Beit Bakfar: Why Resident Deposits Still Define Balance-Sheet Quality
Beit Bakfar is pushing harder into leasing, but balance-sheet quality is still largely determined by the resident-deposit cycle. At year-end 2025 resident liabilities stood at NIS 473.6 million, reported working capital was negative NIS 337 million, and even the March 2026 rating case still leans on deposit-driven working-capital inflows.
The main article already argued that net profit is the wrong lens for reading Beit Bakfar. This follow-up isolates the reason. The company says there is no material economic difference between the different resident-payment tracks, but there is a very large balance-sheet difference between a deposit contract and a leasing contract. This is not really an argument about apartment pricing or monthly fees. It is an argument about what kind of liability the company builds, how exposed it remains to CPI indexation, and whether growth creates flexibility or simply replaces one funding source with another.
This is the point: Beit Bakfar is clearly moving toward leasing, and that shift is real. But as of December 31, 2025 the balance sheet still lives in a deposit world. Resident liabilities stood at NIS 473.6 million, reported working capital was negative NIS 337.4 million, and operating cash flow in 2025 depended heavily on the fact that more deposits came in than went out. Even the March 11, 2026 rating report builds its liquidity case around continued working-capital inflows of that kind.
The balance sheet looks very different once resident deposits are deducted
The right place to start is not the income statement but the real-estate line. At year-end 2025, fair value of investment property stood at NIS 1.615 billion. But the company itself analyzes the operating asset base net of resident liabilities, because those liabilities are part of the economics of a senior-housing property. Once they are deducted, net value of the yielding properties falls to NIS 1.142 billion.
That matters because nearly one third of gross fair value in the yielding portfolio is matched by a resident liability. Any reading of the company as a clean low-leverage real-estate owner based only on property value misses the non-bank liability that sits inside the model. This is not just an accounting footnote. It is the question of whether asset value is actually available as balance-sheet strength.
The same distortion appears in working capital. The company reports negative working capital of NIS 337.4 million, but almost all of that deficit comes from classifying resident liabilities as current because residents can terminate their contracts at any time. Excluding that resident layer, current assets of NIS 213.4 million stand against only NIS 77.2 million of other current liabilities, which means the ordinary short-term position is actually positive by NIS 136.2 million.
| Year-end 2025 snapshot | NIS m | What it means |
|---|---|---|
| Current assets | 213.4 | The ordinary liquid/current asset base |
| Current liabilities excluding residents | 77.2 | The normal short-term burden |
| Resident liabilities | 473.6 | The liability layer that defines how the balance sheet looks |
| Working capital including residents | (337.4) | The reported deficit |
| Working capital excluding resident liabilities | 136.2 | The ordinary short-term picture |
This is the central paradox. On paper the balance sheet looks stretched. Economically, the board estimates that only NIS 40 million to NIS 50 million of those resident obligations will likely have to be repaid over the next 12 months, partly because average resident stay is around 10 years and, in practice, repayments are usually funded by deposits from new residents entering vacated units. That is why resident deposits both weigh on the balance sheet and soften the practical meaning of the reported working-capital deficit. That is also why they still define balance-sheet quality.
Leasing is improving, but it has not replaced the deposit engine
Leasing is the company’s attempt to improve liability quality. Under this track, the resident does not pay an upfront deposit, and the company does not accumulate an indexed deposit liability. The company also stresses that leasing reduces exposure to higher life expectancy because the economics are less sensitive to the gap between incoming and outgoing residents.
The numbers show real progress. In 2025, among contracts signed with new residents in the existing homes, excluding the Kfar Saba expansion project, 54% were leasing contracts and another 10% were signed under the similar reverse-deposit format. In the comparable 2024 period those numbers were 38% and 28%, respectively. The board report also states that during the reporting period 66% of newly signed agreements were in leasing and similar tracks.
But the improvement has not replaced the deposit engine yet. First, the company explicitly notes that leasing is marketed in existing projects only, not in the Kfar Saba expansion. Second, the increase in current liabilities and resident liabilities in 2025 was driven mainly by deposits paid by residents in that expansion project. In other words, the main growth engine of the year still arrived with deposits, not with leasing.
