Shemen Nadlan: Ashdod Is Already Worth ILS 284 Million, but How Much of the Economics Depends on a Related-Party Deal
By the end of 2025, Ashdod was already carried at ILS 283.944 million and management presented representative NOI of ILS 22 million. But both numbers rest mainly on an internal economic package: a related-party tenant, cost-transfer mechanisms, landlord participation in fit-out, and budget supervision tied to the controlling shareholder.
The main article framed Ashdod as one of the key assets that will decide whether Shemen Nadlan's balance-sheet jump can become real NOI. This follow-up isolates the sharper question. How much of the ILS 283.944 million fair value already reflects the economics of a normal income asset, and how much depends on a related-party structure that ties together the land, the tenant, the cost mechanics, and the supervision layer.
That question matters because Ashdod already represents close to a quarter of portfolio value, yet by the end of 2025 the new building had barely generated any income. The only revenue actually recorded from the asset during 2025 was about ILS 129 thousand from leasing an existing storage structure during construction. At the same time, the company was already presenting representative NOI of ILS 22 million for Ashdod, and the valuation was already setting the asset at ILS 283.944 million. In other words, most of the economics are already being read through the future contract, not through an operating history that has been tested in the open market.
The good news is that the contract was built to shift a meaningful part of the cost risk to the tenant and to preserve the landlord's yield in advance. The less clean part is that the tenant is related, the land came from the controlling shareholder, and the same controlling shareholder also sits inside a budget-supervision mechanism that pays him both a fixed fee and a share of the savings if actual cost comes in below budget. That is the core of the continuation thesis. Ashdod looks strong on paper not only because it is large, but because its contractual architecture was designed to make it look economically coherent before the full operating proof arrives.
This Is Not Just A Lease, It Is A Full Economic Package
| Component | What was agreed | Why it matters |
|---|---|---|
| Land | The land was transferred into the partnership at an agreed value of ILS 150 million, with another ILS 750 thousand injected for purchase tax | The project's starting economics were set through a controlling-shareholder transaction, not a normal market purchase |
| Tenant | Orsher, a private company controlled by Tzvi Ben Zvi, leases the entire site under a long-term contract | The property does not need an external lease-up process in order to look occupied |
| Scope and term | The leased area was enlarged from about 12,500 square meters to 32,620 square meters, for 10 years plus two 5-year options | This is the main income anchor of Ashdod for years ahead |
| Base rent | ILS 45 per square meter for the first 3 years, ILS 46 in year 4, ILS 47 in year 5, and then 5% step-ups | Rent is not a one-time number. It is a pre-built return path |
| Cost mechanics | Expected budget is ILS 146.7 million, actual landlord cost is capped at ILS 160 million, and any excess above budget raises annual rent by 6% of the excess | The lease is meant to preserve landlord economics even if cost shifts |
| Automation and fit-out | The landlord participates in automation fit-out up to ILS 17 million or 35% of the cost, whichever is lower; every ILS 100 per square meter adds ILS 1 per square meter per month to rent | Even the most expensive fit-out layer is tied back into rent economics |
| Operations and security | The tenant bears taxes, municipal charges, utilities, insurance, and maintenance on a triple-net basis; security includes Ben Zvi's personal guarantee and a 12-month promissory note | From the company's perspective, the structure is meant to reduce both operating and collection risk |
What matters here is not any single clause by itself, but the way the clauses fit together. This is not a lease that only sets rent. It is a lease that predefines how cost overruns are treated, how automation fit-out is handled, who pays above the landlord cap, and how the landlord's return is preserved even if the final design changes. Put differently, the Ashdod lease functions almost like a financing envelope for the project, not just a revenue envelope.
That also explains why the company says it does not need to face regional competition in Ashdod, because the entire property is already covered by a long-term lease with Orsher. That reduces leasing risk. It also means the next critical step is no longer another signature. It is delivery, operation, and actual collection.
At Year-End 2025, Fair Value Was Already There, But The Income Was Not
The right way to read Ashdod at the end of 2025 is to compare the narrow gap between cumulative cost and fair value with the much wider gap between fair value and the NOI that has actually started to run. Cumulative cost in the asset rose during 2025 from ILS 188.942 million to ILS 279.588 million, while fair value rose from ILS 189.858 million to ILS 283.944 million. The annual fair-value gain was only ILS 3.441 million.
This chart matters because it shows that Ashdod is not being carried as a development project with a huge unlocked spread already embedded in the accounts. By the end of 2025 fair value exceeded cumulative cost by only about ILS 4.4 million. So if someone is looking here for a large valuation cushion that has already been crystallized on paper, that is not really what the numbers show. Most of the story from here depends on the contract turning into income, not on the valuer adding another major layer of upside before the property starts operating.
