YBOX: Paper value is growing, but cash and permits still run the story

Getting to Know the Company

YBOX is not a classic income-producing real-estate company, and it is not yet a residential developer whose delivery machine already throws off stable cash. It is a development and urban-renewal platform with a large Tel Aviv and Gush Dan project book, several sizeable assets already sitting on the balance sheet, and not enough current cash generation yet to carry that balance sheet comfortably. That is the core of 2025: the balance sheet keeps expanding faster than the operating income base.

What is working now? These are real projects, not just land stories. Wallenberg is close to completion, Gat Rimon has moved deeper into execution, Glipoli and Tor Malka can release surplus, and the company widened its future pipeline through the DMRI Ba'ir transaction. But the easy misread is that this progress still lives mostly in inventory, appraisal value, and future rights. In the 2025 income statement the company reported only NIS 43.5 million of revenue, of which just NIS 4.5 million came from rent and management fees, while cash interest paid reached NIS 68.2 million.

That means the active bottleneck is not simply “demand,” and not just “rates.” The bottleneck is the gap between project value on paper and real balance-sheet flexibility. As long as Gat Rimon still depends on a full permit, Wallenberg still has no binding leases, and the company keeps carrying inventory, financing costs, and construction obligations, the key question is not how much value exists on paper but how much of it is actually getting close to cash.

That is also why 2026 looks like a financing-and-permit proof year, not a clean harvest year. If Gat Rimon receives its full permit, if Wallenberg starts signing tenants, and if surplus releases from completed projects really come through, the picture can improve quickly. If that slips, the company will still have a large recorded asset base, but debt will continue to dictate the tempo.

The economic map at year-end 2025 looks like this:

That chart matters because it frames the story correctly: YBOX is first a balance sheet of projects and only then an income statement. Anyone reading the company through 2025 revenue alone misses the embedded future value. Anyone reading it only through appraisal and inventory misses the financing burden needed to carry that value until it matures.

Events and Triggers

Gat Rimon has become the main 2026 test

Gat Rimon now links almost every layer of the story: inventory, investment property, the hotel component, bank financing, bonds, presales, and possible upside from the Beit Romano Gat Rimon plan. By year-end 2025 the project had drawn about NIS 239.5 million out of a NIS 350 million financing framework signed in December 2024. Roughly NIS 129.3 million was classified as short term for the development component, and about NIS 110.2 million as long term for the income-producing and hotel components.

Operationally, there is progress. The company completed excavation, shoring, and foundation work, and by the report publication date said it was approaching structural and basement work. During 2025 it also signed an agreement to sell about 1,900 square meters of office space in the project for NIS 52 million plus VAT, with the first NIS 3.64 million payment already received on July 1, 2025. By the publication date, 22 apartments had also been sold.

But this is exactly where progress has to be separated from resolution. On January 14, 2026 the company signed an amendment to the bank support agreement that delayed the date for satisfying the conditions for the financing facilities to April 30, 2026. Two and a half weeks later, by January 30, 2026, the project still had not received its full building permit under the current zoning plan. As a result, on February 1, 2026 the company announced that the interest rate on Series V bonds was stepping up, with the annual rate on the outstanding principal rising by 0.3 percentage points from that date.

This is not cosmetic. It shows that the market does not need a covenant breach to identify where the pressure sits. It is enough for the key project to miss a planning milestone on time, and the carrying cost starts to move higher. That is not just a delay issue. It is a balance-sheet economics issue.

There is also visible upside here, but it has to be held correctly. The company estimates that if the Beit Romano Gat Rimon plan is approved and the project receives the additional rights it assumes, total project surplus could rise by about NIS 220 million to roughly NIS 500 million. That is a very large figure relative to the company, but it depends on a full set of management assumptions around rights, cost, pricing, and equity. It is not cash today. It is a strategic option for 2026 and beyond.

