Hila Offices 2025: The Asset Book Jumped, But NOI Still Has To Prove Itself

Understanding The Company

At first glance, Hila Offices can look like a small income-producing real-estate company growing through acquisitions. That reading is too shallow. In practice, this is a leveraged asset platform holding both active income-producing properties and a very large layer of future value: a hotel under construction in Tel Aviv, land in Ra'anana, and land in Los Angeles. At the end of 2025, total assets had already reached NIS 634.4 million, investment property NIS 505.7 million, and equity NIS 142.7 million. But revenue was only NIS 6.5 million, and NOI only NIS 6.0 million.

What is working now? The active assets are producing more. Revenue rose 19%, NOI rose 15.7%, the UK footprint expanded sharply, and the acquisitions completed at the end of 2025 and the start of 2026 were bought at relatively high initial yields. On the bond side, the company remains within covenant limits, and the series expansions allowed it to keep building the portfolio.

What blocks a cleaner reading? Current cash earnings still have not caught up with the balance sheet. Net finance expense reached NIS 23.4 million, almost 4 times reported NOI. True unrestricted cash at year-end, excluding trust deposits, was only NIS 2.4 million. So Hila should not be read like a mature yielding office landlord. It should be read like an asset platform pulling value forward through debt, collateral, and execution.

There is also a practical market constraint that matters early: only bond series trade publicly. That changes the whole angle of analysis. In Hila's case, the market is not judging only theoretical asset value. It is also judging collateral depth, the pace of collateral perfection, and the company's ability to turn a signed deal into a fully financed and fully secured asset without legal or operational friction.

This is the number that organizes the whole thesis: out of NIS 505.7 million of investment property, only NIS 141.3 million belongs to assets actively producing income at the end of 2025. The rest, roughly NIS 364.5 million, sits in the Tel Aviv hotel, the Ra'anana land, and the Los Angeles land. In other words, about 72% of the value still does not sit on current NOI.

| Economic block | Fair value at end 2025 | Current contribution | What really matters | |-----|------|-------| | Tel Aviv hotel | NIS 229.5 million | No current NOI | The core value-creation story, but also the main execution, funding and timing risk | | Ra'anana | NIS 76.6 million | No full NOI yet | Large planning upside, but the immediate move is an interim building expected only in 2027 | | Los Angeles land | NIS 58.4 million | No NOI | 15 plots intended for 10 villas for rent, still in permit stages | | Active Israel | NIS 73.6 million | NOI of NIS 3.54 million | Tzur Yigal and Elad, the current Israeli earnings base | | Active UK at end 2025 | NIS 67.7 million | NOI of NIS 2.48 million | Northampton and Centennial Park, before Newport and Milton Keynes were added after year-end |

The operating map itself is already less local than it may seem. In 2025, Israel contributed NIS 3.98 million of revenue and NIS 3.54 million of NOI, while the UK contributed NIS 2.50 million of revenue and NIS 2.48 million of NOI. By area, the UK already represents 64% of the active income-producing square meters, versus 36% in Israel. Put differently, the growth center has shifted to the UK even though the single biggest value block still sits in Tel Aviv.

One more point is easy to miss: the company has three main tenants that together accounted for about 35% of 2025 revenue. One of them, the Northampton tenant, alone accounted for 24% of revenue. That is not unusual for a small real-estate platform, but it is still a reminder that even the active revenue base is not yet especially diversified.

Events And Triggers

The main story of 2025 and early 2026 is a change of shape. Hila did not just grow assets. It replaced part of the older story of "few active assets and a lot of development value" with a newer story of "more UK income-producing assets funded mainly through the bond market." That matters because over time it should reduce the gap between on-paper value and actual NOI. It just has not finished doing that yet.

The UK Moved To The Center

Centennial Park was signed in August 2025 and completed in October. It includes three office buildings, 5,169 square meters, and 229 parking spaces, for GBP 11.375 million. The property was valued at GBP 11.97 million, with annual contracted rent of GBP 1.352 million. The report presents an 11.8% yield here.