That is the core of the story. Leasing improves the liability structure of the existing portfolio, but as long as the major growth projects are funded in part by incoming deposits, balance-sheet quality still depends on the old machine. It is simply becoming somewhat more efficient.
Two cash bridges, two different answers
This is where the cash framing matters, because two legitimate cash bridges tell two very different stories.
normalized / maintenance cash generation: If you stop before working-capital movements, the 2025 cash base was only NIS 19.6 million. That is what remains after backing fair-value gains, non-cash resident-deposit effects, and the other accounting adjustments out of reported profit. It also fits with the company’s disclosed real representative FFO, which was NIS 31.7 million. The company explicitly chose not to include resident-deposit changes in FFO even though they sit inside operating cash flow.
all-in cash flexibility: On a full cash-uses basis, the year ended with a NIS 66.8 million decline in cash and cash equivalents. Operating cash flow of NIS 69.7 million did not cover NIS 205.5 million of investing outflows and the NIS 30 million dividend, so the overall picture also depended on a bond and warrant issuance that brought in NIS 99.0 million net. In other words, 2025 was not funded by recurring operating cash generation alone.
That chart matters because it separates cash flow from cash-flow quality. Of the NIS 50.1 million contribution from working-capital movements, NIS 46.3 million came directly from the gap between NIS 94.9 million of resident deposits received and NIS 48.6 million refunded to residents. In other words, almost all of the working-capital support in operating cash flow came from the deposit cycle.
That is not inherently a problem. It is how the model works. But it does mean that high operating cash flow at Beit Bakfar is not automatically the same thing as strong recurring cash generation. It also reflects occupancy pace, the pricing gap between incoming and outgoing residents, and the company’s ability to keep the deposit cycle positive. That is precisely why the company strips deposit changes out of FFO, and precisely why operating cash flow on its own is not a sufficient measure of balance-sheet quality.
Even the rating case still depends on the deposit machine
The March 11, 2026 rating report gives a second layer of confirmation. The outlook is stable and liquidity is described as adequate. But what matters is how that liquidity case is constructed. Maalot estimates that in the 12 months beginning October 1, 2025 the company’s main sources are around NIS 205 million of liquid resources, NIS 20 million to NIS 30 million of operating cash flow, and NIS 80 million to NIS 120 million of net working-capital movements. Against that, it places NIS 70 million to NIS 90 million of capex and an annual dividend of about NIS 30 million.
So even the external credit read is not looking only at cash on hand or EBITDA. It assumes the company will continue to generate funding from working capital, which in practice means the resident-deposit cycle. In its base case for 2025 through 2027, Maalot even assumes NIS 130 million to NIS 180 million of net working-capital movement in 2026, attributed partly to deposits expected from occupancy of the Kfar Saba expansion.
That is where real balance-sheet quality gets tested. If Kfar Saba occupancy progresses as planned, the balance sheet gets both incoming cash and a wider monthly-fee base. If the pace is slower, or if a larger share of marketing shifts too quickly into leasing, the company will gain better liability quality but lose part of the funding source that currently helps finance growth, dividends, and investment. That is why the leasing shift is positive, but not free.
Bottom line
Beit Bakfar is not stuck in the old model. On the contrary, it is steadily pushing leasing, reducing CPI exposure, and moving toward better liability quality in the existing homes. The broader year-end liquidity position, roughly NIS 203.8 million across cash, short-term deposits, and financial assets, also gives it time.
But that time is still being bought through resident deposits. Resident liabilities remain large, the working-capital deficit remains a direct consequence of them, and 2025 operating cash flow depended mainly on the fact that more deposits came in than went out. So balance-sheet quality here is still not just a story of low financial debt or rising property value. It is first and foremost a story about the company’s ability to recycle, replace, and price the resident-deposit layer correctly.
What matters from here is fairly simple. Whether Kfar Saba occupancy turns into net deposits and real cash rather than just a larger reported liability. Whether leasing continues to gain share without hitting the funding engine that comes from entry deposits too hard. And whether cash generation before working-capital movements begins to grow enough for the company to finance more of its investment program and dividend from the underlying business itself, and less from the gap between an incoming resident and an outgoing one.
Until that happens, resident deposits are not a technical balance-sheet line. They are the clearest measure of balance-sheet quality.
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