Shemen Nadlan 2025: The Balance Sheet Has Already Jumped, but the Big NOI Still Depends on Ashdod and Haifa

Getting To Know The Company

Shemen Nadlan is no longer a story about a legacy industrial business that changed direction. By the end of 2025 it is a logistics, industrial, and storage real-estate platform rebuilt around the 2023 merger with the Ben Zvi partnership. But it is still not a mature income landlord in the classic sense. With only 11 employees, the company already holds investment property valued at ILS 1.153 billion, while annual revenue is still only ILS 26.5 million. That gap tells the story immediately: the balance sheet has moved ahead of the income statement.

What is already working? The company managed in a short period to build real scale, lift revenue by 131% to ILS 26.5 million, grow NOI by 223% to ILS 18.6 million, and move management-view AFFO into positive territory at ILS 3.3 million. What still makes the story unclean? Nearly 60% of portfolio value sits in two assets, Haifa and Ashdod, and neither is a fully stabilized, plain-vanilla NOI engine. Haifa still leans on interim-use income and future planning optionality, while Ashdod is still under construction and its economics rely on a related-party tenant.

That is exactly where a superficial read can go wrong. Net profit of ILS 20.5 million makes 2025 look like a clean turning point. In reality, ILS 26.6 million of the year came from fair-value gains on investment property, and roughly 78% of operating profit relied on revaluation. At the same time, FFO under the securities-authority approach is still negative, at ILS 0.964 million. So if an investor is looking for a landlord that has already fully crossed into the cash-generating phase of the story, this is not yet that company. The right way to read 2025 is as a platform-building year, and 2026 through 2027 as bridge-and-proof years.

Market cap stood at about ILS 624.4 million as of April 3, 2026, below year-end equity of ILS 701.1 million. There is no need to turn that into a value call, but it does help explain what the market is testing: not whether the company has built a larger balance sheet, but whether the not-yet-stabilized assets will actually convert into NOI, and whether the path there can be funded without leaning too heavily on bridge financing and value that still sits mainly on paper.

The Economic Value Map

The important point is that the income-producing layer that already works represents only about a quarter of the portfolio. That does not make the company automatically cheap or expensive. It does mean the right lens is a moderately leveraged growth platform whose balance-sheet value has expanded much faster than its cash-generating layer.

Four Points To Keep In Mind

• The improvement in results is real, but it came mainly from acquisitions and first-time contributions, not from deep organic growth inside the same asset base.
• Most future value is concentrated in assets that still require execution, funding, occupancy, or planning progress.
• The balance sheet looks stronger, but the all-in cash picture makes clear that the company is still funding its jump through debt and capital-markets financing.
• The next 2 to 4 quarters will be decided less by another revaluation gain and more by delivery, refinancing, and the ability to turn development assets into real NOI.

Events And Triggers

The first trigger: 2025 was a year of acquisitions and completions. The company completed the Emek Hefer acquisition in January 2025, the Beersheva transaction in May 2025, and the Barkan deal in June 2025. These are here-and-now rent-base additions. They also explain why revenue and NOI jumped so sharply versus 2024. Put simply, a large part of the improvement came not from higher rent in the same properties, but from owning many more properties.

The second trigger: Ashdod moved from concept to real execution. According to the board report, the project was roughly 70% engineering-complete by the report date, most construction work is expected to be completed by the end of 2026, and full completion is expected in the first half of 2027. This matters because Ashdod alone is already valued at ILS 283.9 million, nearly a quarter of the portfolio, so any delay in the schedule or change in the financing structure would affect how the whole company is read.

The third trigger: In April 2025 the company issued ILS 102 million of convertible bonds, generating net proceeds of ILS 98.6 million. The issuance funded the Beersheva and Barkan acquisitions and also temporarily repaid part of the Ashdod credit line. That improves flexibility in the short term, but it also highlights that the company is still not funding growth out of surplus cash generated by a stabilized operating portfolio.

The fourth trigger: Haifa took both an operating hit and gained another layer of optionality. On the negative side, the company recorded a provision of about ILS 2.5 million for a revised municipal property-tax assessment for 2024 and 2025, which hurt annual NOI. On the positive side, in December 2025 it signed an agreement to develop a high-voltage energy-storage project with capacity of about 80 MWh on a small portion of the site. This is not the core thesis yet, but it is another sign that management is trying to extract additional economic uses from an asset whose long-term value is still only partly reflected in current cash generation.

