Regulatory Filings • Jul 30, 2025
Regulatory Filings
Open in ViewerOpens in native device viewer
Rating Outlook Updated to Stable from Negative Following Continued Strengthening of Business Profile and Expected Improvement in Financial Ratios; Affirmation of '+ilAA/ilA-1' Rating
Yonatan Revach 972-3-753908 [email protected]
Eyal Evron 972-3-7539723 [email protected]
| Summary of the Rating Action |
|---|
| 3 |
| Key Considerations for the Rating Action |
| 3 |
| Rating Outlook 5 |
| Negative Scenario 5 |
| Positive Scenario 5 |
| Company |
| Description5 |
| Base Case Scenario 6 |
| Liquidity 6 |
| Covenants Analysis7 |
| Rating Adjustments7 |
| Environmental, Social, and Governance Factors |
| 7 |
| Issuance Ratings – Subordination Risk Analysis |
| 7 |
| Capital Structure 7 |
| Analytical Conclusions 8 |
| Methodology and Related |
| Articles8 |
Rating Update
We assess that the company's business profile has improved in recent years. The company consistently demonstrates improvement in its business, as reflected in significant NOI growth resulting from same-property NOI growth and contributions from acquired assets and additional space in assets whose construction was completed. For example, in 2024, the company showed about 17% growth in NOI, to about NIS 417 million from about NIS 357 million in 2023. The company also maintains a high and stable occupancy rate of about 96% over time (about 98% excluding the Infinity complex in Ra'anana), and demonstrates, in our view, above-average profitability, reflected in an adjusted EBITDA margin of about 88% over time. The company's growth continued in the first quarter of 2025, with NOI increasing by about 18% to about NIS 112 million from about NIS 94 million in the same quarter last year. We expect NOI growth to continue in the next two years and also lead to continued growth in the EBITDA base, among other things due to the logistics asset in Beit Shemesh, which began generating income in the second quarter of 2025 and is expected to contribute about NIS 20 million to NOI this year and about NIS 26 million at full operation in 2026. In addition, improvement is expected in the performance of the Ra'anana asset as grace periods end, and we estimate that dividends received from companies accounted for using the equity method will increase starting in—
**REIT 1 LTD**
2025, after the loans in the 'Machatzit HaYovel' company (50% holding) were repaid at the beginning of 2025, and the company is expected to receive its share of the free cash flow from the held company.
The company's strategy to increase its asset portfolio has led to the portfolio's value reaching about NIS 9 billion as of March 31, 2025 (including investments accounted for using the equity method), compared to about NIS 6 billion in 2021. The portfolio growth was supported by acquisitions such as Gedera, part of the Doctors' House in Ramat HaHayal, three floors in the Yovel Tower, and increased holding in Sarona Gardens, as well as the completion of assets such as the Infinity Tower in Ra'anana and the logistics asset in Beit Shemesh, which was completed this year and is pre-leased at 100% occupancy for 10 years. Thus, in our assessment, the company's development risk has decreased, which was already low due to regulatory restrictions on REITs' development activities.
The business profile is limited due to exposure to a significant asset, the Infinity Business Park in Ra'anana, which accounted for about 17% of the asset portfolio value as of December 31, 2024, and contributed about 9% to NOI that year (excluding income-producing assets in companies accounted for using the equity method). As of March 2025, the Infinity Tower is leased at about 70% occupancy, and renovations in the other buildings in the complex – Infinity Plaza and Infinity Campus – were recently completed. The business park is centrally located near major transportation arteries, which may reduce occupancy risk in the long term. In addition, the completion of the Infinity Ra'anana complex will improve the company's tenant diversification, but even today the company has about 965 tenants, and unlike in the past, it is not exposed to dependence on a single tenant, which supports our assessment of the improvement in the company's business profile.
