Kohan 2025: The Bond Bought Time, But The Story Still Turns on Refinancing and Offices

Company Overview

Kohan is not just another U.S. commercial real-estate issuer that came to Tel Aviv to sell a distressed-mall story. It is first and foremost a newly listed Israeli bond wrapper around a U.S. property portfolio that was transferred into it only in March 2026. That point matters because it changes how 2025 should be read. This is not the operating history of a seasoned public issuer. It is the economic history of a portfolio that was inserted into a public debt vehicle only at the end of the period.

What is working now? The underlying portfolio is already large enough to produce real numbers. Rent revenue rose to $85.2 million in 2025, NOI rose to $47.5 million, FFO rose to $21.3 million, and no single tenant accounts for 5% or more of company revenue. That is a different starting point from a tiny, concentrated real-estate story. On top of that, after the balance-sheet date the company raised NIS 412 million in Series A bonds at a fixed 7.5% annual rate, a move that bought time against a layer of short and expensive bridge debt.

But the thesis is still not clean. Year-end cash was only $1.45 million, working-capital deficit was $131.9 million, and about $104 million of debt was classified as current. Net income of $45.4 million looks solid at first glance, but $24.1 million of that came from fair-value gains. In other words, more than half of the bottom line still came from revaluation rather than recurring cash economics. Even the headline NOI does not translate one for one to listed-company economics: consolidated NOI was $47.5 million, while company-share NOI was $39.6 million. Consolidated investment-property value was $420.7 million, while company-share value was $362.6 million.

The active bottleneck sits in two places at once: refinancing and office exposure. 311 South Wacker in Chicago is a large office asset acquired at what looks like a deep price, but at year-end it was only 43% occupied and carried a $20 million loan at 14% interest due in May 2026. At the same time, the company holds a secured note backed by five Manhattan office buildings. That may become ownership in the second quarter of 2026, but as of year-end it was still not recurring accessible NOI. It was optionality with execution risk.

So this is not just a story about buying U.S. malls cheaply. It is a story about whether a new public debt wrapper can take a portfolio that was often acquired out of distress, refinance a layer of double-digit asset debt, and turn accounting profit and portfolio NOI into cleaner FFO and actual liquidity.

That chart shows why the story attracts attention. Everything went up. It also shows why discipline matters: FFO improved nicely, but it still trails the jump in rent revenue and the bottom-line headline.

Events And Triggers

The move from private wrapper to public issuer

The company itself was incorporated only on August 28, 2025, and had no revenue, expenses, or cash flows from incorporation through year-end. The rights in the 17 property-holding companies were transferred into the issuer only in March 2026, alongside the bond issuance. That is not a technical legal footnote. It is the reason 2025 should be read as portfolio history, not as proof that a stable public liquidity layer already existed.

Series A is the core trigger, not just a financing technicality

In March 2026 the company issued NIS 412 million principal amount of Series A bonds, non-indexed, at a fixed 7.5% annual rate. Principal amortizes in four unequal payments, 5% in each of 2027, 2028, and 2029, and 85% in July 2030. That structure extends the horizon materially relative to some of the existing asset-level loans, but it also creates a large concentration at the back end. So the bond buys time against the near bridge wall much more than it eliminates refinancing dependence altogether.

The rating report assigns the issuer a conditional A3.il and the secured Series A a conditional A2.il with a stable outlook. The one-notch uplift on the bond reflects collateral quality. Midroog also states that a large part of the proceeds is meant to repay about $86 million of senior debt on eight pledged assets. That is a real improvement. But it still needs to be framed correctly: the deal improves the debt profile. It does not suddenly make the issuer flush with comfortable liquidity.

311 South Wacker: the asset that looks too cheap and therefore needs skepticism

311 South Wacker is the clearest example of the gap between an attractive purchase price and clean operating economics. The company acquired the building in June 2025 for $45 million. The presentation adds that the prior owners bought it for about $300 million in 2014 and invested another $38 million in renovations. It is very easy to stop there and tell a bargain story. That is only partly true. The spread tells you the deal was done at a deep basis. It also tells you the market had already punished this asset for years.

