Rit Azorim Living in the First Quarter: FFO Turns Positive, Cash Still Depends on Funding
Rit Azorim Living moved to positive FFO even under the ISA methodology, but the improvement also reflects capitalized financing costs and a still-open debt market. The income portfolio is stable, while the Ashdod acquisition and projects under construction keep 2026 as a cash and funding proof year.
The first quarter of Rit Azorim Living closes part of the gap highlighted in the prior annual Deep TASE coverage at /en/analysis/2369: the rental portfolio is producing stable NOI, and FFO has turned positive even under the ISA methodology. That is a real improvement from 2025, when positive management FFO was still far from the more conservative calculation. But the quarter does not yet turn the company into a fully self-funded cash generator, because reported profit also benefited from capitalized financing costs on projects under construction, while cash interest, investments and debt still set the pace. The important question now is not only whether the company can keep growing the portfolio, but whether it can fund that growth without bringing liquidity pressure back to the center. The acquisition of 50 apartments in Ashdod shows that management is already looking again for new transactions, but it also adds a near-term cash use before the larger projects start producing rental income. The next few quarters therefore sit on four proof points: Park Hayam delivery, progress at Ben Shemen and the International Quarter, funding for new transactions, and evidence that operating cash flow can hold up after interest and project investment.
The Income Portfolio Already Carries the Report
Rit Azorim Living is a residential rental REIT, but this quarter it sits between two different layers. The first layer is an operating income portfolio: 870 income-producing apartments, 98% occupancy, fair value of about NIS 2.08 billion and quarterly NOI of NIS 15.6 million. The second layer is a portfolio of projects and transactions that still need delivery, occupancy and longer-term funding.
The good operating number is that rental, maintenance and property-management revenue reached NIS 17.5 million, compared with NIS 16.4 million in the same quarter last year, while profit from property rental and operation rose to NIS 15.6 million from NIS 14.7 million. The growth is not a sharp same-property acceleration. The company says same-property NOI run-rate, excluding Ashkelon, which was occupied during 2025, reflects only about 1.4% growth versus 2025. In other words, the core portfolio is stable, but the step-up still depends on projects moving into rental income, not only on rent growth in the existing portfolio.
That sector context matters. In an income-producing real estate company, debt, development projects and refinancing are normal parts of the model. The mere existence of leverage or construction is not the edge. What matters in this quarter is that the company is starting to show positive FFO while the stack of cash uses continues to grow. That is better than 2025, but it still needs proof that the income portfolio can carry the expansion, not only support it through capital-market access.
FFO Improved, But Part of the Improvement Comes From Construction Accounting
Net profit moved to NIS 12.1 million, compared with a NIS 18.5 million loss in the same quarter last year. A quick read would stop there and call it a strong quarter. A more useful read breaks the change into two layers: property operations improved, but non-cash and accounting items also pushed the bottom line.
Fair-value gains contributed NIS 3.9 million, versus a NIS 14.9 million fair-value decline in the same quarter last year. At the same time, net finance expenses fell to NIS 3.8 million from NIS 11.6 million, mainly because financing costs were capitalized on projects whose construction began during 2025. That capitalization is not an accounting flaw. It is normal treatment for qualifying assets under construction. But from an earnings-quality perspective, it moves the center of gravity: part of the funding cost is not hitting the income statement now, but is being added to the asset base.
The FFO calculation itself sends a more positive signal than last year. FFO under the ISA methodology was NIS 6.45 million, compared with negative NIS 6.91 million in the same quarter last year, and management FFO was NIS 6.5 million. The sharp 2025 gap has almost disappeared this quarter. That is a real improvement, because the positive number no longer depends mainly on large management adjustments. Still, FFO cannot be read in isolation while cash interest and project investment remain high.
Park Hayam compensation also needs to be separated. The company recognized another NIS 1.8 million of income in the quarter for the proportional compensation related to the delayed delivery of 98 apartments in Bat Yam, after purchasing 11 additional units and resetting the delivery timetable. But the FFO calculation neutralizes that income as part of other income and expenses. So the compensation still matters for understanding Park Hayam and current assets, but it is not the main reason FFO turned positive this quarter.
Funding Buys Time, Growth Still Requires More Sources
All-in cash flexibility after actual cash uses tells a less clean story than profit. Operating cash flow was NIS 12.9 million, but cash interest paid was NIS 13.4 million. The company also invested NIS 38.0 million in investment property, projects under construction, advances and land, and received NIS 12.8 million from investment-property sales in Ashkelon. After Series D bond proceeds of NIS 112.7 million net, short-term credit repayment of NIS 95.4 million, additional repayments and interest, cash fell from NIS 86.8 million at the start of the period to NIS 74.1 million at the end.
This is not acute operating weakness, but it is also not broad cash flexibility. The working-capital deficit fell to about NIS 155 million on a consolidated basis, from about NIS 205 million at the end of 2025, which is an important improvement. But the deficit still mainly reflects about NIS 191 million of loans for land and rental housing assets classified as current liabilities. Of that, a roughly NIS 95 million land loan for the International Quarter reached maturity on May 26, 2026 and is in the process of being extended for another year, while a roughly NIS 96 million land loan for Park Hahoreshot was extended to January 31, 2027.
The debt market helped the company this quarter. Series D was issued in January with NIS 114 million par value, 2.59% annual CPI-linked interest, collateral over 100 apartments in Ashkelon, and one bullet repayment in December 2028. In April, the company expanded another bond series and raised about NIS 83.2 million gross. These are not just funding data points. They explain why the company is moving from handling short-term pressure back into looking for new transactions.
The new Ashdod transaction is where the improvement meets the next constraint. On March 31, 2026, the company signed an agreement to acquire 50 occupied apartments in the V Towers project in Ashdod's Tet-Zayin quarter, close to an existing company property in the same area, for NIS 107.5 million. Ten percent of the consideration was paid near signing, and the balance is due within 90 days. The apartments are not subject to a regulatory rental obligation, but the company intends to rent them for 20 years.
The transaction makes strategic sense: an occupied property, next to an existing asset, closer to income than land or early-stage development. But the filing does not provide a NOI target for this transaction, and the main cash payment comes before the acquisition proves its operating contribution. Ashdod is therefore not only an acquisition. It is a test of whether the company can fund growth while operating cash flow is only beginning to cover the cost of money.
Conclusions
The first quarter improves Rit Azorim Living's position, but it does not close the whole story. The rental portfolio is stable, ISA FFO is now positive, and access to the debt market remains open. On the other hand, part of the earnings improvement comes from capitalized financing costs and fair-value effects, while cash after interest, investments and repayments still depends on funding, disposals and loan extensions.
The rest of 2026 should be less a year of narrative and more a year of execution. Park Hayam needs to be delivered in July and start producing actual NOI. Ben Shemen and the International Quarter need to show project and long-term funding progress. Ashdod needs to close and later provide rental data that justify the cash use. If those three pieces advance without renewed working-capital pressure, this quarter will look like the beginning of a move from asset value on paper to a portfolio that produces more cash. If they are delayed or funded at a heavier cost, positive FFO will remain a good signal, but not enough proof of a full improvement in business quality.
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