Real Estate Is Moving Faster Than Cash: Hachsharat Hayishuv in 2025

Getting to Know the Company

The superficial way to read Hachsharat Hayishuv is as another Israeli yielding real-estate name with a few malls, one standout office tower, an urban-renewal arm, and a lot of debt. That reading is incomplete. The group’s economics are no longer centered mainly in Israel: in 2025 about 56% of consolidated NOI came from MLP’s European logistics parks, and about 62% of investment-property value came from that same engine. At the same time, Hachsharat Hayishuv shareholders do not own 100% of that engine, and the route from MLP to them runs through minorities, corporate debt, and a long reinvestment cycle.

What is working now is fairly clear. Consolidated NOI rose to ILS 434.5 million, net profit rose to ILS 459 million, equity attributable to shareholders rose to ILS 1.895 billion, and MLP kept expanding in area, revenue, and FFO. Israel is also moving in the right direction: Nimrodi Tower continued to lease up, Seven Stars Eilat kept filling, and the company kept pushing urban-renewal projects forward.

What still blocks a cleaner thesis is not asset quality but the conversion layer. In 2025, changes in fair value of investment property came in at ILS 566 million, more than the year’s total net profit. Cash flow from operations was only ILS 114 million, and after investment and financing activity consolidated cash fell from ILS 815 million to ILS 243 million. This is not the picture of a stuck company. It is also not the picture of a business that has already turned into a free-cash machine.

That is why 2026 looks like a bridge year with a double proof test. One test is whether the progress in Nimrodi Tower and MLP really turns into more recurring and more accessible cash. The second is whether urban renewal starts to look like a profit and cash-flow engine, rather than a large pipeline with even larger projected gross profit.

The group’s economic map looks like this:

What a first read can easily miss:

• The bottom line is moving faster than cash. Net profit of ILS 459 million rested on ILS 566 million of revaluations, while operating cash flow was only ILS 114 million.
• The core engine is no longer Israeli. Most of NOI and investment-property value now comes from European logistics, not the directly owned Israeli portfolio.
• Israeli growth was not broad-based. Offices drove the improvement, while retail NOI fell and Seven Stars Herzliya ended a weaker year.
• Urban renewal looks richer on paper than in the bank. The company itself describes a market built on 20-80 and 10-90 deals, with an embedded economic discount of 5.3% to 7%.

Events and Catalysts

The first catalyst: In January 2026, MLP raised EUR 350 million of senior notes at 4.75% due 2031 and listed them in Luxembourg. This is an important external signal: the international debt market is still open to the group’s European platform. That is positive because it supports refinancing and further growth. It is also a reminder that the main growth engine still lives inside a financed development model, not a model built around sending recurring cash upstream.

The second catalyst: Nimrodi Tower is getting much closer to stabilization, but the company’s own materials show two different snapshots of the same process. The 2025 property table shows 85% occupancy at year-end, with actual NOI of ILS 78.0 million and adjusted NOI of ILS 83.6 million. The dedicated valuation published in the same cycle shows 48,046 sqm leased, about 94% of the area attributable to the company, and says that after a subsequent lease for floors 50 and 51 occupancy rises to about 99%. Even if these are not identical definitions, the direction is clear: the asset entered 2026 much closer to stabilization than the year-end table alone suggests.

The third catalyst: The group kept rotating assets. In 2025 it sold 30 Israeli assets for ILS 106.5 million, with only about ILS 2 million of NOI attached to them. In addition, the sale of the company’s share in the Seven Stars complex in Rishon LeZion generated net cash of about ILS 30 million. This is the right move from a portfolio-focus perspective: fewer small assets, more emphasis on campuses and larger properties. It still does not solve the parent-level cash question on its own.

The fourth catalyst: In urban renewal, the company keeps building through equity partnerships. Menora Deal 2 added roughly ILS 200 million of equity investment across six housing projects, while Menora Deal 1 was expanded by adding the second stage of Kiryat Yam. This is positive because it reduces the need to load every project entirely onto the balance sheet. It also says the company clearly recognizes the arm’s capital constraint and the need to share value in order to keep scaling.

Efficiency, Profitability and Competition

The core insight here is that profitability improved, but its quality differs sharply by engine. Anyone reading 2025 as a uniform story of broad improvement is missing the distinction between Europe, Israeli offices, Israeli retail, and urban renewal.

