Antokolsky: The Permit Arrived, but Permit Fees, Arbitration and Project Finance Still Drive the Economics

What The Permit Actually Changed

The main article already made the broad point: a building permit at Antokolsky does not, by itself, close the gap between value and accessible value. This follow-up isolates the harder part. Once the permit was received, the project moved out of planning risk and straight into economic and financing risk. The permit locked in rights for 94 apartments plus retail and office space, but it also exposed everything that is still unresolved: permit fees owed to the Israel Land Authority, an agreement with the state over its rights, arbitration with the partner, and project finance that still does not exist.

Three points stand out immediately. First: the permit did not open marketing. The company says marketing is expected only in the second half of 2027, and only subject to resolving the permit-fee issue, securing financing for that payment, signing project finance, and signing an agreement with the state. Second: the project’s base economics are positive, but the margin of safety is not wide. Third: the March 15, 2026 credit update bought time until June 30, 2027, but left only ILS 11 million of unused facility capacity for future interest and guarantees. That is bridge funding for the waiting period, not financing that takes the project into execution.

The right lens here is all-in cash flexibility, meaning how much real cash is left after the project’s actual cash uses and obligations. This is not a question of theoretical cash generation years from now. It is a question of whether the project can move from permit status to executable status after the fees and levies already paid, after interest stopped being capitalized, and with a large ILA charge still unresolved.

The On-Paper Economics Are Still Positive, but The Cushion Is Thin

Most of the project tables are shown on a 100% basis, while the company’s effective share in the project is 49.22%. On that basis, the end-2025 model shows expected revenue of ILS 488 million against expected cost of ILS 441 million, or expected gross profit of ILS 47 million and a 9.6% gross margin. The average residential selling price used in the model is ILS 63,170 per square meter including VAT. Those are not bad numbers, but they are not numbers that allow for much error.

A 5% drop in selling prices cuts expected gross profit to ILS 23 million, and a 10% drop pushes it to about negative ILS 2 million. A 10% increase in construction costs reduces expected gross profit to ILS 29 million. And that is before moving from accounting gross profit to economic profit, which falls to ILS 27 million once financing, selling, and marketing costs that do not sit in cost of sales are included.

This chart matters because it shows that the project does not sit on a fat profitability cushion. Even before financing, arbitration, and permit fees, the economics are already fairly sensitive to price and cost. The company also says explicitly that if the adjustment formula were applied, gross margin at the company-share level would be expected to reach 21% in 2025. That is another way of saying that part of the upside already depends on a disputed legal outcome, not on a hard operating base case.

There is another point the market could easily miss. The company presents expected withdrawable surplus of ILS 108 million, but the expected drawdown timing is only in 2030 to 2031, and only after all project obligations are repaid and subject to bank approval. That is not near-term cash. It is an end-of-project model. It does not answer the funding question for 2026 and 2027.

The filing is cautious even beyond that. Revenue, gross profit, economic profit, and surplus expectations also rely on a draft zero report that had not yet been signed. In other words, even the layer that is supposed to translate planning into bankability was still, by the company’s own wording, not yet sitting on a signed financing document.

Permit Fees Are Not a Footnote. They Are the Center of the Economics

The core issue is the permit-fee demand from the Israel Land Authority. The original demand at the start of 2023 stood at ILS 68 million. In June 2024 BIT received an updated demand of ILS 76.6 million, and by December 31, 2025 the revalued amount, according to the external appraisal, had already reached about ILS 87 million. VAT, purchase tax, and indexation are added on top, while half of the betterment levy paid is offset against that amount.

This is not a theoretical issue in the accounts. In the year-end valuation, about ILS 57 million was deducted for the expected permit-fee payment after exhausting the appeal and objection processes, net of 50% of the betterment levy and including ancillary costs and expected purchase tax. Another ILS 8 million was deducted for the betterment levy already paid, and another roughly ILS 5 million was deducted for affordable-housing apartments. Those are 8 apartments of roughly 400 square meters that will be rented for 20 years at a 40% discount to market rent under city policy. So a meaningful part of the gap between the gross planning rights and the economics that actually make it into the model is already consumed inside the permit package itself.

Even after the permit was received, BIT still cannot begin construction or marketing until the ILA issue is resolved. That is why the company says explicitly that it intends to fund the permit-fee payment through bank financing, a new investor, or shareholder loans. If three possible funding channels are still being discussed at this stage, then funding is no longer a side issue. It is part of the project’s economic core.

This chart is not meant to add unlike items together. It is meant to show proportion. Against about ILS 111.5 million of existing bank debt, ILS 84.6 million of owner loans, and a revalued ILA exposure of about ILS 87 million, the March 2026 update left only ILS 11 million of unused facility capacity. Anyone reading the credit extension as if it solved the issue is missing the scale of the capital stack.

