Vertical City: Billion-Shekel Value, a Few Hundred Thousand of Cash

What This Follow-up Is Isolating

The main article argued that Israel Canada's bottleneck is not a shortage of project value. It is the distance between project value and cash that can actually climb to the parent. Vertical City is the cleanest way to test that argument. By the end of 2025 it had large rights, rising value, an active contractor, a full phase-A building permit, and only NIS 317 thousand of cash.

There is also a reason to isolate it now. On March 6, 2026, before Israel Canada attached the project-company statements to its own annual report, B.S.R. disclosed that its annual report included Vertical's financial statements and the project valuation. Once the project company is viewed as a standalone financed vehicle, the headline changes. Vertical ended 2025 with NIS 2.131 billion of total assets, but almost all of that sat in investment property and land inventory, not liquidity.

Three points matter from the start:

• The value is real. Vertical reported NIS 1.315 billion of investment property, NIS 774.4 million of land inventory, and NIS 534.6 million of disclosed expected gross profit at the project level.
• The funding burden is heavier than the P&L suggests. Reported finance expense was NIS 15.4 million, but actual financing cost reached NIS 104.4 million, of which NIS 89.1 million was capitalized into assets.
• Future cash is not current cash. Expected withdrawable surplus of NIS 632.6 million on a 100% basis sounds attractive, but it is a 2031 number, it is conditional, and it also includes capital already invested into the project.

Where the Value Was Created

Vertical is not just an appraisal story. It is a very large project in the "Triangle Exchange Complex" in Ramat Gan, with about 176 thousand square meters above ground and about 244 thousand square meters including underground area. The mix explains why the headline is easy to misread: 400 long-term rental apartments for at least 20 years, 350 student-dorm units, retail, public buildings, and office space. Out of the overall rights, about 75 thousand square meters of office rights are classified as long-term land inventory. Not all of the value sits in the same accounting bucket, and not every part of the project will generate the same type of cash.

The operating progress is real as well. In February 2025 Vertical signed an agreement with Electra Construction for excavation, retaining-wall, and foundation works at about NIS 390 million plus VAT. The contractor started work in April 2025, and on September 11, 2025 the project received a full phase-A building permit, including the first office tower and the residential tower with 350 student-dorm units and 400 rental apartments. This is no longer a land-bank story.

What lifted value in 2025 was not only execution. It was also planning. The local committee had already recommended a conditional deposit of a rights-enhancement plan in July 2024. Then, during December 2025 and January 2026, preparatory discussions at the district committee advanced a plan for an additional 181.6 thousand square meters: 33.6 thousand square meters of free-market residential space, 135 thousand square meters of employment space, and 13.4 thousand square meters of public buildings. Accordingly, Vertical recorded a fair-value gain of about NIS 114 million in 2025, after a gain of about NIS 187 million in 2024. That is the key distinction: a meaningful part of the value created in 2025 was planning-led and accounting-led, not cash that already hit the bank account.

There is also commercial proof, but it is still partial. By December 31, 2025 Vertical had sold about 26.5 thousand square meters of office space for about NIS 850 million including VAT. In the project's own marketing table that becomes NIS 725.8 million of signed revenue, or 36% of total expected project revenue of NIS 2.051 billion. So demand exists, pricing exists, and part of the disclosed value clearly rests on something tangible. But most of the expected revenue is still unsigned, which means most of the value still sits in the future.

Why It Is Still Not Cash

The fastest way to understand Vertical is through its balance sheet. At year-end 2025 the project company carried NIS 1.315 billion of investment property and another NIS 774.4 million of land inventory. Against that, it had only NIS 317 thousand of cash, NIS 1.008 billion of short-term bank credit, and NIS 505.5 million of shareholder loans. That is not a contradiction. It is the project model itself: value is being built inside the assets, while the funding stack sits above them and waits to come out first.

The most misleading line is finance expense in the income statement. A quick read shows NIS 15.4 million and suggests a manageable burden. That reading is incomplete. Note 10 shows actual financing cost of NIS 104.4 million: NIS 54.5 million of interest on bank loans, NIS 47.7 million on shareholder loans, and additional bank fees. Of that amount, NIS 89.1 million did not pass through the income statement. It was capitalized into assets. The funding burden did not disappear. It was pushed into the project.

The cash-flow statement cuts through the same illusion. In 2025 Vertical burned NIS 122.6 million in operating activity and another NIS 146.8 million in investing activity. It filled that hole with NIS 216.9 million of financing inflow and still finished the year with only NIS 317 thousand of cash. That is why the right sequence here is cash first, valuation second.

There is another yellow flag that is easy to miss. Vertical's new financing facility was signed on November 13, 2025 with two local banks for up to NIS 1.29 billion, at annual interest of prime plus 0.2% to 0.7%, but the facility itself runs only until December 31, 2026. At the same time, the project disclosure points to expected completion of marketing in 2031, expected completion of construction in 2031, and expected surplus extraction in 2031. This does not mean financing is absent. It does mean the financing bridge is far shorter than the timetable on which the value is supposed to become cash.

What Could Actually Reach Israel Canada

This is where created value and accessible value part ways. In the table titled "expected gross profit and adjustment to surpluses," Vertical discloses expected gross profit of NIS 534.6 million and expected economic profit of NIS 488.5 million. That sounds like upside. But the same table also shows expected withdrawable surplus of NIS 632.6 million on a 100% basis because it includes NIS 256.4 million of equity already invested into the project, and then deducts a tax adjustment of NIS 112.4 million. In other words, even the surplus number is not all "new profit." Part of it is simply capital that has already gone in and may only come back at the end of the process.

Israel Canada's effective stake in Vertical is 55.9%. On simple arithmetic, that implies about NIS 354 million of economic share in the expected surplus before any further friction at the parent-company level. That is a useful indicator, but it should not be confused with near-term cash to public shareholders. Surplus extraction is conditioned on completing construction, receiving Form 4, handing over units to buyers once paid under the contracts, repaying all project obligations, legally cancelling buyer guarantees, and then getting bank approval. That is a financed-project checklist, not a mature-asset cash distribution.

One more point matters. The shareholder loans themselves are supposed to be repaid out of the project's available surplus. So even if Vertical reaches its targets, the order of priority inside the box does not start with Israel Canada's public shareholders. It starts with the project's own funding stack. That is exactly the thread that links Vertical back to the main article: value exists, but it does not jump over the bank, the partners, or time.

That is also why the office market is only part of the story. The question is not just whether Vertical can sell the remaining office inventory close to its disclosed assumptions. The harder question is whether the project can keep moving at a pace that allows it to refinance, stay funded, and reach 2031 without financing friction eroding the value being created on the way. As long as only 36% of expected revenue was signed by the end of 2025, and 46.7 thousand square meters of office space remained unsigned, that distance is still large.

Bottom Line

Vertical is not a counterexample to the Israel Canada thesis. It proves it. This is a project with planning progress, a contractor, a permit, signed sales, and meaningful value. But anyone who reads only the NIS 1.315 billion of investment property or the hundreds of millions of shekels of projected gross profit misses the central point: by the end of 2025 Vertical was first and foremost a heavily financed project company, not a cash machine.

So the right way to read Vertical is not "how much is it worth," but "when and on what terms does that value become surplus that can actually be upstreamed." On that discipline, the year-end 2025 answer is still tough: not in 2026, not without the bank, and not without finishing a project that still depends on future sales and ongoing funding.