Dor Alon follow-up: how much of the real estate is a balance-sheet anchor and how much is real optionality

What This Follow-up Is Isolating

The main article argued that Dor Alon's operating picture looked better than the headline, while the balance sheet still needed air. This continuation isolates only one layer inside that story, the real estate. The question is not whether Dor Alon has meaningful real estate. It clearly does. The question is how much of the headline number already behaves like a real balance-sheet anchor, and how much still depends on approvals, time, and financing.

Three facts frame the answer. First: investment property reached ILS 1.673 billion at year-end 2025, but the annual increase was driven overwhelmingly by ILS 423.4 million of construction cost, while net fair-value uplift was only ILS 9.1 million. Second: almost the entire real-estate layer is concentrated in only two projects, Aloni Yam at ILS 1.470 billion and Aloni Kfar Saba at ILS 157 million. Third: the same assets that support the balance sheet also absorb financing capacity, with a ILS 591 million working-capital deficit that the company itself mainly attributes to short-term borrowing used to fund Aloni Yam.

That leads to the core conclusion. There is a real balance-sheet anchor here, but much less free optionality than the gross headline suggests.

This chart matters because it breaks the headline apart. Anyone looking only at the move from ILS 1.241 billion to ILS 1.673 billion could assume that the appraiser created a major step-up. In practice, most of the move came from capital poured into the projects.

What Already Counts as a Balance-Sheet Anchor

Dor Alon's real balance-sheet anchor is not revaluation profit. It is the existence of advanced assets with permits, construction progress, and values that are already sitting in the balance sheet. That is the key distinction between real estate that is mainly a story and real estate that is already carrying weight.

Aloni Yam is the center of that layer. The project holds rights in four plots in southern Herzliya's employment zone, with an approved plan, building permit, active main contractor, and advanced execution status. At year-end 2025 it was carried at about ILS 1.470 billion, up from ILS 1.072 billion a year earlier. Structural works, façade, and aluminum installation were already completed, landscape-development works were still underway, and the currently built phase was expected to be completed in the third quarter of 2026.

The more interesting point sits behind the headline number. In the very material valuation disclosure, the asset's value immediately before the valuation date was stated at about ILS 1.467 billion, while the valuation itself came in at ILS 1.470 billion. The same disclosure also states that around ILS 395 million of investment was accumulated in the asset during 2025. The implication is straightforward: most of the jump in the balance-sheet value came from the company building, paying, and advancing the project, not from the appraiser dramatically changing the mark.

Aloni Kfar Saba looks different. It is much smaller, at ILS 157 million versus ILS 123 million in 2024, but it is also much closer to an operating anchor than to a distant option. Construction was completed during the third quarter of 2025, and the works later reached Form 4. Here the anchor is easier to see, because the asset has already crossed the construction threshold.

Another important point is that by year-end 2025 the group's investment-property balance included about ILS 1.627 billion of land and investment property still in construction and planning stages. In other words, the number is large, but most of it still does not represent a mature, stabilized income-producing portfolio. It represents real assets whose value is meaningful, but whose conversion into income, monetization, or capital flexibility is still partial.

This chart shows why the term real estate, in the plural, can mislead. In Dor Alon this is not a broad portfolio of many similar assets. It is a layer dominated by one very large project, with a smaller second project alongside it.

Where Real Optionality Starts

The real optionality sits in the extra rights, not in the number already booked today. At Aloni Yam the company is advancing a specific plan that includes additional above-ground building rights, mainly for employment and residential use, of roughly 62 thousand square meters. The full-project visualization assumes approval of the promoted plan in full. In Kfar Saba, the city-led plan allows an additional roughly 20 to 25 thousand above-ground square meters, and the company has requested approval for about 33 thousand square meters.

That is the genuine option layer. Not what is already measured, but what could enlarge the projects beyond their current state. But that also needs precision. The Aloni Yam valuation disclosure states explicitly that the valuation assumptions include the potential for additional rights under the recently approved master plan, using a delay factor and subject to costs. In other words, part of the optionality is already sitting inside the book value. So it would be wrong to take the ILS 1.470 billion carrying value, add another layer of rights on top as if it were all free upside, and present the whole package as separate optionality.

