Improvement in the Infinity complex in Ra'anana is still not enough: REIT 1 lowered forecasts

REIT 1 has made progress in marketing office space in the Infinity complex, but it will require further effort until full occupancy. Meanwhile, its NOI (Net Operating Income) has risen moderately, and like Amot, it was required to revise its performance forecast for the year downward.

REIT 1 holds 58 income-generating properties. Although their weight in its assets has decreased over the years, office properties are still its main area of activity, and in the second quarter of the year they were responsible for 40% of its NOI, compared to 26% generated by industrial and logistics properties and 19% generated by commercial properties. However, while its other properties enjoyed occupancy rates of 96% or more, the occupancy rate in offices reached 83% at the end of June, after progressing relative to the end of 2025, when it stood at 79%.

The fund's weight in this context is located in Ra'anana and is concentrated in the Infinity complex. In this complex, the company holds three properties with a total area of 150,000 square meters, which suffer from low occupancy rates relative to its other properties, even though they have begun an upward trend. Excluding them, the occupancy rate in REIT 1's offices jumps to 94%.

The condition of the Infinity tower, which has about 61,000 square meters (the company's share is 50%), is the best among the three properties in the complex, and the pace of leasing in it has accelerated in the last year - from 71%, which it reached slowly until November 2025, to 87% at the end of June. Alongside it in the complex are two additional properties with a total area of 90,000 square meters, whose renovation, after Amdocs left them in 2022, was completed at the end of 2025. So far, only 53% of the space has been leased in them. However, the pace of leasing has also improved there, and this is an addition of 8% compared to the end of 2025.

In total, since the beginning of the year, the fund has leased 20,000 square meters of offices in the three properties, of which 11,000 square meters were in deals with Enlight and Ondes since the end of June. It estimates that the NOI from the three Infinity properties will reach 44 million shekels at the end of the year, similar to its volume last year. However, from the contracts signed so far, it is expected to record an NOI of 58 million shekels in 2027, and at full occupancy it is expected to reach 80-85 million shekels.

The fund's total quarterly NOI stood at 135 million shekels at the end of June, only 2% more than its volume in the corresponding quarter last year. This is because the contracts signed in Ra'anana have not yet affected the results, and the fund vacated several properties that generated income last year in favor of renovation processes. The FFO (Funds From Operations, the accepted index for examining the profitability of income-generating real estate companies) fell by 1% to 93 million shekels. In the summary of the first half as a whole, the NOI rose by 3% to 263 million shekels and the FFO remained unchanged at 181 million shekels.

In the first quarter and in the first part of the second quarter, under the influence of the war, revenues from parking lots operated by the company were damaged, the largest of which is the Karta parking lot near Jaffa Gate in Jerusalem. The NOI from them in the half-year summary fell by 7% relative to the corresponding half-year last year, to 14 million shekels. This damage, along with delays in the occupancy of a number of properties it built and leased, partly under the influence of the war as well, led REIT 1 to revise its forecast for the year downward. The upper limit of the NOI forecast was lowered from 545 million shekels to 540 million shekels, and the entire FFO forecast was lowered from a range of 369-379 million shekels to 365-370 million shekels.

REIT 1 is traded at a value of 4.3 billion shekels, after its stock fell by 20% since the beginning of the year, partly following its identification with the struggling office sector, compared to a 7% drop in the TA-Income Israel index in which it is included.