YBOX in the First Quarter: Removing Gat Rimon’s Office-Sale Condition Shifts the Load to Permits and Debt

YBOX reported a first quarter that moves Gat Rimon closer to execution and makes the balance sheet’s cash dependency clearer. The financing credit committee agreed to remove the requirement to sell 30% of the office space, and the company expects the full building permit during the second quarter of 2026 after paying the relevant fees and levies. That improves the path into project financing at Gat Rimon, from which the company expects about NIS 19.7 million in 2026 after entry into financing. At the same time, the company sold 15 apartments from the start of the year through the report date, compared with 4 in the comparable period, so demand has not disappeared. The quality of those sales still needs attention: most sold-but-not-delivered apartments carry 15%-20% upfront payments and a large balance near delivery, without purchaser underwriting by the company. The quarter is therefore a tight execution calendar in which the permit, the amended financing agreement, bond issuance and project surpluses must arrive before operating cash flow stops consuming cash. The near-term market read will be changed by actual cash access: a full Gat Rimon permit, debt issuance that covers 2026 needs, a signed Wallenberg lease and collection from buyers under deferred payment terms.

Gat Rimon Moved Forward in Financing Before Receiving a Full Permit

For YBOX, quarterly profit is not the right starting point. This is an urban real-estate developer with a large project inventory, assets under development and rental assets, and its economics are driven by three checkpoints: permits, entry into bank or non-bank project financing, and conversion of signed sales into cash that reaches the company. At the end of March 2026, the balance sheet included real-estate inventory of about NIS 1.006 billion, investment property of about NIS 313.6 million and revalued property, plant and equipment of about NIS 124.5 million. Against that asset base, cash stood at only NIS 9.9 million.

The natural continuation of the previous annual analysis is whether 2026 has started to close the three open gaps from the end of 2025: Gat Rimon, Wallenberg and project surpluses. The first quarter gives a partial answer. Gat Rimon advanced on one critical point because the financing credit committee approved the cancellation of the requirement to sell 30% of the office space. That condition is especially heavy in a mixed-use project because apartments, hotel space and offices do not share the same market or monetization pace.

The relief does not replace the permit. The company has paid the fees and levies for the full building permit and expects it during the second quarter of 2026. The amended financing terms still depend on receipt of the permit by June 30, 2026 and on signing the financing amendment. Series F bonds are already carrying the cost of the delay: the failure to receive the full permit by January 30, 2026 increased the interest rate by 0.3% from that date. In cash terms, Gat Rimon moved from a visible office-sale hurdle to a permit-and-financing amendment hurdle that now determines when cash reaches the company.

The project appendix explains why that matters. Gat Rimon had signed contracts representing about NIS 288 million by the end of March, about 51% of expected project revenue, and the company sold another 4 apartments after the balance-sheet date for about NIS 22 million excluding VAT. On the cost side, the completion rate excluding land was only 17%, and remaining costs were estimated at about NIS 166.7 million. There is better visibility on financing and marketing, not an immediate move into a project that generates free cash.

Sales Recovered Through Payment Terms That Delay Much of the Collection

The strongest commercial figure in the quarter is the sales pace. From the start of 2026 through the report date, the company sold 15 apartments in the Galipoli, Tur Malka, Yad LaBanim and Gat Rimon projects, compared with 4 apartments in the comparable period. For one quarter, that is real improvement, especially for a company whose balance sheet needs sales to support project financing and debt issuance.

The quality of sales is less clean than the quantity. The company says that, like other developers, it grants buyers indexation exemptions and more convenient payment terms. Of the apartments sold and not yet delivered, 27 apartments totaling about NIS 85 million excluding VAT require a 15%-20% payment near signing and the balance near delivery. Another 34 apartments totaling about NIS 239 million excluding VAT require a first 15%-20% payment, an additional payment according to construction progress and the balance near delivery. Together, those two groups represent 61 apartments and about NIS 324 million excluding VAT, with a large part of the consideration arriving later.

The company says the impact of a significant financing component in these payment-term transactions was immaterial in the quarter. The more important issue is collection and cancellation risk. The company does not underwrite buyers when granting these payment terms, and from the start of the year through the report date there was one cancellation totaling about NIS 3 million excluding VAT. In Yad LaBanim alone, one sale agreement totaling about NIS 3.5 million including VAT was cancelled in the quarter, after three agreements totaling about NIS 9 million including VAT were cancelled there in 2025.

That does not mean the sales are weak. They are stronger than last year. It means the next proof point moves from the sale agreement to the ability to collect the remaining consideration without widening concessions further and without increasing cash consumption on the way to delivery. That is why the gap between customer credit and supplier credit matters: in the first quarter, average customer credit was about NIS 20.0 million, compared with average supplier credit of about NIS 1.5 million. In a development company, this is where a signed sale can look good in the income statement while still requiring funding on the balance sheet.

