El Ad US: The District, the Phase II-III Land Option, and the Shift Toward Income Property
The District is the only asset in the portfolio that can move El Ad US from inventory realizations to recurring NOI, but the controlling-shareholder option on the Phase II-III land means not all of that future upside is guaranteed to stay inside the issuer. As of year-end 2025, the income-property shift is still halfway done: Phase I is creating value, Phases II-III stayed almost flat, and roughly half of the investment budget still lies ahead.
The District is El Ad US's only future recurring-NOI engine, but as of year-end 2025 almost all of the progress clearly staying inside the issuer sits in Phase I, while the Phase II-III land already sits under a purchase option granted to the controlling shareholder.
- Between September 30, 2025 and December 31, 2025, Phase I fair value rose from $27.2 million to $50.7 million, while Phases II-III stayed at $40.9 million.
- In September 2025, the controlling shareholder received a three-year option to buy the Phase II-III land component for about $41.9 million.
- By year-end 2025, cumulative project investment had reached $93.8 million, but another $95.7 million still remained to be invested and budget completion stood at 50%.
- Phase I received a separate construction-loan path of up to about $85 million, while the later land still carried a $28.6 million land loan.
- Phase I needs to keep advancing without a material budget or timetable slippage until first occupancy expected in the first quarter of 2027.
- The company needs to clarify whether the controlling-shareholder option on Phases II-III is likely to be exercised, left in place, or amended.
- The construction-loan framework has to translate from financing structure into visible execution progress.
- The later land either needs to begin revaluing upward or justify monetization, otherwise a large part of the upside will remain theoretical.
- The shift toward income property is real, but for now it applies mainly to the first building rather than to the full District build-out.
- The controlling-shareholder option makes Phases II-III less of a certain internal NOI engine and more of a potential capital-flexibility tool.
- The late-2025 value uplift came from execution, not from a new market re-rating of the later land.
- The company is already financing The District as two economic blocks: Phase I for construction, and Phases II-III as a separate land position.
- Can Phase I reach first occupancy in the first quarter of 2027 without needing capital beyond the current framework?
- Will Phases II-III remain inside the issuer as a future NOI path, or be monetized through the controlling-shareholder option?
- Will the later-phase land start to move in value, or will The District continue to create value almost entirely through Phase I execution?
A fair objection is that the controlling-shareholder option may actually improve the issuer's risk profile by giving it a way to monetize part of the distant future, reduce capital intensity, and stay focused on the phase closest to producing NOI.
The District is the project that determines whether El Ad US remains mainly an inventory-realization story with one rental project, or starts building a real recurring-income base. The land option determines how much of that future stays inside the issuer.
The Thesis
The main article argued that The District is the only asset in El Ad US that can eventually generate recurring operating income rather than another burst of inventory-sale proceeds. This follow-up isolates the harder question: how much of that future actually remains inside the issuer, and how much of it has already been turned into a strategic land option.
That is the real issue here. By year-end 2025, The District is no longer one economic block. Phase I is a future income property under construction, with a defined path to first occupancy in the first quarter of 2027. Phases II and III are still development land, and that land is already subject to a three-year option granted to the controlling shareholder, starting on September 30, 2025, for consideration of about $41.9 million.
That changes the way the project should be read. Anyone who treats The District as if all 1,290 future units are automatically destined to become internal recurring NOI is counting too much. As of year-end 2025, the live recurring-income track that clearly stays inside the issuer is Phase I. Everything beyond that sits in a gray zone between long-dated upside, capital needs, and strategic flexibility.
| Layer | September 30, 2025 | December 31, 2025 | What it means |
|---|---|---|---|
| Phase I | Fair value of $27.2 million | Fair value of $50.7 million | Almost all of the late-2025 value creation happened here |
| Phases II-III | Fair value of $40.9 million | Fair value of $40.9 million | The later land stayed flat while also becoming subject to the controlling-shareholder option |
| Total District | Fair value of $68.1 million | Fair value of $91.6 million | The uplift came almost entirely from Phase I execution, not from a fresh re-rating of the later phases |
Where The Value Actually Moved
Once the project is broken into its two economic layers, the headline about a "shift toward income property" becomes much clearer. In the bond presentation, based on September 30, 2025 data, The District was shown at a fair value of $68.1 million. Of that, $27.2 million sat in Phase I and $40.9 million in the later phases. Three months later, the total fair value rose to $91.6 million, but the new split is the important part: Phase I moved up to $50.7 million, while Phases II-III remained at $40.9 million.
That distinction matters. Late 2025 did not produce a new breakout in the Phase II-III land. It produced execution progress in Phase I. So if there is a real shift in El Ad US toward a recurring-income model, it sits in the first building under construction, not in the theoretical full build-out of the entire site.
