Megurit in the First Quarter: New Apartments Nearly Doubled NOI and Refinancing Rests on Free Collateral
Megurit opened 2026 with NOI of NIS 33.9 million, up 79%, and operating cash flow of NIS 19.1 million. The step-up mostly comes from apartments entering the portfolio and delay compensation, while 2026 maturities still require free collateral, new debt and open capital-market access.
Megurit gives the first quarterly proof that the 2025 expansion of its residential rental portfolio is starting to reach NOI, meaning property rental profit before financing and corporate overhead. NOI rose to NIS 33.9 million, almost 1.8 times the parallel quarter, and operating cash flow rose to NIS 19.1 million. That is real progress versus the issue raised in the previous annual analysis: the portfolio is larger and is beginning to produce more operating cash. The part that keeps the quarter from being a clean story is the source of the increase. Same property NOI grew only 4.5%, part of total growth came from compensation for delivery delays, net finance expense rose to NIS 23.0 million, and the company kept buying apartments at scale. The quarter improves the thesis, but does not settle it. The next read will depend on the occupancy pace of new apartments, refinancing 2026 bond maturities on reasonable terms, and keeping operating cash flow above the dividend while acquisitions continue.
New Apartments Made the Portfolio More Income-Producing
Megurit is a residential REIT in Israel. It buys, develops and rents residential apartments, and its value is built through two layers: rent and occupancy that produce recurring NOI, and apartment value that supports equity and debt collateral. Debt, pledges and bond refinancing are normal in income-producing real estate. What is unusual this quarter is that the operating step-up is already visible, while it is still too early for that improvement to carry the full capital structure by itself.
As of March 31, 2026, the company held 2,412 housing units in 47 projects: 1,602 income-producing units and another 810 units in development or construction. After the balance-sheet date, Megurit added 44 units in the Enav 360 project in Kfar Saba, bringing contracted projects to 2,456 units. Occupancy in existing projects was about 100% near publication, and about 94% across all projects because newly received apartments were still in initial marketing. The problem is not apartment demand. The bottleneck is timing: how fast new apartments become fully leased, and how much of that surplus remains after financing, management fees, acquisitions and dividends.
Rental revenue in the quarter was NIS 29.7 million, compared with NIS 18.6 million in the parallel quarter. Rental profit, property operation and delay compensation totaled NIS 33.9 million, compared with NIS 19.0 million. The growth came from 4 new income-producing projects with 187 apartments, 4 projects reclassified into investment property with 375 apartments, 2 projects reclassified from property under construction with 163 apartments, delay compensation and higher rent.
The filter for growth quality is same property NOI, meaning NOI from assets that operated in both periods after initial marketing. It rose to only NIS 18.3 million, up 4.5% year over year. That does not make the total step-up weak. It means the step-up mostly reflects new assets entering the portfolio. If the new apartments reach full occupancy and remain in the portfolio for a full quarter, total NOI should become more recurring and less dependent on delivery events.
Delay compensation adds a layer that needs careful reading. In the first quarter, the company received NIS 5.8 million for delays in 5 projects, compared with NIS 4.5 million in all of 2025 and NIS 6.8 million in all of 2024. Cumulative delay compensation reached NIS 17.1 million by the end of March 2026. The company also describes an income shortfall of about NIS 4.5 million because of delayed apartment receipt, and is pursuing 5 claims against developers. So the compensation is not a clean bonus. It replaces part of the rent that did not arrive on time and keeps part of NOI tied to delivery pace and legal collection.
Accounting Profit Helps Equity More Than It Proves Cash
Net profit in the quarter was NIS 36.2 million, double the parallel quarter. Its composition is less comfortable than the headline number. Fair-value adjustments contributed NIS 40.0 million, more than total net profit, while net finance expense rose to NIS 23.0 million and general and administrative expenses rose to NIS 12.0 million. The implication is simple: the revaluation supports equity and collateral, but it is still not a substitute for recurring cash flow that can pay debt and dividends.
