Levinstein Properties in the first quarter: occupancy moved, cash still leans on short-term credit
Levinstein Properties opened 2026 with stable NOI but lower FFO, because Kfar Saba and Beer Sheva have left the construction phase but still do not generate material income. The quarter reinforces the view that 2026 is a bridge year for occupancy and debt rollover, not yet a harvest year.
The first quarter gives only a partial answer to the questions that were open at Levinstein Properties at the end of 2025: occupancy in Kfar Saba and Beer Sheva is moving, but it has not yet crossed the line where it changes the results. The company reports that about 23% of the leasable areas in each asset has been leased, yet material income has not been recognized because tenant fit-out work and occupancy conditions have not yet been completed. That makes the quarter look less like the beginning of a harvest year and more like a transition period, where the old income-producing asset base still carries NOI while the new assets already carry a financing cost. Net finance expenses rose to NIS 7.8 million, mainly after capitalization of finance costs stopped on those assets, and FFO under the ISA approach fell to NIS 8.6 million from NIS 10.6 million in the comparable quarter. The cash picture looks better only on the surface: cash rose to NIS 7.9 million, but after a NIS 23.4 million increase in short-term credit and a NIS 14.4 million dividend. The next quarters will be measured less by revaluations and more by actual income from Kfar Saba and Beer Sheva, lower reliance on short-term credit, and enough financing room without distributions absorbing the cash.
Levinstein Properties is an Israeli income-producing real estate company that operates office, retail and industrial properties, alongside projects in construction, first leasing and planning-stage development. It is not a classic growth company. It is an asset and revaluation machine that has to prove that book value turns into NOI, cash flow and financing capacity. Because the company has no active tradable equity security, the screen is especially relevant for bondholders and for investors looking at the parent-company value through assets and debt.
The economic map is compact: Discount Tower, Levinstein Tower and Ramat Eliyahu are the stable income base, Kfar Saba and Beer Sheva are the new occupancy test, Pardesiya is still under construction, and the old central bus station compound in Tel Aviv is a large value reserve that still depends on planning and financing. There were no material fair-value changes this quarter, so no revaluation hides the activity. The read is about income, financing and cash.
In the previous annual analysis, the key test was whether 2026 would turn value already booked in Kfar Saba, Beer Sheva and the old central bus station into NOI and financial flexibility. The first quarter does not close that test. It only shows that the new assets are moving commercially while still not offsetting the financing cost now flowing through earnings.
Occupancy Moved, Income Still Lags
The number worth pausing on is not the small increase in rental income, but the gap between leased space and income that has not yet appeared. Rental and maintenance income rose to NIS 22.1 million from NIS 21.2 million in the comparable quarter, and total group rental income including jointly owned assets rose to NIS 26.3 million from NIS 23.4 million. But total NOI, including jointly owned assets, barely moved: NIS 21.4 million versus NIS 21.3 million.
That gap explains the quarter. Kfar Saba already contributed to the initial increase in income after operations began at the end of 2025. But as of May 10, 2026, Levinstein Properties had leased about 23% of the leasable areas in each of Kfar Saba and Beer Sheva, and still had not recognized material income from those areas. The reason is an execution stage: tenant fit-out work and occupancy conditions that have not yet been completed.
That changes how 2026 should be tested. If leasing keeps moving but actual occupancy is delayed, the value of the two assets will remain ahead of the cash flow. If the signed areas start producing recurring income in the coming quarters, the first quarter will look in hindsight like a short transition period. For now, the evidence sits in the middle: commercial progress is visible, cash-flow proof is not.
Capitalized Interest Stopped Shielding Earnings
The accounting headline is that net profit fell to NIS 7.3 million from NIS 10.1 million in the comparable quarter, but the more important move is in financing. Operating profit actually increased slightly to NIS 16.0 million from NIS 15.4 million, and operating expenses remained under control. The problem is that net finance expenses rose to NIS 7.8 million from NIS 4.4 million.
The company attributes most of the increase to the end of finance-cost capitalization on Beer Sheva and Kfar Saba, after construction was completed at the end of 2025. That is an economic shift even though it sounds accounting-driven: during construction, part of the financing cost sits inside the asset, and after completion it hits current profit. When the same assets still do not generate material income, the expense is already here and the NOI is still on the way.
The debt structure adds pressure too. Finance expenses on bank credit rose by about NIS 1.6 million versus the comparable quarter, mainly because short-term credit balances increased to finance investment property and assets under construction. Bond finance expenses declined after scheduled principal repayments, so the issue is not the bonds alone. It is the move toward a shorter layer of bank credit and commercial paper.
The Cash Picture Still Depends On Short-Term Debt
The all-in cash picture for the quarter looks at what is left after actual cash uses: operating cash flow, investment in assets, dividends, loan repayments and short-term credit. On that basis, cash rose from NIS 3.2 million at the beginning of the year to NIS 7.9 million at the end of March, but not because operating cash flow covered every need. Operating cash flow was NIS 11.5 million, against NIS 14.8 million used for investments and a NIS 14.4 million dividend.
Debt closed the gap. Levinstein Properties increased short-term bank credit by NIS 23.4 million net, and current credit from banks and others reached NIS 577.4 million. The consolidated working-capital deficit was about NIS 617 million, and the solo deficit was about NIS 515 million. The board concluded that this does not indicate a warning sign, based on expected cash flows, subsidiary cash access, credit lines and assets. For the reader, liquidity still relies on rollover capacity and bank access, not on surplus cash sitting at the company.
The reassuring side is that this is a company with NIS 1.367 billion of equity, an equity-to-assets ratio of 56%, LTV of 30%, and an ilA corporate rating with a stable outlook. Covenant headroom remains wide: debt-to-CAP is 36% versus a 70% ceiling, and in the old central bus station facility the debt-to-asset-value ratio is 13% versus a 60% ceiling. The company also has a NIS 370 million credit facility with about NIS 277 million still undrawn, and unencumbered investment properties with an aggregate value of about NIS 555 million.
Still, this is not the same cash quality as a business funding investments and distributions fully from recurring cash flow. A NIS 14.4 million dividend in a quarter where FFO fell to NIS 8.6 million is not a covenant problem, but it does sharpen the capital-allocation question after the delisting of the equity. As long as the new areas do not produce material NOI, any additional distribution will be tested against the pace of short-term debt rollover.
Conclusion
The current conclusion is that the first quarter confirms the cautious reading from the end of 2025 more than it overturns it. Levinstein Properties does not look like a company under acute balance-sheet stress: covenants are far away, the rating is stable, the main assets have high occupancy, and the company has credit lines and unencumbered assets. But at the business level, Kfar Saba and Beer Sheva have not yet moved from signing and investment to a stage where they change NOI, while their financing is already visible in earnings and FFO.
The counter-thesis is strong enough to keep this from becoming a negative story: if the 23% leased area converts quickly into occupancy and income, and if short-term funding rolls over without a sharp cost increase, this quarter will look like an expected bridge between the end of construction and the beginning of income generation. The next proof point is in the coming reports: whether NOI starts rising fast enough to cover the financing cost, whether cash grows without another layer of short-term credit, and whether the distribution policy stays aligned with the all-in cash picture rather than only with accounting surplus.
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.