Shlomo Real Estate after 2025: how much of the stability rests on related parties, and what the control transition changes

The main article already made the broader point: the 2025 story at Shlomo Real Estate shifted toward refinancing, funding cost and the seasoning of HOPE TOWN. This continuation isolates a different layer: how much of the stability in the report actually rests on leases, services and arrangements inside the same control group.

That is not a generic governance footnote. It is a credit issue. In a bond-listed issuer like Shlomo Real Estate, a related party can look like an anchor tenant, but it is also a source of concentration, internal economics and dependence on group-level decision making. And once March 1, 2026 moved control from a single owner to a joint-control arrangement among the heirs, the question changes. Not whether the group link disappears, but whether it remains a smooth anchor or becomes a more sensitive layer of coordination, renewal and approval.

Four findings frame the read:

• Related-party rental and management revenue reached NIS 48.349 million in 2025, against total rental and management revenue of NIS 188.072 million. In other words, roughly a quarter of the top line came from related parties.
• Shlomo Holdings and its controlled companies alone generated NIS 37.694 million in 2025, and the company explicitly says it has material dependence on that ecosystem because roughly half of the leasable area in Israel is rented to companies controlled by the controlling-shareholder group.
• Martin Gehl 7 adds the optics of a very long lease, but it was structured with a 9-month rent-free fit-out period, a landlord fit-out commitment of up to NIS 15 million, and 50-50 ownership together with the tenant.
• The Afcon thread points the other way: related-party leases around that group actually shrank during 2025 and into early 2026, proving that group support can stabilize the portfolio, but can also contract quickly.

How Much Of The Stability Actually Sits Inside The Group

The first number that needs to stay on the page is simple: the related-party layer is not an add-on. It is part of the base. In 2025, related-party rental and management revenue reached NIS 48.349 million. Against total rental and management revenue of NIS 188.072 million, that is about 25.7% of the top line. At the same time, the major-tenant disclosure in Israel goes further: Shlomo Holdings and its subsidiaries generated NIS 37.694 million, and the company states explicitly that it has material dependence on that group because it rents roughly half of the area in its Israeli properties.

So this is no longer a story about a single anchor tenant. It is a business relationship in which the revenue side and part of the operating side both sit inside the same control envelope.

Kiryat Shlomo is an anchor, but also a relationship

At the center of that dependence sits Kiryat Shlomo in Tzrifin. The two main leases there are with Shlomo Holdings and with Shlomo Garage Network and Road Services. The first covers about 68,299 square meters at monthly rent of roughly NIS 1.511 million, and the second about 12,785 square meters at monthly rent of roughly NIS 439 thousand. Both current lease terms end in August 2026, and both include two additional option periods of roughly 4.5 years each, with option rents to be determined by an independent appraiser.

That is reassuring on one level. These are not one-year rolling contracts. But it is also not market cash flow that is detached from the group. The most important asset in Israel depends on two tenants from the same family of companies. On top of that, the major-tenant section says that under the Tzrifin logistics-center lease, Shlomo Holdings received rights of first refusal and rights of first offer if the company sells or re-leases all or part of the leased area. In other words, the group is not only a tenant. It also has a degree of grip around the business perimeter of the asset.

The management-income line is not pure margin either

That same pattern shows up in the management-services layer. In Kiryat Shlomo the company provides management, operation and maintenance services to the related-party tenants, but the economics are not a clean fixed spread. Under the agreement, the tenants pay actual cost plus a 12.5% management premium, while a list of cost items is excluded from that premium, including municipal taxes, electricity, water, insurance, depreciation fund, financial services, engineering services and maintenance labor.

So part of the management-income line is indeed additional income, but it is not the same as a separate, clean NOI stream. It is closer to an internal service mechanism than to a pure outside-margin business.

Even the company's own management sits inside the same ecosystem

The same logic appears at the corporate-management level. In June 2024 the company renewed its management agreement with Tobias, a company controlled by the controlling shareholder, for three years through the end of June 2027. Tobias provides the services of the chairman and CEO, the CFO, customer-relations and PR, director services, and also office, bookkeeping, accounting, asset-management and IT services. The company says the annual payment to Tobias in 2025 for management services was about NIS 4 million plus VAT, while variable compensation of NIS 1.608 million for 2025 was approved subject to shareholder approval. In the financial statements that appeared as NIS 5.665 million of management-fee expense to a controlling-shareholder company, including bonus.

The key point is not whether that cost is high or low. The report does not provide a direct market benchmark. The point is that both the revenue engine and part of the operating-management infrastructure sit inside the same control environment. The stability of 2025 is therefore group stability, not only property stability.

Martin Gehl 7: A Long Lease Bought With Free Rent And Landlord Support

At first glance, Martin Gehl 7 looks like a clean new anchor. The major-tenant disclosure already presents it as a lease that runs through March 2041, with two extension options of 60 months and 59 months, and a 5% rent step-up in each option period versus the rent at the end of the base term. On paper, that is exactly the kind of contract that improves visibility.

But the transaction note shows a more complicated picture. In July 2025 the company and Shlomo Insurance bought, on a 50-50 basis, the leasehold rights in a shell-condition office building of about 10,000 square meters for total consideration of roughly NIS 73.9 million. At the same time, the two owners entered into a cooperation agreement governing management, decision making, funding mechanisms, separation mechanisms and dispute resolution.

