Ofek Group in the First Quarter: Regus Could Add Profit, Debt Repayment Depends on Financing and Asset Sales
Ofek Group opened 2026 with higher revenue from the Lishanski project, a NIS 5.5 million loss and negative operating cash flow. The Regus memorandum adds potential operating profit from the second year, but debt repayment still depends mainly on Lishanski releases, credit lines and asset-sale or refinancing moves in 2027.
Ofek Group opened 2026 with a quarter that makes the company easier to read as a credit story than as a normal profit-and-loss story. Revenue rose to NIS 6.3 million, mainly from revenue recognition on the Lishanski project, but gross profit fell to NIS 0.3 million and the group reported a NIS 5.5 million comprehensive loss. Part of the margin pressure is not simply a collapse in project pricing. It reflects the sale of a commercial unit that had previously been classified as investment property and was transferred to inventory at fair value, which raised the accounting cost recognized on sale. The memorandum of principles with Regus can improve the value of the income-producing part of Lishanski and add operating profit from the second year, but it is not yet legally binding and the company will bear the fit-out and furnishing costs. On the balance-sheet side, Series A bond covenants are still met, but the auditors draw attention to the planned funding sources and the uncertainty attached to them. The proof points for the next few quarters are therefore not another revenue line from Lishanski, but a definitive Regus agreement, construction financing for Mega Ashdod, releases from the Lishanski escrow account, and asset sales or refinancing before the 2027 and 2028 bond repayments.
Revenue Rose While the Commercial Unit Absorbed the Margin
The company is a small real estate developer that became a bond company after issuing NIS 64 million of Series A bonds in June 2025. The analytical weight therefore sits at the intersection of three items: construction and marketing progress at Lishanski, the Ashdod hotel assets that still require financing and development, and the bond repayment schedule. This is an income-producing and development real estate business, but at this stage it works mainly as a project-finance machine: assets need to progress, be sold, receive bank financing or become rental income in order to service debt.
First-quarter revenue totaled NIS 6.3 million, compared with NIS 4.1 million in the comparable quarter on adjusted comparison data. Revenue from sales of office and parking inventory totaled NIS 5.4 million, while rental and management fees added NIS 0.9 million. That looks like progress, but gross profit fell to only NIS 0.3 million, compared with NIS 1.2 million in the comparable quarter. The important explanation is not just high cost of sales. It is an accounting classification issue: a commercial unit at Lishanski, covering about 180 square meters with a right to use an outdoor area of about 195 square meters, was sold after previously being carried as investment property, and the cost entering the income statement was the fair value at the change-of-use date.
That means the income statement still does not provide full proof of project margin quality. On the sales side, Lishanski is progressing: the marketing rate as of March 31, 2026 was 27%, and cumulative signed contracts amounted to about NIS 42.9 million for offices, NIS 7.2 million for commercial space, NIS 3.9 million for parking spaces and NIS 0.4 million for storage units. On the completion side, the project still needs cash: the remaining cost to complete the development portion is about NIS 39.8 million, and expected construction completion is July 2027.
| Lishanski in the First Quarter | Key figure | Credit relevance |
|---|---|---|
| Budget completion rate in the income-producing portion | 63.18% | The project is advancing, but not yet producing full free cash |
| Remaining cost to complete the development portion | NIS 39.8 million | Completion still needs financing, buyer receipts and cost control |
| Cumulative marketing rate | 27% | Sales exist, but most office space is still not under contract |
| Cumulative office contracts | NIS 42.9 million | A signed revenue base, but not enough by itself to cover the full funding need |
| Expected construction completion | July 2027 | The same window in which the first bond principal repayment approaches |
Regus Improves Lishanski Visibility Only After a Definitive Agreement
The most interesting business event came after the balance-sheet date. Ofek Lishanski signed a memorandum of principles on April 20, 2026 with Regus, part of IWG, to operate a shared-workspace center covering about 1,300 square meters and about 30 parking spaces in the Lishanski project. The company estimates that the center will generate about NIS 4 million of operating profit from the second year onward.
