Shufersal: Why LARO's Property Value Is Not the Same as Accessible Cash
Shufersal has a real property layer through LARO, but most of that value still does not equal cash accessible to shareholders. The gap comes from the asset mix, the consolidated accounting treatment, the March 2025 halt to LARO financial moves, and a development pipeline that is still only optionality.
Why LARO Needs To Be Isolated From The Big Number
The main Shufersal 2025 article made one point in compressed form: the real-estate layer has value, but that value does not automatically roll into cash that shareholders can actually use. This continuation pushes that distinction all the way through. The NIS 5.4 billion property number is not wrong. It just sits in the wrong layer from the shareholder-access perspective.
The annual report and the capital-markets presentation present two different floors of the same building. On the wider floor, Shufersal shows about NIS 5.4 billion of property owned by the group, including investment property, assets serving operations, owned logistics centers, and the group's share in an automated fulfillment center. On the narrower floor, the real-estate segment itself stands at NIS 4.107 billion of fair value across 98 assets, and that segment already excludes the owned logistics centers in Shoham and Rishon Lezion and the group's rights in the Modiin automated center.
So the headline number is already shrinking before it even reaches shareholders. But that is only the first step. The real question is not how much real estate Shufersal owns. It is how much of it is already external rent-generating property, how much is leased internally to the retail business, and how much still depends on planning, financing, or a structural step that has not happened.
| Layer | Amount | What It Includes | Why It Is Still Not Accessible Cash |
|---|---|---|---|
| Group-owned property value | About NIS 5.4 billion | Investment property, operating assets, owned logistics centers, and share in an automated fulfillment center | This is a broad property headline, not a separate cash box |
| Real-estate segment fair value | NIS 4.107 billion | 98 assets and 251.3 thousand square meters, excluding Shoham, Rishon, and Modiin logistics assets | A large share of this still sits in assets leased back into the group |
| Assets leased to the group | NIS 2.382 billion | 69 assets, mainly branches | Internal value, not automatic shareholder cash |
| Assets leased to external tenants | NIS 1.725 billion | 29 assets | This is the more external layer and also the layer carried as investment property in the consolidated balance sheet |
That chart is the core of the issue. LARO does have real assets, real NOI, and real FFO, meaning recurring cash generation from the property arm. But most of the value, and most of the NOI, sits in assets leased back into Shufersal itself. That matters strategically. It matters for operating economics. It matters for the balance sheet. It is still not the same thing as freely accessible cash.
Where The Value Actually Sits
Even when broken down, the real-estate segment looks solid. Out of 251.3 thousand square meters, about 134 thousand are branches, about 70 thousand are retail property, and about 47 thousand are office space. Value is concentrated in exactly the same place: NIS 2.382 billion in branches, NIS 1.225 billion in retail property, and NIS 500 million in offices. The operating-income profile is similar: NIS 146 million of NOI from branches, NIS 60 million from retail property, and NIS 28 million from offices.
That means anyone reading LARO as if it were mainly an external rental platform is missing the central point. The heart of the value is not a detached mall or office tower portfolio. It is the branch network, held through an internal real-estate layer.
That is exactly where the market can get confused. The real-estate numbers are real. But as long as most of them sit in branches serving the operating business, turning that value into cash accessible to shareholders requires an additional step: a sale, financing, a partner, a structural separation, or an actual upstream distribution. Without one of those steps, shareholders are still looking mainly at strategic and balance-sheet value, not at an open cash pipe.
What The Accounting Says, And What It Does Not Allow
This is where the gap becomes especially sharp. In LARO's own reporting, the assets leased to Shufersal, mainly branches, are treated as investment property. In Shufersal's consolidated statements, those exact same assets are treated as fixed assets or right-of-use assets. The annual report states explicitly that the fair value of those internally leased assets is NIS 2.382 billion, while in Shufersal's consolidated accounts they are carried at only about NIS 971 million of depreciated cost.
This is not an accounting trick. It is a correct description of two different layers. At the LARO level, these are leased assets measured at fair value. At the consolidated level, they are part of the group's operating infrastructure. That is why not every property gain is distributable economics. In 2025 consolidated investment property rose to NIS 1.725 billion, and fair-value gains on investment property reached NIS 140 million. That is a real number. It is still not a substitute for cash.