At year-end the property was only 43% occupied, generated $6.3 million of NOI, and carried a $20 million loan at 14% interest due in May 2026. As long as occupancy stays low and financing costs stay in the double digits, 311 South Wacker is primarily a financing and execution challenge. It may eventually become a meaningful source of upside, but today it is the largest single overhang on the portfolio read.

Manhattan Note: interesting optionality, still not accessible NOI

In March 2025 the company acquired a first-lien secured note backed by five Manhattan office properties for about $17.4 million against roughly $110 million of unpaid balance. The financial statements say the company is expected to become the owner of those assets in the second quarter of 2026 by exercising its rights under the note. The presentation adds that the portfolio sits in the Flatiron / Union Square area, totals 362,599 square feet, carries 88% occupancy, and generates about $5.6 million of annual adjusted NOI, with 27% of the space leased to Anheuser Busch through 2030.

That is analytically compelling, but the framing has to stay precise. As of year-end 2025, this was still not an owned operating property inside the investment-property line. It was a real-estate-backed loan recorded at about $17 million. The market may treat it as upside optionality, but it should not be placed at the center of the current cash thesis as if it were already recurring portfolio income.

There is already one proof point

Not everything is stuck. In January 2026 a subsidiary completed the refinancing of a $21 million loan at 6.75% for 15 years. That is small relative to the whole balance sheet, but it matters because it shows the path from expensive short debt to longer and cheaper funding is not just theoretical. The question for 2026 is whether this remains a one-off example or becomes a broader pattern.

This chart makes the point that the story does not rest on a single property. It also reminds the reader that 311 South Wacker is already large enough to shape the way the whole portfolio is read.

Efficiency, Profitability, And Competition

The 2025 growth is real, but its source matters more than its pace. Most of the revenue increase versus 2024 came from acquisitions. The company itself says that newly acquired companies contributed about $19.2 million of revenue, while lease renewals at existing properties contributed about $12.4 million of rent growth. This was a year in which portfolio expansion did most of the heavy lifting.

That is not inherently a problem. Real-estate companies do grow through acquisitions. The issue is that credit markets do not primarily reward an issuer for buying properties. They reward it for turning those acquisitions into cleaner NOI, broader FFO, and cheaper debt. On that front the picture is less polished. NOI rose to $47.5 million, but finance expense also rose to $22.2 million, and net income of $45.4 million included $24.1 million of fair-value gains. A large part of the improvement in the bottom line still does not translate into recurring cash.

That gap stands out even more through FFO. In 2025 FFO rose to $21.3 million from $14.7 million in 2024. That is a good result, but it is still far below the accounting profit and well below the pace of the consolidated headline. Anyone reading the company only through net income can end up with the impression that the portfolio already produces wide and clean economics. In reality, the number that matters more for 2026 is FFO, especially FFO after the expensive debt layer and the management-cost layer.

There is also a meaningful tension inside the operating story itself. Midroog estimates that NOI from same assets declined by about 8% between January to September 2025 and the same period of 2024 across ten comparable properties. That means the consolidated numbers grew thanks to acquisitions, while the existing asset base was still seeing rent pressure and occupancy management issues. This is exactly the difference between growth driven by a larger asset base and growth driven by stronger economics at the existing properties.

The company-share bridge matters as well. Consolidated investment-property value stood at $420.7 million at year-end, but company-share value was $362.6 million. Consolidated NOI was $47.5 million, but company-share NOI was $39.6 million. That is not a technical accounting footnote. It means the investor needs to be careful with portfolio headlines as if every dollar sits cleanly at the listed-company layer.

Competition also looks different depending on the asset class. In the core retail portfolio the company operates in secondary and tertiary markets and tries to create value exactly where large institutional owners often do not want to do the active work of repositioning, leasing, and tenant mix management. That can work well in properties such as Robinson, Killeen, Rimrock, or Southern Park. But in offices the competitive backdrop is different. It is not just competition between buildings. It is competition against a market that has gone through a structural reset. The rating report says explicitly that office exposure carries higher business risk, even if Class A offices showed signs of stabilization in the second half of 2025.

The important point is that the portfolio is no longer one-dimensional. It has a broad retail layer, but it also has a wide gap in maturity and asset quality. So the right read on profitability is not simply “U.S. retail centers.” It is a retail base that carries the results today alongside an office layer and a short debt layer that keep the thesis from becoming clean.

