Herzliya: How Much of the Value Is Current Rent and How Much Is Planning Assumption?

The main article argued that Herzliya is no longer the near-term trigger in Intergama's story. It is more of a planning option that still carries value, but not immediate cash. This follow-up isolates that point all the way down: out of the NIS 101.36 million fair value at year-end 2025, how much is really supported by current rent, and how much depends on planning, permitting, and regularizing non-permitted built area.

The short answer: at year-end 2025, the Herzliya asset is still first and foremost a rent-producing property. Value excluding the additional-rights component stands at NIS 94.8 million. That means about 93.5% of total value is supported by the existing building, while only about NIS 6.56 million, or roughly 6.5% of total value, sits in future planning upside. That is a sharp change from year-end 2024, when the additional-rights component stood at NIS 17.4 million, or about 16% of value.

The implication cuts both ways. On one hand, Herzliya now looks less like a site whose value mainly rests on a planning dream. On the other hand, the rent base is not perfectly clean either: this is a 1980s building in a more competitive and more crowded market, with limited flexibility for long leases and heavy reinvestment because the company still aims to demolish and rebuild it.

How Much of the Value Comes From the Existing Building

At year-end 2025 the asset was 98% occupied, with 16 tenants, 6,053 occupied sqm, NIS 6.725 million of external revenue, and NIS 5.25 million of NOI. That translates into a 5.2% yield on total fair value, and a 5.5% yield on value excluding additional rights. That is the key point: most of the value is still supported by rent, parking, and ongoing operation, not by a future zoning event.

That chart tells the whole transition. In 2024 value rose to NIS 108.6 million, but almost all of the increase versus 2023 sat in the additional-rights component. In 2025 the opposite happened: the value of the current building itself actually rose to NIS 94.8 million, while the planning component fell to just NIS 6.56 million. In other words, Herzliya became less speculative, not less supported.

It also explains why the 98% occupancy figure should not be read as proof of a clean rental growth story. External revenue fell from NIS 7.233 million in 2024 to NIS 6.725 million in 2025, and NOI fell from NIS 5.93 million to NIS 5.25 million, even as occupancy recovered to 98%. So there is a real cash-flow base here, but not a rental engine that is getting stronger. That also fits management's own description: the area is more saturated, the older building is less attractive than newer stock, and the plan to replace the building limits flexibility around long leases and heavy investment.

That matters because if most of the asset's value is supported by the current building, then the quality of that rent base matters more than the headline around "potential." The property is active, almost full, and in a good location. It is not a new building with visibly improving pricing power.

What Is Left of the Old Rights Once You Strip Out the Permit Breach

This is where "there are rights" turns into "there is upside." According to the valuation, before Plan Her/2440 and based on the valid planning regime and building permits, the property had about 908 sqm of unused above-ground rights. But the same property also includes a gallery level that was completed at about 1,250 sqm instead of about 504 sqm under permit, which means roughly 746 sqm were built without a permit.

That is not a technical side issue. If the valuer assumes the 746 sqm excess can be regularized, that assumption effectively consumes almost all of the old rights. After regularization, the residual rights under the old planning regime fall to only about 162 sqm, and the valuation treats that remainder as economically negligible.

That is the core of the continuation. If someone is looking for a cushion of legacy rights that exists even before the new planning route, the practical answer is that most of that cushion is already needed to legitimize area that is physically there but not permitted. So it is hard to argue that by year-end 2025 Herzliya contains a full rent-supported value, a comfortable bank of old rights, and a large new planning option all at once. The legacy rights are barely upside. They are mostly a regularization mechanism.

What Exactly Sits Inside the NIS 6.56 Million Planning Component

So the remaining planning component is not really about the old rights. It mainly rests on a new future scenario, but a narrower one than before. The approved plan allows a mixed-use building on the lot at FAR 8. In a unification-and-reparcellation scenario with the adjacent lot, FAR can rise to 12. But by year-end 2025 the valuation no longer assumes that broader combined route. The company chose to move forward independently, and at this stage without the neighboring lot, so only the FAR 8 rights were included.

That is exactly why the additional-rights component fell by about 62% in one year, from NIS 17.4 million to NIS 6.56 million. Not because rent collapsed, and not because the location stopped mattering, but because the planning route became narrower and more asset-specific. The company still describes a future mixed-use tower with residential, office, and ground-floor retail uses and total rights of about 16,000 sqm, but under a standalone route and with some areas allocated to public obligations.

Even that NIS 6.56 million is not a clean free option. The valuation includes a delay until approval of a detailed point plan, with the company itself indicating an estimated approval timeline in the first quarter of 2028. That is followed by additional time until a building permit. Interim income from the existing asset is included, but so are a 25% reduction in income near project execution, licensing costs to regularize the gallery area, and a 60% betterment levy under the assumption that the permit arrives by the end of 2030.

So the remaining planning premium is not free upside. It is taxed, delayed, dependent on a detailed plan, dependent on a permit, and also dependent on the company holding the existing building together through the bridge period without broader erosion in rent terms. This is already a narrower option with more checkpoints embedded in it.

There is also a numeric hint that this layer is no longer the dominant driver of value. The property's sensitivity analysis says that a 10% change in built-sqm value would move total asset value by only NIS 3 million. If planning optionality were still the center of the story, you would expect sharper sensitivity.

Conclusion

At year-end 2025, Herzliya is mainly an income-producing asset with a small planning kicker, not a site whose value mainly rests on planning. About NIS 94.8 million of value already sits in the existing building. Only about NIS 6.56 million sits in future rights. And what once looked like a cushion of legacy rights is largely absorbed by the assumption that 746 sqm built without a permit can be regularized.

That means the key question from here is not whether Herzliya has potential. It does. The real question is whether the company can advance the standalone FAR 8 route, regularize the permit breach, and meanwhile keep rent stable in an older building whose commercial flexibility is already constrained. If it can, the NIS 6.56 million planning premium may prove conservative. If not, even that smaller premium may still be generous.