DMRI Ba'ir: Future growth engine or an expensive use of today's cash?

The main article already established that YBOX ends 2025 with too much value still waiting to mature and too little cash that is easy to work with. This follow-up isolates the place where that gap becomes most concrete: DMRI Ba'ir. This is not just a pipeline-expansion deal. It is a capital-allocation decision made in a year when the group ended 2025 with only NIS 29.5 million of cash and cash equivalents and negative NIS 148.0 million of operating cash flow.

It is easy to see why management wanted this deal. Access to up to 50% of DMRI Ba'ir gives YBOX a much wider urban-renewal footprint in Gush Dan, mostly in Tel Aviv, and also gives it an operating role inside the platform. But the current-period cost matters just as much: by year-end 2025 the group had already paid NIS 23.027 million toward the deal, the shares still had not been allocated, and part of the funding came from a non-bank bridge facility carrying interest at prime plus 3% to 3.5%.

That is the core question here: did YBOX buy a strong future growth engine, or did it buy a strategically sensible option that was still too expensive for the cash position of 2025?

What YBOX is really buying

Strategically, the transaction is easy to understand. Under the July 2025 agreement, the group is to receive up to 50% of DMRI Ba'ir for total consideration of NIS 58 million. At the report date DMRI Ba'ir held 28 urban-renewal projects, 25 of which already had the required majority. The projects are in Gush Dan, mostly in Tel Aviv, and the underlying land can support 1,467 housing units, of which DMRI Ba'ir's share is 840 units. In addition, 3 projects were already under construction and 7 projects had building permits subject to standard conditions.

This is not the purchase of a vague concept. It is the purchase of a pipeline that has already cleared part of the early-stage signing and planning risk. That is why the strategic case is straightforward: YBOX is widening its development inventory in one move instead of building it project by project.

The more interesting part is that this is not structured as a passive minority stake. Alongside the share-allocation agreement, the parties also signed a shareholders' agreement that sets a four-member board, two directors per side, with equal voting power. Governance, in other words, is symmetrical rather than controlled by one side. But the parties also signed a management agreement under which the group will manage DMRI Ba'ir and its projects, and DMRI Ba'ir will pay the group management fees of 2.5% to 2.75% of revenue plus VAT.

That matters. YBOX is not only buying a share of future project profit. It is also buying an operating seat that can, if execution advances, create a recurring fee layer before full project realization.

That table explains the attraction. For a company still heavily dependent on a small number of major projects, buying a wider and more advanced renewal platform can make real strategic sense. But this is exactly where capital allocation comes in: a good asset does not automatically mean a good deal if the cash burden lands in a year when the margin for error is already thin.

The cash is already out, but the ownership is not in yet

The most important detail in this deal is not the NIS 58 million headline. It is the gap between cash that has already left and rights that have still not fully arrived. By the report publication date the group had already paid about NIS 23 million of the consideration, and the deal was therefore still not completed and the shares still had not been allocated. On the December 31, 2025 balance sheet, that amount already appears as a separate NIS 23.027 million line item: advances on account of an investment in an associate.

That distinction matters a lot. Economically, the cash is already gone. Accounting-wise, YBOX is still not showing a completed equity-accounted holding. So year-end 2025 captures an awkward middle stage: the company is already bearing the cost of the decision before it is fully receiving the holding itself.

The event sequence sharpens that point. Competition approval for the transaction was received on September 29, 2025, which means a key regulatory step was already in hand. Even so, by the report publication date the transaction was still not complete and the shares had still not been allocated. For the reader, that says something simpler: time between signing and closing is not free.

That chart is the core of the story. The amount already paid into the deal equals almost four-fifths of year-end cash. The remaining consideration, about NIS 35.0 million, is already larger than all the cash YBOX had on hand at the end of 2025. And even if one looks only at the dedicated bridge facility, it still had only NIS 14.7 million of undrawn capacity left at year-end. That is nowhere near enough on its own to cover all of the unpaid consideration.

That leads to the first key conclusion of this follow-up: in 2025 terms, DMRI Ba'ir was not a comfortable deployment of excess cash. It was a capital commitment that still needed additional funding even after the bridge had already been partly drawn.

