Delek Israel Properties: What The Prime Storage Option Is Actually Worth
Delek Israel Properties has picked up an interesting way to add NOI with no company CAPEX, but the headline about up to ILS 6 million of annual NOI is misleading if it is read like in-place rent. It is a site-use-fee ceiling that already includes partners' share, sits behind a long chain of feasibility and approvals, and remains subordinate to the company's own redevelopment optionality.
The main article argued that Delek Israel Properties becomes interesting when it can pull another layer of value out of the same asset base, not when it simply points to abstract potential. The Prime MOU sits exactly on that line, which is why the headline "up to ILS 6 million of annual NOI" can sound like near-ready rent. That is not what was disclosed.
To understand why, four facts matter from the start:
- ILS 6 million is a ceiling, not a base case. The company says explicitly that this is a preliminary, uncertain estimate under a full-utilization assumption.
- ILS 6 million is not necessarily all attributable to Delek Israel Properties. The figure is presented as NOI "including partners' share in the properties."
- This is site-use economics, not project economics. Delek Israel Properties disclosed annual use fees, while the ILS 930 million capex case, ILS 227 million revenue case, and ILS 107 million EBITDA case belong to Prime.
- The land remains real estate first. If the company advances rezoning or additional construction at a relevant station, and the disclosed planning and permit triggers are met, it can cancel the option or shorten the operating period.
Why ILS 6 million is a use-fee ceiling, not NOI that deserves an in-place-rent multiple
The key point is the compensation structure. Delek Israel Properties did not disclose profit sharing, an EBITDA split, or participation in project returns. It disclosed annual use fees in a range of ILS 30 thousand to ILS 90 thousand per high-voltage installation, or about ILS 80 per AC kW in low-voltage systems, with indexation linked to the same mechanism that applies to electricity sales.
That sounds technical, but it is the whole story. Delek Israel Properties is getting land-and-use economics here, not ownership of a storage business.
The ILS 6 million number reinforces that read. Prime describes an initial opportunity across about 65 properties. If one takes only the top end of the disclosed high-voltage annual fee, ILS 90 thousand per year, and multiplies it by 65, the result is about ILS 5.85 million. That does not prove every site will sign at the top end. But it does show that the company's disclosed ceiling sits numerically very close to the use-fee cap that was disclosed, not to some hidden participation in project profitability.
That chart deliberately mixes different income measures, because the point is to show where the economics actually sit. Prime describes a storage platform of up to 1.5 GWh, about ILS 930 million of investment, about ILS 227 million of revenue and about ILS 107 million of EBITDA in the first full operating year, together with a PIRR of about 12% and an EIRR of about 23%. Delek Israel Properties, by contrast, describes a maximum NOI add-on of up to about ILS 6 million per year, including partners' share in the properties, and only under a full-potential assumption in high-voltage systems with maximum connection size above 8 MW.
So even in the full case that was disclosed, Delek Israel Properties is not buying itself ILS 107 million of EBITDA. It is providing land and receiving use fees.
That is also why the easiest shortcut is the wrong one. If one mechanically capitalizes ILS 6 million using the 6.25% to 7.3% cap-rate range the company presents for its property base, the output is roughly ILS 82 million to ILS 96 million of gross value. That is exactly the jump investors should not make here. It ignores the fact that the figure is a ceiling rather than a run rate, that it already includes partners' share, and that there is not yet even a binding asset list.
The option chain is much longer than the headline
The path from an MOU to real NOI has several layers, and every layer cuts certainty.
| Stage | Disclosed time window | What still has to happen before the next step |
|---|---|---|
| Exclusivity | 6 months | The parties need to reach a binding framework agreement |
| Feasibility checks | Up to 12 months after signing the framework agreement | Prime tests, at its own cost, whether storage can actually be installed at each relevant property |
| Binding asset list | Only after feasibility and with the company's consent | Only at this point does the market learn which properties really enter the path |
| Site-specific option | 36 months from the date the binding list is set | Prime still has to decide, property by property, whether it builds |
| Operation | 24 years and 11 months from commercial operation | The project still has to reach construction, connection, approvals, and actual operation |
That table looks procedural, but it is the core of the thesis. As of now there is no binding framework agreement, no binding list of assets, no certainty around the outcome of feasibility checks, and no certainty around connection sizes or the number of sites that will ever reach operation. Beyond that, the company itself makes clear that the ability to build storage depends on partner consents, required approvals, grid connection, and agreements with relevant parties.