Wallenberg is nearly built, but not yet operating

If Gat Rimon is the permit trigger, Wallenberg is the trigger for turning appraisal value into operating value. YBOX holds 50% of the asset, and the year-end appraisal puts the project at NIS 364 million on a 100% basis, or about NIS 182 million for the group’s share. That remains a very meaningful layer of value.

The problem is that at the same date, and still at the report publication date, there were no binding lease agreements in place. Main construction work had been completed, Form 4 was expected in the second quarter of 2026, but the project had not yet crossed the test that really matters: tenant signing and NOI generation. Accordingly, the carrying value of the group’s rights at Wallenberg fell to NIS 182 million from NIS 188.5 million a year earlier, and the company recognized about NIS 16 million of fair-value loss on its share in 2025.

That is an important signal because the markdown did not come from a stuck project. It came from a project that is almost done. Precisely when construction is over, the market and the appraiser are telling the company: now show leases. Until then, it is not enough that the asset exists. The question is who moves in, and on what terms.

DMRI Ba'ir widens the pipeline, but consumes cash now

In July 2025 the company’s urban-renewal subsidiary signed an agreement under which the group may receive up to 50% of DMRI Ba'ir in exchange for a total NIS 58 million investment through equity, shareholder loans, and a capital note. DMRI Ba'ir holds 28 urban-renewal projects, 25 of which already have the required majority, and most are in Tel Aviv. Strategically, the logic is clear: anyone trying to deepen a future Gush Dan pipeline gets a much wider inventory option here.

But the cost also has to be read at the current layer. By the publication date the group had already paid about NIS 23 million of the consideration, while the deal was still not completed and the shares had not yet been allocated. To finance part of that consideration it entered, in October 2025, into a non-bank facility of up to NIS 30 million carrying interest at prime plus 3% to 3.5%, with NIS 15.3 million already drawn by year-end. In other words, YBOX improved its future strategic option set, but financed part of that option with relatively expensive money in a year when its balance-sheet flexibility was already limited.

The option exercises helped, but did not change the story

Until the March 2, 2026 expiry date for Series 3 warrants, about 3.877 million warrants were exercised and the company raised about NIS 3.9 million. That is a positive cash support, but relative to the NIS 44.9 million cash decline in 2025 and the depth of the operating cash drain, it is a small valve rather than a solution.

That chart sharpens the trigger story: even after all the project headlines, the current recognized base in 2025 still rests on a relatively small development revenue engine rather than a broad NOI layer.

Efficiency, Profitability, and Competition

Profitability weakened even before financing took center stage

2025 ended with NIS 43.5 million of revenue, down 8.9% from 2024. Apartment sales fell to NIS 23.9 million from NIS 32.2 million, while construction services in combination deals rose to NIS 15.2 million from NIS 12.4 million. Rent and management fees increased to NIS 4.46 million, but that is still far too small a layer to change the company’s economics.

At the same time, gross profit fell to NIS 5.45 million from NIS 7.79 million, which means a gross margin of just 12.5%. Breaking that down by engine gives a narrow base: roughly NIS 3.57 million of gross profit from apartment sales, about NIS 1.30 million from construction services, and only about NIS 0.58 million from rent and other recurring activity. That is a thin operating base for a company carrying NIS 23.3 million of G&A and another NIS 2.65 million of selling and marketing expense.

Even before fair-value movements, the core business was weak. After selling, marketing, and overhead but before the fair-value line, the company was already clearly negative. The operating line then dropped to a NIS 38.2 million loss, partly because the fair-value movement on investment property swung to a NIS 18.0 million loss after a NIS 23.1 million gain in 2024. In other words, what masked some weakness in 2024 reversed direction in 2025.

The steep fall versus 2023 partly reflects the one-off sale of White Village land inventory in that year. But even against 2024, the current year does not read like a business beginning to scale cleanly. It reads like another year in which headquarters and financing still sit far above what the operating engine currently produces.

