Kardan Israel in the First Quarter: Apartment Sales Jumped, but Cash Still Has to Reach the Parent

The first quarter improved the business headline for Kardan Israel, but it did not close the parent-level cash gap. Apartment sales jumped to 116 units, Kfar Saba received an occupancy approval and began handing over space, and Kardan Real Estate approved a dividend whose company share is NIS 17.8 million after the balance-sheet date. These are real advances on issues that were left open after the previous annual analysis. Still, the group moved to a NIS 9.7 million net loss, operating cash flow was negative NIS 85.9 million, and the solo working-capital deficit remained about NIS 197 million. The quarter proves that projects are moving. It does not yet prove that value is moving up to the parent quickly enough to reduce financing risk. From here, the key questions are whether the sales are collected, whether Serverz begins to generate recurring revenue, and whether Shoham moves toward a customer or financing structure that narrows the gap between project value and accessible cash.

Kardan Is Primarily a Value-Access Story

Kardan Israel is a hybrid holding company and real-estate developer. It holds about 59.41% of Kardan Real Estate, while also directly holding logistics and data-center real-estate projects. Its economics therefore operate on two layers: below the parent are projects that need land, construction, funding and long timetables, and above them is a parent company that needs value to flow upward through dividends, loan repayments, asset sales, or assets that can support financing.

The simple sector tag, real estate and construction, misses the real engine. Kardan is an asset and financing machine: residential and logistics development create inventory and backlog, data centers create revaluation and future-income optionality, and El Har adds a construction arm with a large backlog but high sensitivity to labor, execution pace and profit estimates. In this model, debt, working capital and guarantees are not background noise. They are part of how the business moves forward and part of the reason value is not always accessible to shareholders.

This quarter touches three open checkpoints from prior coverage. In residential, 2026 had to show whether demand was really recovering. In data centers, Kfar Saba had to move from an appraised asset toward delivery and leasing. At the solo level, the parent had to show a new cash source, not only continued financing against assets.

Apartment Sales Recovered, but Have Not Yet Become Cash

Selling 116 apartments in the quarter is a sharp change versus 32 units in the first quarter of 2025 and 52 units in the fourth quarter of 2025. On the surface, that can look like a demand inflection. In Kardan's case, the next check is what kind of sale it was and what happens afterward: revenue recognition, collection and margin.

A large share of the jump came from Kiryat Gat: during the quarter, 14 free-market units and 85 target-price units were sold there, and after the balance-sheet date another 92 units were sold in that project. That is good for the marketing pace and reduces unsigned inventory, but it also changes the comparison base. A target-price sale is not economically identical to a free-market sale, and the mix matters when testing whether the improvement is in unit volume, price, margin or cash flow.

The gap already appears in the results. Consolidated revenue rose only to NIS 131.0 million from NIS 127.0 million in the comparable quarter, while gross profit fell to NIS 17.0 million from NIS 24.6 million. Operating profit declined to NIS 2.6 million from NIS 10.7 million, and finance expenses almost doubled to NIS 23.8 million from NIS 12.9 million. The result was a NIS 9.7 million net loss, compared with a NIS 4.6 million net profit in the comparable quarter.

Payment terms remain a yellow flag. The Banking Supervision Department's draft temporary instruction from March 23, 2025 restricts financing for deferred-payment apartment sales and bullet or balloon loans through the end of 2026, and Kardan Real Estate granted 80/20 promotions to some buyers in 2025 and in the first quarter of 2026. The sales jump is therefore a positive signal, but it still has to become collections and profitability without broader use of commercial flexibility.

Kfar Saba Crossed a Step, Shoham Remains an Option Under Construction

There was real progress in data centers: in March 2026, the Kfar Saba project received occupancy approval, and the company began handing over space to buyers and tenants. This moves the project from valuation and planning toward delivery and operation, exactly the missing point in prior coverage.

Even here, the route to cash is gradual. Serverz, the partnership that builds and operates the Kfar Saba data center, leases the data-center space from the project partners. The lease was signed in August 2025, became effective at the beginning of 2026, and runs for 24 years and 11 months, including the option period, for about NIS 6.8 million per year indexed to CPI. At the same time, Serverz recorded a NIS 2.3 million loss in the quarter, with the group's share of the loss at NIS 0.8 million. Kfar Saba is beginning to look like an operating asset, but not yet like a full profit source.

The more important note-level finding is the Kfar Saba mediation agreement. Kardan-Gevay had previously paid betterment levies, usage fees and permit fees under protest. In March 2026, mediation with Rani Zim ended, and Kardan-Gevay's share of the liabilities was set at NIS 6 million, about 20% of the charges. During the quarter, it received a NIS 9.5 million refund for excess amounts paid, and it was also agreed that only in limited cases would Kardan-Gevay participate in up to 20% of future data-center costs. That reduces future friction in an asset where market attention tends to focus on value and capacity, not on liability allocation between partners.

Shoham is less settled. The final building permit was received in January 2026, the structure and envelope of two out of the three planned data-center facilities are under construction, and the project was revalued at year-end 2025 to a fair value of about NIS 489 million, with the company's share at about NIS 163 million. Q1 did not add a new anchor customer contract or new Shoham revenue disclosure. Shoham therefore remains a large value option, but one that still has to pass through a customer, financing and operation before it can support the solo layer with cash.

Solo Improved Slightly, but Debt Still Sets the Pace

When analyzing Kardan, it is important to separate project-level cash generation from all-in cash flexibility after the actual cash uses of the period. In Q1, the second frame matters more. On a consolidated basis, operating activity consumed NIS 85.9 million, mainly due to a NIS 35.7 million increase in apartment, logistics and land inventory, a NIS 28.6 million decline in land-purchase liabilities, and a NIS 17.7 million increase in receivables and contract assets. Financing activity contributed NIS 47.8 million, mainly from NIS 111.7 million of new long-term loans alongside NIS 62.3 million of short-term credit repayment. Consolidated cash fell to NIS 196.9 million at quarter-end from NIS 242.4 million at the beginning of the year.

At the solo parent level, there is improvement, but not enough to change the picture by itself. Parent cash rose to NIS 14.5 million from NIS 2.6 million at the end of 2025, and there was a NIS 17.8 million dividend receivable from Kardan Real Estate, received in April. Solo operating activity even generated NIS 12.5 million, compared with a NIS 36.4 million cash burn for all of 2025. Against that, the solo working-capital deficit still stands at about NIS 197 million.

The pledged-share position also illustrates the practical limit on value access. Out of about 111.1 million Kardan Real Estate shares held by the company, 24.2 million are pledged to Series E bondholders and another 55.9 million are pledged to banks and financial institutions. About 31.0 million shares are unpledged. There is a meaningful listed asset, but a large part of it already supports the financing structure.

The first quarter turns 2026 into a proof year. The positive side is clear: residential sales recovered, Kfar Saba received occupancy approval, the Serverz lease is already effective, and the Kardan Real Estate dividend slightly strengthens the parent. The burden is just as clear: profitability weakened, finance expenses rose, consolidated operating cash flow remained negative, and Shoham still did not present a new anchor contract. The counter-thesis is that the quarter mainly reflects timing, because the dividend was received in April, Kiryat Gat sales should enter revenue later, and Kfar Saba has started delivery. That is still not enough. For the read to improve, project value has to move up to the solo layer faster than debt and working capital require funding.