Beit Bakfar 2025: Profit Fell, but the Real Test Moved to Occupancy and Buildout

Company Overview

Beit Bakfar looks weaker in 2025 than it really is, but it also looks cleaner than it really is. On the surface, net profit fell to NIS 106.7 million from NIS 133.2 million in 2024. A quick read can mistake that for operational cooling. That would be wrong. Revenue rose 6.0% to NIS 109.6 million, NOI rose 4.2% to NIS 72.4 million, and recurring real FFO rose 12.0% to NIS 31.7 million. The decline in the bottom line mostly reflects lower fair value gains, which fell to NIS 99.5 million from NIS 139.1 million a year earlier.

But the opposite reading is too easy as well. Beit Bakfar is not just a stable retirement-housing landlord with a strong balance sheet and an appealing pipeline. It is now entering the stage where the existing portfolio has to carry a bigger-capacity Kfar Saba, while the company also starts to move Be'er Yaakov and Modiin toward execution. The key question is no longer whether 2025 was a good year. The key question is whether 2026 and 2027 will prove that the company can absorb new capacity without losing the conservative balance-sheet profile that helped define the story up to now.

What is working now? The current asset base is still solid. The company operates five retirement-housing campuses with 883 active units, of which 826 units sit in the income-producing assets it owns. Average occupancy only slipped to 90.1% from 90.9%, and almost all of that decline sits in Kfar Saba. At the same time, average monthly income per resident rose to NIS 11,525 from NIS 10,823, while average monthly income on contracts signed during the period rose to NIS 12,516 from NIS 12,335. There is real pricing power here, not just accounting uplift.

What is still unresolved? The bottleneck has moved from the balance sheet to the execution sequence. The Kfar Saba expansion only received its completion certificate in March 2026, Be'er Yaakov only received its excavation and shoring permit on March 25, 2026, and Modiin is still pre-permit. The company itself says that future projects may require bank project financing. In other words, 2025 closes the preparation stage and opens the proof stage.

This is also where a superficial read can go wrong twice. First, it can panic over negative working capital of NIS 337 million. Most of that gap comes from resident deposits, NIS 473.6 million, being presented as current liabilities because of contract structure, even though the company estimates actual resident-deposit repayments over the next 12 months at only NIS 40 million to NIS 50 million. Second, it can overreact to year-end cash falling to NIS 8.9 million. In practice, the company also ended the year with NIS 103.4 million of short-term deposits and NIS 91.5 million of financial assets. Cash fell, but financial liquidity increased.

There is also a practical screen issue that belongs early in the piece. At a recent share price of NIS 14.33 and 69.9 million shares outstanding, the company trades around a NIS 1 billion equity value. This is not a tiny story. Yet equity turnover on the last trading day was only about NIS 49 thousand. Short data is almost irrelevant, just 452 shares short, a 0.00% Short Float and an SIR of 0.06. The message is simple: there is no bearish positioning signal here, but there is also no comfortable screen liquidity.

The quick economic map looks like this:

That chart captures the right starting point. The improvement in 2025 sits in recurring economics, not in the headline net-profit line.

Events and Triggers

The fourth quarter looked strong, but for the wrong reason

The fourth quarter of 2025 was the strongest quarter of the year on net profit, at NIS 78.4 million. Revenue also rose to NIS 28.3 million from NIS 26.4 million in Q4 2024. But it would be a mistake to read this as a sudden step-up in the operating engine. NIS 84.7 million out of NIS 101.5 million of pre-tax profit in the fourth quarter came from fair value gains on investment property, versus NIS 100.9 million in the comparable quarter.

So the fourth quarter delivered a strong headline without changing the real question. In 2026 Beit Bakfar does not need to prove that it can revalue. It needs to prove that it can fill.

Kfar Saba moved from construction to occupancy, and that changes the whole read

The most important development in the story is not inside the P&L. It is in the Kfar Saba expansion. The company built 80 new units over roughly 9,323 square meters, and added another 12 units in the existing building over roughly 950 square meters. By December 31, 2025 it had invested about NIS 138 million of equity into the project, and by the report date about NIS 145 million. The project was completed in the first quarter of 2026, received its completion certificate in March 2026, and occupancy began.