That is why the right way to read the deal is as a staged option. It can absolutely create value, especially because Prime carries all initiation, construction, operation, and maintenance costs and the company does not expect expenses from executing the transaction. But there is still a long distance between an attractive option and annual NOI that deserves the same treatment as existing rent.
Why the cancellation clause matters more than Prime's IRR
The single most important detail, and the easiest one to miss, sits in the footnote to Delek Israel Properties' own report. The company keeps the right to cancel the option or shorten the operating period if it decides to initiate a change of use at a relevant station, or if the area is needed for additional construction at that station, once the relevant planning approval and or permits have been secured and only if vacating the area is actually required for the works.
That says something deeper than the legal wording alone. Storage sits below real-estate enhancement, not above it. If a given site later has a better use from the company's perspective, whether through added construction, rezoning, or another enhancement route, storage does not automatically get 25 years of priority.
From the company's standpoint, that is actually a positive. It allows Delek Israel Properties to open another NOI lane without giving up deeper real-estate upside in advance. But from the standpoint of anyone trying to capitalize the ILS 6 million today as if it were fixed rent, this is a real weakness. Existing rent usually enjoys far clearer contractual priority. Here, the alternative land use still holds the steering wheel.
Add the related-party angle and the picture becomes even more obvious. Even if Prime's project economics look attractive, this transaction still has to go through the approvals path required for a deal with a company under the same controlling shareholder and receive the approvals required by law from the relevant corporate bodies. That is another major filter between theoretical potential and actual NOI.
What this does for the thesis, and what it still does not solve
The bullish case is not irrational. The MOU fits well with the strategy the company itself lays out: extracting more value from existing assets, expanding uses, diversifying tenants, and lowering exposure to the fuels market and to the main tenant. In both the presentation and the annual report, the company explicitly talks about extracting more potential from fuel-station complexes, adding uses, and reducing dependence on Delek Israel to below 50% of expected NOI over the medium term.
The Prime MOU fits that framework exactly. It tries to pull another return layer out of the same asset base, with no Delek Israel Properties CAPEX, and on top of a real-estate base that already works: at December 31, 2025 occupancy was 99%, and in most of the company's properties, 57 assets, there are fuel-station compounds that include gas stations, convenience stores, and additional retail space.
The problem is that the direct impact on the thesis is still limited. The representative NOI the company shows for 2025 is about ILS 78 million, and the presentation shows that even after the progress made so far, Delek Israel still accounts for about 76% of that figure. If one adds the full storage ceiling of ILS 6 million to that framework, and assumes simply that the full amount drops into the "others" bucket while the existing NOI stays flat, Delek Israel's share of NOI falls only to roughly 71%. That is an improvement, but it is still a long way from the sub-50% target.
That chart is obviously an illustration, not management guidance. It assumes the existing NOI does not move, and that the full ILS 6 million is eventually realized and falls into uses outside Delek Israel. But that is exactly why it is useful: even in a relatively friendly scenario, storage is an interesting add-on, not a structural reset.
The same is true against the total representative NOI base. The ILS 6 million ceiling equals only about 7.7% of the current representative NOI. Against the roughly ILS 163 million NOI target the company marks for 2030 and beyond, it is only about 3.7%. So the right way to frame the MOU is not as a shortcut to a new thesis, but as one more layer of optionality on top of the existing enhancement strategy.
Bottom line
The Prime MOU matters, but not for the reason the first headline implies. It matters because it shows how Delek Israel Properties is trying to work the same asset base harder: more uses, more use fees, and more diversification, without putting in its own capital and without giving up deeper redevelopment upside in advance.
That is positive. But it is still not NOI that deserves to be treated like existing rent. The ILS 6 million is an initial ceiling, it includes partners' share, it rests on a full-realization assumption, it sits behind a long chain of framework agreement, feasibility, binding asset list, site-level options, approvals, grid connection, and partner consents, and it remains subordinate to the company's right to prefer future rezoning or additional construction.
In one line, what exists today is a good land-use option with outside funding, not a mature NOI line. If the next year brings a binding framework agreement, a binding site list, and the first sites that actually move into signed use agreements and construction, the value of that option will become far more tangible. Until then, the right question is not how much ILS 6 million is worth at an income-property cap rate. It is how much of the long road toward that ILS 6 million has actually become binding.
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