Who is paying for the sales pace

The filing is explicit. The company says that in recent years, given the slowdown in the sector, the scope of apartment sale agreements that include exemption from construction-input indexation has increased. It also details several common payment structures: 15% to 20% at signing and the remainder at delivery, or 15% to 20% at signing, another 20% to 25% based on construction progress, and the balance at delivery.

This is exactly where normal growth has to be separated from growth partly supported by the developer’s own balance sheet. The company says that the financing component embedded in the 2025 transactions where it granted easier payment terms is not material. But the economic structure is clear: when the buyer brings less cash earlier, the company carries more of the funding burden itself. That matters even more because the company also states that it does not conduct underwriting on apartment buyers receiving those benefits.

As of the filing and publication date, only 3 cancellations had been recorded, with a total value of about NIS 9 million including VAT. That is not alarming by itself. But it still does not answer the more important question: how strong is current demand quality in a market where preserving sales pace may require commercial concessions.

Backlog exists, but it is still far from delivery

Across the projects under construction, namely Gat Rimon, Tor Malka, and Hassan Arafa, the company reports 149 total housing units, book inventory of NIS 311.1 million, and expected gross profit of NIS 185.2 million. During 2025 it signed 11 binding sale contracts, but 114 units remained unsigned at year-end.

Those numbers sharpen the structure of the thesis. There is meaningful project-level profit potential here, but it sits before delivery, before final financing, and before a large part of the signature base. So the NIS 185.2 million cannot be read as cash waiting around the corner. It is a project estimate that still belongs to the world of execution, permit timing, cost control, and housing-market conversion.

Cash Flow, Debt, and Capital Structure

The right cash lens here is all-in cash flexibility

In YBOX’s case, the right cash lens is not a normalized maintenance view. It is the all-in cash picture after the period’s real cash uses. The reason is simple: this is not a thesis about the recurring cash engine of a mature income property. It is a thesis about the financing flexibility of a development platform carrying projects until they mature.

On that basis, 2025 was heavy. Cash flow from operations was negative NIS 148.0 million, versus negative NIS 109.2 million in 2024. According to the company, the deterioration came mainly from higher interest payments, increased investment in inventory and land advances, and higher headquarters cost. Investing cash flow actually turned slightly positive at NIS 1.9 million, largely because of lower trust deposits and customer advances, but that was offset in part by a NIS 23 million advance payment for the DMRI Ba'ir transaction. Financing cash flow contributed NIS 101.2 million, supported by the Series Z convertible bond issuance and new loans, against ongoing debt repayment.

The bottom line is that cash and cash equivalents fell from NIS 74.4 million to NIS 29.5 million. That is more than a 60% decline in one year, despite fresh financing.

That chart shows what the accounting profit line hides: even when the company can still raise financing, cash burns too quickly to create a comfortable cushion.

There is an even sharper point here. The income statement shows net finance expense of NIS 20.24 million in 2025. But the finance note shows gross finance expense of NIS 75.66 million, of which NIS 53.84 million was capitalized into qualifying assets. And the cash flow statement shows NIS 68.19 million of interest paid. This is the real pressure point. The reported finance line is far smaller than the actual financial burden the company carried. Much of the cost did not disappear. It was simply moved into inventory.

The balance sheet expanded, but accessible value did not expand with it

Total inventory, current and non-current combined, rose to NIS 988.1 million from NIS 735.4 million at the end of 2024. Investment property declined to NIS 308.2 million from NIS 391.3 million, partly because of Gat Rimon reclassifications and fair-value movement. Revalued fixed assets rose to NIS 118.4 million. On the other side, equity fell to NIS 428.4 million from NIS 459.0 million.

The key point is not just that the balance sheet got bigger. It is what is missing from it: as of December 31, 2025 and the publication date, the company had no unencumbered real-estate assets. In addition, unused credit lines were only about NIS 65 million. That does not mean the company is immediately in trouble. It does mean that anyone looking for “cushion” has to ask whether that cushion belongs to equity, or whether it is already pledged to the debt stack above it.

