Where G City's 2025 Revaluation Gain Came From, And How Much Of It Was Truly Operating
G City moved from just NIS 38 million of revaluation gains in 2024 to NIS 674 million in 2025, but the improvement did not come from one place. The core drivers were Poland and the Nordic platform, and much of the gain was tied to same-property NOI growth being capitalized through appraisal models before that value turns into cash.
What This Follow-up Is Isolating
The main article already argued that G City's property layer improved in 2025, but shareholder value still has to survive the balance sheet. This follow-up isolates only the NIS 674 million revaluation gain, because that is the line item most likely to be misread. From a distance it looks like a simple year of friendlier market conditions. Once the number is opened up, the picture changes: a large part of the move came from real operating improvement in same-property NOI, occupancy, and rents, but that improvement passed through appraisal models that translate it into value before it becomes cash.
The key point is that 2025 was not a clean cap-rate relief year. Cap rates did not move in one direction across the group, and in the US they actually moved against the company. To understand the quality of the gain, the right questions are three separate ones: where the revaluation was actually booked, which geographies were genuinely supported by operations, and where the appraisal model was already giving credit for rent growth, lease-up, and stabilized occupancy.
The move from NIS 38 million to NIS 674 million is too large to explain with a generic "rates stabilized" sentence. It has to be broken down by geography and by driver.
Where The Paper Gain Actually Came From
The segment tables show the answer quickly. G Europe contributed NIS 251.0 million of revaluation gains, CTY contributed NIS 203.9 million, and Israel contributed NIS 112.8 million. Brazil added NIS 36.0 million, while Gazit Horizons in the US was close to flat and slightly negative at minus NIS 3.0 million. So even before other activities and consolidation adjustments, roughly two thirds of the group's revaluation came from just two arenas, Poland and the Nordic platform.
What matters is not only the platform layer, but the geographies underneath it. At G Europe, the 2025 revaluation gain came entirely from Poland. Inside CTY the picture is more selective: Finland still posted a value decline, while Sweden and Norway posted positive revaluation gains, and Estonia and Denmark were positive but smaller. So even inside "North Europe" this was not a uniform market re-rating. The improvement came mainly from the countries where the operating recovery was strong enough to overcome a still demanding yield environment.
The 2025 driver map can be summarized like this:
| Geography | What the filings show | The right read |
|---|---|---|
| Poland through G Europe | NIS 251.0 million of revaluation gains, 100% of G Europe's revaluation | The single largest value engine of the year |
| North Europe through CTY | NIS 203.9 million, with Finland still negative and Sweden and Norway positive | A selective recovery, not a blind rerating of the whole platform |
| Israel | NIS 112.8 million | A real improvement, but one where cap-rate help mattered more relative to NOI growth |
| Brazil | NIS 36.0 million | Positive, but modest relative to operating support |
| US | Minus NIS 3.0 million | The clearest proof that operating improvement alone is not enough when cap rates move the wrong way |
What Was Operating, And What Was Really Valuation Relief
This is where the read gets more interesting. In the investor presentation, same-property NOI rose by 14.3% at CTY, 5.6% at G Europe, 5.4% at Gazit Horizons, 5.3% in Brazil, and only 1.6% in Israel. At the same time, the board report shows that average cap rates did not all move in the same direction: Central Europe improved from 6.3% to 6.2%, Israel from 6.7% to 6.5%, Brazil stayed at 7.7%, North Europe worsened from 6.2% to 6.3%, and the US worsened from 5.2% to 5.4%.
That chart gives the cleanest answer to the central question of this follow-up. The 2025 value uplift was not a uniform cap-rate story. In North Europe, same-property NOI surged, but cap rates actually widened by 10 basis points, and CTY still finished with positive revaluation gains. That is strong evidence that operating recovery did most of the heavy lifting there. In Brazil, same-property NOI rose by 5.3% while cap rates were unchanged, so this also does not read like a pure cap-rate story. The US gave the mirror image: same-property NOI rose by 5.4%, but cap rates widened by 20 basis points and revaluation nearly vanished. That is exactly what a cap-rate headwind looks like when it overwhelms operations.
Israel looks different. Same-property NOI rose by only 1.6%, but cap rates tightened by 20 basis points and revaluation gains reached NIS 112.8 million. That does not mean the improvement was unreal. It does mean that in Israel, a larger part of the 2025 gain came from the valuation side rather than from recurring NOI growth.
In Central Europe, meaning Poland, both forces worked together. G Europe posted 5.6% same-property NOI growth and a 10 basis point cap-rate improvement. Poland is therefore the clearest case in 2025 where operating performance and valuation mechanics were moving in the same favorable direction.
