This article first appeared on GuruFocus .
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NOI (Net Operating Income):Totaled ILS651 million in Q2 2026, up ILS3 million year-over-year; excluding foreign exchange impacts, NOI increased by approximately 4%.
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Same-Property NOI:Totaled ILS649 million, compared with ILS648 million in the same quarter last year; excluding foreign exchange impacts, same-property NOI increased by 3%.
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FFO (Funds From Operations) Excluding Senior Housing:Totaled ILS411 million, down 1% year-over-year.
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FFO Including Senior Housing:Totaled ILS426 million, up ILS1 million year-over-year; excluding foreign exchange impacts, FFO increased by 1% to approximately ILS430 million.
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Net Income:Totaled ILS155 million in Q2 2026, down from ILS320 million in the same quarter last year, mainly due to fair value adjustments and higher financial expenses.
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Retail Segment NOI:Increased by approximately ILS22 million year-over-year, driven by real rent increases, CPI impact, and a provision recorded last year, partially offset by Spiral Tower connection works.
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Offices Segment NOI:Decreased by approximately ILS10 million year-over-year, reflecting a one-time termination payment of ~ILS90 million received last year from Meta; excluding this, NOI increased by 4%.
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Data Centers NOI:Decreased by approximately ILS12 million, mainly due to foreign exchange impacts of ~ILS16 million, partially offset by income from a new 4.8-megawatt project.
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Senior Housing NOI:Increased by approximately ILS4 million, supported by higher revenues and occupancy at Palace Tel Aviv, Ra'anana, and Lehavim, with medical department occupancy exceeding 95%.
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Tenant Sales (Malls):Showed strong growth of approximately 8% in the quarter.
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Investment Property and Under Construction:Totaled approximately ILS53 billion, up ILS778 million during the quarter.
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Investments in Data Centers:Totaled approximately ILS969 million during the period, mainly in the Undheim project in Norway.
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Fair Value Adjustments:Recorded income of approximately ILS243 million, mainly from lower cap rates on data center projects.
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Gross Financial Debt:Totaled approximately ILS30.4 billion; net financial debt was approximately ILS24.1 billion, comprising 37% of total assets.
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Average Effective Interest Rate:3% with an average duration of 6.5 years.
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Comprehensive Income:Recorded a loss of ILS548 million, compared with a profit of ILS258 million in the same quarter last year, impacted by translation losses and hedging instruments.
Release Date: August 19, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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NOI increased by 4% in constant currencies, with strong growth in the Retail segment (9%) and tenant sales (8%).
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Data centers continue to expand, with new agreements in London (13.6 MW) and Norway (5 MW) contributing to a contracted NOI of over ILS1 billion.
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The Spiral Tower is on track, with construction progressing well and strong interest from international and local companies.
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Senior Housing segment showed continued NOI growth, with high occupancy and the new Palace Rishon LeZion home already contributing to FFO.
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The company maintains strict financial discipline, with a successful bond issuance and a conservative debt profile (average interest rate of 3%, duration of 6.5 years).
Negative Points
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Net income decreased significantly to ILS155 million from ILS320 million in the prior year, due to fair value losses and higher financial expenses.
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Comprehensive income was a loss of ILS548 million, impacted by translation losses from the strengthening of the shekel against the Norwegian krone and EUR.
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Data center NOI was negatively affected by foreign exchange rate changes, with a ILS16 million impact in the quarter.
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FFO remained flat, with an increase in G&A expenses related to data center expansion, and the Offices segment saw a decline due to the one-time Meta termination payment.
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The company faces execution risks in its data center construction projects, with delivery timelines extending into 2029 for some phases.
Q & A Highlights
Q: How much better are the TikTok expansion economics versus the original contract, and what is the timing for all the phasing to reach the stabilized level of 275 megawatts of contracted data center capacity? A: CFO Ariel Goldstein stated that negotiations are underway with TikTok for an additional 60 megawatts. While details are confidential, he noted that the income per kilowatt is expected to be better than the previous agreement, as the original negotiation occurred in 2022 and market pricing has since changed. Regarding the 275 megawatts, he provided a detailed timeline: the new 13.6-megawatt London agreement will be delivered in early 2027; the Undheim project in Norway will be delivered mainly in 2027, with the final phase in early 2028; and the Mainz project (KMW) will be completed in phases from the end of this year through early 2029. CEO Danna Azrieli added that the company has mitigated all execution risks to the best of its ability, with everything on track regarding permits, power, and properties.
