Yesodot Eitanim: Migdal HaEmek is selling, but is any margin left after financing
At Nofim Migdal HaEmek, 45 apartments were already under contract and stage A had reached 76.5% completion, yet the project’s expected total gross margin had fallen to just 1%. The surplus bridge shows that after financing, marketing, and selling costs, expected economic profit is already slightly negative and expected withdrawable surplus is only ILS 4.736 million.
Why Migdal HaEmek Deserves Its Own Read
The main article argued that Yesodot Eitanim’s equity base is less of a constraint now, but value still has to pass through financing and execution. Nofim Migdal HaEmek is where that gap becomes especially clear. There is already construction, there are already apartment sales, and there is even an actual revenue line at the partnership level. But at exactly the point where the project should start to look more mature, expected total gross margin has dropped to only 1%, and the bridge from gross profit to withdrawable surplus shows how little is left after the financing layers.
This matters because Migdal HaEmek can look, at first glance, like a project that has already moved beyond the main risk point. Stage A was already 76.5% complete on an engineering or cost basis, 45 units had already been sold cumulatively, and the Migdal HaEmek partnership generated ILS 42.373 million of revenue in 2025. But those numbers do not answer the core question on their own: are sales now producing margin for shareholders, or mostly financing the path to the next checkpoint.
There Is Volume, but It No Longer Creates a Cushion
| Checkpoint | End-2025 figure | Why it matters |
|---|---|---|
| Project scale | 146 units in two stages, after rights to 6 units were sold in December 2025 | This is still a large project relative to the company |
| Company share | 50% | Not all of the project’s volume belongs to the listed shareholder layer |
| Execution status | Stage A at 76.5% completion, stage B still at 0% | Construction is advancing, but not across the full project |
| Permits status | Permits had been obtained for 76 units by the report publication date | The licensing side is advancing too, but not yet for the whole project |
| Cumulative marketing | 45 units signed, 31% sales rate, 101 units still unsigned | There are sales, but most of the project is still open |
| 2025 pace | 16 units were signed during 2025, only 1 of them in the fourth quarter | The pace exists, but it is not smooth |
| Project economics | ILS 341.283 million of expected revenue versus ILS 334.566 million of expected cost | Almost all of the future revenue base is already absorbed by cost |
| Expected profitability | ILS 6.717 million of expected gross profit, equal to 1% | That is a very thin cushion for a project of this scale |
That chart is the core of this continuation read. Migdal HaEmek’s problem is not the absence of demand altogether. Expected project revenue has stayed around ILS 340 million over the last three years. What has moved is mainly the cost line. Expected cost rose from ILS 305.542 million in 2023 to ILS 334.566 million in 2025, and expected gross profit fell from ILS 32.935 million to ILS 6.717 million.
That also explains why the sales line is no longer enough on its own. Forty-five signed units looks like real progress, but by the end of 2025 there were still 101 unsigned units, 7,684 unsold square meters, and ILS 115.114 million of attributed cost tied to areas that still had no binding contracts. When the gross-profit cushion for the full project is only 1%, most of the economics remain open exactly where cost sensitivity matters more than the fact that sales are moving.
The sensitivity table is no more comforting. A 5% increase in construction cost per square meter cuts ILS 15.277 million from the expected gross profit still left to recognize, while the gross profit still left to recognize itself stands at only ILS 1.766 million. That does not mean the scenario will happen, but it does show how far the project’s margin cushion has already eroded.
After Financing, Very Little Margin Is Left
This is the part a reader can miss if they stop at the marketing table. In the bridge between expected gross profit and expected withdrawable surplus, gross profit as shown in the financial statements at December 31, 2025 stands at ILS 6.717 million. After adding financing costs that were recorded through profit and loss, expected gross profit rises to ILS 32.114 million, and the company’s share of that amount stands at ILS 16.057 million.
But that is not the figure that represents the economics after all project layers. The same bridge shows ILS 16.679 million of measurement differences, explicitly described as income and expenses not recognized in cost of sales, including financing, marketing, and selling costs. After that gap, expected economic profit for the project turns into a loss of ILS 662 thousand.
