Liquidity Pressure Mounts Across Israel’s Development Market

Carasso Turns to Institutional Capital in Tel Aviv

Signs of strain are becoming increasingly visible across Israel’s real estate sector, as development companies move to sell stakes in major projects worth hundreds of millions of shekels in order to shore up liquidity and reduce risk.

This week, Carasso Real Estate, controlled by the Carasso family, reported that it is in advanced talks to bring an institutional partner into its largest project, located in the Rival complex in Tel Aviv, with an overall value of approximately NIS 1.27 billion. According to the company, the unidentified institutional investor is expected to acquire 49% of the project’s rights for about NIS 620 million. The proceeds will be used as equity to finance the project and are also expected to leave Carasso Real Estate, managed by Dan Parnas, with excess cash flow.

The project is being developed on land owned by the company, spanning roughly 14 dunams between Yad Kapaiim, Yad Harutsim and Rival streets. It includes about 11,000 square meters designated for employment, commercial and hotel uses, alongside 9,500 square meters of public space. In addition, approximately 37,000 square meters of residential space are planned across three towers rising 41 to 48 floors, comprising around 410 apartments, some of which are intended for long-term rental.

Hagag’s Shadal Sale Highlights Financing Constraints

Carasso’s move follows a series of similar transactions in the market. About a month ago, Hagag Group reported the sale of a luxury development project in central Tel Aviv to Aviv Group for approximately NIS 730 million. The project, located on Shadal Street near Rothschild Boulevard, is currently at an early stage of due diligence.

The Shadal Street development consists of a 40-story tower that will include around 17,000 square meters of residential space and approximately 20,000 square meters designated for hotel use. Hagag estimates the project’s expected gross profit at about NIS 272 million, reflecting a gross margin of roughly 50%. As of the end of 2024, the company estimated average residential prices in the project at around NIS 85,000 per square meter.

At first glance, the transaction appears puzzling: there is little obvious economic incentive for a developer to relinquish a project with such a high projected profit margin in one of Tel Aviv’s most sought-after locations. However, while the Shadal Tower promises substantial returns, construction has yet to begin, meaning that the anticipated profits would only be realized several years down the line.

Against this backdrop, financial pressures offer a clearer explanation. The Hagag Group, controlled by Ido and Tzachi Hagag, is carrying financial debt of approximately NIS 3 billion, and is required to repay around NIS 800 million during the current year. This includes its share of a NIS 405 million loan taken by its subsidiary, Head Master, to finance the Shadal project.

Hagag’s shares are currently traded at a market value of about NIS 1.47 billion, after recording a slight decline in 2025. At one point during the year, the shares were trading below the company’s equity, which stood at approximately NIS 1.34 billion at the end of the third quarter of 2025, further indicating the pressures facing developers across the sector.

Aviv Expands From a Cash-Strong Position

For the Aviv Group, this marks another strategic move made from a position of strength, as it currently sits on a cash reserve exceeding one billion shekels. Controlled by Doron Aviv and Dafna Harlev, the group announced about a month ago that it had won three major tenders from the Israel Land Authority, two in Herzliya and one in Petah Tikva, for the construction of a total of 973 housing units. The projects involve a total investment of approximately NIS 905 million and are expected to generate revenues of around NIS 4 billion.

Why Developer Balance Sheets Matter More Than Ever

In the current market environment, these transactions underscore the growing importance for buyers and investors to look beyond the apartment itself and assess the financial strength and liquidity of the developer. Not all companies carry the same level of risk, and some offer a materially safer investment profile than others.