Debt is not breaching terms, but it is already dictating behavior

At year-end 2025 the liability structure included NIS 309.1 million of short-term loans and current maturities, NIS 370.1 million of long-term loans, NIS 177.9 million of regular bonds net of current maturities, and another NIS 121.2 million of long-term convertible bonds. On top of that sat NIS 113.6 million of payables for land acquisition. The company remains in compliance with all bond covenants as of year-end 2025, and that matters. But it does not change the fact that the debt stack is already telling management what must be completed and in what order.

The company reports positive consolidated working capital of NIS 9.0 million. But that is the standard accounting number, not the real near-term funding picture. On a 12-month basis, the group still shows an adjusted working-capital deficit of NIS 268.8 million. That adjustment mainly reflects NIS 425.0 million of inventory not expected to convert within a year, NIS 129.3 million of loans classified short but linked to longer project cycles, and NIS 17.9 million of construction-service liabilities extending beyond 12 months.

This is a good example of the difference between what is technically acceptable and what is economically comfortable. The company is right that this structure is common in development. But anyone reading standard current assets as if they represent real financing headroom is missing the actual payment schedule.

Forecast and Forward View

Before getting into 2026 detail, four non-obvious findings need to sit up front:

• Finding one: the reported finance line understates the carrying burden. In 2025 the company carried NIS 75.7 million of gross finance expense, paid NIS 68.2 million of cash interest, and reported only NIS 20.2 million net because most of the burden was capitalized.
• Finding two: the “positive” working-capital picture is largely technical. On a 12-month view, the group is still short almost NIS 269 million.
• Finding three: the two assets carrying much of the story, Wallenberg and Gat Rimon, have not yet crossed the cash test. The first is waiting for lease-up, and the second is waiting for full permit and fully activated project financing.
• Finding four: the DMRI Ba'ir deal improves the future strategic option set, but in 2025 it was first and foremost a use of cash, not a source of earnings.

Once those four points are in place, the right label for the next year becomes clear: this is a proof year, not a breakout year. The company has already done much of the work required to enlarge the project book and the balance sheet. What it now has to prove is that this pipeline can start turning into permit, lease-up, surplus release, and cheaper funding support.

What has to happen for the read to improve

The first item is Gat Rimon. The company has to turn the January 14, 2026 financing amendment into a manageable timetable shift rather than a rolling delay. A full building permit, satisfaction of financing conditions, and construction progress all need to come together. Without that, the project remains a theoretical value engine that is also a carrying-cost engine.

The second item is Wallenberg. If Form 4 does arrive in the second quarter of 2026 and the company starts signing tenants, the NIS 182 million carrying value at the group level can begin to be read through future NOI. If not, the 2025 markdown may end up looking like only the first adjustment rather than the last.

The third item is release of real sources from projects already much closer to monetization. Management points to NIS 17 million expected to be released from Glipoli and Tor Malka, plus about NIS 26 million of equity surplus potentially releasable from Gat Rimon in the first half of 2026, subject to lender discretion. Those are important sources, but each is conditional, and that is exactly why the market will treat them cautiously until they actually hit cash.

What could break the thesis

The main risk is not just another soft quarter in sales. The main risk is an accumulation of medium-sized delays: permit timing slips, support agreements move again, tenant signing lags, rights monetization stretches out, and sales continue to depend on softer buyer terms. None of these, alone, has to be fatal. Together, they extend the period during which the balance sheet has to be carried.

This is also where the macro backdrop has to be read correctly. Management argues that further rate cuts, if they continue, may support the sector. That is fair. But the same filing also says explicitly that renewed inflation, construction-input index pressure, and higher rates could compress project profitability, and that the market remains highly sensitive to the security backdrop. So better macro is not an automatic cushion. It is only a possible support layer if the projects themselves move.