After the balance sheet date: On February 2, 2026 the company signed a memorandum of understanding with a contractor for Ariel A, and close to the report publication date it also signed a bank project-finance agreement for that project. That does not create NOI tomorrow morning, but it does change the execution map by moving Ariel A from a short-funded land story toward a formal project-finance path.

Efficiency, Profitability, And Competition

The central 2025 story is not just growth. It is a change in the quality of the asset base. As the company bought more triple-net assets and more long-lease properties, it did not just lift revenue. It also improved the quality of the gross margin. That still does not mean the whole story has already become clean, recurring profit and cash flow for common shareholders.

Growth Came Mainly From New Volume

Revenue rose from ILS 11.4 million to ILS 26.5 million, and NOI rose from ILS 5.8 million to ILS 18.6 million. But the more revealing figure is Same Property NOI, which was only ILS 4.9 million. In other words, most of the NOI jump did not come from deep operational improvement in the same properties. It came from portfolio expansion. That is not a criticism. It is simply the right way to separate what has already been proven from what still needs proving.

At the margin level, the company posted a gross margin of 70.1% versus 50.5% in 2024. Management’s explanation is reasonable: a large part of the contribution came from assets such as Albad, Petah Tikva, Emek Hefer, and Beersheva, which are leased on triple-net terms and therefore push more operating cost to the tenant. That is a real improvement in asset quality. But it also takes time for such a portfolio to stabilize, and today it is still small relative to the mass of assets that remain in development.

Reported Profit Is Still Revaluation-Heavy

This is the main yellow flag in the year. Fair-value gains on investment property and property under construction amounted to ILS 26.6 million, while operating profit was ILS 34.1 million. Put differently, about 78% of operating profit came from revaluation. The fourth quarter makes that even clearer: fair-value gains were ILS 39.3 million, while quarterly net profit was ILS 31.6 million. So a reader who looks only at the 2025 bottom line sees a clean turnaround. A reader who goes one layer deeper sees that profit is still ahead of cash.

FFO reinforces the point. Under the authority approach, FFO is negative ILS 0.964 million. Under management’s approach, AFFO is positive ILS 3.3 million after adding back ILS 1.384 million of share-based compensation and ILS 2.876 million of CPI-linked principal expense on debt. That does not automatically make management’s figure invalid. It does mean the company has not yet reached the point where headline accounting profit can be read as a clean proxy for shareholder economics.

What Is Actually Competitive Here

The company is clearly focused on logistics, industrial, and storage assets, especially around ports, transportation corridors, and industrial nodes. It has one obvious advantage: a control and management group with deep exposure to the sector, including Zvika Ben Zvi on the logistics side and JTLV on the platform and execution side. That likely explains how Shemen Nadlan managed to build a portfolio worth more than ILS 1.15 billion in a relatively short time.

But that advantage comes with a limitation. In Ashdod, the company’s next major NOI engine is anchored by a long-term lease with Orshar, a private company controlled by Zvika Ben Zvi, one of the controlling shareholders. That is not necessarily negative, and in some respects it lowers leasing risk. Still, when the next major value engine rests on a related-party tenant, the market is likely to demand not just an appraisal and a contract, but actual delivery, occupancy, and cash collection.

Cash Flow, Debt, And Capital Structure

This is where the story really sits. A reader who looks only at equity-to-assets, 59.7%, and leverage of 31.1% might conclude that the company already enjoys a fully comfortable capital structure. That is only partly true. Leverage is not extreme. But from a cash-timing perspective, the company is still living through a transition period in which assets are being acquired, built, and revalued faster than they are becoming free cash flow.

The All-In Cash Picture

The reading frame here is all in cash flexibility, meaning how much cash is actually left after the year’s real cash uses. On that basis, 2025 was a debt-funded investment year. On the positive side, the company moved to ILS 16.7 million of cash generated from operating activities. On the other side, investing activity consumed ILS 230 million, while financing activity supplied ILS 203.6 million. Cash at year-end was only ILS 4.8 million.

What does that mean in practice? Operating activity is starting to generate real cash, but it still does not fund the development and acquisition plan. The company is financing the platform build-out through bank debt, convertible bonds, and lower cash balances. That is not necessarily an immediate liquidity problem, but it is a good reason not to confuse improved NOI with full financial flexibility.

If we wanted to look instead at normalized / maintenance cash generation, the picture would already look better: the operating asset base is producing more rent, and the move toward triple-net assets is improving earnings quality. But that is not the primary frame right now. For Shemen Nadlan, the investment case in 2026 and 2027 depends first on whether management can bridge the execution and financing phase, not only on what the recurring earning power of a fully stabilized portfolio might eventually look like.