Then the sequence continued. Newport was bought for GBP 5.8 million and completed on January 30, 2026. Milton Keynes was bought for GBP 7.7 million and completed on February 13, 2026. Newport is fully let to a single tenant and carries annual fixed rent of GBP 747 thousand, with adjusted NOI of about GBP 786 thousand. Milton Keynes is fully let to EMW Law LLP, with annual income of about GBP 852 thousand until August 2030 and about GBP 964 thousand thereafter until lease expiry.

The positive side is clear. Hila found UK office assets at double-digit initial yields, with existing tenants and income profiles that can lift NOI faster than any development move in Israel. The other side is just as clear: this is still a concentrated office book. Northampton is entirely let to REGUS. Newport has one tenant. Milton Keynes has one tenant that itself sublets part of the space. Centennial Park is spread across three buildings, but each building is effectively let to one tenant.

Funding Worked, But Not Without Friction

This growth was not built from excess cash. In May 2025 the company expanded Series B and raised roughly NIS 77.6 million gross. In October 2025 it issued Series D with NIS 101.5 million nominal and about NIS 100 million of net proceeds. In January 2026 it expanded Series G by about NIS 23.743 million nominal and about NIS 25.5 million gross.

From the company's perspective, that proves access to the capital market. From the reader's perspective, the more important point is different: not every funding risk is a demand-for-bonds risk. Sometimes it is a collateral-perfection risk. That is exactly what happened in February 2026 סביב Milton Keynes. The seller gave notice that if the deal was not completed within 10 business days, it could cancel and forfeit the deposit. The company wrote that completion still depended on trustee and collateral processes not fully under its control. The deal was eventually completed, but the message was sharp: the financial engine works, yet it is highly sensitive to legal perfection.

Centennial Park tells a similar story. The first mortgage on the property was still not registered by the end of March 2026, and the trustee approved two separate 30-day extensions. The filings tie the delay to the UK Land Registry, not to a problem in the economics of the asset itself. But for bondholders this is not a technicality. Until the collateral is fully perfected, economic value and perfected security are not the same thing.

In Israel, The Assets Are Moving Forward, But More Slowly Than The Value Already Suggests

In the Tel Aviv hotel, the company decided in 2025 to change the execution plan: instead of opening Stage A on its own, it will build Stages A and B continuously. That may produce a better operating asset at the end, but it also delays the point at which the project turns from a valuation thesis into real income.

Ra'anana shows more immediate operational progress. At the start of January 2025, lease and management agreements were signed for most of the interim building area, around 2,200 square meters of offices plus about 1,900 square meters of logistics and storage. In March 2025, a bank loan of about NIS 35 million was approved at prime plus 1.5% for 12 months in order to refinance existing debt. After the balance-sheet date the loan was extended by 24 months and an additional NIS 14.5 million credit line was approved for the interim building. So here too the direction is positive, but full NOI contribution is still not here.

Efficiency, Profitability And Competition

The important fact in 2025 is not simply that the numbers improved. The important fact is which numbers improved, and which numbers rose much faster than they did. Revenue rose to NIS 6.476 million from NIS 5.443 million. NOI rose to NIS 6.021 million from NIS 5.204 million. But net finance expense rose to NIS 23.397 million from NIS 16.536 million.

That is the core earnings-quality story. At the active-property level there is real improvement. In Israel, NOI rose to NIS 3.544 million from NIS 3.343 million. In the UK, NOI rose to NIS 2.476 million from NIS 1.861 million. Active income-producing space in the UK rose to 7,254 square meters from 2,090 square meters, and fair value of active UK property rose to NIS 67.7 million from NIS 18.9 million. That is not cosmetic.

But the bottom line still leaned heavily on revaluation. Fair-value gains reached NIS 48.9 million against operating profit of NIS 49.15 million. Put differently, almost all operating profit for the year came from real-estate revaluation gains. That does not make the profit "fake." It does mean the recurring operating engine is still not thick enough to carry the capital structure on its own.