The legal process is also still far from resolved. BIT filed its court claim against the ILA in July 2024. The ILA filed its defense in February 2025, and the court hearing was set for June 25, 2026. In parallel, BIT also filed an appraisal objection in August 2024, but the ILA has refused to discuss it until the legal arguments are resolved. In early January 2026 the parties told the court that they agreed the decision would be based on pleadings, document discovery, and written summations. That means the single biggest economic variable in the project is still trapped in a legal track.

Arbitration Turns Part of the Upside Into a Claim, Not Into Cash

Antokolsky’s economics do not depend only on the ILA. They also depend on the adjustment mechanism with the partner. The investment agreement says the settlement should be made once the building permit is actually received, based on two moving parts: approved saleable area above a base area of 9,440 square meters, and charges for betterment levy, public burdens, and ILA payments above ILS 20 million. At the report date, the company’s expected indemnification from applying that formula stood at about ILS 31 million.

But this is exactly where the friction begins. Even though the permit was received, the adjustment mechanism had still not been activated by the time the report was approved. In the arbitration that began in 2024, the partnership is seeking, among other things, an internal auction, reimbursement of interim funding it advanced instead of the partner, and implementation of the adjustment formula so that the defendants transfer about ILS 48 million to the company, based on the full permit fees charged to BIT as of the claim filing date. On the other side, the foreign company and the heirs argue that the late owner’s guarantee expired with his death, that failure to provide interim funding was not a breach, and they also raise new arguments over how the mechanism itself should be applied.

What matters for investors is not only the existence of the process, but what it does to the numbers. The company presents an expected ILS 31 million indemnification, but it also says explicitly that no asset or liability has been recognized in the financial statements for the adjustment mechanism. In plain terms, part of the more attractive project economics still sits in litigation. It exists as a claim, not as cash.

The interim funding layer tells the same story. During 2023 through 2025, the company, through the Ravad Avidar partnership, extended loans to the foreign company so it could fund its share of BIT’s interest burden after it failed to provide its own portion. Those loans stood at about ILS 6.3 million at the end of 2025, carried 10% annual interest, and rank ahead of most other owner loans. That is a clear sign that the partner dispute is not a legal side note. It has already changed the financing of the waiting period.

At the report date, a summary preliminary arbitration hearing had been set for April 14, 2026, and the parties had also agreed to refer the disputes to a fast mediation process in parallel to arbitration, with a first mediation meeting set for March 31, 2026. The company’s legal advisers estimate a better-than-50% chance that the causes of action will be accepted, without fixing the amounts. That wording matters. It gives some support to management’s position, but it still does not convert the upside into a balance-sheet item.

The March 2026 Credit Extension Bought Time, Not a Move Into Project Finance

The March 15, 2026 update did three things: it pushed out the maturity of the ILS 97 million land loan, the ILS 14.5 million fees-and-levies loan, and the validity of the facility itself to June 30, 2027. At the same time, BIT asked to reduce the facility so that the unused balance would stand at just ILS 11 million, which can be used for future interest expenses and cash guarantees. The pricing terms did not change.

That is a real but limited improvement. It is not project finance. The company says explicitly that other than the existing bank loan, no specific financing and no project accompaniment facility have yet been taken for project execution. It also says BIT does not expect to need additional sources in the coming year, but if BIT reaches an arrangement with the ILA or wants to start executing the project within the coming year, it will have to sign an accompaniment agreement with a bank that can, among other things, finance the permit-fee payment. That is effectively an admission that the current extension finances the waiting period, not the launch.

There is also an important accounting and cash-flow shift once the permit was received. Up to December 7, 2025, interest on the loan was capitalized into inventory. From that point on, it is no longer capitalized and instead flows through finance expense. The amount paid in interest on that loan was about ILS 6.7 million in both 2025 and 2024, and it now shows up much more directly in earnings and cash flow. The company even writes that, from 2026 onward, interest payments are expected to be funded through new bank loans at BIT. That sharpens the real point: even before moving into execution, the project is already generating a need to finance the waiting period.

Then there is the guarantee layer. The company is the one that provided the bank with an unlimited shareholder guarantee for all of BIT’s obligations, and all of its requests that the heirs of the foreign partner’s late controlling shareholder provide a guarantee for 40% of BIT’s obligations have gone unanswered. So the credit extension is not just more time. It is more time that still rests on a full guarantee from Ravad and on unresolved counterparty risk.

What Will Decide Whether the Permit Becomes Executable Economics

In the end, the permit did one very important thing: it ended the argument about whether the project can be built. From here, the argument is about who pays, when, and on what terms. For Antokolsky’s economics to move from model to project, three things have to happen almost together: the ILA has to move into a practical payment and financing route, the state has to sign a binding arrangement over its rights, and arbitration has to stop delaying the adjustment mechanism and the division of the funding burden between the parties.

Until then, the permit is a real planning achievement, but not a complete economic solution. It moved the project closer to execution while, at the same time, turning financing, counterparties, and legal process into the layer that decides whether this is a profitable project that can actually be funded, or just a reasonable-looking model that still sits on paper.