Ram Aderet in the First Quarter: Sales Lean on Financing Terms While Debt Still Sets the Pace

In the first quarter of 2026, Ram Aderet moved back to net profit, lifted its contracted sales pace, and completed an important financing step through Series D bonds, but the report still does not show a full move from project financing to released cash. Net profit of NIS 7.5 million relied on an accounting gain of about NIS 12.1 million from a business combination, while the underlying business still posted an operating loss and net finance expense rose to NIS 7.0 million. Contracted sales look stronger, with 75 apartments sold from January to March versus 60 in the comparable period, but about 66.5% of sales excluding Mehir Lamishtaken were made under favorable financing terms. That does not cancel the demand signal, but it changes the quality of that demand: the company is selling, and in many cases it is also helping finance the buyer in one form or another. On cash flow, the company says operating cash flow was positive after excluding the Petah Tikva land purchase, yet all-in cash flexibility after actual cash uses still depends on debt issuance, a locked deposit pending the Havatzelet permit, and continued lender consent. The bank waiver on the equity-to-net-balance-sheet ratio, together with the Havatzelet credit extension to June 30, 2026, leaves the read close to the one from the prior annual analysis: operational progress exists, but value still has to pass through permitting, project finance, collection, and surplus release.

The Business Is Selling Apartments, but the Economics Sit Between Land, Permits, and Project Finance

The company has two connected engines: residential development and construction contracting, mainly for projects owned by the company and its partners. That is why the top line alone is not enough. A residential developer can show sales, gross profit, and expected surpluses, but creditors and investors get a cleaner view only when projects move from land and marketing into bank accompaniment, revenue recognition, collection, and actual surplus release.

That structure explains why this quarter matters. In one quarter the company increased contracted sales, bought new land in Petah Tikva, consolidated for the first time a company in which it already held 90%, and continued to rely on interim financing arrangements in key projects. There is no active listed equity layer that lets investors read the company through a normal market multiple. The economic read runs mainly through access to debt, collateral quality, the pace of surplus release, and the ability to avoid a stretched working-capital position until projects mature.

The part that is working now is the sales pace in several projects. Havatzelet in Netanya, for example, reached 123 sold apartments out of 192 apartments being marketed, a 64% sales rate, although the project table still shows no construction completion rate. In Lod, Kiryat Gat, and Jerusalem, several projects already show higher sales rates in projects that are moving through construction. The difficult question is not whether units are sold, but under what terms they are sold, when revenue is recognized, and how much cash remains after banks, bondholders, and the cost of new land.

Sales Rose, but a Large Share Requires Customer Financing

The visible positive is that apartment sales strengthened. The company signed 75 apartments from January to March 2026, versus 60 apartments in the comparable period of 2025, and the financial volume at the company's share rose to NIS 142.0 million from NIS 107.4 million. From April 1 through shortly before publication, another 8 apartments were sold for NIS 17.8 million.

The less comfortable data point is sales quality. Of sales excluding Mehir Lamishtaken, about 66.5% of the quarter's sales volume used favorable financing terms, for a financial volume of NIS 115.4 million. Within that, 43.6% of transactions used contractor loans, 18.8% combined a contractor loan with a significant financing benefit, and another 4.1% used a significant financing benefit only. In other words, the sale does not always stand on regular price and payment terms. A large part comes with financing relief that helps preserve sales pace, but can delay collection, weigh on working capital, or weaken cash quality until delivery.

This is a growth-quality issue, not a minor commercial footnote. When a residential developer increases sales through favorable financing terms, the question shifts from signing pace to who funds the period between contract and cash. If buyers pay later or receive financing support from the company, part of the strength moves from pure demand to the balance sheet. The next reports need to show whether those sales turn into revenue and collection without requiring more credit usage or further land-financing extensions.

Profit Turned Positive, but Operations Still Do Not Cover Financing

Consolidated revenue rose 5.0% in the quarter to NIS 152.0 million. Apartment-sale revenue was almost unchanged, at NIS 104.5 million versus NIS 103.8 million, while construction revenue rose to NIS 47.4 million. Gross profit improved to NIS 10.0 million, mainly due to the residential development segment, where gross profit rose to NIS 19.9 million and the gross margin reached 13.3%, versus 8.3% in the comparable period.

But that improvement did not reach operating profit. Selling and marketing expenses almost doubled to NIS 3.0 million, general and administrative expenses rose to NIS 8.3 million, and the company still ended the quarter with an operating loss of NIS 1.2 million. That matters: the business improved at the gross-profit level, but it still did not produce operating profit sufficient to absorb finance costs.

