New Rental REIT to Launch Amid Investor Skepticism of Existing Funds
Translated & summarized from Calcalist by baba
Shikun & Binui is launching a new rental housing REIT, Shikun REIT, to trade on the Tel Aviv Stock Exchange. This comes as existing REITs are acquiring apartments at significant discounts due to a real estate slowdown. However, investor skepticism persists, with the stocks of existing REITs underperforming market indices. Analysts cite high financing costs and yields not yet competitive with government bonds as reasons for the lack of investor confidence, though some see potential future opportunities.
The story in 5 lines · by baba
- Shikun & Binui to launch Shikun REIT, holding 835 rental apartments in Tel Aviv's Sde Dov.
- Existing rental REITs are acquiring apartments at significant discounts amid a real estate slowdown.
- Investor sentiment remains skeptical, with existing REIT stocks underperforming market indices.
- High financing costs and yields less attractive than government bonds contribute to investor caution.
- Falling interest rates and rising rental yields may present future investment opportunities.
Shikun & Binui is set to launch a new real estate investment trust (REIT) that will trade on the Tel Aviv Stock Exchange. The fund, Shikun REIT, will hold rental housing projects initiated by the company in the Sde Dov area of Tel Aviv, comprising 835 apartments. This move comes as existing rental housing REITs have been actively acquiring apartments at attractive prices in recent months. However, their stock performance has lagged behind market indices, raising questions about investor sentiment.
Shikun REIT will be merged into the publicly traded shell company Continual. Shikun & Binui acquired the rights to the Sde Dov projects in 2021 and 2022 for approximately NIS 2 billion. Due to rising interest rates, the assets' value stood at NIS 1.1 billion by the end of June, with the REIT valued at NIS 273 million. The projects are expected to generate income starting in 2029 and 2031.
Meanwhile, existing REITs have been busy. Azorim Living and Abu Megurim recently purchased 80 and 50 apartments, respectively, in projects by Tzarfati and Azorim for NIS 198 million and NIS 120 million. These deals reflected discounts of 14% and 15%-20% off market prices, respectively, due to the ongoing slowdown in the residential real estate market, which has left developers with unsold inventory.
Despite this activity and attractive deal prices, investors remain unimpressed. Shares of Megurit, Azorim Living, and Abu Megurim have fallen significantly since the start of 2026, underperforming the TA-Real Estate index. Moshik Yosupovitch, Israel equities manager at Migdal Insurance and Finance, explained that while the rental market is strong with rising demand and rents, the yields from recent acquisitions are not yet attractive enough compared to lower-risk investment alternatives. High financing costs due to interest rates also burden the REITs, potentially making debt more expensive than asset returns.
Some REITs have also experienced negative revaluations. Azorim Living reported expected rental yields of 3.6% from its recent acquisition, while Abu Megurim projected a 5.4% yield. These figures are less appealing than the yields on U.S. and Israeli 10-year government bonds, which exceed 5% and 4%, respectively. Azorim Living reported losses in 2023-2025 due to financing expenses and negative revaluations, though it achieved a profit in the first half of 2026 after cost-cutting and revaluation gains. Despite the challenges, a senior REIT official noted that falling interest rates and rising rental yields, coupled with discounted apartment acquisitions, could create future investment opportunities, even if not yet reflected in stock performance.
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