Adjusted NOI Says Something Important, But Not The Easy Thing To Assume

The company presents adjusted NOI of NIS 14.683 million. That is 2.4 times reported NOI of NIS 6.021 million, and the explanation is explicit: the metric includes the full income from assets acquired during the year that did not yet contribute a full year of revenue. Of the gap, NIS 473 thousand is attributed to Israel and NIS 8.189 million to England.

That number is useful because it gives the reader a clue about what the portfolio is supposed to generate after the transition period. But it is a mistake to read it as if it already exists today. In 2025 it still had not passed through reported earnings, through operating cash flow, or through full proof of execution in the newly acquired assets. In Hila's case, the gap between accounting NOI and adjusted NOI is not a minor technical bridge. It defines the entire difference between what already exists and what management is trying to build.

Hila Is Not Competing For "Offices". It Is Competing For Yield Against Tenant Quality

The report presents the ability to find assets with strong tenants and long lease periods as one of the company's main competitive advantages. That is especially true in the UK. In Centennial Park the tenants are Genesis Cancer Care UK, Brentano Suite Elstree, and Medik8. In Newport the tenant is Shared Services Connected Limited, a business-support provider to government bodies. In Milton Keynes the tenant is EMW Law LLP.

That is a clear strategy: do not chase a "nice" office asset, chase an asset that offers a high initial yield with a tenant whose credit story can at least be defended. The advantage is faster NOI build. The drawback is that tenant concentration and UK office-market risk immediately move into the center of the risk profile. The higher the initial yield, the more important it is to ask whether part of that yield also reflects higher risk in the building, the location, or the tenant flexibility.

Cash Flow, Debt And Capital Structure

The right way to read Hila in 2025 is through an all-in cash-flexibility lens, not through net profit. When you do that, the balance sheet looks much less comfortable than the jump in assets and positive net profit might suggest.

At year-end the company had NIS 2.444 million of unrestricted cash and cash equivalents. At the same time it held NIS 95.510 million of current trust deposits and another NIS 15 million of non-current trust deposits. Those are not the same shekels. True unrestricted cash is very small; the trust balances sit inside the collateral and earmarked-use structure.

Cash flow from operations was only NIS 1.943 million. Against that stood NIS 169.182 million of investing outflow, almost fully covered by NIS 168.875 million of financing inflow. That is the exact profile of a leveraged bridge year: the company is building a portfolio, but it is still not funding that portfolio out of active properties.

The Debt Layer Is Large, But The Covenant Ratios Are Not Yet The Main Story

At the end of 2025 the debt stack already looked substantial: NIS 195.118 million in Series B, NIS 62.665 million in Series G, NIS 100.078 million in Series D, plus NIS 48.534 million of short-term bank credit. In addition, NIS 5.253 million of bond current maturities sat in current liabilities.

The liquidity note sharpens the picture even more. Within one year alone, the company faces forecast contractual outflows of NIS 58.737 million for non-derivative financial liabilities, including NIS 52.735 million of bank and other loans and NIS 5.253 million of bonds. That is not a schedule you cover with NIS 2.4 million of unrestricted cash. It is a schedule you cover with refinancing, collateral, and continued access to funding sources.

Still, on paper the covenant picture looks comfortable:

| Covenant | Soft trigger | Hard trigger | Actual at end 2025 | |-----|------|-------| | Adjusted equity | NIS 60 million | NIS 45 million | about NIS 169.1 million | | Adjusted equity to balance sheet | 22.5% | 15% | about 27% | | Net financial debt to Cap | 85% | 90% | about 63.8% | | Debt-to-collateral Series B | 0.70 | 0.75 | 0.64 | | Debt-to-collateral Series G | 0.75 | 0.80 | 0.72 | | Debt-to-collateral Series D | 0.75 | 0.80 | 0.48 |

That matters because it prevents mistakes in both directions. On one hand, the company does not look close to an immediate covenant event. On the other hand, anyone reading only the covenant table misses the real friction. In Hila's case, the near-term pressure does not come from the written ratio. It comes from the company's ability to complete, on time, the collateral package that stands behind that ratio.