The move to net profit mainly came from a NIS 12.1 million gain from a business combination. The company already held 90% of the development-and-construction subsidiary, and on March 31, 2026 an amendment to the shareholders' agreement changed the decision-making mechanism from unanimous approval to ordinary majority. As a result, the company gained control and began consolidating the activity instead of accounting for it as an equity-method investment. That kind of move increases control and consolidated reporting, but it is not cash. It also brings assets and liabilities onto the balance sheet, including NIS 89.2 million of buildings inventory, NIS 68.3 million of land inventory, and NIS 87.4 million of bank loans.

So the net profit is a limited positive signal. It improves equity, but it does not prove that the base business is already profitable after financing. If the gross-profit improvement continues, marketing expenses stabilize, and finance costs decline with interest rates, the picture can improve. For now, the quarter proves the accounting value of the control change and the progress in development more than clean operating profitability.

All-In Cash Still Depends on Financing

The cash analysis needs two separate frames. Under normalized cash generation, the company notes that operating cash flow was positive after excluding the Petah Tikva land purchase of about NIS 100 million. That is positive: the existing activity did not necessarily burn cash before the new land purchase. Under all-in cash flexibility after actual cash uses, the Petah Tikva purchase does count, because it is real cash that left the system. On that basis, operating cash flow was negative NIS 80.9 million, investing cash flow was negative NIS 57.6 million, and the dependence on financing stayed high.

The cash picture was built this way: negative operating cash flow of NIS 80.9 million, negative investing cash flow of NIS 57.6 million, mainly due to the roughly NIS 53 million Series D deposit held in trust, and positive financing cash flow of NIS 148.6 million from Series D and higher short-term credit. The sources presented by the company explain the near term, but also the friction. It has NIS 13.3 million of cash and cash equivalents at the solo level, about NIS 53 million of Series D proceeds that will be released only after a full building permit for Havatzelet, NIS 23.7 million of unused credit facilities, and expected project surpluses of about NIS 655 million from projects under execution, of which about NIS 415 million have already been pledged to bondholders. That is a meaningful source base, but part of it is conditional, part of it is pledged, and part of it depends on project execution.

Debt remains the layer that sets the pace. Short-term bank and other credit rose to NIS 660.3 million, and long-term loans rose to NIS 79.4 million, mainly because of the loan used to acquire the Petah Tikva land. In parallel, Series D added NIS 107.75 million par value of debt at a 6.9% annual coupon, but only half of the proceeds were transferred to the company in March. The rest depends on a full Havatzelet permit, and if the building permit is not received within six months from the trust deed date, the Series D coupon rises by 0.125% until the permit is received or until repayment.

The more worrying event is that the bank waiver did not disappear. Under the Aderet Ganei Ayalon project finance agreement in Lod, the company met the minimum equity covenant, with NIS 190.2 million versus a NIS 185 million requirement, but the equity-to-net-balance-sheet ratio stood at 14.2% versus a 17% requirement. The company received a waiver for the March 31, 2026 financial statements. By contrast, the company is in compliance with the Series D bond covenants, where the equity-to-net-balance-sheet ratio must not fall below 12%, equity must not fall below NIS 130 million, and the net-debt-to-collateral ratio for Havatzelet must not exceed 82.5%. That gap matters: the bond market sees relative cushion, but the bank still requires a waiver in a specific project finance layer.

Interest rates provide only partial relief. The company has prime-based loans of about NIS 740 million, and every 0.5% decrease in the Bank of Israel rate is expected to reduce annual finance expenses by about NIS 3.7 million, assuming the same debt volume. On the other side, it has interest-bearing deposits of NIS 69.2 million that offset part of the effect. Lower rates can help, but they do not replace permits, project finance, and surplus release.

Conclusion

The first quarter strengthens the view that the company is making business progress, but remains in an interim financing period. Contracted sales rose, the development segment improved, and net profit turned positive, but sales rely heavily on favorable financing terms and net profit relies on an accounting gain from a business combination. On cash, the report offers two different stories: existing activity that can look positive after excluding the Petah Tikva land purchase, and all-in cash flexibility that still requires debt, a locked deposit, and lender consent.

The current conclusion is that the company opened 2026 better in terms of sales and project visibility, but has not yet proven that sales become accessible cash fast enough to reduce reliance on interim financing. The positive case is that the Petah Tikva land, the consolidation of the development-and-construction subsidiary, Havatzelet's sales pace, and falling rates can turn the year into a positive proof year if permits and project finance progress on time. Over the next few quarters, market interpretation will depend less on the net profit itself and more on four items: receiving a full Havatzelet permit and releasing the remaining Series D proceeds, a more stable solution for the bank equity-to-net-balance-sheet ratio, a lower share of sales under favorable financing terms or evidence that those sales are collected normally, and actual surplus release from projects already under execution. If those arrive together, this quarter will look like a constructive transition stage. If not, the report will mostly remain part of the same story: a lot of activity on paper, while the route to free cash still runs through the lenders.