The Working-Capital Deficit Is Not A Distress Signal, But It Is Also Not A Footnote

The company ended 2025 with a working-capital deficit of about ILS 105 million. The board explains why it does not see that as a liquidity problem: most of the deficit comes from the short-term classification of two material project loans, around ILS 62 million in Ashdod and around ILS 27 million in Ariel A, which are expected to be replaced by longer-term financing as the projects advance. In addition, the company holds a non-binding credit line of up to ILS 190 million secured by Haifa, unused at year-end and extended for another year in January 2026.

That explanation is reasonable. But the practical friction needs to sit next to it. The Haifa line is non-binding, and actual drawdown is subject to full bank discretion. So Haifa is simultaneously a strategic asset, a potential collateral cushion, and a source of bridge funding. That is a strength, but it is not the same thing as cash already sitting in the bank.

The Debt Layer

At the end of 2025 the company had ILS 96.1 million of short-term bank credit, ILS 175.1 million of long-term bank debt, and ILS 92.9 million of convertible bonds. Total financial debt rose quickly, even if not yet to an extreme level. The convertible bonds carry a 4.5% annual coupon, with an 8.84% effective rate, and mature in a single payment in May 2028. On the bank side, the Ashdod project uses a construction-finance framework of about ILS 193 million, of which about ILS 62.1 million had been drawn by year-end 2025.

The implication is that the balance sheet is stronger than that of a classic high-leverage development name, but capital flexibility is still not fully clean. It depends on finishing Ashdod on time, moving Ariel A into formal project finance, and keeping Haifa useful not only as a paper-value asset but also as collateral that helps the company move through the bridge period.

Value Created Versus Value Already Accessible

This is a critical point in transition-stage real-estate stories. Fair value of ILS 402.9 million in Haifa and ILS 283.9 million in Ashdod is not automatically the same thing as common-shareholder-accessible value. In Haifa, income is still interim-use income, spread across more than 45 occupiers, and the appraisal itself rests on a large land position with future development potential. In Ashdod, the value is already booked, but the major NOI still depends on completion, occupancy, and conversion from construction financing into an operating asset.

So at the end of 2025 the central question is not whether the company has created accounting value. It has. The real question is how much of that value is already accessible, cash-generating, and defensible, and how much still has to pass through another year or two of execution and financing.

Forecasts And The Road Ahead

Four Non-Obvious Findings

• First: 2025 already showed a sharp NOI jump, but authority-view FFO is still negative. The transition into the economics of a real stabilized landlord is not complete.
• Second: About 59.6% of portfolio value is concentrated in Haifa and Ashdod, and neither currently gives a simple, mature NOI picture.
• Third: The working-capital deficit is largely explained by short project loans, but the bridge still relies on refinancing, a non-binding facility, and on-schedule execution.
• Fourth: 2026 looks like a bridge-and-proof year, not a harvest year. Anyone expecting the full breakout immediately may be pulling the story forward too quickly.

2026 Looks Like A Bridge-And-Proof Year

Management is effectively saying two things at once. One, the direction is clear: finish Ashdod, advance Ariel A, keep developing Ofaqim, and move Gvat forward. Two, in timing terms, most of that still does not translate into a full future-portfolio NOI picture in 2026. In Ashdod, most of the work is expected to be completed by the end of 2026, with full completion in the first half of 2027. In the investor presentation, management shows expected occupancy in the fourth quarter of 2026, while the automated portion, around 10% of built area, is expected to be occupied about four months later. That means even in a good scenario, 2026 is more a first-delivery year than a stabilization year.

Ariel A is even longer-dated. Management presents expected occupancy in the second quarter of 2028, while the project has already moved from short land financing toward formal bank project finance near the report date. So the practical question for the next 2 to 4 quarters is not whether Ariel A is worth a lot in the long run. It is whether the financing and execution phase progresses in an orderly way without creating additional pressure on the cash position.

The Bull Case Exists, But It Is Not Yet In Hand

In the investor presentation, management lays out a path toward representative NOI of about ILS 86 million for the current asset set, excluding future redevelopment in Haifa. That path combines the 6 operating assets, Ashdod, Haifa interim use, Ariel A, Ofaqim, and Gvat. It is a meaningful upside roadmap, but it has to be read correctly: it is an execution-dependent end-state picture, not a 2026 earnings number.

