Namco Realty: How NOI and AFFO Rose While FFO Was Cut
Namco Realty ended 2025 with NOI up to $290.2 million and AFFO up to $144.1 million, yet FFO fell to $48.6 million because it left roughly $97.6 million of FX and hedge expense inside the metric. That gap is not a technical footnote. It is the difference between what improved in the properties and what swung in the shekel liability layer.
The main article already established that 2025 was not an operating setback for Namco. NOI rose, AFFO rose, and cash flow from operations strengthened as well. This follow-up isolates the part that is easiest to misread: how can FFO be cut almost in half in the very same year.
The answer is that Namco's 2025 FFO was not a clean property metric. It kept a currency and financing layer inside the number, and that layer moved in the opposite direction from the properties. So the year only looks contradictory if you hold on to one headline metric. Once NOI, AFFO, operating cash flow and FFO are lined up next to each other, the picture changes: the properties improved, but the FX line cut the metric readers are most tempted to treat as an operating proxy.
The Numbers Look Contradictory, But They Are Not
Four numbers organize the whole reading:
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| NOI | $218.2 million | $290.2 million | 33.0% |
| Cash flow from operations | $196.6 million | $266.1 million | 35.3% |
| FFO | $88.5 million | $48.6 million | (45.1%) |
| AFFO | $87.1 million | $144.1 million | 65.5% |
That is not a real contradiction. It is a clash between two kinds of measurement. NOI and operating cash flow say the property layer worked better in 2025. AFFO says most of that improvement still existed after management's adjusted bridge. FFO, by contrast, shows what happened once the company left the currency line inside the metric.
The split becomes even sharper at the attributable line. Attributable FFO fell to $17.6 million from $65.9 million, while attributable AFFO rose to $107.8 million from $63.7 million. That is not noise. It is a sign that 2025 has to be read through several layers rather than through one headline.
FFO Was Cut Because The Currency Layer Stayed Inside
The reconciliation table is unusually explicit here. The company says directly that the decline in FFO was driven mainly by exchange differences that are not neutralized under the FFO calculation. That is the core point. In 2025 the company recorded $97.6 million of net FX and currency-hedge expense, versus only $0.5 million of income in 2024. That is a swing of about $98.1 million in one line.
The filing also explains the mechanism. The line comes mainly from shekel-denominated bonds and from cash and deposits denominated in shekels. Put differently, the real-estate engine is dollar based, but part of the financing wrapper was raised in shekels in Tel Aviv. When the shekel moves, FFO can tell a very different story from the properties themselves.
That chart sharpens what is hiding inside the table. The gap between FFO and AFFO reached $95.5 million in 2025. In 2024 the gap was close to zero, and actually went about $1.5 million in the opposite direction. So anyone reading only the FFO line could easily conclude that operations weakened, while the reconciliation itself shows that the main distortion came from leaving the currency layer inside the metric.
There is another useful detail here. Out of the reported $97.6 million FX and hedge line, the company attributes about $2.3 million to a fair-value loss on currency hedging transactions. That is why AFFO does not add back the full reported line one for one, but adds back $95.3 million. This matters. Not all of the issue is pure translation, and a small part of it is also the cost of trying to soften the exposure.
NOI And Operating Cash Show That The Properties Improved
If FFO on its own is misleading, what tells the 2025 story more accurately? First, NOI. It rose to $290.2 million from $218.2 million, an increase of about $72.1 million. The company attributes the increase mainly to a larger property base. Rental and related-service income also rose to $482.0 million from $405.5 million.
The same direction appears in cash flow. Cash flow from operations rose to $266.1 million from $196.6 million. So it is difficult to argue that 2025 was a year in which the property engine weakened. The improvement reached operating cash as well.
But this follow-up is not here to replace one misread with another. AFFO does not mean financing stopped mattering. The company itself says the increase in AFFO came mainly from higher NOI and was partly offset by higher financing expense on loans and bonds, mainly because the balances of those loans and bonds grew during 2024 and 2025. The results table says the same thing: net finance expense rose to $113.8 million from $104.6 million.
So 2025 was not a year in which NOI jumped and everything flowed cleanly through to recurring earnings. It was a year in which the properties worked better, the debt layer absorbed part of the improvement, and the currency layer cut FFO before the reader even reached the operating question.
The cash-flow statement confirms that as well. Alongside the stronger operating inflow, 2025 still included $407.9 million of investing outflow and $212.9 million of financing inflow. That is why AFFO is not the same thing as free cash. It is simply a better answer than FFO to a narrower question: did the recurring property base improve once the currency noise is taken out. On that question, the 2025 answer is yes.
The company adds one more useful signal. Some of the significant properties acquired during 2023 to 2025 are still in the middle of improvement processes, so their contribution has not yet been fully reflected in AFFO. That does not change the 2025 reading, but it does explain why management treats AFFO as a better midpoint than FFO for this year rather than as the end of the story.
What To Take From The Gap
The bottom line of this follow-up is straightforward. 2025 did not create a contradiction between NOI and FFO. It created a situation in which one metric, FFO, mixed together four different layers: properties, financing, currency and a small hedge effect. NOI said the properties improved. The cash-flow statement said the improvement reached operating cash. AFFO said the improvement still existed after the adjustment layer. FFO mainly said that the shekel exposure became very heavy in this particular year.
That is exactly what a first read can miss. Anyone reading only FFO may think the business weakened. Anyone reading only AFFO may think the problem disappeared. The more precise reading is that the real estate worked better, but the shekel bond layer and the higher financing burden kept that improvement from looking clean in every metric.
So in the next reports the question will not be only whether NOI keeps rising. The question will be whether the FX line calms down, whether financing expense stops climbing so quickly, and whether operating cash flow keeps confirming that the improvement is not just an adjusted-metric story. Only when those three line up together does FFO become an easier number to read at face value again.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.