That matters because it connects the income-producing part of Lishanski with an operator that already has a platform. Regus operates 20 shared-workspace centers in Israel and belongs to an international group operating more than 3,000 workspaces worldwide. For an office and commercial project under construction, that improves the likelihood of future rental income and can support the company's ability to present future cash flow to lenders.
The agreement is not yet closed. The memorandum is not legally binding and remains subject to a definitive agreement. Ofek Lishanski will also bear the fit-out and furnishing costs according to IWG specifications. The same move that can add future operating profit therefore also requires interim investment. This is not signed cash that already covers debt. It is an improved probability that Lishanski's income-producing component will have a clearer commercial use.
This detail changes the near-term market read. If the memorandum becomes a definitive agreement, Lishanski gains an operating anchor that can support refinancing against the income-producing property. If the agreement is delayed or requires higher fit-out costs, the future operating profit remains a target rather than available cash.
Bond Repayments Depend on a Funding-Heavy 2027
The most important part of the report is not the loss line. It is the forecast cash flow. The auditors drew attention to the company's financial position, its plans, the planned funding sources and the uncertainty attached to them. The company also reports a warning sign because working capital was negative by about NIS 1.4 million as of March 31, 2026, and working capital for the 12-month period was negative by about NIS 24 million.
The right frame is all-in liquidity after actual cash uses, not recurring operating cash generation alone. In the first quarter, operating cash flow was negative by NIS 3.0 million, investing activity used NIS 0.8 million, and financing activity provided NIS 4.1 million. The cash balance at the end of March was only NIS 1.2 million. That is not an immediate failure because the company presents expected sources and credit lines, but the weight moves from current operations to execution on financing and asset-sale transactions.
For 2026, the forecast cash flow relies, among other sources, on NIS 11 million of construction financing for Mega Ashdod, NIS 9.7 million of releases from the Lishanski escrow account and a NIS 12 million credit line from a non-bank lender. On May 31, 2026, the company received financial-institution approvals for credit lines totaling NIS 12 million, which strengthens the 2026 forecast.
The 2027 picture is broader and more complicated. Forecast sources include NIS 33 million of Mega Ashdod construction financing, NIS 26 million from Lishanski releases, NIS 10 million from a Tourism Ministry grant or bridge loan, NIS 23 million from the sale of 50% of the Gali Hayam asset after zoning-plan approval, NIS 12.9 million of bank financing against the remaining 50% of Gali Hayam, NIS 26 million of financing against the income-producing property at Lishanski, and NIS 15 million of net profit from the sale of additional Lishanski rights. Against that stand NIS 12.7 million of interest payments, repayments to lenders, NIS 33 million of Ashdod construction costs, and a NIS 32 million Series A bond principal repayment.
Covenants show the company is not close to a current breach. Equity stood at about NIS 39 million versus a NIS 25 million threshold, the collateral-to-debt ratio was about 116% versus a 100% threshold, and equity to total assets stood at about 19% versus a 13% threshold. The bonds are unrated, and the main collateral is a pledged account and a pledge over Lishanski project surplus. The focus is therefore not only formal covenant compliance, but the pace at which surplus, financing and asset sales become cash before the repayment dates.
Signatures and Financing Will Decide Whether Lishanski Turns Into Cash
The first quarter gives Ofek several supports, but it does not settle the credit story. Lishanski is advancing, the Regus memorandum was signed, NIS 12 million of credit lines were approved after the balance-sheet date, and the company is meeting bond covenants. At the same time, low gross profit, negative operating cash flow, the auditor emphasis paragraph and a forecast that depends on several future sources show that the company is in a funding transition year.
The current read is cautious. The main asset is progressing, but creditors need to see that progress turn into liquid sources. Three items will change the picture over the next few quarters. The first is a definitive Regus agreement and a clearer view of fit-out costs. The second is completing Mega Ashdod bank financing on terms that allow construction without pulling additional cash from the parent company. The third is evidence that 2027 sources, mainly Lishanski releases, sale or financing of Gali Hayam and refinancing against the income-producing property, are moving before the first bond principal repayment. Without that, future Regus operating profit is a positive business story, but not a sufficient answer to the debt schedule.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.