This is exactly why the controlling-shareholder option matters. The option price, roughly $41.9 million, sits very close to the value attributed to Phases II-III in both the September presentation and the year-end split. In other words, the later phases do not currently look like a hidden reservoir of massive upside inside the issuer. They look more like land that can be monetized around its appraised value if the company decides that future capital intensity is too high to keep in-house.
The Shift To Income Property Is Still Incomplete
It is easy to hear the name The District and picture a nearly finished income-producing asset. That is not where things stood at year-end 2025. The residential-rental segment generated no revenue in 2023, 2024, or 2025. NOI from current use was negative $133 thousand in 2025. Even in the bond presentation, the roughly $7.2 million annual NOI figure is presented as a post-stabilization target, not as a current run rate.
The year-end project economics reinforce the point. Cumulative investment in the project reached $93.8 million, while total expected investment stood at $189.5 million. That means another $95.7 million still had to be invested, with budget completion at only 50%.
That number is the key separator between two stories that are easy to blur together. Story one: The District is El Ad US's only future recurring-income engine. Story two: that engine is still consuming capital rather than generating operating cash flow. Both are true at the same time. Anyone reading the project as a mature income property is simply ahead of the facts.
The timeline itself keeps the story grounded. Phase I includes 292 apartments, with first occupancy expected in the first quarter of 2027, while the full project is planned to include roughly 1,290 units plus retail. So even if Phase I proceeds exactly on plan, the company remains far from the point where the full scope of The District is producing actual NOI.
The Financing Structure Already Separates Phase I From The Later Land
The September 2025 financing steps show that the company is already organizing The District as if it were two separate economic assets. To enable the construction loan for Phase I, project debt was refinanced. The package included a partial repayment of about $8 million of the land-loan principal, the release of an upper portion of the Phase I land from the land-loan collateral package, and amendments to the financing documents so Phase I could move forward on its own construction track.
The result is a financing structure that already makes the split explicit:
| Layer | Known facility / balance | What sits behind it |
|---|---|---|
| Phase I | Construction-loan facility of up to about $85 million | Phase I land, equity, guarantees, and construction-related rights |
| Phases II-III | Land loan with carrying value of $28.6 million at year-end 2025 | The later-phase land component |
This is not a technical footnote. It means the company has already created a path in which Phase I can advance as the future income property, while the Phase II-III land remains a separate value block with separate debt and a separate option in favor of the controlling shareholder.
That is why the strategic reading cuts both ways. If the option is exercised, the company may reduce the capital burden of developing the later phases and remain focused on the part of The District that is closest to producing NOI. If the option is not exercised, the company keeps the full long-term upside, but it also keeps the longer-dated capital commitment.
How Much Upside Really Stays Inside The Issuer
The simplest way to think about The District is this:
- Phase I upside: clearly stays inside the issuer, and it has already shifted from a land story to an execution, budget, financing, and occupancy story.
- Phase II-III upside: still exists, but it is no longer certain to become internal recurring NOI. It has already been framed as an optionable land block.
That is precisely why The District changes El Ad US's profile, but not in the way a first read might suggest. Without The District, El Ad US would remain largely an inventory-realization story. With The District, it now has one clear route toward recurring NOI. But anyone building a thesis around the company eventually owning a broader income-property platform has to place a large asterisk next to Phases II-III. As of year-end 2025, those phases are still land, land debt, and an option, not income property.
One more point matters. The later-phase value did not move between the fall and year-end, while Phase I did. That reinforces the idea that the value the issuer is currently creating inside itself comes from moving Phase I forward, not from passively holding the later land.
Bottom Line
The one-line thesis: The District is indeed El Ad US's bridge into income property, but as of year-end 2025 that bridge runs almost entirely through Phase I, while Phases II-III sit in an in-between zone between future upside and a monetization option for the controlling shareholder.
What changed between September 30, 2025 and December 31, 2025 was not the story of the whole land package. It was the value of Phase I. That is the part building internal value. The strongest counter-thesis is that the option actually helps bondholders because it gives the company a way to crystallize value, reduce future capital needs, and stay focused on the phase closest to producing NOI. That is a serious argument. But it also means part of The District's future upside may simply not remain inside the issuer.
Over the near to medium term, the market will have to watch four checkpoints: Phase I execution pace, actual use of the construction facility, any update on exercise or amendment of the Phase II-III option, and whether the later land starts to revalue upward or remains stuck around the same reference point. This matters because The District is not just another asset in the portfolio. It is the test of whether El Ad US is truly building a recurring-NOI future, or merely buying time with one income project and an option on the rest.