Cash Flow, Debt, And Capital Structure

Cash flow

Operating cash flow of $58.6 million in 2025 looks strong versus $28.6 million in 2024. But this is exactly where cash framing discipline matters. That is not free cash that simply sat on the balance sheet. It is only the starting point.

On an all-in cash flexibility view, after the actual cash uses of the year, the picture is less comfortable. The company spent about $94.1 million on acquisitions, repaid about $14.5 million of debt, paid about $20.2 million of interest, and distributed about $28.0 million to shareholders and minority interests. Even after taking into account about $8.8 million of proceeds from land and outparcel sales, $58.6 million of CFO did not cover those uses. So 2025 was not a year of building a cushion. It was a year that still depended on new debt and owner capital.

That chart may be the single most important one for understanding 2025. It does not say the company faced an immediate liquidity crisis. It does say the operating model, as it looked through 2025, still needed new funding and owner support to move forward.

Debt, covenants, and management fees

The debt stack tells the same story from another angle. At year-end, stated interest rates on the property loans ranged from 7.3% to 14.5%, and part of the book was clearly bridge financing. That is exactly why Series A was necessary. It is hard to build a stable credit story over time when a meaningful slice of the portfolio is financed at double-digit cost.

The near-term 2026 map is especially telling:

Against that backdrop, covenant headroom is actually wide. At December 31, 2025 equity stood at $227.5 million versus a $120 million minimum, and versus a $150 million tighter threshold for coupon step-up. Net debt to net cap was 50% versus a 75% ceiling, and 72.5% on the tighter test. Adjusted NOI stood at $55.6 million versus a $25 million floor, and $27 million on the tighter test. Debt to collateral was 60% versus an 80% ceiling, and 75% on the tighter test.

That matters because Kohan is not facing a covenant story today. It is facing a translation story, turning NOI into better debt. The bond documentation gives the company room. It does not yet give it genuine cash comfort.

There is another structural nuance worth keeping in the frame. Many property loans are backed by full and unlimited personal guarantees from the controlling shareholder. That provides support. It also reminds the reader that parts of the structure still lean on sponsor support, not only on stand-alone asset economics. It is not incidental that Midroog describes financial flexibility as narrow even while leverage metrics look acceptable.

Outlook

Four points to hold before thinking about 2026:

• This looks like a bridge year, not a breakout year. Series A bought time, but it did not erase refinancing dependence.
• The retail base can carry the results, but the office layer still sets the tone of the risk profile.
• The consolidated headline improved faster than the economics that actually remain at the company layer.
• One proof point already exists, Robinson refinanced at 6.75%, but the real test is whether the rest of the double-digit debt stack follows.

Why 2026 is a transition year

Midroog assumes leverage will stay around 45% to 50% in 2026 to 2027 and that FFO from existing assets alone will stand at $30 million to $32 million per year. That is a supportive base case, but it rests on several conditions at once: stability in retail performance, disposal of weaker assets, additional growth in the portfolio, and lower funding costs on the assets pledged into the bond structure.

On the other hand, the liquidity policy presented to the rating agency, maintaining liquidity equal to only half a year of interest, is explicitly described as relatively weak. In addition, the company told Midroog it targets distributions of up to 50% of annual FFO, with up to $10 million planned across 2026 and 2027. That does not break the story, but it clearly weighs on it. As long as the debt stack is still being rebuilt, the market will prefer to see more cushion and less distribution.

What must happen for the read to improve

First, the expensive 2026 debt needs to be genuinely refinanced, not merely pushed out. If 311 South Wacker, Southern Park, Santa Fe, and Valley move from 13% to 14.5% bridge-style debt into longer and cheaper financing, the thesis can improve fast. That matters not only because of interest expense, but because it would make 2026 look less like an obstacle course and more like a portfolio that can actually finance itself.

Second, the office story needs early proof. 311 South Wacker does not have to become a perfect asset overnight, but it does need to stop dictating the entire risk read. Better occupancy, new leases, or a manageable refinancing would materially reduce the overhang. The Manhattan note also needs to move from theoretical optionality to a path that does not absorb further expensive capital before producing clean property economics.