The company's leverage rose slightly above 50% in recent years, mainly due to asset acquisitions, investment in the construction of the Infinity Tower and renovation of the Infinity Park in Ra'anana, and the construction of the Beit Shemesh asset, as well as a high inflation environment (most of the debt is CPI-linked). In addition, the pace of value increase was moderate and the company did not issue equity to balance leverage since 2022. As of December 31, 2024, the leverage ratio was about 53%. However, we estimate that in the next two years, the company's leverage will decrease based, among other things, on growth in annual operating cash flow, proceeds from asset sales (the second part of the proceeds from the sale of an asset in Lod and the remaining proceeds from the sale of floors in the 'Yovel Tower' asset to the state after it exercised its option), value increases compared to recent years, and relatively limited investment needs. In our base case, we estimate that the leverage ratio will be in the range of 51%-53% in 2025 and 50%-52% in 2026. The management policy presented to us, to maintain leverage of about 50% over time, supports the financial profile, the rating, and the rating outlook.
In recent years, the company's EBITDA to financing expenses coverage ratio has eroded, due to increased debt and the impact of the inflation environment on financing expenses (most of the company's debt is CPI-linked), but in the last two years it—
**REIT 1 LTD**
has slightly improved to 1.9x-1.8x. Looking ahead, we estimate that the significant growth in the adjusted EBITDA base, particularly due to contributions from assets whose construction was recently completed and increased dividends from companies accounted for using the equity method, along with S&P's assumptions for moderating inflation, will lead to an improvement in the coverage ratio, to a range of 2.0x-1.8x in 2025 and 2.2x-2.0x in 2026.
There are several company characteristics that support the rating compared to the peer group, including its subjection to REIT regulation, which in our view provides stability and transparency to the business and financial model, as the leverage and development restrictions support maintaining financial ratios appropriate for the rating. In addition, the current ownership structure, which is also derived from regulatory requirements, includes the holding of the company's shares by leading financial institutions in Israel, with no controlling shareholder, which gives the company very high access to debt and equity issuances in the capital market. The company also demonstrates above-average profitability over time and, according to management policy, maintains a significant amount of unencumbered assets, totaling over NIS 8 billion as of March 31, 2025.
The stable rating outlook reflects our assessment that REIT 1 will continue to demonstrate strong operational performance in its asset portfolio over the next 24 months, and will maintain over time an EBITDA to financing expenses coverage ratio of about 2x and a debt to debt and equity ratio of about 50%, while maintaining above-average profitability and 'adequate' liquidity.
We may lower the rating if there is a deterioration in the company's business profile, for example due to a significant decline in operational performance such as a material and prolonged drop in occupancy rate, a sharp decline in rental prices, or a significant increase in financing costs. We would also consider a negative rating action if the company shows a debt to debt and equity ratio above 55% and an EBITDA to financing expenses coverage ratio below 1.8x, on average over time, or if our assessment of the company's liquidity deteriorates.
We may take a positive rating action if the company significantly expands its incomeproducing asset portfolio, while maintaining adequate operational performance and in a way that increases asset and tenant diversification and reduces exposure to a significant asset. We would also consider a positive rating action if the debt to debt and equity ratio falls to about 35% as part of a financial policy and the EBITDA to financing expenses coverage ratio reaches about 4x.
REIT 1 LTD was founded in 2006 and focuses on the ownership and management of incomeproducing real estate assets in Israel. The scope of development activity and leverage level are limited according to REIT regulation and company policy, and at least 75% of the fund's assets must be in Israel. Most of the company's assets are located in high-demand areas, mainly in central Israel, and are used
**REIT 1 LTD**
mostly for offices and retail. The company has 58 assets leased to about 965 tenants, covering about 687,000 square meters and with wide geographic distribution in Israel, and is also active in the industrial and logistics segments, parking lots, and more. The main stakeholders in the company are institutional financial entities, and according to REIT regulation, it is subject to minimum diversification rules among the public investors and has no controlling shareholder.
