G City published its second-quarter report. It contains two lines that each require explanation, and they pull in opposite directions.
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The Quarter
| NIS millions | The quarter | Share of revenue |
|---|---|---|
| Revenue | 516 | |
| Gross profit | 359 | 69.6% |
| Operating profit | 373 | 72.3% |
| Pre-tax profit | 179 | 34.7% |
| Net profit | 124 | 24.0% |
| Attributable to shareholders | 83 | |
| Non-controlling interests | 41 | |
| Basic earnings per share | NIS 0.48 | |
| Balance sheet total | 30,362 | |
| Shareholders' equity | 7,774 |
The First: Operating Profit Higher Than Gross Profit
NIS 373 million of operating profit, on gross profit of NIS 359 million.
That sounds impossible, and in an ordinary business it really is - selling and administrative expenses can only reduce gross profit, not increase it.
And in income-producing property it is routine, for one reason.
Investment property assets are measured at fair value, not at cost less depreciation. And when the value rises, the difference is recorded as profit - above the operating line.
So the operating profit of an income-producing property company is made up of two entirely different things: the income from operating the assets, and the change in their valuation.
The first is cash coming in. The second is an accounting entry.
And that is why we saw exactly the same phenomenon this week at Big and Mivne - and did not see it at Azrieli, whose operating profit was below its gross profit.
Here the gap is positive but modest: NIS 14 million. That means the revaluation in the quarter offset administrative and selling expenses and left a small surplus - not a quarter that leans on a large increase in value.
And the Second: Financing Took NIS 194 Million
From NIS 373 million of operating profit, NIS 179 million was left before tax.
NIS 194 million was taken out - 52.0% of operating profit.
| Q2 2026 | Financing as a share of operating profit |
|---|---|
| Big | 39.6% |
| Mivne | 51.8% |
| G City | 52.0% |
| Azrieli | 74.3% |
G City sits in the middle of the sector's range.
And the explanation is in the balance sheet: NIS 30.4 billion of assets against equity of NIS 7.8 billion - a ratio of 3.9 to one, the highest of the four companies in the table.
And yet financing takes less from it than from Azrieli, which is less leveraged. The reason, as I wrote yesterday, is that this ratio also depends on the size of the operating profit in the numerator - and at G City it is large relative to revenue.
And the Line That Decides for the Shareholder: 33.1% to the Minority
Of net profit of NIS 124 million, NIS 41 million is attributable to non-controlling interests.
G City shareholders are left with NIS 83 million - two thirds.
And this is a structural fact worth knowing about this company.
G City operates through held companies in different countries, and some are not wholly owned. The company consolidates 100% of their results - all the revenue, all the operating profit - and sets aside the partners' share only in the final line.
The meaning: the 72.3% operating margin describes the consolidated assets, not the shareholder's share in them.
And this is the same phenomenon we saw this week at Delek Group - where the minority took 40% - and at Neto Holdings, where it took 55.8%.
And the Tax: 30.7%
NIS 179 million before tax and NIS 124 million after - that is, tax of NIS 55 million, an effective rate of 30.7%.
That is about 8 percentage points above Israel's corporate rate.
At a company operating in several countries this is not surprising: each jurisdiction taxes at a different rate, and the blended rate derives from the mix of profits between them. The structured filing does not detail that split, so I do not assert its source here.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
G City is the fourth income-producing property company we have read over these two weeks, and comparing them teaches more than any one of them alone.
What separates them is not asset quality but two ratios: how much of operating profit is revaluation rather than operation, and how much of operating profit goes to lenders.
At G City the answer to the first is "little" - the gap between gross and operating is only NIS 14 million, meaning the quarter rests almost entirely on operating the assets. And I read that positively, because a revaluation does not pay interest.
And the answer to the second is "about half" - which is mid-range for the sector.
And what I hold as the central point is actually the last line: two thirds of the profit reaches shareholders, and one third does not. At a company operating through partnerships in several countries, that is the figure that determines how much of the NIS 30.4 billion balance sheet really stands behind the share.
And what I would look for in the full accounts is the geographic breakdown - occupancy, rent per square metre and capitalisation rate by country. The capitalisation rate is the variable that determines the revaluation, and it moves with local interest rates rather than with the asset's performance.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