Third, the existing NOI base needs to show that it can grow without depending mainly on yet another wave of acquisitions. This matters because part of 2025 growth came from purchased assets, while Midroog’s same-asset read still points to pressure inside the existing book. If 2026 brings better asset-level performance at the same time as lower financing cost, the market read can improve meaningfully more than it would from one more acquisition announcement.

What can still weigh on the read

The core downside is not collapse. It is grind. A scenario in which the bond allows the company to handle the near wall, but 311 South Wacker stays weak, the office layer keeps demanding attention, and FFO does not broaden as expected, is a scenario in which the market concludes the company bought time but did not solve the underlying issue.

There is also a sequencing problem. If the company moves too quickly toward distributions before the short and expensive debt layer is visibly lower and liquidity is visibly better, the market is likely to read that as a discipline test rather than as confidence.

Risks

Refinancing risk: even after Series A, year-end 2025 still showed minimal cash and a layer of short and expensive asset debt. If 2026 refinancing is delayed or completed at still-punitive pricing, the improvement story will stay partial.

Office risk: 311 South Wacker is already large enough to affect the whole credit profile, and the Manhattan note adds another office angle that had not yet become fully owned operating real estate at year-end. The rating report is explicit that office exposure carries higher business risk.

Value creation versus value capture risk: $420.7 million of investment-property value and $47.5 million of NOI sound strong, but company-share economics are lower and net income includes material fair-value gains. That means the path from the consolidated headline to actual cash at the issuer layer is still long.

Sponsor and structural risk: management fees to the controlling shareholder and affiliates are within the bond cap at 5.2% of adjusted NOI, but they still remind investors that part of the economics leaks out. In addition, outside the transferred company perimeter, some entities in the broader sponsor group have gone through lender enforcement and forbearance processes. The company says no insolvency proceedings were opened beyond what was described, but the backdrop still prevents the market from treating the sponsor ecosystem as uniformly clean.

Capital-allocation discipline risk: a policy of distributing up to 50% of FFO can look investor-friendly, but at this stage it can also clash with the need to build a cash cushion and keep repricing the debt stack downward.

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Conclusions

The right way to read Kohan after the 2025 annual package is simpler than it looks. What supports the thesis today is a portfolio that already produces real NOI and FFO, broad tenant diversification, comfortable covenant headroom, and a major financing event in March 2026 that bought the company time. What blocks the thesis from becoming cleaner is the fact that this extra time still needs to be translated into cheaper refinancing, better office performance, and a genuinely stronger liquidity cushion.

Current thesis: Series A improved Kohan’s playing field, but 2026 will still be judged mainly on whether the company can refinance expensive debt and clean up its office exposure, not on the fair-value headline.

What changed relative to the earlier understanding of the story? Kohan is no longer just a private group buying distressed malls and other challenged assets. Since March 2026 it is also an Israeli public issuer with a structured bond framework, pledged collateral, and access to a capital-markets tool that can extend its horizon. That is a real improvement. But it does not erase the fact that the portfolio entered the public wrapper while still carrying an expensive bridge layer and one heavy office asset.

Counter thesis: one can argue that the caution here is overstated because the company already showed it can buy at deep bases, reposition assets, refinance at least one property on far better terms, and remain comfortably inside all bond covenants, so the move from bridge debt into public debt may turn out smoother than the current skepticism implies.

What could change the market read in the short to medium term? Actual refinancing of the expensive 2026 loans, positive operational or financing news at 311 South Wacker, and orderly progress in turning the Manhattan note into owned assets without draining liquidity. What would undermine the read is debt that gets extended but not really repriced, offices that do not improve, or distributions that arrive too early relative to the balance-sheet cleanup.

Why does this matter? Because for a foreign real-estate bond issuer, the difference between a good property portfolio and a good credit story sits exactly at the point where NOI meets refinancing. Kohan has already proved the first part. It still needs to prove the second.

Over the next 2 to 4 quarters, the thesis strengthens if short and expensive debt is replaced with longer and cheaper financing, if 311 South Wacker stops being the main financing overhang, and if FFO starts expanding without depending mainly on another acquisition wave. It weakens if the company remains too reliant on capital-markets windows, if the office layer absorbs more capital, or if accounting improvement keeps running far ahead of liquidity improvement.