The interesting part is the two-sided effect. On one hand, this is exactly what can lift 2026. The company points to roughly NIS 11 million of NOI at full occupancy. The rating report notes that roughly 80% of the units had already been marketed by the end of 2025. On the other hand, to get there the company paused marketing in the legacy building, only resumed it in the first quarter of 2026, and saw average occupancy in Kfar Saba fall to 81.4% from 91.6% a year earlier.

That is why group occupancy only slipped modestly while the business read changed dramatically. If Kfar Saba refills smoothly, 2025 will look like a well-managed bridge year. If it does not, 2025 will look like the year the company reminded investors how concentrated the asset base still is.

Be'er Yaakov is no longer just paperwork, while Modiin is still not yet execution

In Be'er Yaakov the company owns roughly 4 dunams of land on which it plans a retirement-housing project with 249 units, commercial space and parking basements. After a conditional committee decision in October 2025, the project received its excavation and shoring permit on March 25, 2026, and the company expects construction to start in the second quarter of 2026. Planning and construction cost is estimated at NIS 240 million to NIS 260 million, excluding land cost, purchase tax and betterment levy.

In Modiin the company is still in final planning ahead of a permit application. This is the larger project, 300 units, a nursing department and commercial space, with land acquisition cost of NIS 75 million plus VAT, development fees of about NIS 43 million, and estimated planning and construction cost of NIS 300 million to NIS 325 million, excluding land cost and purchase tax. At year-end 2025 the project was carried on the books at about NIS 107 million.

Usha is earlier still. The company discusses 270 to 355 units, a NIS 21 million investment for a 74% stake in the land-holding entity, and about NIS 300 million of additional investment at the joint-entity level. That is not a 2026 driver. It is an option for 2027 and beyond.

This is where the next key trigger comes from. Beit Bakfar is moving from a model where one major project, Kfar Saba, dominated the development story, to a model where two and perhaps three projects stand in line. That opens real upside, but it also changes the capital burden.

The bond and the rating gave the company a framework, not a free pass

In May 2025 the company issued Series A bonds and warrants for the first time. Principal came to NIS 99.525 million, the coupon is fixed at 4.5%, principal payments only start in March 2029, and final maturity is in March 2032. In March 2026 the rating was reaffirmed at ilA for the issuer and ilA+ for the bond series, both with a stable outlook.

This is positive for several reasons. It funds part of the next stage, creates a liquidity layer, and signals that the company is no longer just an equity-funded story. But it also marks a regime change. Beit Bakfar is now entering a period where investors will judge it not only on asset quality, but also on how well it sequences development, dividends, covenant room and liquidity.

Efficiency, Profitability and Competition

The base economics improved even while surface occupancy softened

Revenue rose 6.0% in 2025, and that increase did not rely only on revaluation. The board report says higher rental and maintenance revenue came from both CPI-linked pricing and a real maintenance-fee increase in January 2025, as well as a larger share of leasing-style agreements. Sub-tenant revenue also rose thanks to new agreements and CPI-linked updates, while other revenue increased because more agreements were signed during the year.

At the same time, property operating expenses rose to NIS 37.3 million from NIS 34.0 million, mainly because of payroll updates, minimum-wage increases, staff added ahead of Kfar Saba occupancy, and public-area refurbishment in Hadarim. That matters because it shows the company already carried part of the 2026 readiness cost inside 2025.

The bottom line on operating quality is still positive. NOI rose to NIS 72.4 million from NIS 69.5 million, and recurring real FFO rose to NIS 31.7 million from NIS 28.3 million. Even after stripping out fair value effects, 2025 was a better operating year.

The occupancy issue in 2025 is basically a Kfar Saba issue

The group number, 90.1% occupancy versus 90.9% in 2024, looks calmer than it really is. It hides concentration. Kfar Saba average occupancy fell 10.2 percentage points to 81.4%. Hadarim slipped more modestly, to 94.1% from 95.8%. By contrast, Bitan Aharon improved to 89.0% from 85.1%, and Gedera improved to 92.8% from 91.5%.