The fair-value adjustment table sharpens the point. This was not a broad revaluation of the whole portfolio in one direction, but a set of specific properties and transactions:
| Source of fair-value adjustment in the quarter | Fair-value adjustment | What it means |
|---|---|---|
| Neve Zemer, Ra'anana | NIS 17.3 million | New income-producing asset acquired in the quarter |
| MOMA Florentin, Tel Aviv Jaffa | NIS 11.9 million | New acquisition adding value before full rental contribution |
| Ramat Hasharon Stage C | NIS 11.0 million | Value based on a prior appraisal and a no-change letter |
| HaSolalim, Tel Aviv | NIS 5.8 million | Some apartments were received in the quarter, the rest after the balance-sheet date |
| Electra Mul Hanof and Lev Ganei Tikva | NIS 11.2 million negative | Not every asset contributed to the positive revaluation |
This is the point the market could flatten. The positive revaluation improves equity, which rose to NIS 2.16 billion, and the equity-to-balance-sheet ratio, which stood at 30.17%. That matters for financing. At the same time, operating cash flow of NIS 19.1 million is the number that starts answering whether the portfolio can support the debt and distribution layer. In this quarter, it covered the cash dividend paid, NIS 16.1 million, but it did not fund the full set of cash uses: investing activity consumed NIS 504.2 million, mainly advances and investment property acquisitions, and the company needed NIS 498.9 million from financing activity.
This cash distinction matters. In recurring operating cash generation, the quarter improved. In all-in cash flexibility after actual cash uses, including investments, dividends, repayments and debt and equity issuance, Megurit still depends on the capital markets and the banking system to keep growing the portfolio and refinancing debt.
2026 Refinancing Rests on Free Collateral and New Debt
The note on the gap between current assets and current liabilities is where the quarter shifts from an operating story to a financing story. The current gap was about NIS 1.359 billion. The main pressure points are near maturities: about NIS 51 million of Series H in June 2026, about NIS 498 million of Series E in September 2026, about NIS 374 million of Series F in December 2026, and about NIS 577 million of Series D in March 2027. In addition, NIS 110 million of short-term bank and institutional credit was repaid at the end of April through a new NIS 112 million bank loan.
The company does have sources. In the quarter it raised NIS 441.5 million gross in Series K and NIS 153.3 million gross through an expansion of Series I. It also raised about NIS 147.5 million in a private placement and NIS 130.8 million gross through a rights offering. After the balance-sheet date, it issued unsecured Series L bonds with NIS 330.5 million par value and net proceeds of NIS 295.6 million, at an effective CPI-linked rate of 4.02% after splitting the proceeds between liability and equity components. Series L pushes part of the load forward: it amortizes between 2028 and 2034 and is not secured by collateral.
The other source is free collateral. The company held pledgeable assets of about NIS 1.226 billion, made up of unpledged Sale Law guarantees of about NIS 119 million and unpledged real estate of about NIS 1.107 billion. By signing, that amount rose to about NIS 1.295 billion, mainly because unpledged Sale Law guarantees rose to about NIS 188 million. The company also had NIS 80 million of unused bank credit lines.
The more important financing source lies in the value of assets pledged to Series D, E and F. Their value was about NIS 1.886 billion against liabilities of about NIS 1.449 billion. The company says that based on the 80% financing ratio it has commonly used in past bond issuances, it could raise about NIS 1.509 billion against those assets. That is the number supporting the refinancing plan. It also frames the risk: if debt-market terms, asset values or available collateral move against the company, the cushion narrows quickly.
What Will Decide the Next Quarters
The first quarter gives Megurit a better starting point than it had at the end of 2025. The portfolio is larger, new apartments are already moving NOI, operating cash flow improved, and the debt market opened to it after the balance-sheet date even through an unsecured series. That is real progress versus the question raised in the previous financing analysis: whether the fundraising package merely deferred pressure or genuinely created time and flexibility.
The reservation is not that the company is failing to advance. It is advancing, and the quarterly numbers prove it. The constraint is that the model still needs three things at once: rapid apartment absorption, large debt refinancing without a sharp loss of collateral flexibility, and a dividend that does not run ahead of cash flow. Over the next quarters, stronger contribution from new projects, fewer vacant apartments in marketing and reasonable refinancing terms for Series E and F would strengthen the read. Further delivery delays, higher bond yields or another equity raise needed to meet the maturity schedule would weaken it. For now, the quarter says NOI has started to work. It does not yet say financing has stopped defining common-shareholder value.
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