What really drove 2025

Consolidated NOI rose 15% to ILS 434.5 million. Total profit from real-estate operations rose to ILS 515 million, and property revaluations added another ILS 566 million. Internally, profit from rental assets in Israel rose to ILS 189 million and profit from rental assets abroad rose to ILS 243 million. By contrast, profit from residential development in Israel fell to only ILS 8 million, while profit from residential development abroad rose to ILS 75 million.

MLP remains the center of gravity. Its revenue rose from PLN 372 million to PLN 421 million, NOI rose from PLN 229 million to PLN 264 million, FFO rose from PLN 47 million to PLN 55 million, and the equity-to-assets ratio improved from 42.4% to 45.7%. Leasable area reached about 1.296 million sqm, and by the time the report was signed the company was already talking about 25 parks with more than 2 million sqm of potential. This is a real operating engine, not just a revaluation story.

But this is not a free pass. MLP’s net financial debt rose from PLN 2.441 billion to PLN 2.901 billion. In other words, the platform is growing with more assets and more equity, but also with more debt. So the statement that MLP is worth more is correct. The statement that this value is already fully available to Hachsharat Hayishuv shareholders is still premature.

In Israel, offices pulled while retail softened

The Israeli story almost splits in two. Office NOI in Israel jumped from ILS 71.2 million to ILS 108.1 million, an increase of about 52%. That is almost the whole local growth story, and it sits mainly on Nimrodi Tower. On the other hand, retail NOI fell from ILS 86.7 million to ILS 77.4 million. That is not noise.

Seven Stars Herzliya shows this tension well. Its fair value edged up to ILS 1.15 billion, but NOI fell from ILS 66.2 million to ILS 59.2 million, average occupancy slipped from 91% to 89%, and average tenant sales per sqm per month fell from ILS 2,474 to ILS 2,169. This is not a crisis. It does mean retail did not deliver the same quality of growth that the office portfolio delivered.

Put differently, and this is the key point: if you strip out Nimrodi Tower, Israel looks far less dynamic than the consolidated line suggests.

Profit quality at Nimrodi Tower

Nimrodi Tower is a strong asset for the thesis, but it is also an easy place to over-read the year. Rental income rose to ILS 94.5 million in 2025 from ILS 62.3 million, and actual NOI rose to ILS 78.0 million from ILS 45.2 million. That looks excellent. The catch is that fit-out stipend income amounted to ILS 44 million in 2025, versus ILS 28 million in 2024 and ILS 9 million in 2023. As a result, adjusted NOI only rose to ILS 83.6 million from ILS 83.0 million.

That is a material point. A significant part of the jump in NOI does not reflect only a mature rent roll. It also reflects a lease structure in which tenants receive support for fit-out costs. This is not “bad.” It does mean the right reading of 2025 is “the asset is moving nicely toward stabilization,” not “the asset has already finished the support phase and turned into clean recurring income.” The next test is what happens as these stipends fade and the tower has to lean more on regular rent.

The positive side is tenant quality. The dedicated valuation says the State of Israel is the leading tenant in the tower, and that roughly 73% of the area attributable to the company is leased to it, mostly on long contracts. That strengthens the credit quality of the asset. The other side of that same fact is high concentration in one asset and one tenant.

Urban renewal: large potential, modest present

The urban-renewal arm is the best example of the gap between value being created and value already being accessible. On one hand, the company presents a very large pipeline: eight projects under execution or marketing, five expected to mature further during 2026, sixteen expected to mature in 2027, and another eight in 2028. It also presents cumulative projected gross profit of about ILS 2.2 billion through 2028 across projects already in execution and projects expected to become execution-ready.

On the other hand, profit from residential development in Israel was only ILS 8 million in 2025, down from ILS 22 million, while revenue fell to ILS 76 million from ILS 228 million. That is a huge gap between the future the company is drawing and the present accounting result, let alone the present cash result.

The company itself explains why. Over the last two years, the housing market moved toward 20-80 deals and sometimes even 10-90 deals, with an economic discount embedded in those structures of 5.3% to 7% of list price. This is the key point. When the residential market relies on deferred payments, contractor loans, and subsidized financing, the question is not only whether there are sales. The question is who is funding them, at what cost, and what that does to margin, working capital, and cancellation risk.