Q: Can you provide more details on the new data center service agreements announced in London and Norway, and their expected contribution? A: CEO Danna Azrieli announced two new agreements. The first is in London at the Romford campus, covering 13.6 megawatts over an eight-year term with extension options, expected to contribute annual NOI of approximately GBP25 million (roughly ILS101 million), with recognition beginning in Q1 2027. The second is at the Enebakk campus in Norway with a large international technology company for 5 megawatts over a 15-year term, with an option to extend for an additional 15 years, expected to contribute average annual NOI of approximately ILS24 million. With these new agreements, the company's contracted NOI now stands at more than ILS1 billion (approximately EUR316 million).
Q: What were the key drivers of the NOI performance in the second quarter, particularly in the Offices and Retail segments? A: CFO Ariel Goldstein explained that total NOI was ILS651 million, up ILS3 million year-over-year, or about 4% excluding foreign exchange impacts. The Retail segment increased by approximately ILS22 million, driven by real rent increases, CPI impact, and a provision recorded in the prior year following the war, partially offset by the impact of connecting the Spiral Tower to Azrieli Center. The Offices segment decreased by around ILS10 million, primarily due to a one-time termination payment of approximately ILS90 million received from Meta in the prior year. Excluding this one-time payment, NOI increased by 4%, as the space vacated by Meta has been fully leased at better rates.
Q: What is the status of the Spiral Tower and the Glilot campus, and what is the expected impact on the portfolio? A: CEO Danna Azrieli provided updates on both projects. The Spiral Tower, expected to open in about two years, has reached the 80th floor of its 91-story core, with main floor plates at the 68th floor and aluminum at the 55th floor. She noted significant interest from large international and local companies. The Glilot campus is in final construction stages, with SolarEdge occupying approximately 60% of the building. The remaining space is being marketed, with a unique offering of almost 3,000 square meters on a single floor, attractive to high-tech and other industries.
Q: How did the Senior Housing segment perform, and what is the status of the new Palace home in Rishon LeZion? A: CFO Ariel Goldstein noted that Senior Housing NOI increased by around ILS4 million, driven by higher revenues and occupancy rates at Palace Tel Aviv, Ra'anana, and Lehavim, as well as an increase in the medical department occupancy rate, which exceeded 95%. CEO Danna Azrieli added that the new Palace home in Rishon LeZion, the fifth in the portfolio, opened in June. Approximately 40% of the 274 units have already been sold, and occupancy is underway. The home includes a medical department and approximately 3,000 square meters of retail space, most of which has been leased. The FFO has already benefited from the first units delivered, with a more significant impact expected as sales and occupancy progress.
Q: What were the main drivers of the change in net income and comprehensive income for the quarter? A: CFO Ariel Goldstein explained that net income totaled ILS155 million, down from ILS320 million in the prior year. The decrease was mainly due to fair value adjustments, with a loss of ILS35 million recorded this quarter compared to a gain of ILS193 million last year, and higher financial expenses due to a higher average debt balance and a one-time financing income in the prior year. These were partially offset by an increase in the share of associate companies' results, including a revaluation of the data center project in Germany. Comprehensive income was a loss of ILS548 million, impacted by a loss on Bank Leumi shares, a loss on interest rate hedging instruments, and a significant ILS680 million loss from translation differences due to the shekel strengthening against the Norwegian krone and the Euro.
Q: Can you elaborate on the company's investment activity and financial position during the quarter? A: CFO Ariel Goldstein detailed that the company invested approximately ILS645 million in income-producing properties under construction, mainly in the Spiral Tower, Glilot campus, Modi'in North Lot 10, and the Rishon LeZion Senior Housing project. In the Data Center segment, investments totaled around ILS969 million, primarily in the Undheim project in Norway. The company also completed the acquisition of full ownership rights in the land of the Romford data center project in London. Gross financial debt stood at ILS30.4 billion, with net financial debt of ILS24.1 billion, comprising 37% of total assets. The company completed an issuance of ILS2 billion in Series K bonds with a 15-year average duration and maintained a low average effective interest rate of 3%.
Q: What is the outlook for the data center segment, and how is the company positioned for the AI infrastructure ramp-up? A: CEO Danna Azrieli expressed strong confidence in the data center segment, stating that it has become a significant component of the group's NOI mix. She highlighted the substantial opportunity in the ongoing AI infrastructure ramp-up and the company's confidence in sustaining momentum. The company is advancing construction at data centers in Mainz, Germany, and Undheim, Norway, and continues to work
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