The examples already appeared after the balance-sheet date. In Milton Keynes, release of the Series G expansion proceeds required bondholder approval, pledges on contractual rights, shares, shareholder loans, and company assets. In Centennial Park, extensions were needed because the first mortgage was still not registered. The implication goes deeper than it first seems: in Hila's model, funding risk is not only about the cost of debt. It is also about the operational and legal ability to perfect the security package.

Even The Overhead Structure Is Lean, But Related

The company does not operate with a broad internal platform. It relies on a management agreement with a company controlled by the controlling shareholder for CEO services, marketing and development, administration, and office services. Starting in October 2024, the monthly management fee rose from NIS 160 thousand to NIS 197 thousand plus VAT. On top of that, the company reimburses the management company on a back-to-back basis for employee and service-provider costs.

This is not the center of the thesis, but it is still a useful reminder: even at the HQ level, Hila is built as a lean platform dependent on outsourced related-party services, not as a mature landlord with a deep internal operating layer. That supports flexibility, but it also means control over expenses and execution runs through a clear related-party structure.

Guidance And Forward View

Finding one: most of the value still does not produce NOI. Anyone who looks at NIS 505.7 million of investment property and NIS 142.7 million of equity without asking how much of that is actually active today is missing the main point. The company has an asset base, but most of it is still developmental or planning-stage.

Finding two: adjusted NOI already describes what the company wants to become, not what it has already become. NIS 14.683 million is an important number because it includes assets acquired during the year that did not contribute a full year. But that is exactly why it also reminds the reader that recurring reported profitability is still not there.

Finding three: the Tel Aviv hotel is the biggest value engine, but still not a cash engine. The valuation work presents a value of NIS 388.3 million for a built and completed 258-room hotel, based on base rent of NIS 6,000 per room per month plus a variable component, while also presenting NIS 85.449 million of remaining costs to complete and finance the project. As long as the company is building Stages A and B continuously, without opening in between, the economic thesis remains ahead of the cash profile.

Finding four: in the UK, the company has already bought yield, but it still has to buy operational credibility. Centennial, Newport, and Milton Keynes are supposed to improve NOI, but 2026 will also be judged on mortgage registration, collateral perfection, tenant management, and execution discipline.

What Has To Happen Operationally

Over the next 2 to 4 quarters, the single most important thing is full contribution from the new UK assets. In 2025 Centennial Park contributed only part of a year, while Newport and Milton Keynes contributed nothing to the annual report. If 2026 does not show a clear step up in NOI and rental cash flow, it will be hard to argue that the company has already moved past the transition period.

In Israel, the story is different. Elad already moved from a property under construction into an income-producing asset, but at the report date 70% of the space was leased to six tenants and the rest was intended for a workspace operator. That is a step forward, but not an event that changes the entire profile on its own. Ra'anana, despite the signed agreements for the interim building, is still targeting completion and occupancy only in 2027. So anyone looking for a sharp improvement already in 2026 is probably relying much more on the UK than on Israel.

That chart matters because it reminds the reader that growth will not arrive merely through the inertia of the currently signed contracts. The fixed income base, assuming no option exercise, actually declines from NIS 8.65 million in 2026 to NIS 7.19 million in 2028 and 2029. So to improve the story, Hila needs more than time. It needs the new assets, further value extraction, and proof that the future assets are genuinely moving toward income production.

What Has To Happen Financially

The good news is that the company has already shown it can raise capital. The less comfortable news is that it has not yet shown that the friction is behind it. Completion of the Centennial Park mortgage registration, full security completion around Milton Keynes and Newport, and preservation of covenant room will stay part of the read even if the next income statement looks better.

Ra'anana also matters here. The bank loan initially taken for 12 months is a reminder that transition assets rely on bank availability as well as the bond market. The post-balance-sheet extension improves flexibility, but it does not remove the fact that the asset is still waiting for construction rather than full income.