Why The Split Is Never Completely Clean
This is where over-simplification becomes dangerous. The line between "operating" and "revaluation" is not clean, because the appraisals do not capitalize only reported 2025 NOI. The valuation reports use an income-capitalization approach and a representative cash-flow base built on current NOI, but they explicitly include forward adjustments: embedded rent step-ups in signed leases, normalization of above-market or below-market leases, and lease-up assumptions for vacant space expected to be let. In other words, the appraisal already takes the operating recovery and gives it forward credit inside the value.
The annual report says this indirectly but very clearly. For several assets, no separate occupancy sensitivity was prepared because the rent assumptions used in the appraisals already embed occupancy changes. That is an important point. It means the NIS 674 million gain cannot be split into an "operating box" and a "cap-rate box" as if the two were independent. In G City's model, operating recovery flows through the valuation itself.
The better way to judge quality is therefore different: ask where the appraisal received help from friendlier cap rates, and where it stood mainly on the back of NOI. Read that way, 2025 looks better than the first skeptical instinct suggests, but also less clean than a NIS 674 million headline can imply.
What The Sensitivity Analysis Says
If the goal is to test what really matters more inside the model, operating improvement or yield change, Note 12 gives a very useful stress test. In North Europe, a 25 basis point cap-rate move changes value by roughly minus NIS 549 million to plus NIS 595 million. But a 5% NOI increase changes value by NIS 707 million. In Central Europe, the comparison is roughly minus NIS 150 million to plus NIS 162 million for a 25 basis point move, versus about NIS 201 million for a 5% NOI increase. In Israel it is minus NIS 127 million to plus NIS 137 million versus NIS 171 million. In Brazil it is minus NIS 47 million to plus NIS 50 million versus NIS 150 million. Only in the US is the cap-rate effect broadly similar to, and slightly stronger than, the effect of a 5% NOI move.
| Region | 25 basis point cap-rate effect | 5% NOI effect | What it means |
|---|---|---|---|
| North Europe | Minus NIS 549 million to plus NIS 595 million | Plus NIS 707 million | NOI matters at least as much as the cap-rate side, and arguably more |
| Central Europe | Minus NIS 150 million to plus NIS 162 million | Plus NIS 201 million | Operations are not secondary here either |
| Israel | Minus NIS 127 million to plus NIS 137 million | Plus NIS 171 million | Rent and NOI sensitivity is strong, but 2025 also got cap-rate help |
| Brazil | Minus NIS 47 million to plus NIS 50 million | Plus NIS 150 million | Operations are the main force, not yield change |
| US | Minus NIS 91 million to plus NIS 103 million | Plus NIS 80 million | This is the geography where the cap-rate effect still dominates |
This table matters because it breaks two common mistakes. The first is that all of 2025 was "just rates." That is not true. The second is that all of it was "purely operating." That is not true either. The more accurate formulation is that 2025 was a year of real operating recovery, and the appraisal model gave that recovery full and sometimes forward credit, but only in some regions did it also receive a tailwind from cap-rate relief.
So How Much Of It Was Truly Operating
The most defensible answer from the disclosed evidence is this: most of the move from NIS 38 million to NIS 674 million did not come from a broad-based compression in yields. It came from the combination of same-property NOI growth across most platforms and an appraisal model willing to capitalize that improvement. Poland and the Nordic platform were the core of the story. Israel made a meaningful contribution, but there the weight of cap-rate relief was larger relative to the NOI improvement. Brazil contributed operating support with very little cap-rate help. The US showed that the market can still resist even when operations improve.
That means 2025 does mark an improvement in the quality of G City's property economics, not just an accounting rebound. But it still does not mean the full NIS 674 million is clean value. Part of that value remains on paper as long as it depends on cap-rate assumptions, future lease-up, and the ability to preserve the current pace of rent growth. That is the difference between the return of revaluation gains and full proof that value has already become a hard cash-flow base.
Focused Conclusion
The bottom line is simpler than the headline suggests. G City's 2025 value gain did not come from one place, and certainly not only from easier capital-market conditions. Most of the drive came from Poland and the Nordic platform, where operating improvement was real enough to carry through even in an environment where cap rates did not always improve.
But the discipline matters. Revaluation is still an accounting profit. G City's appraisals do not measure only what hit the cash register in 2025. They also measure what the appraisers assume will stabilize, lease up, and reprice in rent. So the right conclusion is not that the NIS 674 million was only cap-rate relief, but also not that it was only operating. It was mainly an operating recovery that has already received full appraisal recognition, and is still not cash.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.