REIT 1 Lowers Forecasts as Office Space Leasing Progresses Slowly in Ra'anana Infinity Complex

REIT 1 has made progress in leasing office spaces at the Infinity complex in Ra'anana but still faces challenges before achieving full occupancy. The company's net operating income (NOI) increased moderately, yet it revised downward its full-year performance forecasts. REIT 1 owns 58 income-generating properties, with office assets remaining its core focus, accounting for 40% of NOI in Q2 2026, compared to 26% from industrial and logistics assets and 19% from retail properties.

While most of REIT 1's properties maintain occupancy rates above 96%, office occupancy stood at 83% at the end of June 2026, up from 79% at the end of 2025. The main challenge lies in the Ra'anana Infinity complex, where the company holds three properties totaling 150,000 square meters. These offices have lower occupancy rates but are improving. In contrast, REIT 1's office properties in Netanya have a 94% occupancy rate.

Within the Infinity complex, the Infinity Tower, comprising about 61,000 square meters (50% owned by REIT 1), showed the best performance, with occupancy rising from 71% in November 2025 to 87% by June 2026. Two other renovated properties totaling 90,000 square meters, vacated by Amdocs in 2022, have reached 53% occupancy, up 8% since the end of 2025. Since the start of 2026, REIT 1 leased 20,000 square meters across the three properties, including 11,000 square meters in deals with Enlight and Ondas by late June.

REIT 1 expects the NOI from the Infinity complex to reach 44 million shekels by year-end, similar to last year, with projected NOI of 58 million shekels in 2027 based on current leases and a full occupancy potential of 80-85 million shekels. The fund's total quarterly NOI was 135 million shekels at the end of June, a 2% increase year-over-year, with a slight 1% decline in FFO (funds from operations) to 93 million shekels.

The first half of 2026 saw a 3% NOI increase to 263 million shekels, while FFO remained steady at 181 million shekels. However, revenue from parking facilities, including the large Karta parking near Jerusalem's Jaffa Gate, declined by 7% due to the conflict with Iran. This, along with delays in occupancy of several properties partly related to the conflict, prompted REIT 1 to lower its full-year forecasts. The upper NOI forecast was reduced from 545 million to 540 million shekels, and the FFO forecast was adjusted downward to a range of 365-370 million shekels from 369-379 million shekels.

REIT 1's market value stands at 4.3 billion shekels, with its stock down 20% since the start of 2026, reflecting concerns about the struggling office sector, compared to a 7% decline in the TA Real Estate Index, where it is listed.