Mega Or Reports 740 Million Shekels Annual NOI From Signed Data Center Contracts
Mega Or's signed contracts for its data center assets now generate an annual net operating income (NOI) of 740 million shekels, marking an 89% increase over its total projected NOI for 2025 and a 58% rise compared to its second-quarter annualized NOI. This is a significant jump from 106 million shekels in signed contracts at the end of June last year and 460 million shekels at the end of March. Despite this growth, data centers still represent a smaller portion of Mega Or's overall business, which remains focused on logistics centers and commercial properties.
The company began operating its first data center in Modiin in the second half of last year, with a weighted capacity of 9.5 megawatts IT, generating 24 million shekels in revenue in Q2. In contrast, its logistics and commercial centers produced quarterly revenues of 214 million shekels. Mega Or is currently developing seven additional data centers with a combined capacity of 311 megawatts IT, expecting annual NOI of about one billion shekels once fully operational and leased. Of this, 740 million shekels are already secured by signed contracts.
In June, Mega Or signed a deal with AI company Crusoe for 67.6 megawatts IT capacity in facilities under construction in Haifa and Bnei Shimon, expected to start operating in Q2 next year and generate an annual NOI of 85 million dollars (approximately 255 million shekels). However, a recent halt order from the Electricity Authority on new data center connection approvals raises uncertainty about connecting these new facilities, and Mega Or has yet to assess the impact.
Construction costs for data centers rose 9% from 11 million to 12 million dollars per megawatt, increasing the total estimated cost of the pipeline to 3.7 billion dollars, mainly due to a weaker dollar against the shekel and higher electricity costs. Mega Or also expanded its land holdings for data center development by purchasing the former Alliance factory site in Hadera for one billion shekels in April and an adjacent plot from Schnepf for 95 million shekels in July.
Mega Or’s core business remains leasing logistics and commercial centers, with total NOI rising 25% to 117 million shekels in the quarter, driven by new properties including the Modiin data center, a Jumbo store in Beersheba, and a management center built for the security company Controp. This NOI growth also lifted the company’s FFO by 25% to 85 million shekels. After a large revaluation gain of 777 million shekels in the previous quarter, Q2 saw a smaller but still strong revaluation profit of 338 million shekels, mainly from the Bnei Shimon data center.
However, financing expenses of 103 million shekels, compared to financing income of 39 million shekels last year, along with an 11 million shekels loss on Big company shares (versus a 149 million shekels gain last year), led to a 41% decline in net profit attributable to Mega Or shareholders to 252 million shekels. Mega Or’s stock has risen 66% this year, outperforming larger peers Azrieli, Melisron, and Big, whose shares have seen smaller gains or declines.
