READ THE FULL MLSR.TA RESEARCH REPORT
Melisron (TASE: MLSR.TA) is Israel’s largest mall owner/operator with a NIS 25.8 billion income-producing portfolio spanning malls, offices, and residential development across 909 thousand sqm. Total managed area is 1,067,000 sqm, and total managed asset value is ~NIS 29.6 bn. The company has multiple projects under development which are expected to boost growth in the mid-to-long term. The newer residential segment has over 13,000 units in the pipeline, of which 5,400 are expected to be constructed in the near term. The residential segment pipeline has the potential to produce over NIS 17 billion in revenues and approximately NIS 2.7 billion in operating income. We expect continued growth in NOI and FFO.
The company has a diversified portfolio spanning retail, offices, hi-tech parks, residential development, and single-tenant properties, which provides exposure to multiple segments of Israel’s commercial and residential real estate markets. Melisron is controlled by Liora Ofer through Ofer Investments.
The company’s core portfolio comprises 18 Ofer-branded malls and shopping centers located in high-quality, high-traffic locations nationwide. Key retail assets include Ofer Ramat Aviv, Kiryon, Ofer Grand Mall Haifa, Ofer Grand Mall Be’er Sheva, Ofer Grand Mall Petah Tikva, and Ofer Rehovot. The retail portfolio represents Melisron’s primary operating platform and provides a significant base of recurring rental income.
Melisron also owns six major office and hi-tech properties, including Ofer East and Ofer West in Petah Tikva, Ofer Carmel, Ofer Yokne’am, Ofer Millennium Buildings, and Landmark in Tel Aviv’s Sarona district, a flagship mixed-use development jointly owned with AFI Properties. The office portfolio provides further diversification and exposure to Israel’s technology and business-services sectors.
Residential real estate represents a growing component of the platform through Aviv Melisron, which focuses on residential construction and urban renewal in high-demand Israeli markets. The business has dozens of projects under development encompassing thousands of housing units, with a strategy centered on mixed-use developments that combine residential and commercial components.
Valuation
We use multiple valuation methodologies to arrive at a valuation and price target.
Our DCF calculation projects modest organic, or same-store, growth, but adds the value of future projects over a 6–7-year period. Future project growth is driven primarily by the residential segment as discussed above. Using the current cap rate of 6.7% as the discount rate provided a valuation of NIS 51,500 cents per share.
We also use an after-tax NOI / Cap Rate calculation based on future projections of NOI.
The current 6.8% cap rate may still be reflecting a relatively high Israeli interest-rate and geopolitical risk premium, while the underlying environment is already moving in the opposite direction. We believe a case can be made that cap rates should be lower, perhaps around 6.0%.
A reasonable case can be made for Israeli real-estate cap rates to decline from approximately 6.8% toward 6.0% as interest rates normalize. The Bank of Israel has already reduced its policy rate to 3.25% and forecasts an average rate of approximately 3.0% in 2Q27, while inflation is expected to remain below 2%. Israeli 10-year government yields have also declined to approximately 3.65%. Against this backdrop, a 6.8% capitalization rate implies a spread of more than 300 bps over the risk-free rate, which appears increasingly conservative for high-quality, well-occupied commercial properties. The spread is even larger when you take into consideration the real cap rate to the nominal 10-year rate, which would imply a spread of approximately 480bps.
Melisron’s own 2025 disclosures indicate actual NOI yields of approximately 6.6% on malls and 6.0% on offices, suggesting that a 6.0% stabilized cap rate is achievable for its highest-quality assets.
A reduction in the portfolio capitalization rate from 6.8% to 6.0% would increase property values by approximately 13%, before accounting for NOI growth. With Israeli economic growth expected to accelerate and interest rates continuing to normalize, further cap-rate compression represents a material potential source of NAV upside for Melisron and other leading Israeli real-estate companies.
Therefore, a cap rate of 6.0% on estimated 2027 NOI estimates would create a value of NIS 25,240,400 or NIS 52,964 cents per share.
In addition, if we apply the new estimated cap rate of 6.0% to our DCF model, the valuation increases to NIS 62,583 cents per share.
We take a conservative approach and average all 3 rates, which creates a price target of NIS 55,680 cents per share.
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