MB After Capitalization Stops: Land Carrying Costs Now Hit Profit
The suspension of cost capitalization at MB changes the proof point: the land still sits on the balance sheet at $134.0 million, but its costs are now running through earnings. In Q1, the land and development segment posted an operating loss of $1.748 million and a net loss of $5.123 million.
In the first quarter, MB stopped being only a future question mark inside Silverstein Properties' asset base. After the prior MB analysis, where the land remained a real-estate option without a closed execution path, the current quarter adds a sharper layer: the company suspended cost capitalization under IAS 23 because most development activity was paused. That means the costs no longer only accumulate inside inventory, but start flowing through profit and loss. This is not a large new write-down and it is not a cancellation notice, but it is a change in the quality of the loss: the land option is beginning to consume current earnings while the alternative development path has not yet been shown. The real-estate inventory line stayed at $134.0 million, but the land and development segment ended the quarter with a $1.748 million operating loss and a $5.123 million net loss. Forfeited-advance income was only $0.641 million, so the one-time 2025 gain no longer masks the cost of waiting. The current read on MB is therefore more negative: the land can still become a development asset, but until there is an execution plan with a partner, financing and timing, the financial statements are starting to penalize the wait.
The Capitalization Stop Moves the Cost of Waiting Into Earnings
For project land, accumulating costs before revenue is not unusual by itself. It is part of the normal model for this type of asset: buy land, advance planning, pay interest and carrying costs, and only years later get a partner, a sale or an income-producing property. That is why the large inventory balance is not the edge. The abnormal point is that the company itself is no longer treating most of those costs as costs that continue to build into an active project asset.
Note 5(a) changes MB's accounting status. During the three months ended March 31, 2026, the company suspended cost capitalization under IAS 23 because most project activities were paused and management is considering other investment and building opportunities. As a result, all costs were charged to the interim consolidated statement of comprehensive income. The company still leaves room to reassess the criteria and resume capitalization in the future, but until that happens, the waiting period has a visible earnings cost.
That cost is already visible beyond the note. Group net finance expenses rose to $20.483 million in the quarter from $14.878 million in the comparable quarter, with management attributing the increase mainly to interest and amortization expenses related to MB that had previously been capitalized as part of the asset's cost. This is the difference between land whose costs keep building inside the balance sheet and land that starts weighing on period earnings.
Forfeited Advances No Longer Cover the Cost of Waiting
The segment numbers show the transition clearly. In 2025, MB still benefited from a large $28.511 million one-time income line from forfeited third-party advances. In the first quarter of 2026, only $0.641 million remained. Against that amount stand operating expenses, an inventory write-down, a negative fair-value move and finance expenses that create a clear segment loss.
| MB Checkpoint | What Happened in Q1 2026 | Why It Matters |
|---|---|---|
| Real-estate inventory under planning and development | $134.0 million | The carrying value did not fall in the quarter, but it also did not receive new development validation |
| Forfeited-advance income | $0.641 million | A fragment of the 2025 one-time income, not recurring profit |
| Operating loss in land and development | $1.748 million | The land is already weighing on earnings before finance costs |
| Net loss in land and development | $5.123 million | The cost of waiting reaches the segment bottom line |
| Draw from the MB credit facility | About $3m | Liquidity exists for the project, but the draw is not proof of value |
The table does not say the land is worthless. It says something more precise: the value still sits on the balance sheet, while the cost has already moved into profit and loss. Real-estate inventory remained $134.0 million at both year-end 2025 and March 31, 2026, and the latest MB valuation still relates to September 30, 2025. In other words, the quarter did not provide a valuation update that settles the quality of the land. It did provide an important update on the quality of holding it: without meaningful development activity, the waiting period is no longer only an accounting issue.
The credit facility does not change that conclusion by itself. The company drew about $3m from the MB facility and still had about $97m available and undrawn. That gives the ability to finance the interim period, but it does not prove the land is moving toward a new economic path. If the money mainly funds time, interest and carrying costs, it buys optionality, not a result.
Resuming Capitalization Would Matter More Than Another One-Time Income Line
The next proof point for MB is not another small amount of forfeited advances. The $0.641 million income line in the current quarter shows that similar reimbursements can still appear, but it does not change the quality of the asset. What could change the read is a return of project activity to a level that again justifies capitalization, or concrete disclosure on an alternative route after the failed casino path.
The problem is not that the company is reviewing alternatives. The problem is that the capitalization stop currently acts as an accounting signal of immaturity: management cannot yet present MB as a project advancing at a pace that justifies building costs into inventory. As long as that remains the case, the next reports will be assessed less by whether inventory stays at $134.0 million and more by whether MB costs continue to appear as quarterly expenses.
The strongest counterpoint is that the stop may be temporary. If a clear plan, partner, financing package or resumed activity appears during 2026 and allows capitalization to resume, the first quarter will look like a short bridge period after the casino failure. But if MB continues to combine a high inventory balance, an available credit facility and costs charged to earnings, the land option will look less like an asset waiting for value creation and more like an asset weighing on earnings quality.
The Accounting Income Is Gone, and MB Needs a Development Path
MB can still create value, but the first quarter makes clear that the value is not currently accessible through the financial statements. In 2025, forfeited advances created accounting income that masked part of the waiting cost. In Q1 2026, capitalization stopped, one-time income almost disappeared, and the segment posted a $5.123 million net loss. From here, the checkpoint is clear: resumed capitalization, a stable valuation cycle or an execution plan with financing and a partner would put MB back on the path of an active option. Without one of those, the land will remain on the balance sheet, but earnings are already paying for the wait.
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