The cleaner, nearer-term piece is the current operating base. According to the presentation, the 6 operating assets are expected to generate around ILS 19.9 million of NOI in 2026. That matters because it shows that even without Ashdod and without a planning unlock in Haifa, the company already has a real rent base that is starting to support the story. What is still missing is a base large enough to carry on its own the whole layer of development spend, debt, and embedded future optionality.

What The Market Is Likely To Measure

In the short to medium term, the market is likely to care far more about four checkpoints than about the next headline net-profit number.

• Ashdod: whether the project keeps moving on schedule and whether the handoff from construction debt to NOI looks credible.
• Haifa: whether the asset remains a strong bridge source without damaging its longer-term optionality.
• Ariel A: whether financing and execution confirm that the land is becoming a project rather than remaining only an appraisal story.
• Earnings quality: whether more of the next improvement comes from rent and NOI and less from revaluation.

If the first three progress and the fourth starts to show through, the thesis improves. If one of the execution tracks gets stuck, a large part of today’s paper value may remain outside the shareholder layer for longer than the market wants to wait.

Risks

The first risk is asset and value concentration. Haifa and Ashdod together amount to roughly ILS 686.8 million, almost 60% of portfolio value. That means one delay, repricing, or more expensive financing package at either asset can materially change the read of the whole company.

The second risk is related-party dependence in Ashdod. The company is building its next major NOI engine around a long-term lease with Orshar, a private company controlled by Zvika Ben Zvi, one of the controlling shareholders. In addition, Ben Zvi has a budget-supervision role in the project with compensation partly tied to cost savings. This does not automatically indicate a material governance flaw, but it does create a structure that requires investors to look carefully not only at the appraisal, but also at governance quality, execution discipline, and actual conversion into active rent.

The third risk is funding and refinancing. Management offers a fairly convincing explanation for why the working-capital deficit does not indicate immediate liquidity stress, but even after that explanation, the company still depends on two moves: replacing short funding with longer-dated financing, and maintaining real access to the Haifa credit line. Until both are fully executed, flexibility remains partly theoretical rather than fully locked in.

The fourth risk is the gap between temporary NOI and durable NOI. Haifa is the clearest example. In 2025 rent from the asset, including municipal-tax reimbursements from tenants that were not billed directly by the municipality, amounted to about ILS 10.9 million. Based on binding lease contracts signed through the report date, expected 2026 rent is about ILS 7.82 million. Those two numbers are not perfectly comparable, so this is not evidence that the asset has weakened. It is a reminder that current Haifa income is still interim-period income, not yet a super-stable long-term NOI engine.

The fifth risk is claims, municipal charges, and planning dependency. The company is dealing with a revised Haifa municipal-tax assessment, a ILS 20 million claim related to an Ariel asset, and projects whose success depends on permits, project financing, and execution. These are not theoretical tail risks. They are real friction points that can affect pace and economics.

Conclusions

Shemen Nadlan exited 2025 as a much larger company than the one that entered it. That is visible in portfolio size, property value, revenue growth, and the move to meaningful NOI. But the core issue is still open: most of the value sits in assets that do not yet pay full stabilized rent, and the bridge between the balance sheet and cash flow is not finished. Over the next year, the market is likely to focus less on the next revaluation gain and more on Ashdod delivery, refinancing, and the company’s ability to turn land and projects into real NOI.

Current thesis: Shemen Nadlan has rapidly built an impressive logistics and industrial portfolio, but as of the end of 2025 it is still a transition platform where execution and financing matter more than accounting profit.

What changed: The company is no longer leaning on one or two assets and a broad future promise. It now has a wider operating base, its first public debt layer, and a flagship project in advanced execution at Ashdod. At the same time, precisely because the balance sheet has grown so quickly, the question of how much value is truly accessible to common shareholders has become sharper.

Counter-thesis: The cautious read may prove too conservative, because leverage is still moderate, the operating asset base is already broader, and if Ashdod and Ariel A progress as planned, a large part of today’s balance-sheet value could convert into real NOI faster than the market expects.

Why this matters: This is a classic test of accounting value creation versus actual monetization through rent, cash flow, and financing. Not every jump in fair value is already a jump in common-shareholder economics.

What will decide the next 2 to 4 quarters: keeping Ashdod on schedule, moving Ariel A forward both financially and operationally, using Haifa carefully as a bridge without eroding its optionality, and showing future earnings improvement that relies more on rent and NOI and less on revaluation.