The second chart is there to show that not every positive figure around the project means the same thing. Gross profit still left to recognize stands at only ILS 1.766 million. Expected withdrawable surplus at the report date stands at ILS 4.736 million, but that is not the same thing as clean operating margin either. The bridge includes ILS 7.444 million of repayment of mezzanine or equity-complement loans in the company’s share, alongside another ILS 913 thousand of other adjustments. In other words, what remains available to withdraw reflects the financing structure and the return of funding layers, not a wide project margin.
This is not just a theoretical reading. At the full Migdal HaEmek partnership level, 2025 already included ILS 42.373 million of revenue from construction work and the sale of land rights. Against that sat ILS 39.637 million of execution cost, ILS 2.721 million of loss from fair value of investment property under construction, ILS 2.385 million of operating expenses, and ILS 4.774 million of net financing expense. The partnership’s bottom line was a loss of ILS 7.144 million, and the company’s share of that loss was ILS 3.572 million. That is the figure that settles the volume-versus-margin debate. Sales and execution are already there, but financing and the other cost layers are still eating the economics.
Stage B Still Sits on a Financing Structure That Is Moving
To understand why this does not end with a margin reading alone, the financing terms matter too. The credit framework for the residential project and sale guarantees reaches roughly ILS 335.2 million, of which about ILS 236 million was still unused at the end of 2025. Interest on the bank credit is prime plus 1.5%, but that is only one layer. There is also a sale-guarantee fee in the range of 0.4% to 0.9% per year and an unused-credit allocation fee in the range of 0.2% to 0.6% per year on the unused total amount.
The more important point is that stage B still does not sit on a simple track. Its financing depends, among other things, on obtaining a building permit for stage B, completing 40% of stage A works, selling 32 stage A units and 9 stage B units, and starting stage B construction by June 30, 2025. By the report publication date, the partnership was already in discussions with the bank to split the project into three stages, and as part of that framework another roughly ILS 5 million of equity had been injected. That is a clear sign that the original structure no longer fits the project’s actual state smoothly.
There is also another layer of complementary financing above that. The original complementary financing signed in December 2022 carried interest at prime plus a 6% to 7% spread plus VAT, secured by a second-ranking charge after the bank. In March 2024, half the accrued interest up to that point was capitalized into principal, which grew to roughly ILS 34.6 million. The existing complementary financing for the residential project was repaid in December 2024 through a non-bank partnership loan, and by the report publication date that partnership loan had been extended to April 2026 with an option for another 8-month extension. In addition, the remaining complementary financing tied to the commercial project, roughly ILS 9.3 million close to the report publication date, was extended to April 19, 2026.
The implication is straightforward. Migdal HaEmek is not suffering only from a thin margin. It is also sitting on relatively expensive and flexible financing layers, some of which continue to roll even after the project is already selling and building. So the question here is not whether apartments are being sold. The question is how much of that volume can actually pass through all the financing layers and remain as margin.
What Has to Be Solved From Here
First, cost erosion has to stop. In a project whose expected total gross margin has already fallen to 1%, even steady sales will not on their own offset another rise in cost.
Second, the staging structure has to stabilize. If the project has to move from a two-stage framework into a three-stage framework, that is not just a technical adjustment. It means both the financing path and the execution path are still not fully set.
Third, the story has to move from volume to real surplus. Expected withdrawable surplus of ILS 4.736 million looks modest relative to the scale of the project, and the bridge itself makes clear that this amount does not come from a wide economic margin but also from the return of financing layers.
Conclusion
Migdal HaEmek is selling, and it is building too. This is no longer land sitting idle on paper. But that is exactly why the continuation matters. As the project moves forward, it becomes clear that the issue is no longer whether units can be moved. The issue is how much value is left after financing, marketing, selling, and complementary capital layers.
Current thesis: Nofim Migdal HaEmek has volume and execution progress, but by the end of 2025 the margin left after financing had almost disappeared, and expected withdrawable surplus was still very modest relative to the project’s size.
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