That matters because it means the 2025 story is not broad demand deterioration across the platform. It is much more specific: works and refurbishment in Kfar Saba, a temporary pause in legacy-building marketing, and preparation for a new wing. Anyone reading the group occupancy decline as evidence of broader demand erosion may be too harsh. Anyone ignoring it altogether misses how much the 2026 investment case now sits on one asset.

The leasing mix keeps improving, but it does not solve every issue

One of the more interesting shifts at Beit Bakfar is the gradual move toward leasing and similar tracks. By the end of 2025, about 40% of agreements in the active homes were in leasing and similar formats, versus 37% in 2024 and 30% in 2022. During 2025 itself, about 66% of newly signed agreements were in leasing or similar formats.

The benefit is clear. The company reduces resident-deposit accumulation, lowers CPI exposure on deposit balances, and increases the share of recurring indexed income. That is economically smart.

But the move is not one-directional. Leasing reduces the upfront deposit received from the resident, which weakens part of the natural funding engine of the sector. More importantly, the company explicitly says this model was not being offered in the Kfar Saba expansion as of the report date. In other words, the company is relying less on its most successful agreement format exactly where the largest block of new capacity now has to fill.

Concentration is still high, in the asset base and in NOI

The rating report points to a relatively small asset base and roughly 9% market share. The filings show why that matters. The two largest homes, Hadarim and Bitan Aharon, generated about NIS 48.7 million of NOI in 2025, or roughly 67% of group NOI. The fair-value picture is similar: together those two assets account for about NIS 1.07 billion, roughly 66% of the value of the income-producing portfolio.

That is not a problem as long as all four homes are running smoothly. It becomes a yellow flag when one of them, Kfar Saba, is in a transition year and the other two large assets carry too much of the stability on their own.

Cash Flow, Debt and Capital Structure

In all-in cash flexibility terms, the balance sheet is still comfortable

To understand Beit Bakfar's cash flow, it helps to separate two stories. The first is normalized / maintenance cash generation, meaning how much cash the current business produces before growth investment. On that basis the picture is constructive. Cash flow from operations rose to NIS 69.7 million from NIS 69.0 million despite lower net profit. That is a solid number.

The second is all-in cash flexibility, meaning what remains after the year's actual cash uses. Here the read is more nuanced. In 2025 the company invested NIS 9.9 million in investment property, NIS 55.7 million in investment property under construction, NIS 6.1 million in fixed assets, paid NIS 30 million of dividends, and moved NIS 100 million into short-term deposits plus another NIS 79.6 million into financial assets. That is why year-end cash itself fell to NIS 8.9 million.

But this is not a stress signal. It is mostly a liquidity repositioning signal. If cash, short-term deposits and current financial assets are combined, the company ended the year with NIS 203.8 million of financial liquidity, versus only NIS 92.5 million a year earlier.

Put differently, the company did not burn through its liquidity cushion. It moved from immediately available cash into managed liquid instruments after the bond issue. The real uses were capex and dividends. The rest was mainly treasury management.

Resident deposits matter more than profit, but less than the balance sheet format implies

This is where retirement housing requires a different reading discipline. Resident deposits stood at NIS 473.6 million at the end of 2025, versus NIS 448.7 million at the end of 2024. The cash-flow statement shows NIS 94.9 million of resident-deposit inflows against NIS 48.6 million of refunds. On the balance sheet, the full amount is shown as a current liability, which is what creates the NIS 337 million working-capital deficit.

Economically, that is only a partial read. The board explicitly says actual resident-deposit repayments expected over the next 12 months are only NIS 40 million to NIS 50 million, and that refunds are funded in practice by deposits from incoming residents. That is exactly why Beit Bakfar can look strained in current-liability presentation while not actually being under liquidity stress.