What Kind Of Year 2026 Looks Like

For now, 2026 looks like a proof year, not a breakout year. To move the read in a better direction, three things need to happen together: full-year UK contribution, lower friction in the collateral package, and visible progress in the Tel Aviv hotel without cost slippage or another timeline pushout. If two out of three happen, the read improves. If one of them stalls, the whole future-NOI story remains too far away from the balance sheet.

Risks

The First Risk Is Not Asset Price. It Is The Gap Between An Asset And Perfected Collateral

The filings from early 2026 already showed this. Milton Keynes nearly became a timing and cancellation issue because of the chain of trustee and collateral processes. Centennial Park required extensions because the UK mortgage registration had not been completed. As long as Hila relies on leveraged acquisitions and secured bonds, that risk remains part of the model.

The Second Risk Is Concentration In Future Value

The Tel Aviv hotel alone is worth NIS 229.5 million. Ra'anana adds NIS 76.6 million, and the Los Angeles land another NIS 58.4 million. Those three blocks together make up a very large share of total value, yet none of them contributes normal current NOI at the end of 2025. So any planning, execution, or funding delay does not just hurt an "option." It hits the core of the company's asset value.

The Third Risk Is Tenant Concentration And High UK Office Yields

Double-digit yields in UK office properties are not a free gift. They usually come with questions around tenant quality, lease flexibility, or exit-market depth. Newport has one tenant with break options in January 2028 and January 2029, subject to conditions. Milton Keynes also has one tenant, with roughly half of the space sublet onward to four subtenants. Northampton has one tenant that already represented 24% of 2025 revenue. That is not a reason to reject the strategy, but it is absolutely a reason not to confuse a high yield with a low-risk yield.

The Fourth Risk Is Thin Cash Against A Heavy Maturity Calendar

The company explains that negative operating cash flow does not imply a liquidity problem as long as access to funding sources remains available. That is true in principle, but it also means explicitly that the current model does not yet stand on its own. When unrestricted cash is only NIS 2.4 million and the next year carries more than NIS 58 million of forecast contractual outflows, any delay, weaker debt-market backdrop, or project slippage can immediately weigh on the picture.

There Is Also A Smaller Legal Layer, But Not A Zero One

In Elad, a settlement was signed in 2025 for NIS 750 thousand of management-fee debt. In addition, the company still faces other claims of about NIS 1 million and about NIS 355 thousand, with management stating that at this stage there is difficulty in assessing the outcome. This is not the core thesis, but it is a reminder that the platform is not operating in a completely frictionless environment even at the level of existing properties.

Conclusions

Hila Offices entered 2026 with a larger asset base, a wider UK portfolio, and proven ability to raise debt. That is the supportive side of the thesis. The central blocker remains the same: NOI and free cash are still small relative to the asset and debt structure built around them. In the near term, differentiation will come less from another acquisition and more from whether the company can turn signed assets and on-paper collateral into fully contributing, fully perfected, and stable economics.

Current thesis: Hila is building an asset base that could justify much higher NOI, but in 2025 and early 2026 it is still more of an asset-upgrading and funding platform than a mature income-producing real-estate company.

What changed versus the prior read: the UK is no longer a side activity. It is becoming the only near-term NOI engine that can improve the picture before the Tel Aviv hotel and Ra'anana mature.

Counter-thesis: it is fair to argue that this report already marks the turning point, because the new UK assets were bought at high yields, the covenants look comfortable, and once the full-year contribution arrives the coverage picture could look very different.

What could change the market read in the short to medium term: completion of the Centennial collateral registration, smooth integration of Newport and Milton Keynes, and a visible improvement in reported NOI without leaning almost entirely again on revaluation gains.

Why this matters: because in Hila's case the real question is not whether value was created on paper, but how much of that value has already started turning into NOI, cash flow, and financial flexibility that can be relied on.

What has to happen over the next 2 to 4 quarters: full contribution from the UK assets, disappearance of collateral friction, and credible progress in the Tel Aviv hotel. What would weaken the thesis is another delay, another episode of transition-funding dependence, or a persistent gap between adjusted NOI and the NOI actually reaching the accounts.