What the market is likely to watch in the next few quarters

In the near and medium term, the market is likely to focus on four checkpoints:

• whether Gat Rimon finally receives the full permit and moves from deferred conditions to full financing activation
• whether Wallenberg starts producing binding leases rather than only appraisal value
• whether surplus release and option exercises remain small supporting items or become a real funding bridge
• whether the company can keep selling without leaning even harder on buyer-friendly payment structures

Risks

Financing and carrying-risk pressure

The filing makes clear that the company depends on a mix of bonds, banks, and other lenders, with no free real-estate assets left. That means any material timing slippage at the large projects can become a problem not because value disappeared, but because there may not be enough room to carry the balance sheet until that value matures.

Permit and execution risk

Gat Rimon, Hassan Arafa, Gvulot, and the large urban-renewal projects will continue to depend on permits, municipalities, contractors, and bank support agreements. Gat Rimon already showed how a missing full permit can translate directly into higher bond cost. That is a useful test case for the rest of the pipeline too.

Demand-quality risk

The company operates in a market where preserving sales pace may require index waivers and more flexible payment terms. At the same time it does not underwrite the buyers receiving those benefits. As long as cancellation rates stay low, the issue is manageable. If the market weakens again, it can turn more quickly into a collections and backlog-quality issue.

Accounting value versus accessible value

Wallenberg already showed in 2025 that value can decline even in a nearly completed project if leases are still missing. At Gat Rimon, part of the upside is tied to additional future rights that are not yet finally approved. Anyone reading appraised value as if it were equal to cash may discover that it is highly sensitive to timing and execution.

Short Sellers' View

Interestingly, the short data is not signaling panic. As of March 27, 2026, short float stood at just 0.34%, versus a sector average of 0.83%. SIR, meaning days to cover, stood at 2.45 versus a sector average of 2.927. There was a sharper moment in February, when short float reached 0.78% and SIR 5.84, but that pressure has eased since then.

The implication is that skepticism is not currently being expressed through a crowded short position. It is showing up in a different way: thin trading, a wait-for-proof stance, and difficulty in pre-valuing appraisals and projects that have not yet crossed into income.

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Conclusions

2025 was not the year in which YBOX proved that its heavy balance sheet is starting to convert into cash. It did prove that the company owns real assets, real projects, and a meaningful future pipeline, but also that the central friction remains intact: much of the value is already in the accounts, while much less of it is already working for cash. In the near to medium term, market interpretation will be driven mainly by Gat Rimon, Wallenberg, and the company’s ability to release surplus without adding another layer of financing pressure.

Current thesis: YBOX holds more project value than its 2025 reported results can show, but also less real balance-sheet flexibility than the balance sheet alone might suggest.

What changed versus a 2024 read is that the question is no longer whether the company has a pipeline. The question is whether that pipeline is now starting to pass the financing, permit, and occupancy test. Gat Rimon moved forward operationally but also exposed financing dependence more clearly. Wallenberg moved closer to completion but still did not prove lease-up. DMRI Ba'ir widened the future, but consumed current cash.

The strongest counter-thesis: anyone looking at the company through pipeline depth and embedded rights can reasonably argue that the market is still giving too little weight to the upside. If Gat Rimon, Wallenberg, and the newer projects clear their 2026 milestones, 2025 could look in hindsight like a necessary bridge year rather than a structurally weak one. The company also stayed within covenant limits, and management says it received positive indications from underwriters regarding additional secured bond issuance.

What could change market interpretation over the near to medium term is not another appraisal line. It is execution evidence. A full permit at Gat Rimon, first leases at Wallenberg, and visible cash release from Glipoli, Tor Malka, and later Gat Rimon could materially improve the read. More delays, higher carrying cost, and continued reliance on buyer concessions would do the opposite.

Why this matters is simple: in a leveraged development company, the gap between recorded value and accessible value is the gap between a balance sheet that creates freedom and one that still has to be financed through another year.