AFI Properties in the first quarter: Belgrade becomes the next concentration test
AFI Properties opened 2026 with higher NOI and AFFO, but the more important angle is the accumulation of investment around Belgrade. Serbia already contributes about 16% of quarterly NOI, and the project pipeline there turns growth into an execution, country-risk and financing test.
AFI Properties reported an operationally strong first quarter: company-share NOI rose 10% to NIS 275 million, AFFO rose 12% to NIS 125 million, and operating cash flow was NIS 206 million. But this quarter is not only about the regular improvement in yielding assets or debt refinancing. It sharpens a less visible portfolio shift: Belgrade and Serbia are moving from a diversification source to a growth and concentration node. That can work, because the company already owns high-occupancy assets there and has a project pipeline that can add NOI over the next few years. Still, the same move raises dependence on a country that Midroog flags as carrying relatively high political and geopolitical risk, and on projects that still need to be completed, occupied and converted into cash. The current conclusion is mixed but leaning positive: the operating business works, but growth quality will be tested less by the amount of new square meters and more by whether Belgrade moves from balance-sheet expansion to NOI, sales and cash flow without adding leverage pressure.
The Quarter Is Good, But The Center Of Gravity Moves To Belgrade
The company is an income-producing real-estate platform with a large development layer, not just an asset owner waiting for rent indexation. It owns offices, retail and rental housing in Israel and Central and Eastern Europe, while developing new projects that are not yet fully reflected in NOI. Its economic machine therefore combines yielding assets, fair-value movements, debt refinancing and development. In the first quarter, that machine kept working, but it also showed where the next growth test sits.
The headline numbers are good. Company-share NOI was NIS 274.7 million, compared with NIS 249.9 million in the comparable quarter. Management AFFO was NIS 124.7 million, compared with NIS 111.5 million. Net profit rose to NIS 95.7 million, despite a net NIS 24.5 million decline in the value of investment property and property under construction. Operating cash flow was NIS 206.1 million, compared with NIS 185.3 million in the comparable quarter.
What supported the quarter was not only finance income or revaluation. Management breaks down the NOI increase as follows: leasing activity contributed NIS 17.8 million, indexation and other effects added NIS 7.4 million, acquired or sold assets contributed a net NIS 6.8 million, and the euro-shekel exchange rate reduced NOI by NIS 7.1 million. In other words, even after currency pressure, leasing activity itself lifted the income run rate.
Following the annual analysis, which framed 2026 as an occupancy and refinancing year, the first quarter adds a new checkpoint. Landmark and debt still matter, but a large part of future growth now runs through Belgrade. That is where both opportunity quality and the cost of concentration need to be tested.
Belgrade Is No Longer A Secondary Market
Serbia carries more weight than a quick country map suggests. In the yielding-asset split, the value of Serbian assets is NIS 2.45 billion on a company-share basis, about 14% of income-producing assets. In the first quarter, Serbia contributed NIS 44.4 million of company-share income, about 16% of the quarterly NOI shown in the presentation. The central asset is Airport City Belgrade, with company-share value of NIS 1.48 billion, quarterly income of NIS 28.1 million and 95% occupancy.
The future weight is more important. The European project table includes four projects in Belgrade and Serbia: ACB Business Avenue Office 2, ACB Business Avenue Office 3, ACB Business Avenue Hotel and Zmaj North C. Together they represent about 73 thousand sqm, expected completion costs of about NIS 255 million, and full-occupancy rental income or operating profit of about NIS 57.7 million. After the balance-sheet date, AFI Europe also agreed to acquire a Cypriot company that holds a Serbian company with about 75 thousand sqm of land in Belgrade, for about EUR 25 million, to develop a residential-for-sale project with about 164 thousand sqm of built area.