Another layer makes the point even sharper. In the segment note, the real-estate arm recorded NIS 122 million of external revenue in 2025, but also NIS 156 million of intersegment revenue, meaning rent charged to the retail segment. The consolidated statements then eliminate that internal rent, eliminate the related right-of-use depreciation effect, and cancel fair-value changes on those branch assets. Put simply, part of LARO's economics is internal group economics.
| 2025 item | Amount | What It Means |
|---|---|---|
| Real-estate segment external revenue | NIS 122 million | The layer that actually comes from outside tenants |
| Intersegment revenue | NIS 156 million | Internal rent paid by Shufersal retail to the real-estate arm |
| Total real-estate segment revenue | NIS 278 million | A segment number, not a number already accessible to common shareholders |
That is why property value and accessible value are not the same thing here. If part of the NOI exists because retail is paying rent to real estate inside the same group, it does not become free shareholder cash without another step.
The Upstream Pipe Is Still Narrow
At the end of 2022 Shufersal was testing a move that could have changed this whole read. It was looking at transferring the logistics centers in Shoham and Rishon Lezion and the rights in the automated fulfillment center in Modiin into LARO, while also considering bringing in a partner or investor into LARO or even listing it. In other words, the company itself explored a path that could have made the property layer more separate, more externalized, and potentially more financeable.
On March 12, 2025 that path stopped. The board withdrew the tax-ruling request, the condition precedent failed, the restructuring transaction lapsed, and the board decided not to continue examining financial moves in LARO, including both equity and debt. The lease agreements intended to bring the Shoham and Rishon logistics centers into that route also never took effect.
That matters because it resets how the whole property layer should be read. There is no active financial route today that translates LARO value into clearly accessible cash. There is rebranding, more independent management, real assets, asset enhancement, and planning. But the route that might have opened a clearer debt, equity, or partnership layer around LARO was halted.
The corporate appendix adds one more important proof point. LARO recorded NIS 282 million of profit attributable to Shufersal in 2025 and NIS 392 million of profit before tax. But the same table does not show any dividend or profit distribution from LARO to Shufersal. What did move upward were NIS 16 million of management fees and NIS 5 million of interest income.
This may be the most important chart in the article. It does not say LARO lacks value. It says the pipe upward remains very narrow. Accounting profit inside LARO did not translate in 2025 into an upstream cash distribution to Shufersal, and therefore certainly not into cash already accessible to common shareholders.
BIG And The Development Pipeline Add Optionality, Not Immediate Cash
It is fair to argue that this conclusion may be too conservative, because Shufersal still has visible enhancement and monetization routes ahead. The clearest one is the non-binding memorandum with BIG from September 2025. Under that memorandum, the relevant land in Rishon Lezion totals about 110 registered dunams and includes, among other things, the company's logistics center and offices. If the transaction is completed, a new zoning plan would allow a joint retail and employment project in BIG FASHION style on about 50 gross dunams, and BIG would buy half the rights in the project land at a price reflecting NIS 7.7 million per dunam. The remaining land would support a residential project that stays fully owned by Shufersal.
That is a meaningful route, but the distinction still matters. The memorandum is non-binding, it depends on detailed agreements, and it also depends on approval of a new zoning plan. So BIG is clear strategic optionality, not cash already accessible today.
The same rule applies to the development assets highlighted in the presentation. Har Boker in Be'er Sheva is still before a building permit. Talpiot in Jerusalem and Mitzpe Sapir in Tzur Yigal are still in detailed planning toward permit. These assets strengthen the value thesis, but they remain in a stage where capital, time, planning, and execution matter just as much as headline value.
What is really interesting is that Shufersal does not lack real-estate value. What it lacks, for now, is a short, clear, and proven route that moves that value up the chain to shareholders.
Bottom Line
LARO is a real value cushion. It is still not a cash box. That is the distinction that has to stay in place against the impressive property numbers of 2025.
Shufersal's real-estate layer does several important things even without turning immediately into cash. It upgrades branches, generates NOI, strengthens the balance sheet, creates development options, and gives the company an asset base that most food retailers simply do not have. But shareholders need to stay precise about what has not happened yet. Most of the value sits in assets leased internally. A large part of it is not carried at fair value in the consolidated accounts. The separation or financing route through LARO was halted in March 2025. And the development options, including BIG, still have not moved from conditional opportunity into cash realization.
So the right question on LARO is not whether value exists. It clearly does. The right question is when, through what structure, and on what terms that value stops being mainly strategic real estate and starts becoming cash that is truly accessible to shareholders.
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