It also matters that management chose not to include resident-deposit changes in FFO because of the gradual shift toward leasing agreements. Analytically that is the right choice, because it avoids blending recurring cash generation with occupancy-cycle deposit flows. But it also reminds the reader that profit, FFO and cash flow are not telling the same story here.

Debt is not the issue. Sequence is the issue

At the end of 2025, equity stood at NIS 1.237 billion versus NIS 1.156 billion a year earlier. Bond debt stood at NIS 95.7 million, while financial liquidity stood at NIS 203.8 million. In the bond covenant table, the company shows equity of NIS 1.237 billion versus thresholds of NIS 500 million, NIS 550 million and NIS 600 million, while net financial debt to CAP was negative. Even after the bond issue, the company remains far away from immediate covenant pressure.

The Kfar Saba project-level covenant picture also remains comfortable for now. The subsidiary must keep equity of at least NIS 105 million and an equity ratio of at least 35% of the balance sheet through year-end 2025, reverting to 40% from the December 31, 2026 statements onward. The company says it remains compliant.

That matters because it frames the discussion correctly. This is not a retirement-housing company that has already levered up too far. It is a company that still enjoys a meaningful equity cushion, but is moving into the years where investment pace can start to consume that cushion much faster if several projects advance at the same time.

Forecasts and Forward View

Finding one: the 2025 net-profit decline does not mean the core weakened. It mainly means fair value gains came down from an unusually strong 2024 to a still-high, but lower, 2025.

Finding two: Kfar Saba has already absorbed much of the capital and deposit effect before contributing its full revenue and NOI run-rate. That is why the balance sheet has already moved while the operating numbers have not yet fully caught up.

Finding three: the company is far from covenant pressure, but that does not make equity irrelevant. On the contrary. Once Be'er Yaakov and Modiin move into execution, today's strong balance sheet becomes a resource that gets consumed, not just a shield investors can point to.

Finding four: the shift toward leasing improves long-term revenue quality and CPI sensitivity, but it also reduces part of the upfront deposit cushion, and in any case is not yet being used in the Kfar Saba expansion.

The conclusion from those four points is that 2026 is a proof year, not a harvest year. It should not be read as a stress year, because the balance sheet remains comfortable, the rating is stable, and the company itself says it does not expect to need additional sources over the next year beyond the issuance proceeds it already raised. But it should not be read as a solved story either. The handoff from construction site to occupied asset, and then from one occupied expansion to several projects in execution, is the real test.

What must happen in Kfar Saba

Kfar Saba has to prove two things at once. First, the new wing has to fill at a pace that matches the level of marketing already achieved. Second, the legacy building, whose marketing only resumed in the first quarter of 2026, has to return to a normal occupancy level. If both happen, the company can move fairly quickly from a bridge year to a contribution year.

The rating agency offers a useful external anchor here. Its base case assumes 14% to 20% EBITDA growth in 2026, mainly from the completion and occupancy of the Kfar Saba expansion. That is not management guidance, but it is an outside signal that the hard part of 2025 is expected to translate into numbers in 2026.

What must happen in Be'er Yaakov and Modiin

In Be'er Yaakov investors need to see an orderly move from excavation and shoring permit to actual construction, without fast budget drift. In Modiin they need to see a permit and a clearer timetable. This is where the next pressure point sits, because the rating agency base case assumes annual capex of NIS 180 million to NIS 300 million in 2026 and 2027, mainly around Kfar Saba, Be'er Yaakov and Modiin. That is already the stage where a strong-balance-sheet company can stay strong, but only if pace remains disciplined.

What the market is likely to watch in the near term

Over the next days, weeks and quarters, the market is likely to focus on four points:

1. Actual occupancy progress in Kfar Saba and the return to full marketing in the legacy building.
2. Real construction start in Be'er Yaakov, not just planning status.
3. The pace of Modiin and whether new financing is needed earlier than expected.
4. The ability to keep paying NIS 30 million a year in dividends without turning liquidity into an accounting headline rather than an accessible resource.

