Blue Square Real Estate: From Signed Offices to Actual NOI
At Tozeret Haaretz, the leasing story is nearly closed, but in 2025 only a small part of the economics already embedded in value made it into actual NOI. With Global Tower coming right behind it, Blue Square Real Estate’s office test may remain open even after the Tel Aviv tower stabilizes.
What This Follow-Up Is Isolating
The main article already argued that retail is buying the company time and that the real 2026 test runs through offices and housing. This follow-up isolates only the office layer, and within it one question: how much of the Tozeret Haaretz story has already moved from signed leases and appraisal value into NOI that is actually showing up in the numbers.
That question matters because Tozeret Haaretz already checks almost every box the market likes on paper. Form 4 was received in July 2025, a major lease was signed in September 2025 with an anchor tenant for about 15,000 to 20,000 square meters plus an option for another roughly 5,000 square meters for 24 months, and by the March 2026 presentation management says there is no remaining office space without a lease commitment. At first glance, that sounds like a story that has already crossed from development into mature income.
The annual report tells a more careful story. In the material-property table, the office component of Tozeret Haaretz ends 2025 at a value of NIS 871.75 million, with actual NOI of only NIS 10.514 million, against adjusted NOI of NIS 52.378 million and an actual yield of 2.4% versus an adjusted yield of 6%. In the March 2026 presentation, management already shows expected NOI of NIS 60 million. In other words, contracts and valuation are already speaking the language of a nearly stabilized asset, while the 2025 report is still speaking the language of a short transition year.
| Layer | What it says | What it still does not prove |
|---|---|---|
| September 2025 lease | A large tenant signed for about 15,000 to 20,000 sqm, with an option for roughly another 5,000 sqm, and no office floors remained without a commitment | That the space was already fully delivered, billed, collected, and visible through a full-year NOI run rate |
| Year-end valuation | NIS 871.75 million of value, NIS 52.378 million of adjusted NOI, 6% adjusted yield | That this NOI was already flowing through the 2025 P&L |
| 2025 reported results | NIS 12.264 million of revenue and NIS 10.514 million of NOI | That the asset had already become a fully seasoned income property rather than a late-stage transition asset |
The gap between these three layers is the heart of the continuation thesis. Anyone reading only the lease gets a story that is too closed. Anyone reading only actual NOI gets a story that is too weak. The right reading sits in between: Tozeret Haaretz has largely solved the leasing question, but year-end 2025 still does not prove that the tower has fully crossed into normal cash yield.
The Leases Are There, But The Company Itself Says The Income Is Not Fully There Yet
The strongest proof that the transition is still incomplete comes not from interpretation but from the company’s own disclosure. In the actual-yield table it says explicitly that the property already had binding lease agreements whose income was not reflected in 2025, and that in calculating actual yield the related value was therefore neutralized. That is a very important admission. The company is telling readers directly that year-end value should not be matched mechanically against the NOI recorded in the same year.
The implication is simple. This was not a year of “weak demand.” It was a year in which lease signing, delivery, tenant fit-out, rent commencement, and accounting recognition moved at different speeds. The presentation adds another layer: office occupancy at December 31, 2025 stood at 76%, but average office occupancy for 2025 was only 62%, and fourth-quarter average occupancy was 69%. Even at the broader segment level, the exit rate already looks better than the average that actually ran through the annual results.
There is another detail that is easy to miss. The “office component” of Tozeret Haaretz is not just office floors. Under section 8.5.2, the company’s allocated share includes all employment space, the retail space in the south tower, and a relative share of project parking. So the statement that no office space remained without a commitment is clearly positive, but it is not automatically equivalent to saying the entire asset package was already running at full NOI. The NIS 871.75 million property being valued is broader than the office headline attached to it.
The valuation itself says this quietly. In section 8.6.1.2 the appraisal assumptions still distinguish between leased and vacant office areas: 6% cap rate for leased space and 6.75% for vacant space, with monthly office rent assumptions of NIS 150 per square meter for leased space versus NIS 120 for vacant space. That is not the valuation of an asset with no remaining stabilization work. It is a valuation that recognizes that much of the value is already contractually supported, but part of it still rests on a target state rather than on fully proven cash flow.
That is the core point. Tozeret Haaretz has largely passed the demand test, but it had not yet fully passed the actual-NOI test by the end of 2025.
