We Read a 48-Page Financial Report So You Don’t Have To. Here Are 3 Surprising Truths We Found.

Introduction: Beyond the Headline Number

When a company announces its annual results, it’s easy to focus on a single number: net profit. Did they make money or lose it? This figure often grabs the headlines, but it rarely tells the whole story. The most interesting, and often most important, narratives are hidden deeper inside the full financial report.

We dove deep into a real, complex financial document—the 48-page 2025 annual report for TSKB Real Estate Investment Trust, audited by PwC—to uncover a few surprising and counter-intuitive takeaways. These truths show why looking beyond the bottom line is critical to understanding a company’s actual performance.

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1. A Company Can Report a Profit While Its Core Operations Weaken

At first glance, the company had a great year. After a significant loss in 2024, it swung back to profitability in 2025. But a closer look reveals a more complicated picture.

• Net Profit/(Loss): A TL 15.6 million profit in 2025, up from a TL 29.4 million loss in 2024.
• Operating Profit: TL 184.2 million in 2025, which is down from TL 307.7 million in 2024.

How can a company’s core day-to-day operations generate over TL 120 million less profit, yet its final net result improve by over TL 45 million? This represents a staggering 40% drop in the company’s core profitability from one year to the next. The turnaround wasn’t driven by better sales or lower operating costs. Instead, it was primarily due to a massive reduction in a single non-operating expense: “Deferred tax expense.” This expense was (TL 323.7 million) in 2024 but fell to just (TL 124.8 million) in 2025. This is a classic example of how a non-cash, non-operational accounting item can create a misleading picture of a company’s performance, making operating profit the more reliable indicator of business health.

The key takeaway is that the headline profit number can be misleading. The real health of a company’s primary business activities is often better reflected in its operating profit, which in this case, showed signs of weakening.

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2. These Numbers Have Been Warped by Hyperinflation

A surprising detail buried in the report’s footnotes is that the entire financial statement has been adjusted for hyperinflation, as required by Turkish financial regulations (TMS 29). The report notes a staggering three-year cumulative inflation rate of 211%.

This means the numbers you see don’t represent what an asset cost years ago. Instead, every figure has been restated to reflect its value in terms of purchasing power on a single date: December 31, 2025. This doesn’t just apply to the 2025 numbers; even the 2024 comparison figures have been adjusted forward to this same measurement date, ensuring a true apples-to-apples comparison of purchasing power. This accounting adjustment is designed to make financial data more meaningful in a high-inflation economy, but it also creates unusual results.

For instance, the income statement includes a line item called “Monetary gain / (loss),” which showed a loss of TL 5.15 million in 2025. This isn’t a loss from a bad investment or a failed sale; it represents the literal loss of purchasing power the company experienced simply by holding cash and other monetary assets during a period of high inflation. It’s a powerful reminder that the economic context can fundamentally change the meaning of the numbers on the page.

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3. Over 95% of the Company’s Value is a Sophisticated Estimate

The company’s balance sheet shows that the vast majority of its assets are “Investment properties.” The specific figures are TL 6.69 billion in investment properties out of TL 7.00 billion in total assets. This means over 95% of the company’s reported value isn’t cash in the bank or machinery on a factory floor; it’s the estimated market value of its real estate portfolio.

This value is the “fair value” determined by independent experts using complex financial models. Crucially, these models rely on subjective assumptions about an unknowable future, including projected occupancy rates, future rental income, capitalization rates, and discount rates.

The auditors, PwC, identified this valuation process as the single most important area of their review, labeling it the “Key Audit Matter.” They noted the subjectivity involved in their report:

“The valuation of the Company’s investment properties involves significant areas of judgment and requires making subjective assumptions. Significant judgments and assumptions can be directly affected by factors such as capitalization rate, discount rate, occupancy rates of leasable areas, and rental income.”

This is the nature of a real estate investment trust. However, it reveals that a huge portion of the company’s reported worth is, fundamentally, an expert opinion. This makes the auditor’s independent scrutiny of those assumptions the most critical line of defense for investors.

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Conclusion: Reading Between the Lines

A single financial report can tell multiple, conflicting stories. In this one, the headline story of a return to profit was undermined by the fine print, which revealed a core business struggling under the weight of a hyperinflationary economy, with its value ultimately resting on sophisticated, but subjective, expert opinion.

The next time you see a financial headline, what questions will you ask about the story between the lines?

Briefing Document: TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. 2025 Financial Report Analysis

Executive Summary

This document synthesizes the key findings from the independent auditor’s report and consolidated financial statements of TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. (“the Company”) for the fiscal year ending December 31, 2025.

PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. has issued an unqualified (“clean”) audit opinion, concluding that the financial statements present a true and fair view of the Company’s financial position and performance in accordance with Turkish Financial Reporting Standards (TFRS). A central focus of the audit was the valuation of investment properties, which constitute the vast majority of the Company’s assets and are valued at over 6.69 billion TL. Due to the significant judgments and subjective assumptions involved, this was identified as a Key Audit Matter.

Financially, the Company demonstrated a significant turnaround, reporting a net profit of 15.62 million TL in 2025, compared to a net loss of 29.36 million TL in 2024. This was achieved despite a substantial deferred tax expense of 124.77 million TL. Total assets grew marginally to 7.01 billion TL, with equity increasing to 6.20 billion TL.