Cash Flow, Debt and Capital Structure

The core insight here is simple: asset quality is better than the quality of access to that asset value. So the right way to read Hachsharat Hayishuv is not “how much are the assets worth,” but “how much of that value can move upward without being diluted on the way.”

The full cash picture

If we use an all-in cash-flexibility lens, 2025 was a year of operating improvement but not a year of surplus cash. Cash flow from operations rose to ILS 114 million after negative ILS 33 million in 2024. That is real improvement. But investing activity still used ILS 550 million, and financing activity used another ILS 132 million, so consolidated cash fell by ILS 568 million.

The picture is even sharper at the parent level. Cash flow from operations attributable to the company itself was ILS 82.5 million. Against that, the parent’s own financing activity used ILS 133.6 million, including ILS 730.2 million of bond repayments and a ILS 60 million dividend, only partly offset by new debt issuance. Cash and cash equivalents at the parent ended the year at ILS 52 million.

In other words, the NOI improvement has not yet translated into abundant excess cash at the parent. That does not mean there is an immediate liquidity problem. It does mean the group is still in a stage in which incoming cash is absorbed by capex, development, refinancing, and other real capital uses.

Debt, covenants, and liquidity

Financial liabilities arising from financing activity ended the year at about ILS 5.96 billion, including bank loans, bonds, and lease liabilities. At the parent level alone, unallocated corporate bonds stood at ILS 2.991 billion. That is a large number, and it is exactly what separates gross asset value from what is actually accessible to shareholders.

Against that, the financing picture does not look strained at the covenant level. The company meets all financial covenants. The adjusted equity-to-assets ratio at the solo level stood at 34.1%, far above the 20% floor. Adjusted solo equity stood at ILS 1.949 billion, well above minimum thresholds of ILS 650 million to ILS 700 million. Series 21 LTV stood at 60%, and series 25 LTV stood at 57%, both far below the 85% ceiling.

There is also a useful external confirming signal: in February 2026, S&P Maalot kept the unsecured series at ilA- with a positive outlook, and the secured series at ilA with a positive outlook. In other words, the debt market is not reading the company as a real-estate name at the edge of refinancing capacity. It is reading it as a company that still requires tight financing discipline.

Value exists, but not all of it is accessible

The year-end NAV table clarifies the heart of the story. Segment-level net asset value stood at ILS 7.162 billion. But after roughly ILS 2.998 billion of corporate debt, ILS 859 million of other net liabilities, and ILS 1.735 billion of minorities, equity attributable to shareholders was only ILS 1.895 billion.

This is exactly the gap the market is trying to price. On a quick glance, the company traded around the date of the market snapshot at about ILS 1.44 billion of market cap, below its equity attributable to shareholders. On a deeper look, this discount does not look irrational: common shareholders do not own gross real estate. They own the residual claim after debt, minorities, ongoing investment, and refinancing needs.

The company effectively says this itself when it reports a working-capital deficit, both consolidated and solo, while explaining why it is still comfortable: about ILS 69 million of parent cash at year-end, about ILS 470 million of unused credit lines, about ILS 408 million of unencumbered Israeli real estate, and about ILS 618 million of market value in listed holdings in MLP and the listed urban-renewal subsidiary near the report approval date. That is a reasonable answer. It is still not the answer of a company that has already cleared the cash test.

Outlook

Four points matter before looking at 2026:

• The improvement is real, but it is still not clean. NOI is at a high, but net profit still rests heavily on revaluations and on income streams that are not all recurring at the same pace.
• MLP is the engine, not the side story. If Europe keeps compounding, the thesis strengthens. If Europe loses momentum, Israel alone will struggle to replace it.
• Nimrodi is close, Medical Center is not. Nimrodi lease-up is advancing quickly, but Medical Center was only 33% leased at year-end and is due to complete in 2027.
• Urban renewal has to move from presentation to cash. ILS 2.2 billion of projected gross profit is strong capital-markets material. It is not a substitute for cash flow.

2026 looks like a bridge year with proof points, not a clean breakout year. The company is already past the stage where it needs to prove it has quality assets or real growth engines. The real question is whether those assets start producing more accessible cash, and whether growth comes in economic terms that do not erode the quality of the result.

