the guidance:

• Official guidance is still relatively conservative on Infinity. The 2026 plan includes about ILS 44 million of NOI from the asset, broadly similar to 2025, not the full ILS 80-85 million economics of full occupancy.
• The expected increase comes despite deliberate headwind. The company explicitly says that upgrades in existing income-producing assets are expected to reduce 2026 NOI by about ILS 8 million.
• That means the move to ILS 535-545 million of NOI and ILS 369-379 million of adjusted FFO is not relying only on Ra’anana. It assumes continued contribution from the broad portfolio.
• The next big gap remains open. If Infinity progresses faster than the guidance assumption, there is upside. If it progresses slowly, the stock may stay close to book value even after another operationally decent year.

That chart shows why 2026 should be called a proof year rather than a breakout year. The company is guiding to improvement, but not to a leap big enough to remove the need for leasing, upgrade, and execution proof.

What actually needs to happen at Infinity

For the thesis to strengthen, 2026 has to show a sequence of leasing wins, not just stable rent levels. At year-end 2025 the asset had 49 tenants, 50,429 sqm actually leased, and adjusted NOI of ILS 46.9 million. To move toward the representative NOI of ILS 59.9 million, and further toward the company’s ILS 80-85 million full-occupancy target, the upgraded areas have to be filled and the campus/plaza layer has to become a much fuller income engine.

One more point matters here. The company itself effectively separates the tower, already leased at a relatively high level, from the campus and plaza layer. That means the key question over the next 2 to 4 quarters is no longer whether Infinity is a good asset. That question is largely settled. The question is whether the conversion of upgraded space into signed leases will run at the pace the market needs to see.

What could surprise on the upside

Reit 1 has several ways to improve the read even without a dramatic headline number. The first is faster-than-expected leasing at Infinity. The second is smooth integration of SOHO in Netanya after moving to 100% ownership. The third is proof that the company can keep adding assets or projects at reasonable yields without materially burdening the cost of capital.

There is also a longer-dated optionality layer. Together with Enlight, the company is advancing a pipeline of about 230 MWh of storage and about 10 MW of solar, with estimated cost of about ILS 140 million at its share, expected return above 14%, and economic effect expected mainly from 2028. That is interesting, but it is not the engine on which 2026 should be built.

What could weigh on the story

The less comfortable scenario does not have to be a dramatic financing scenario. It can be something much quieter: NOI keeps growing modestly, adjusted FFO stays stable to higher, but Infinity progresses too slowly relative to potential. In that case Reit 1 could still look high quality and well funded, while the stock remains stuck between obvious asset value and the lack of a sharp trigger for a new market reading.

There is also a clear financial-sensitivity layer. A 0.5% change in cap rate affects portfolio value by about ILS 583 million. At Infinity alone, a 0.5% increase in the capitalization rate reduces value by ILS 70 million. A 1% change in the Bank of Israel rate changes earnings by about ILS 13.4 million, while every 0.1% change in CPI affects finance expense by about ILS 3.6 million. These are not immediate stress signals, but they define the story’s sensitivity to rates and inflation.

Risks

The first risk is leasing risk rather than construction risk. Once the main Infinity upgrade works are largely complete, the question moves to commercial execution. If the campus and plaza fill too slowly, the gap between actual NOI of ILS 43.9 million and the ILS 80-85 million full-occupancy target remains open, and the stock may struggle to re-rate.

The second risk is confusing adjusted FFO with full cash flexibility. Adjusted FFO is useful, but it does not replace the fact that in 2025 the company still relied on financing to cover investment activity and dividends. As long as Reit 1 keeps expanding, that may be acceptable. It should not be read as if adjusted FFO were free cash to common shareholders.

The third risk is capital-market sensitivity. Right now the company enjoys good financing access, but the short-dated debt structure and ongoing need to roll funding mean that this advantage has to be preserved. If the bond market becomes more expensive or less open, the hit may show up less in survival and more in growth pace and execution comfort.

The fourth risk is that the new pipeline remains too far away. Yigal Alon, Agamim, SOHO, and the energy projects can all become value drivers, but most are still not current NOI. If Infinity does not progress fast enough and the next pipeline remains in planning and integration stages, 2026 could end up looking like a good but not sufficient year.

The fifth risk is the fair-value layer. Reit 1 is not just a revaluation story, but it is clearly influenced by revaluation. Once cap rates move, or market expectations around offices shift, value can react faster than NOI.

Conclusions

Reit 1 reaches the end of 2025 from a stronger place than a first glance at the office market might suggest. What supports the thesis now is a portfolio that can still expand NOI, a strong capital structure, and proven access to capital markets even in early 2026. What blocks a cleaner read is that the next stage still depends mainly on Infinity Park and on turning upgrade work and partial leasing into fuller recurring income. That is also what should drive the market reaction in the short to medium term.

Current thesis: Reit 1 has already solved the near-term funding question, so 2026 will be a test of Infinity execution and growth quality rather than a test of survival.

What changed relative to the prior cycle? In 2024 Infinity could still be read mainly as an asset in completion mode. After 2025 that is no longer the right framing. It is now an asset where the real question is how quickly upgrades turn into NOI. At the same time, the capital markets showed in 2025 and early 2026 that they are still open to the company.

Counter-thesis: the market may be right to stay cautious, because a meaningful share of the upside still depends on future occupancy and on projects whose contribution remains incomplete.

What could change the market interpretation in the short to medium term? Visible leasing progress at Infinity, smooth integration of SOHO, and continued spread between asset yield and debt cost. What would weigh on the read? Another quarter or two of slow progress in Ra’anana, or a sharper move in rates and cap-rate expectations.

Why does this matter? Because Reit 1 is sitting right on the line between clearly demonstrated asset value and still-required NOI proof. If that proof arrives, the gap between asset value and market perception can close faster.

Over the next 2 to 4 quarters, the thesis strengthens if Infinity keeps leasing without meaningful pricing concession and if portfolio NOI keeps rising even while new upgrade works temporarily weigh on income. It weakens if the company continues to show balance-sheet strength but not real narrowing of the gap between actual Infinity NOI and the level it is targeting.