Liquidity Relies on Bonds, Bank Credit and Surplus Releases

The first quarter shows improved revenue and gross profit, but not improved cash flow. Revenue was NIS 16.3 million, compared with NIS 5.9 million in the comparable period, mainly from progress at Tur Malka and new Galipoli sales. Gross profit rose to NIS 2.9 million, and the gross margin was about 18%. General and administrative expenses of about NIS 6.1 million and net finance expenses of about NIS 4.6 million left the company with a net loss of NIS 7.6 million.

Cash flow is the more important part of the quarter. Operating cash flow was negative by about NIS 34.1 million, after negative operating cash flow was also recorded in 2024, in 2025 and in each of the last six quarters. After net investing uses of about NIS 16.1 million and positive financing cash flow of about NIS 30.6 million, cash declined from NIS 29.5 million at the end of 2025 to NIS 9.9 million at the end of March 2026. This is not maintenance cash generation from a stable activity, but cash flexibility that mainly comes from debt issuance, credit lines and future project surpluses.

The company’s cash-flow forecast shows that structure clearly. From April through December 2026, it expects sources of about NIS 195.5 million and uses of about NIS 169.4 million, lifting year-end cash to about NIS 36.0 million. The largest source is bond issuance secured by project surpluses, totaling about NIS 147.3 million. The company also assumes NIS 20 million of bank credit and about NIS 19.7 million from Gat Rimon after entry into financing.

In 2027 the picture is tighter: the company presents sources of about NIS 289.7 million and uses of about NIS 294.8 million. Issuance remains central, with additional bond expansions totaling about NIS 146.1 million, alongside bank loans and surpluses from Galipoli, Tur Malka and Yad LaBanim. After the balance-sheet date, the company completed a private Series E expansion by NIS 29 million par value for gross proceeds of about NIS 28.7 million. That reduces immediate pressure, and it also proves that the forecast is not based only on operating profit.

The practical issue is the room for error. At the end of March the company had no unencumbered real-estate assets. Unused credit lines were about NIS 105 million at the end of March and about NIS 100 million at the report date, mostly at project companies. At the same time, short-term bank and non-bank debt stood at about NIS 345.1 million, and the company classifies Series E bonds as current debt because the main repayment falls in March 2027. The company says it does not expect material difficulty in obtaining credit or complying with financial covenants, but the 2026 and 2027 cash calendar requires an open debt market, permits and project surpluses close to the forecast pace.

Wallenberg and Demri BaIr Still Sit Above Current Cash Flow

Wallenberg sharpens the gap between value and income. The latest valuation at the end of 2025 was NIS 370 million plus VAT, and a May 2026 appraiser letter said there was no material change through the end of March. No lease agreements had been signed by the reporting period. After the balance-sheet date, the company reported talks to lease office space and parking. A signed contract can start turning appraised value into income, while discussions alone do not replace cash flow.

The Demri BaIr transaction also does not yet create certainty for shareholders. The company recorded advances of about NIS 23.0 million toward an investment in an associate, but the transaction to acquire up to 50% of Demri BaIr had not been completed by the report date. The company is discussing, among other things, a change in the payment date for the remaining consideration. The transaction remains a strategic option with a capital cost and an open closing date, not a 2026 cash source.

The company also widened its project base. In March 2026 it signed an agreement to acquire an additional approximately 9.67% of ownership rights in land in the Hassan Arafa compound for NIS 24 million, in order to enable additional rights under the Gat Rimon-Beit Romano plan if approved. After the balance-sheet date, a wholly owned subsidiary was selected with a partner for an urban-renewal project in Rishon Lezion, with the subsidiary’s share at 50%. These additions may matter over the long term. In 2026, they also reinforce that the company needs to fund projects before those projects return cash.

Conclusions

The first quarter for YBOX leans positive on execution probability: more sales, progress at Gat Rimon, removal of the office-sale financing condition, a post-quarter bond expansion and leasing discussions at Wallenberg. The path to cash changed less. Operating cash flow remains negative, cash is low relative to the balance sheet, and the forecast relies on debt issuance, bank credit and project surpluses that still need to hit milestones.

The current read is not a story of operating weakness alone, because sales and approvals are moving forward. It is also not a story of value already accessible to shareholders, because most of the value still sits in projects, appraised value or sales whose collection is deferred. Over the next few quarters, four items matter most: a full Gat Rimon permit and signed financing amendment, continued access to debt markets without a sharp deterioration in terms, a Wallenberg lease and normal collection from apartment buyers under convenient payment terms. If these happen together, 2026 can move from a funding year into a real connection between assets and cash. If one of them is delayed, the balance sheet will continue to rely on new debt before the projects return the capital invested in them.