What could improve the read

First, full stabilization at Nimrodi Tower. If lease-up really moves from the 85% year-end property-table snapshot toward roughly 99% signed occupancy, the market can start to treat the asset as a mature NOI anchor rather than as a tower still in the monetization phase. This matters especially because the asset is doing so much of the work in Israel.

Second, MLP. The company presents a target of PLN 4.8 billion of equity by 2028, versus PLN 3.2 billion at the end of 2025, and translates that into roughly ILS 600 million of added equity value for Hachsharat Hayishuv’s share. That is a meaningful ambition. For the market to fully accept it, it will need to see that MLP’s growth is not only growing assets, but also preserving financing access and some future path to upstream cash or value release.

Third, urban renewal. The test here is not pipeline size but conversion quality. If 2026 shows more projects moving into execution, more sales on economically reasonable terms, and less dependence on aggressive financing promotions, the renewal story will begin to look more credible beyond the presentation deck. If not, it will remain a paper-value story.

What could weigh on the story

The clearest risk is a continued gap between net profit and cash. This is not a theoretical gap. In the fourth quarter alone, net profit was about ILS 365 million, mainly because of about ILS 397 million of property revaluation gains, mainly at MLP. That is excellent for the income statement. It helps much less if the market is looking for progress in liquidity buffers or in the parent’s ability to release value.

The second drag is the housing market itself. The company explicitly describes a market running on deferred payments, contractor loans, and subsidized financing. Such a market can support headline sales, but it raises sensitivity to cancellations, to buyers’ mortgage-refinancing ability, and to underlying demand quality.

The third drag is that not all of the major Israeli projects are yet in the income-producing stage. Medical Center is still under construction, Jacob Nimrodi Tower is still a longer-duration project, and the company remains in several transition layers of spending before current development value turns into rent.

Risks

Profitability is still sensitive to revaluations, rates, and FX

The company is exposed to three variables that can quickly change the quarterly story: cap rates, CPI, and currency. It says that a 1% increase in CPI increases debt and finance costs by about ILS 30 million, and a 1% increase in Euribor adds about ILS 11 million of finance costs. In addition, it does not hedge the accounting equity exposure to the zloty and the euro, so FX can flatter or hurt reported results without a direct link to underlying operations.

Demand quality in housing

This is probably the biggest yellow flag outside financing. When the company itself describes a market running through 20-80 deals, 10-90 deals, bullet structures, and interest subsidies, it is effectively saying the key 2026 question is not whether there is demand, but how organic that demand is and how much of it is vendor-supported. As long as this is the market backdrop, projected gross profit in urban renewal has to be read with caution.

Paper value versus value for common shareholders

High asset values, rising NOI, positive ratings, and unused credit lines do not change the fact that common shareholders sit below layers of debt and minorities. That means even successful operating execution does not automatically guarantee full recognition in the parent’s equity story. This is especially true in a company whose main value engine, MLP, is consolidated in the accounts but not owned outright.

Conclusions

Hachsharat Hayishuv ends 2025 in better operating shape and with stronger assets than a superficial read would suggest. Europe keeps growing, Nimrodi Tower is moving toward near-full lease-up, and the balance sheet rests on good assets and reasonable financing access. The main obstacle is still the same one: value created in assets and subsidiaries still has to travel through debt, minorities, and ongoing investment before it becomes clean value for shareholders.

Current thesis: Hachsharat Hayishuv is a story of NOI and assets improving faster than the parent’s ability to pull cash upward.

What changed: In 2025 the European engine became even more important, Nimrodi moved from promise to actual result, and urban renewal added another layer of funding and partnerships. On the other side, retail in Israel weakened and the gap between profit and cash remained wide.

Counter-thesis: The market may simply be applying too deep a discount to a high-quality asset portfolio, a growing European platform, and an urban-renewal arm that can unlock large value over the coming years.

What may change the market reading in the short to medium term: The pace of actual lease-up at Nimrodi, how debt markets read financing at MLP and at the parent, and the quality of residential sales in urban renewal.

Why this matters: Because the question here is not whether the assets hold value, but whether the company can translate that value into something accessible to common shareholders without repeatedly depending on open debt markets and another layer of capital.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen is fairly simple: Nimrodi has to prove more stable NOI with less support-like income, MLP has to keep growing without putting too much weight on value access to the parent, and urban renewal has to start showing more execution and cash rather than only a future promise. What would weaken the thesis is the opposite: another year of impressive revaluations with cash still lagging behind.