In parallel, Shlomo Insurance committed to lease about 5,000 square meters and roughly 100 parking spaces. But the lease does not start with immediate cash flow. It includes a 9-month fit-out period free of rent, and only after that does the 180-month lease term begin. In addition, the disclosed rent, about NIS 388 thousand per month, is stated jointly for the company and Shlomo Insurance. In economic terms, that should not be read as if the entire amount flows directly to the company on its own.

The more revealing layer is the concession side. The two landlords committed to shell works in the asset and also to participate in tenant fit-out work up to NIS 15 million. So the stability here was bought with three things at once: a related-party tenant, a rent-free period and direct landlord support for move-in costs.

That is not automatically a criticism. For a bond issuer, there can be clear value in locking in a known tenant for a long term. But it does have to be read correctly: Martin Gehl 7 is an intra-group stabilization mechanism, not a standard third-party lease that starts immediately with a full cash coupon. It improves visibility, but less than it improves near-term cash.

The Afcon Thread Shows That The Same Ecosystem Can Also Shrink

If Martin Gehl 7 shows how the group can create a new anchor, the Afcon thread shows the other side: the same relationship can also shrink quickly.

In one lease, Tadiran Telecom Communication Services in Israel, a limited partnership controlled by Afcon Holdings, rented at 23 Yetzira Street about 1,991 square meters of offices, about 237 square meters of storage and 27 parking spaces for roughly NIS 110 thousand per month, plus management and maintenance services at actual cost plus 15%. The original lease term ended in June 2024, and from January 1, 2025 the leased area was cut to roughly 1,493 square meters and 28 parking spaces, with monthly rent reduced to roughly NIS 74 thousand.

In another lease, Afcon group companies rented at Alexander Yanai Street about 2,870 square meters and 32 parking spaces. Monthly rent stood at roughly NIS 133 thousand through December 2025. Then, on December 23, 2025, a new adjustment was approved: Afcon Renewable Energy vacated space effective January 1, 2026, Afcon Control and Automation extended its lease by two years to March 2029, and Afcon Electric Transportation exercised an option to reduce part of its area. The result is that from January 2026 the leased area fell to roughly 2,005 square meters and 20 parking spaces, and monthly rent dropped to roughly NIS 91 thousand.

That disclosure matters precisely because the sums are small relative to Kiryat Shlomo. It proves that the group link is not a concrete wall. It is flexible, and therefore also sensitive to shifting operating needs inside sister companies.

There is another layer here as well. Afcon Control and Automation is not only a current or former tenant. The company also has a renewable service agreement with it for fire detection and extinguishing, security, building-management and access-control systems, at a 2025 cost of about NIS 217 thousand. In addition, at HOPE TOWN the company approved a contract with the same Afcon Control and Automation for communications and low-voltage work, at about NIS 1.157 million for the company's share.

So the Afcon environment touches both revenue and cost. That is the real difference between "a related-party tenant" and a full group relationship. It may serve the company well, but it also blurs the line between external market validation and internal group solutions.

What The March 1, 2026 Control Transition Actually Changes

On March 1, 2026 Atalia Shmelzer passed away. Under note 22(c), she bequeathed her holdings equally to her children, Asi Shmelzer, Ofra Reif-Shmelzer and Tobi Shmelzer. The company also says that the heirs entered into a shareholders agreement establishing a joint-control mechanism at the holding-company level and across all companies it controls, and that to the best of the company's knowledge the same arrangement also applies to the other companies controlled by the controlling shareholder. As of the report date, probate had not yet been completed.

The first implication is continuity. The company does not report a covenant breach, debt acceleration or interruption in related-party arrangements as a result of the transition. That matters.

The second implication is that "change of control" is not a cosmetic term in the debt stack. It appears across several funding lines:

That is where the key read comes from. The heirs' shareholders agreement looks less like a move that reduces related-party dependence, and more like an arrangement designed to preserve continuity of control across the whole system: the company, the related-party tenants, the service providers and the sister companies. That makes sense. But it does not dissolve concentration. It replaces one controlling person with a shared-control mechanism among three heirs.

From a credit perspective, that cuts both ways:

• In the near term, the arrangement may actually stabilize the picture because it creates formal continuity rather than a control vacuum.
• In the medium term, every lease renewal, capital-allocation decision or new related-party transaction may become more dependent on internal coordination than it was before.

The filings do not provide enough disclosure to say whether that will become real friction. That is exactly where the analysis has to stop. There is not enough evidence to claim an operating control problem. But there is also no basis to pretend that moving from a single control center to a joint-control arrangement changes nothing, especially when the debt stack itself repeatedly flags change of control as a relevant concept.

Bottom Line

This continuation is not arguing that the related-party layer is an immediate weakness. On the contrary. In 2025 it was a central part of Shlomo Real Estate's stability: NIS 48.349 million of rental and management revenue, full occupancy at Kiryat Shlomo, a new long lease at Martin Gehl 7, and a management infrastructure that also sits inside the group.

But it is a specific kind of stability. It is less diversified than NOI alone suggests, less market-like than a long lease alone suggests, and more dependent on the control architecture than a first read might imply.

That is the core point. After March 1, 2026, the question is not whether the group remains inside the story. It does. The question is whether that same group, now under joint control, can keep the web of leases, fit-outs, services and approvals running with the same smoothness.

The next checkpoints are clear:

• Renewal or extension of the Kiryat Shlomo anchor leases around August 2026, and on what economics.
• The move of Martin Gehl 7 from fit-out and free-rent period into actual cash contribution.
• Whether the Afcon and Tadiran rent reductions remain isolated, or start to look like a broader pattern inside the group.
• Whether the control transition remains an administrative event, or starts to surface in approvals, financing and lease renewals.