There is another structural point here. The company says the consideration is to be transferred through a NIS 17 million shareholder loan and a NIS 41 million capital note in DMRI Ba'ir. That means the economics are built through internal capital layers inside the acquired company rather than through a simple one-step cash payment to the seller. Strategically that may be sensible. But it also means the path back to cash depends on DMRI Ba'ir's later ability to generate surpluses, repay layers, and move value upward.

The bridge loan does not just fund the deal, it also fences the upside

To fund part of the consideration, the group entered in October 2025 into a non-bank loan agreement for up to NIS 30 million with a 24-month term from the first draw. The facility carries annual interest at prime plus 3% to 3.5%, paid quarterly. By year-end 2025, NIS 15.3 million had already been drawn.

This is where the quality of the financing layer matters. Other bank loans in the group carried interest at prime plus 1.5% to 1.8%, while Series V bonds were issued at a fixed 7.11% annual rate. That is not a perfect apples-to-apples comparison, but within YBOX's own liability stack it is clear that the DMRI Ba'ir bridge sits in a tighter layer: non-bank lender, higher spread over prime, dedicated collateral, and a relatively short two-year horizon.

The collateral tells the same story. The bridge is secured by a first-ranking fixed charge and assignment over the shares to be allocated to the group under the deal, as well as over the group's rights under the investment agreement in DMRI Ba'ir. In other words, the very asset that is supposed to create the strategic upside is already pledged in order to finance the path toward it.

And that is still not the most important clause. Under the same bridge arrangement, DMRI Ba'ir undertook not to transfer funds of any kind to the project company, including dividends, capital-note repayment, or shareholder-loan repayment, without the lender's prior written consent. In addition, the project company undertook a similar restriction with respect to upstream transfers to its shareholders.

This is the clause that makes the full read much sharper. The bridge loan does not only fund the transaction. It also temporarily narrows the route back from value to cash. Up to this point, one could have viewed DMRI Ba'ir mainly as a project pipeline that may later begin releasing value upward. This clause is a reminder that during the bridge period that value first remains inside the financing structure.

The covenants also reconnect the deal back to YBOX's broader balance sheet. The group undertook that total surpluses in DMRI Ba'ir projects would not fall below NIS 56 million, and it also undertook to keep complying with the financial covenants set out in the Series V bond indenture. So while the transaction sits inside the urban-renewal subsidiary, it is already tied directly to the group's public-debt discipline as well.

So is this a future growth engine or an expensive use of today's cash?

The right answer is that both readings are valid, but not on the same time layer.

On a longer horizon, the strategic logic is real. DMRI Ba'ir gives YBOX a shortcut into a broader and relatively advanced urban-renewal pipeline, with strong Tel Aviv exposure and a management role that can add a fee layer on top of future equity upside. For a company still relying heavily on a few large projects, that broader pipeline can be exactly the right move.

But on the year-end 2025 and near-term reading, this still looks first like a carrying-cost transaction. Real cash has already left. A meaningful amount of consideration is still open. Part of the gap has been funded with a non-bank bridge. And even if DMRI Ba'ir starts generating value, moving that value upward remains subject to lender consent.

That means the deal does not have to fail in order to disappoint. It only has to close too slowly, require another layer of interim funding, or convert its broad pipeline into execution more slowly than the current carrying cost justifies. In that case, the move can remain strategically sound while still looking weak as capital allocation.

On the other hand, if the closing happens without stretching the balance sheet further, if the management role starts to generate fee income, and if DMRI Ba'ir moves relatively quickly from an advanced pipeline into projects that are actually maturing operationally, the reading can change. In that case, 2025 would look in hindsight like a year in which YBOX paid a noticeable price to buy itself a better future growth engine.

That is why the bottom line of this follow-up is simple: DMRI Ba'ir looks better at the strategy layer than at the cash-timing layer. Those are not the same thing. Strategically, this is an interesting asset. In cash terms, year-end 2025 still shows a leveraged option with real carrying cost and constrained upstream access. For that reading to improve, the market will need to see not just that the deal closes, but that the new pipeline starts producing income and flexibility faster than its current funding burden.