Our base case scenario is based on the following key assumptions:
We assess REIT 1's liquidity level as adequate, as the ratio between the company's certain sources and its uses is expected to exceed 1.2x in the 12 months starting April 1, 2025. The company's liquidity is supported, in our view, by prudent risk management policy, reflected in a high amount (over NIS 1 billion) of available and committed credit lines for more than one year, and a large amount of unencumbered assets (over NIS 8 billion). The company also has, in our view, high access to the capital market, and since the last report has raised about NIS 675 million in several bond issuances, extending the average debt duration to over four years.
Below are the company's main sources and uses in the 12 months starting April 1, 2025:
| Main Sources |
Main Uses |
|---|---|
| Cash and cash equivalents of about NIS 175 million. Committed available credit lines for more than 12 months totaling about NIS 1.1 billion. |
Current maturities including commercial papers, and short-term debt in subsidiaries consolidated for the first time in Q1 2025, totaling about NIS 1.3 billion. |
| Operating cash flow of about NIS 300 million (our estimate). |
Capital expenditures (capex) and other investments totaling about NIS 130 million. |
| Proceeds from asset sales totaling about NIS 150 million. Issuance of a new bond series, Series 8, totaling about NIS 150 million (completed). |
Dividend distribution according to taxable income. |
REIT 1 has several financial covenants towards bondholders. To our understanding, as of March 31, 2025, the company has an adequate cushion relative to its financial covenants and we expect it to maintain an adequate cushion in the near term.
ESG factors do not have a material impact on the credit rating analysis of REIT 1 LTD.
Below is the capital structure of REIT 1 LTD as of March 31, 2025:
7 | July 30, 2025
Rating Update
**REIT 1 LTD**
The vast majority of the company's assets are unencumbered.
| • | Methodology - General: S&P Rating Principles, February 16, 2011 |
|---|---|
| • | Methodology - General: Industry Risk, November 19, 2013 |
| • | Methodology: Country Risk Assessment Methodology, November 19, 2013 |
| • | Profile Methodology: Corporate Liquidity Assessment Methodology, December 16, 2014 |
| • | Methodology - General: Methodology for Linking Long-Term and Short-Term Ratings, April 7, 2017 |
| • | Methodology: Key Factors for Rating Real Estate Companies, February 26, 2018 |
| • | Methodology: Methodology for Assessing Structural Subordination Risk of Non Financial Corporate Debt, March 28, 2018 |
| • | Methodology: Methodology for Calculating Financial Ratios and Adjustments, April 1, 2019 |
| • | Methodology - General: Group Rating, July 1, 2019 |
| • | Methodology - General: Credit Risks from Environmental, Social, and Governance Factors, October 10, 2021 |
| • | Methodology - General: Local Scale Credit Ratings, June 8, 2023 |
| • | Methodology: General Corporate Rating Methodology, January 7, 2024 |
| • | Methodology: Methodology for Assessing Management and Corporate Governance of Non-Financial Companies, January 7, 2024 |
| • | Rating Scales and Definitions: S&P Global Ratings Scale Definitions, December 2, 2024 |
| • | Definitions: Rating Scales and The Link Between the Global and Local Rating Scales, March 27, 2025 |
| REIT 1 LTD |
Rating | Date First Published Rating Initially Published |
Last Date Rating Last Updated |
|||
|---|---|---|---|---|---|---|
| Issuer Rating(s) |
||||||
| Long Term |
ilAA\Stable | 14/05/2007 | 31/07/2024 | |||
| Short Term |
ilA-1+ | 06/01/2019 | 31/07/2024 | |||
| Issuance Rating(s) |
||||||
| Commercial Papers |
||||||
| Commercial Papers (Series 5) |
ilA-1+ | 06/01/2019 | 31/07/2024 | |||
| Senior Unsecured Debt |
||||||
| Series 5 |
ilAA | 18/10/2015 | 31/07/2024 | |||
| Series 6 |
ilAA | 25/05/2016 | 31/07/2024 | |||
| Series 7 |
ilAA | 08/12/2020 | 31/07/2024 | |||
| Series 8 |
ilAA | 10/06/2025 | 10/06/2025 |
Issuer Rating History
| Long Term |
|
|---|---|
| July 30, 2025 |
ilAA\Stable |
| July 27, 2023 |
ilAA\Negative |
| July 31, 2017 |
ilAA\Stable |
| July 10, 2014 |
ilAA-\Stable |
| June 24, 2010 |
ilA+\Stable |
| January 14, 2010 |
ilA\Positive |
| January 29, 2009 |
ilA\Stable |
| July 20, 2008 |
ilA\Positive |
| May 14, 2007 |
ilA\Stable |
| Short Term |
|
| January 06, 2019 |
ilA-1+ |
| Additional Details |
Data |
|---|---|
| Event Occurrence Time |
30/07/2025 09:07 |
| Time First Known About Event |
30/07/2025 09:07 |
| Rating Initiator |
The rated company |
**REIT 1 LTD**
S&P Maalot is the trade name of "S&P Global Ratings Maalot Ltd." For the most updated list of ratings and more information about the credit rating monitoring policy, please refer to the S&P Global Ratings Maalot Ltd. website at maalot.co.il.