Aloni Kfar Saba tells a similar story on a smaller scale. There is an existing completed asset, and above it sits a possible layer of extra rights that still requires planning progress. That is real optionality, because if the rights are approved the asset becomes meaningfully larger. But it is still not immediately accessible value.

There is also a more strategic type of optionality. The company continues to examine the possibility of transferring some of its real-estate assets to Blue Square Real Estate in exchange for shares, a route that has been under review since 2020 and was still not completed as of 26 March 2026, partly for regulatory reasons. The mere existence of that path suggests that management knows the market may assign different value to the assets inside a dedicated real-estate platform. But until that review is completed, it remains a strategic option rather than value already crystallized.

Why That Value Is Still Not Shareholder-Accessible

This is the line between a balance-sheet anchor and accessible value. If the same real estate forces the company to provide funding, carry a working-capital deficit, and keep examining financing alternatives, it does not behave like a cash drawer that can simply be opened.

At 31 December 2025 the company had a working-capital deficit of about ILS 591 million, and the board explains that this mainly stemmed from short-term loans used to finance the Aloni Yam project. The company also states that at this stage it chose to finance the project with short-term borrowing and is examining additional financing alternatives for continuing the funding. In the debt note, the company says that of the bank credit balance, ILS 445 million consisted of loans of up to three months that were taken to finance part of the investment in Aloni Yam.

That matters because it says that roughly three quarters of the working-capital deficit is matched, by itself, by short-term funding tied to Aloni Yam. Anyone looking at the real-estate layer only as a value cushion misses the other side of the equation. The same project that supports the valuation is also pulling in short-term funding.

And that is not the full story. By 26 March 2026 the company had already extended a shareholder loan to Aloni Yam that stood at about ILS 1.288 billion, including accrued interest, in order to fund capitalization payments to the Israel Land Authority, municipal levies, and project-development costs. So even beyond the short-term loans, the company has already pushed an enormous amount of owner-level capital into the project.

Ownership structure matters as well. Aloni Yam does not belong entirely to Dor Alon. The company holds 74% of it. That means the ILS 1.470 billion figure is a full-project value at the gross asset level, while Dor Alon's economic exposure is only part of that, and even that part still sits inside an active financing structure. That is exactly the distinction between value that looks large in the consolidated accounts and value that can confidently be called shareholder-accessible.

There is an additional constraint. Certain financing agreements require lender approval for a transfer of Aloni Yam shares or for creating security over the project land. That may look like a technical detail, but it is central to the optionality discussion. If moving the asset or the project equity requires lender consent, then the value exists, but it is not fully free to move.

This does not mean the real estate is fictional. Quite the opposite. It is real, advanced, and grounded in permits, land, construction, and appraisals. But it does mean that the path from balance-sheet value to value that common shareholders can actually enjoy still runs through financing, completion, approvals, and possibly monetization.

Bottom Line

Dor Alon's real-estate layer is both a balance-sheet anchor and an option, but those two pieces are not equal in size. The anchor is larger than skeptics may think, because these are real assets with permits, advanced construction, and values already supported by formal appraisal. The optionality is also more real than a superficial read might suggest, because there are meaningful additional rights at both Aloni Yam and Kfar Saba, and even a potential strategic route for moving assets into a real-estate platform.

What is still wrong to do is to look at the full ILS 1.673 billion as though it were simultaneously anchor, upside, and future cash. Most of the 2025 increase came from project investment, not revaluation. Most of the portfolio is concentrated in one large project that still requires funding and completion. And part of the optionality is already embedded in the carrying value through the valuer's assumptions.

The clean reading is this: the real estate already supports the balance sheet, but it still does not free the shareholders from the balance sheet. For the option layer to become truly accessible value, the next 2 to 4 quarters need to show progress on three fronts at once, completion of the current Aloni Yam build phase, a real shift in how the project is financed, and planning progress that clarifies how much of the extra rights remain an option and how much have turned into something that can actually be monetized.