Why this is a proof year rather than a breakout year

Because what works in Beit Bakfar is already known. The four income-producing owned homes can generate revenue, NOI and operating cash flow. What is not yet known is whether the company can translate the jump in capacity and the development queue into a similar jump in NOI and EBITDA without giving up the more conservative profile that set it apart until now. That is why 2025 can look stable in hindsight while 2026 still decides whether that stability can scale.

Risks

The first risk is absorption, not broad demand

The 90.1% group occupancy figure can blur this, but the near-term operating risk is concentrated in Kfar Saba. If occupancy ramps more slowly than expected, the company will not just lose revenue. It will lose the core argument that 2025 was only a temporary bridge year.

The second risk is the capex sequence

Be'er Yaakov and Modiin are not just value options. They are heavy capital plans. Be'er Yaakov carries an estimated NIS 240 million to NIS 260 million of planning and construction cost, and Modiin NIS 300 million to NIS 325 million, both before land cost. Any permit slippage, cost inflation or early need for added funding will move the discussion quickly from "strong balance sheet" to "how quickly is the balance sheet being consumed."

The third risk is that profit remains too dependent on revaluation

Even after the decline in 2025, fair value gains still totaled NIS 99.5 million. The company also discloses material valuation sensitivity. A 0.5 percentage point increase in discount rates would cut fair value by about 3.38%. That does not mean the valuations are wrong. It does mean too much of the bottom line still runs through valuation assumptions.

The fourth risk is the deposit model and the move toward leasing

Resident deposits are both a funding engine and a source of CPI and balance-sheet sensitivity. The shift toward leasing reduces part of that sensitivity, but it also changes growth quality and the pace of upfront cash intake. If the company expands leasing too quickly without filling units quickly enough, accounting quality improves while actual liquidity may become less generous.

The fifth risk is external, but real

The company says the war did not have a material impact on 2025 results and even notes that the number of signed agreements exceeded the comparable prior period. Still, it explicitly warns that prolonged security tension, economic slowdown or weaker ability to market units could weigh on new construction starts, incoming residents and property values. That is not the central risk today, but it is clearly part of the picture.

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Conclusions

Beit Bakfar ends 2025 as a company whose operating business is better than the net-profit line suggests, but also as a company entering its real test year. The existing core remained stable, NOI and FFO rose, the rating stayed stable, and the balance sheet is still broad. The central bottleneck has now shifted from stability to expansion: can the Kfar Saba expansion be absorbed well, and can Be'er Yaakov and Modiin move forward without turning today's balance-sheet advantage into a temporary phase.

Current thesis: Beit Bakfar still looks like a retirement-housing company with a stable asset base and comfortable funding flexibility, but the quality of the 2026 read will depend mainly on Kfar Saba occupancy ramp and on how disciplined the next buildout stage remains.

What changed versus the prior understanding? In 2024 it was still possible to read Beit Bakfar mainly as an asset story with a strong balance sheet and generous revaluation support. After 2025, the focus has shifted toward new capacity, resident-deposit economics and the sequencing of the development queue.

The strongest counter-thesis is that Beit Bakfar is simply still too small and too concentrated to expand the current pipeline without giving up part of the conservatism that made the story appealing in the first place, so today's strong balance sheet may look like a waystation rather than a durable advantage.

What could change the market's reading in the short to medium term? First and foremost, reports showing a fast recovery in Kfar Saba occupancy, real progress in Be'er Yaakov, and signs that Modiin is not drifting. By contrast, any signal of slower fill-up or earlier-than-expected financing needs would quickly put the focus back on how wide the balance-sheet cushion really is.

Why does this matter? Because in retirement housing, net profit is often only a late accounting outcome. What really defines business quality is the interaction between occupancy, resident deposits, property value and access to funding.

Over the next 2 to 4 quarters, the thesis strengthens if Kfar Saba returns to high occupancy, if NOI keeps rising without help from revaluation, and if Be'er Yaakov and Modiin advance without compressing liquidity headroom. It weakens if occupancy stalls, if the development queue forces aggressive funding earlier than expected, or if 2025 turns out to have looked stronger mostly because it was staged around a project handoff rather than a deeper structural improvement.