All rights reserved ©. It is prohibited to alter, reverse engineer, copy, distribute in any form or by any means, or store in a database or retrieval system the content (including ratings, analyses and information related to ratings, assessments, models, software and its products), and any part thereof (hereinafter, collectively, "the content"), without the prior written consent of S&P Global Ratings Maalot Ltd. or its related companies (hereinafter, collectively, "S&P"). The content shall not be used for illegal or unauthorized purposes. S&P and third parties providing services to it, including directors, managers, shareholders, employees or agents thereof (hereinafter, collectively, "S&P and related parties") do not guarantee the accuracy, completeness, timeliness or availability of the content. S&P and related parties are not responsible for errors or omissions (whether arising from negligence or otherwise), for any reason, for the results arising from the use of the content, or for the security or maintenance of information provided by users. The content is provided on an AS-IS basis.
indirect damages of any kind, including incidental or consequential damages, exemplary, punitive or special damages, costs, expenses, legal expenses or losses (including, without limitation, damages for loss of income or profits, loss of business opportunities or losses caused by negligence), incurred in connection with the use of the content, even if they were advised in advance of the possibility of such damages.
Ratings and other analytical opinions, including the ratings and other information contained in the content, constitute an opinion valid as of the date of publication and do not constitute a statement of fact. S&P's ratings and other analytical opinions do not constitute a recommendation to purchase, hold or sell any securities, or to make any investment decision, and do not address the suitability of any securities. S&P does not undertake any obligation to update the content after its publication in any form or format. The content should not be relied upon in making investment or other business decisions, and it is not a substitute for the skills, judgment or experience of users, their management, employees, advisors and/or clients in making such decisions. S&P does not act as an "expert" or as an investment or securities advisor, except where it is registered as such. Rating reports are valid as of their publication date. S&P updates rating reports following ongoing monitoring of events or annual monitoring.
S&P collects information from sources it deems reliable, but does not audit the information and is not obligated to perform due diligence or independent verification of the information it receives. S&P publishes reports related to ratings for various reasons that are not necessarily the result of a rating committee, including the publication of periodic updates regarding credit ratings and related analyses.
In order to preserve the independence and objectivity of the activities of S&P's various units, S&P maintains separation between these activities. As a result, certain units may have information that is not available to other S&P units. S&P has established procedures and processes to maintain the confidentiality of certain non-public information received in connection with any analytical process it conducts.
S&P receives monetary compensation for providing its rating services and analytical opinions, usually from issuers or underwriters of the rated securities, or from obligors. S&P reserves the right to disseminate its opinions and analytical analyses. S&P's public ratings and analyses appear on the S&P Maalot website at maalot.co.il or on the S&P website at spglobal.com/ratings, and may also be distributed by other means, including in S&P and third-party publications.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.