A critical aspect of these financial statements is the application of TMS 29, which mandates accounting for hyperinflation. All reported figures for both 2025 and 2024 are presented in terms of the purchasing power of the Turkish Lira (TL) as of December 31, 2025, reflecting the high-inflation environment. The Company’s primary activities remain focused on its portfolio of key real estate assets, including Pendorya AVM, the Divan Adana Hotel, and commercial buildings in Fındıklı, Istanbul.

1. Independent Auditor’s Report Analysis (PwC)

The independent audit was conducted by PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., with Talar Gül (SMMM) serving as the responsible partner. The report is dated January 30, 2026.

1.1. Audit Opinion

PwC issued an unqualified opinion, stating: “In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2025, and its financial performance and its cash flows for the year then ended in accordance with Turkish Financial Reporting Standards (“TFRSs”).”

This indicates that the financial statements are free from material misstatement and are a reliable representation of the Company’s financial health.

1.2. Key Audit Matter: Valuation of Investment Properties

The valuation of investment properties was identified as the most significant issue in the audit due to its materiality and the subjective nature of the valuation process.

• Significance: As of December 31, 2025, investment properties were valued at 6,694,866,305 TL, forming a substantial portion of the Company’s total assets.
• Valuation Methods: The fair values were determined by an independent valuation expert using the “income approach” and “market comparison approach.”
• Subjectivity & Risk: The valuation relies on significant professional judgment and subjective assumptions, including capitalization rates, discount rates, occupancy rates, and rental income projections.
• Audit Response: To address this, PwC implemented extensive procedures:
  • Evaluated the competence, capability, and objectivity of the Company’s appointed independent real estate appraiser.
  • Assessed the appropriateness of the valuation methodologies used in the reports.
  • Tested the mathematical accuracy of the valuation calculations.
  • Compared cash flow projections in the income models with the Company’s future budget projections.
  • Engaged its own independent valuation specialists to assess the reasonableness of key judgments and assumptions.
  • Verified that the fair values in the valuation reports were consistent with the amounts presented in the financial statements and footnotes, and that disclosures were adequate under TFRS.

1.3. Other Legal and Regulatory Disclosures

• The audit found no significant issues regarding the Company’s bookkeeping compliance with the Turkish Commercial Code (TTK) and its articles of association for the period January 1 – December 31, 2025.
• The Board of Directors provided all necessary explanations and documents required for the audit.
• The Auditor’s Report on the Early Risk Detection System and Committee was submitted to the Company’s Board of Directors on January 30, 2026.

2. Financial Performance (Statement of Profit or Loss)

The Company shifted from a net loss in 2024 to a net profit in 2025. Revenue saw a slight increase, while a significant deferred tax expense impacted the final profit figure.

All amounts are inflation-adjusted to the purchasing power of the TL as of December 31, 2025.

3. Financial Position (Statement of Financial Position)

The Company’s balance sheet remains robust, dominated by its portfolio of investment properties. Total assets and equity both recorded slight growth in 2025.

All amounts are inflation-adjusted to the purchasing power of the TL as of December 31, 2025.

4. Cash Flow Analysis

Cash flow from operations turned positive in 2025, while significant interest payments led to a net cash outflow from financing activities. Overall, cash and cash equivalents decreased during the year.

All amounts are inflation-adjusted to the purchasing power of the TL as of December 31, 2025.

5. Corporate Information and Structure

• Core Business: The Company’s primary activity is investing in real estate, real estate projects, and real estate-based capital market instruments.
• Establishment: The Company was founded on February 3, 2006, as a subsidiary of Türkiye Sınai Kalkınma Bankası A.Ş. (TSKB).
• Public Listing: The Company’s shares began trading on the Istanbul Stock Exchange (then İMKB) on April 9, 2010.
• Capital: As of December 31, 2025, the paid-in capital is 650,000,000 TL. The most recent capital increase was in September 2021, raising the paid-in capital from 500,000,000 TL to 650,000,000 TL.
• Employees: The Company had 13 employees as of December 31, 2025 (12 in 2024).
• Joint Ventures: The Company holds a 50% stake in Anavarza Otelcilik Anonim Şirketi, a joint venture established with Bilici Yatırım Sanayi ve Ticaret A.Ş. to operate the Divan Adana Hotel. The investment is accounted for using the equity method.

6. Key Accounting Policies and Disclosures

6.1. Basis of Preparation: Inflation Accounting (TMS 29)

In compliance with a decision by the Capital Markets Board of Turkey (SPK), the Company has applied TMS 29 “Financial Reporting in Hyperinflationary Economies” starting from its annual financial reports for the period ending December 31, 2023. This means all amounts in the financial statements, including comparative figures for 2024, are stated in terms of the measuring unit current at the end of the reporting period (December 31, 2025). This is achieved using a general price index (CPI) to reflect the effects of inflation.

6.2. Valuation of Investment Properties

The Company’s properties are valued by Vera Gayrimenkul Değerleme ve Danışmanlık A.Ş., an SPK-licensed independent valuation firm. The following table summarizes the key valuation inputs for major properties:

6.3. Contingent Liabilities and Legal Cases

The Company is a party to several legal cases. Key ongoing cases include:

• A dispute regarding land use for a road construction project near Pendorya AVM.
• A finalized case regarding a zoning change for the Fındıklı Bina II property, which concluded in the Company’s favor.
• A lawsuit filed by an investor to annul certain decisions from the 2018 Annual General Meeting, which was dismissed at the initial hearing.
• The finalization of the purchase of the remaining shares of the Tahir Han property through a court-ordered auction, which was won by the Company. The case is awaiting finalization after appeals were exhausted.

The financial statements note that aside from the disclosed cases, there are no other significant lawsuits expected to result in material liabilities.