| Belgrade / Serbia focus | What already exists | What still needs to happen |
|---|---|---|
| Yielding assets in Serbia | NIS 2.45 billion of company-share value and NIS 44.4 million of quarterly income | Maintaining high occupancy and rental levels in a less straightforward country-risk setting |
| Yielding projects under construction | About 73 thousand sqm and about NIS 57.7 million of full-occupancy income or operating profit | Completion in 2026 to 2027 without material cost overruns or occupancy delays |
| Post-balance-sheet land acquisition | About EUR 25 million consideration for land in Belgrade | Turning land and a residential-for-sale plan into a project that generates sales and cash |
Commercially, the concentration has logic. The company is already active in Belgrade, owns an anchor asset there, and knows the local office market. From a risk-profile perspective, it is no longer a marginal add-on. As more growth passes through the same country, local success can improve the NOI run rate, but a local disruption, delay or funding shift would affect more layers of the portfolio.
Future Growth Depends On Delivery, Occupancy And Funding
Management presents representative NOI of NIS 1.135 billion, after normalizing completed assets to 90% occupancy and applying other adjustments. Future NOI through 2029 is shown at NIS 1.397 billion after adding assets under construction. The NIS 262 million gap is not immediate improvement. It depends on delivery, occupancy, rent levels, completion costs and financing in projects that are still in progress.
Belgrade is a near-term proof point. ACB Business Avenue Office 3 and the hotel are expected to complete in Q4 2026, Zmaj North C in Q1 2027 and ACB Business Avenue Office 2 in Q3 2027. If they are delivered and occupied on time, they will add an operating layer that can support the growth scenario management presents. If not, the gap between representative NOI and future NOI will look more like a target that asks for trust than a near-term run rate.
The new Belgrade land sharpens another distinction. It is not part of current yielding NOI, and it is not similar to buying a yielding asset with a tenant in place. It can open a meaningful residential-for-sale route, but cash will arrive only through development, sales and financing. The potential value there therefore depends less on the acquisition itself and more on the ability to turn it into a project that sells apartments without drawing excess capital from the group.
Debt sets the pace at the same time. Cash, deposits and short-term investments rose to NIS 2.398 billion, compared with NIS 1.730 billion at the end of 2025, mainly because of the Series 17 expansion of about NIS 742 million net, new loans and operating cash flow. This is an all-in cash-flexibility view, not a normalized cash-generation metric: the cash balance grew because the debt market was open, while the company still shows a working-capital deficit of about NIS 1.264 billion on a consolidated basis and about NIS 952 million on a solo basis.
The planned Series 18 is meant to address part of that pressure. S&P Maalot rated an issuance of up to NIS 600 million par value at ilA+, and the draft trust deed points to unsecured, unlinked debt with repayments from 2029 to 2034. If the issuance is completed on reasonable terms, it can extend duration and increase the share of unsecured debt. But financial debt was NIS 14.069 billion at quarter-end, consolidated duration was about 2.8 years, and the presentation shows principal maturities of about NIS 3.56 billion in 2026 before credit lines, commercial paper and debt for assets under construction. The test is therefore not only whether sources exist, but at what price and duration they replace short debt.
Conclusion: Three Tests For The Next Quarters
The first quarter strengthens the view that AFI Properties' operations are working, but it also changes where the risk should be watched. NOI and AFFO are rising, occupancy is high, and the company can still raise debt. On the other hand, future growth increasingly sits on projects, financing and specific countries, led by Serbia. Belgrade is not just another point on the asset map, but a concentration, execution and capital-access test.
Three items will drive the read in the next quarters. The first is closing an issuance or long-term financing that reduces the working-capital deficit rather than only adding temporary cash. The second is delivery and occupancy of the near-term projects in Belgrade and Romania, so the gap between representative NOI and future NOI starts closing in actual numbers, not only in a presentation. The third is currency: from March 31 to May 11, 2026, the euro weakened by about 6% against the shekel, which is expected to reduce equity by about NIS 500 million while creating about NIS 105 million of net finance income from currency swaps. If project and funding progress arrive before currency and refinancing pressure the equity base, Belgrade growth will look like a quality engine. If Belgrade remains mainly backlog and investment before NOI, the interpretation will be of a good company expanding its balance sheet faster than it releases accessible cash flow.
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