Rami Levy: The lease burden, related-party rent, and what is really left after everything

It Is Not the Bank, It Is the Lease Layer

The main article already argued that Rami Levy's retail engine stayed strong while cash flexibility tightened. This follow-up isolates the layer that is easiest to underread on a first pass: leases, and especially leases with related parties. That is exactly where the sentence "there is no material bank debt" stops being sufficient.

This is the core point. At year-end 2025 the balance-sheet lease liability stood at NIS 2.183 billion. In the liquidity note, the same layer already appears as about NIS 2.803 billion of undiscounted contractual cash commitments, with NIS 277.6 million due within one year, NIS 532.3 million in one to three years, and NIS 1.993 billion beyond that. Against that backdrop, bank debt is barely the story.

The real gap sits between two valid but very different cash readings. If the reader looks only at lease principal repayment, NIS 194.3 million, 2025 still looks tight but manageable. If the reader moves to the stricter bridge, the one that fits a financing-flexibility question, and deducts total lease-related cash outflow, NIS 290.7 million, the picture changes materially. It is no longer the same year.

This chart is not trying to claim an immediate liquidity problem. It shows why "no material bank debt" is not the same thing as "a lot of cash is left." On the narrower bridge, after lease principal, CAPEX, dividends, and the Coopix minority purchase, 2025 ends roughly NIS 44 million negative. On the stricter bridge, using total lease cash, the residual goes to about NIS 140 million negative. That is the point where leases are no longer a footnote. They become the main financing wrapper around the retail footprint.

Once Related Parties Enter the Picture, This Is More Than Simple Rent

This topic deserves its own follow-up because the issue is not only leases in general, but leases where a meaningful part of the burden sits with the controlling shareholder and related parties. In 2025 related-party rent rose to NIS 85.7 million from NIS 79.4 million in 2024 and NIS 77.9 million in 2023. Related-party management fees added another NIS 9.35 million.

The annual expense line is only one layer. The more important figure sits on the balance sheet. Lease liability toward related parties stood at NIS 882.3 million at year-end 2025. That is about 40% of the group's total balance-sheet lease liability. In annual payment terms, related-party rent represented roughly one-third of total lease payments in the year.

This is not mainly a fairness argument. The company states that these leases were signed on market terms, and the auditor treated the related-party lease liability as a key audit matter. So the issue is not that the contracts are automatically problematic. The issue is different: even if the contracts are market-based, a meaningful share of the real-estate layer that carries the operating platform still sits with the controlling shareholder and related parties.

That matters even more because the exposure is not confined to a few marginal stores. The related-party lease matrix includes core operating assets. The Modiin logistics center alone carries 30,933 square meters and monthly rent of NIS 964.5 thousand. In other words, the related-party layer reaches into the operating backbone of the chain, not only into a handful of retail boxes.

The Cost Base Is More Rigid Than a Single Line Suggests

There is another reason why related-party lease exposure is not the same as flat annual rent. A large part of the lease schedule is built as minimum rent or a percentage of turnover, whichever is higher, and those rents are indexed to CPI. That means the burden does not naturally delever when the business is strong. In some sites, a better store can actually push rent higher, while indexation keeps the fixed base moving upward as well.

That is exactly where the lack of bank debt becomes misleading. Bank debt can be repaid, refinanced, or resized. Here, the pressure sits in a long-duration operating shell tied to stores, warehouses, and logistics hubs. So the question is not only whether the business remains profitable, but whether profitability expands faster than the fixed-commitment layer.

Time horizon tells the same story. In footnote 10 to the lease note, Rami Levy Hashikma Nadlan granted binding options to extend lease periods for an additional 5 to 8 years starting in January 2026. So after the balance-sheet date the direction was not toward shorter commitments. It was toward longer ones.

This chart shows two different layers. One is the carrying liability, NIS 2.183 billion. The other is the undiscounted contractual schedule, already above NIS 2.8 billion. Within that structure, NIS 882.3 million tied to related parties is not a side note. It is a structural component of the retail machine.

Even the Growth Path Runs Through the Same Channel

The last point, and probably the most relevant one for 2026, is that this is not only a legacy exposure. The lease note also includes stores that have not yet started operating, in Dimona, Hatzor HaGlilit, Acre, and Gedera, all with five-year base periods and further options. So part of the future expansion path continues to run through the same real-estate layer.

That means the debate on Rami Levy is not whether the chain knows how to grow. It clearly does. The debate is whether that growth improves cash flexibility or simply builds another layer of fixed commitments on top of a platform that is already funded mainly through leases.

The dividend approved after the balance-sheet date, NIS 42 million on March 26, 2026, sharpens the point further. It does not prove weakness. It does show that management continues to release cash while the lease layer remains heavy, long-dated, and meaningfully tied to the controlling shareholder.

Conclusion

The main article said cash flexibility tightened. This follow-up shows where that tightening actually happens. The gap is not between a strong business and a weak business. It is between a business that generates cash before leases and a business that still has cash left after leases.

At Rami Levy, bank debt has become almost irrelevant to the core read. The central layer is lease exposure of more than NIS 2.18 billion on the balance sheet and more than NIS 2.8 billion in contractual cash terms, with about 40% of the carrying liability and roughly one-third of annual lease payments tied to related parties. This is not a claim that the contracts are not market-based. It is a different claim: even a profitable, strong-brand retailer with no material bank debt can still run with narrow flexibility if its main fixed commitment sits inside leased real estate.

Put simply, the 2026 test is not whether Rami Levy can sell more. The test is whether more cash remains after leases, CAPEX, and dividends than in 2025.