Home Invest Belgium Taking the next steps Forward

We zoom in on the deal announced between HOMI and City Forward. HOMI will redevelop 8 offices into 700-750 apartments over the next 7-9 years. The deal will push the residential portfolio of HOMI over EUR 1.2B. We assume a total investment of EUR 280.0m, 20% development margin and EUR 14.0m gross rental income. We are very supportive of this deal but the gains on the development are back-end loaded while we see a short term headwind in a building right expiry in Louvain La Neuve (10.9% rents).
At a 98% pay-out ratio, commitment to grow the dividend and a 45.4% (1Q25, right before dividend payment) debt ratio; the main question is financing. In our model, the debt ratio at year end stays marginally below 50.0% in the next 4 years thanks to the NTA uplifts. There are no bond maturities until FY28 and the banking debt maturities are well spread (2H26 first one). We don't factor in asset sales or a capital raise into our model but the room for error is thin. On an NTA basis the company is undervalued but on an EPS basis we only have a 1.1% 3-year CAGR. We repeat our HOLD recommendation and increase our TP from 18.0 to EUR 21.0.