FREE

BriQ Properties | From Capital Gains to Bond-Like Yield; Hold

Lower funding costs and stronger balance sheet – BriQ delivered a 50% yoy increase in H1’25 revenues, with rental income rising by €3.6m to €10.9m and adj. EBITDA up €2.8m to €9m, largely driven by ICI’s full consolidation. Net profit declined to €7.0m (vs €10.2m) mainly due to lower revaluation gains, while the average effective interest rate eased to 4.1% from 5.2% in FY’24. Looking ahead, we have updated our forecasts to factor monetary policy easing, a higher share of RRF-backed funding, and modest rental adjustments from the Piraeus rent suspension and the Kolonaki asset sale. With capex phasing, disposals, and lower funding costs from ECB rate cuts and RRF-backed debt, we now project annual interest expenses €0.5–1.0m lower than before, driving 2025e FFO up 4% vs our previous estimates to €11.6m and net LTV down to 7% gross yield. This is complemented by disposals of lower-yielding assets—already c€9m in 2025 and c€3m p.a. for 2026-27e—with proceeds set to be recycled into higher-return opportunities or cash returns. The approach limits execution risk while supporting a generous 70–75% FFO payout, corresponding to a 6–7% dividend yield in 2025–27e. With predictable income, inflation-linked leases and disciplined capital allocation, BriQ offers an equity profile akin to a high-quality income bond.

Low-cost structure to underpin deleveraging and 4% NAV/share CAGR through to 2028e – With operating costs at c18-20% of rental income and less than 2% of GAV, BriQ ranks as the most cost-efficient REIC in Greece, sustaining EBITDA margins above 80% vs 75% pre-ICI acquisition. We project adj. EBITDA at c€17.3m in 2025e, rising to c€17.9m by 2027e before easing slightly in 2028e due to Alpha Bank lease resets. Net LTV is thus primed to fall to 37–38%, comfortably below mgt’s 40% ceiling. Overall, the c1.4% rental CAGR through to 2028e coupled with falling financing costs will translate into c4% NAV/share CAGR, on our estimates.

Valuation: merits of the thesis largely reflected in the share price – The stock has materially outperformed its Greek and foreign peers since late 2024, propelled by the completion of the ICI transaction, resilient operating performance, and improving sentiment toward rate-sensitive sectors amid falling interest rates. As such, following a c45% total return ytd, BriQ now trades at just c20% discount to 2026e NAV—well off the c35% discount seen earlier in the year and near the tighter end among its peers (though still wider than the c15% cross-cycle average for EU REICs). Although BriQ’s c11% average total return (NAV growth and dividends) over the next 3 years offers good value, we believe this is largely reflected in the current valuation. Our new €3.0 PT (based on 20% discount to 2026 NAV) has been lifted as we roll over our valuation to 2026 but indicates limited upside, thus leading us to lower our rating to Hold.