At the same time, the project was still not complete. Budgetary completion had reached about 66%, remaining investment still stood at ILS 63.053 million, and the company described construction as expected to be mostly complete by the end of 2026, with full completion expected in the first half of 2027. The company's presentation is slightly sharper: occupancy is expected in the fourth quarter of 2026, while the automated part, about 10% of built area, is expected to be occupied about 4 months later.
That sharpens the real point. Ashdod's economics already look large, but by the end of 2025 they were still construction economics, not operating economics. That is why the ILS 22 million representative NOI matters less as a headline and more as a test: will it actually appear at the pace and on the terms that the contract implies.
The Valuation Already Capitalizes The Contract, Not An Open Market Lease-Up
The valuation does not treat Ashdod as vacant land waiting for a tenant. Quite the opposite. It explicitly says that because this is a related-party transaction that includes both land and construction, the value is derived through a combination of income capitalization and residual analysis based on the lease agreement. The discount rate used is 6.3% for the first 10 years and 6.5% for the option period and the remaining term. In other words, the ILS 283.944 million value already assumes that this contract is a real economic anchor.
The chart deliberately does not show NOI. It shows why Ashdod is hard to read as a plain lease transaction. There is land that came from the controlling shareholder, a landlord cost envelope of ILS 187.385 million, and another ILS 33.8 million of tenant-side investment. The company also makes clear that this tenant investment is not included in the value, because it remains tenant-owned during the lease. On one hand, that makes the valuation technically cleaner, because it is not padded by equipment the landlord does not own during the term. On the other hand, it underlines how specifically this asset is being built around one tenant.
The presentation adds another layer. The ILS 22 million representative NOI is explicitly based on a lease covering the entire site, and it excludes additional income sources such as bulk electricity, photovoltaic systems, and storage facilities. On simple arithmetic, ILS 22 million of representative NOI against ILS 283.944 million of fair value implies roughly a 7.7% yield. That is not the problem. The real question is different: how much of that yield reflects market-tested economics, and how much reflects economics engineered inside a related-party circle.
That is the difference between a property that is leased on paper and a property that is proven. At the end of 2025 Ashdod was not just an empty shell next to a marketing deck. It was sitting on a full contract. But a full contract with a related-party tenant is still not the same thing as a property that has already been delivered, switched on, and shown real collection in operation.
The Controlling Shareholder Sits In More Than One Layer Of This Deal
The more sensitive point in Ashdod is that the related-party angle does not end with the tenant. Tzvi Ben Zvi also transferred the land into the partnership, controls Orsher, provides personal security inside the lease package, and was appointed budget supervisor over the expansion project.
That mechanism is built in two layers. First, Ben Zvi is entitled to a fixed fee of ILS 32 thousand per month for up to 30 months, and that fee is part of the expected budget. Second, if actual cost comes in below budget, he is also entitled to a savings-based supervision fee: 50% of the savings up to 2.75% of the budget, and 100% of the savings above that threshold. If actual cost is equal to or above budget, there is no savings fee. At the same time, professional decisions on contractor selection and engineering issues remain with the project manager, and the final actual-cost report is binding.
This does not automatically make the transaction uneconomic. There is a clear alignment logic here: the person who controls the tenant and knows the asset is also meant to help bring the project in on time and on budget. But it does mean that not every shekel of construction savings necessarily remains with the public company. Part of the savings, if achieved, may flow out as a supervision fee to the controlling shareholder. So anyone reading Ashdod only through the ILS 22 million representative NOI is missing a crucial layer: the incentive structure itself is part of the project's economics.
That is exactly why the right question for Ashdod is not whether there is a lease. There is. The real question is how much of the future value will ultimately be proven through operation and collection, and how much still depends on internal mechanisms between the company and its controlling shareholder.
What Has To Be Proven Next
- The first test: occupancy really has to start in the fourth quarter of 2026, with the automated part following shortly after rather than slipping materially.
- The second test: the full contract has to move from valuation support into actual NOI and real collection. Until the end of 2025 the asset had produced only negligible income from the temporary storage structure.
- The third test: the final actual-cost report has to show that the contractual mechanisms really worked, whether through staying inside budget or through activating the rent-adjustment formula without reopening the whole story.
- The fourth test: any possible upside from electricity, photovoltaic, and storage-related income should remain upside, not become a substitute for the fact that the base case still rests on a related-party lease.
Bottom Line
Ashdod is already too large to be treated as a distant option. At ILS 283.944 million of fair value it is one of the company's most important assets, and the ILS 22 million representative NOI explains why management presents it as the next major NOI engine.
But at the end of 2025 Ashdod's economics were still not proven through open-market leasing or through NOI already running in the accounts. They were proven mainly through an internal contractual system: land contributed by a controlling shareholder, a related-party tenant for the full site, rent formulas that pass through part of the cost pressure, an automation-fit-out layer, and budget supervision that can reward the same controlling shareholder if savings are achieved. That does not make the deal uneconomic. It does mean that the next proof the market will look for is not another clause or another valuation, but delivery, operation, collection, and evidence that this contract works outside the paper as well.
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