More Than Half Of Office Value Already Sits In One Asset That Is Still Maturing
This is where the story stops being about one property and becomes a question about the whole office segment. According to the annual report, the office segment ended 2025 with total value of NIS 1.606 billion. Out of that, Tozeret Haaretz alone stood at NIS 871.75 million. That means a little more than 54% of total office value is already concentrated in one asset that is still moving from signed leases into full income.
That explains why an apparently dry segment datapoint, office NOI falling to NIS 34.803 million in 2025 from NIS 40.709 million in 2024, is actually very important. The segment already added 27,000 square meters of signed leases over the last twelve months, point-in-time occupancy already improved, and still full-year NOI went down. That suggests the new leasing at Tozeret Haaretz did not yet have enough time in 2025 to offset lost time during construction and tenant fit-out, or weakness and partial maturity elsewhere in the office portfolio.
This is also why the argument over Tozeret Haaretz is not a niche asset discussion. It is the central debate over how to read the office segment as a whole. If Tozeret Haaretz starts contributing NOI at a pace closer to the NIS 52.378 million adjusted number or the NIS 60 million management target, the office segment could suddenly look like a real growth engine. If the pace is slower, the entire segment will keep looking like a value story that is still ahead of cash.
There is one more subtle point. In the March 2026 presentation, management shows office-segment NOI of NIS 35 million for 2025, essentially the same as the NIS 34.803 million in the annual report. Against that, it shows expected NOI of NIS 60 million for Tozeret Haaretz alone. So even under management’s own framing, the new tower is supposed to produce far more future NOI by itself than the whole office segment produced in 2025. That is a large promise, and therefore a hard checkpoint.
Global Tower Keeps The Office Story In Proof Mode
Even if Tozeret Haaretz starts looking much better in 2026, that does not necessarily turn the office segment into a mature and clean earnings story. The reason is Global Tower in Petah Tikva. In the March 2026 presentation, management shows roughly 37,000 square meters of rights there, about NIS 430 million of invested capital, expected NOI of about NIS 35 million, and expected occupancy in the first quarter of 2027.
This matters not because Global Tower looks weak, but because it may look attractive. The issue is timing. If Tozeret Haaretz is the asset that has to prove in 2026 that signed space really turns into actual NOI, Global Tower is the next asset that could reopen the same conversation: marketing, occupancy, leasing, and gradual conversion into actual segment cash flow. In other words, even a positive outcome at Tozeret Haaretz does not necessarily end the office transition story for the group. It may simply hand the baton to the next project.
The annual report already sets up that reading. Section 8.1.9 says the office market still includes a lot of space in planning, permitting, construction, and occupancy; that Tozeret Haaretz has been completed and has no remaining vacant office space to let as of the report date; but in the same breath it adds that Global Tower is expected to be completed in 2026 and that its demand advantage remains a company assessment. That is exactly the distinction investors need to hold: Tozeret Haaretz is nearly past the leasing question, while Global Tower is still ahead of the proof stage.
That means the office risk is not only that Tozeret Haaretz comes through too slowly. The risk is that investors get a sequence of assets that move one after another from construction into leasing, while the segment as a whole stays in a long “the NOI is coming soon” phase. At that point, the problem is no longer one asset. It is pacing.
Conclusion
The right way to read Tozeret Haaretz at the end of 2025 is neither “the asset has already proven itself” nor “this is only a revaluation story.” The sharper truth is this: Blue Square Real Estate has largely answered the demand question in Tozeret Haaretz, but it has not yet fully answered the actual-NOI question.
Current thesis: in Tozeret Haaretz, the story has already moved from whether the offices can be leased to how quickly signed floors become actual NOI, and that is precisely why the asset matters more now.
What the market now needs is far less narrative and far more straightforward operating evidence: actual office NOI rising sharply, average occupancy catching up with year-end occupancy, and proof that the end-2025 valuation did not move too far ahead of the economics. If that happens, the 2025 revaluation will look like a value recognition that arrived somewhat early but did not detach from cash. If it does not happen, offices will remain the place where value has already been booked but certainty has not.
The less comfortable part is that even a positive Tozeret Haaretz outcome may not settle the segment. Global Tower can still keep the office portfolio in a transition frame, with one asset leaving proof mode while another enters it. So Blue Square Real Estate’s office test is no longer about whether leases can be signed. It is about whether the company can turn a line of signed office projects into a segment that looks mature at the NOI level, not only in valuation decks.
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