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Lamda Development | Unfolding Ellinikon value

A diversified business entity – Lamda Development is the company behind the Ellinikon re-generation project, which will turn the Athenian Riviera area into a new ‘smart-city’ destination. Alongside the Ellinikon development projects, Lamda operates a portfolio of assets, including four shopping malls, two yacht marinas, land plots and offices. The operating assets’ NAV is currently c€706m, while the Ellinikon assets under development, including the two Ellinikon malls, enjoy a NAV of c€692m (primarily land and development costs).

Recalibrating for Lamda Malls in 2024 – Within 2024 Lamda restructured its malls subsidiaries, under one entity, namely Lamda Malls (LM), which now incorporates the 4 malls under operation and the 2 Ellinikon malls under development. The new structure aims to streamline operations, while taking advantage of synergies in management services. As such we have recalibrated our forecasts, now modeling annual adj. EBITDA growth of +3-5% yoy in the new LM entity in 2024-26e. Assuming an average 10-yr EBITDA yield of c8.8%, we calculate LM GAV at €1,535m in 2024e and NAV of c€1bn (€5.9/share), with scope for the latter to exceed €7/share upon full operation of the two Ellinikon malls (namely by 2028e, first full year of operation, based on our forecasts).

Important Ellinikon achievements gradually feeding in numbers – The Ellinikon development is gradually unfolding with important project milestones achieved in the past year. Lamda has already placed in the market c155K sqm of residential developments (€1.6bn contracted value), while it has sold land plots of c170 sqm (worth €280m) and has entered agreements for the development of projects in hospitality, leisure, retail, education and Build-to Rent residential properties. Lamda is running a multi-dimensional agile business model aiming to create value and proceed with simultaneous developments. Ellinikon cash proceeds to date (c€800m) point to a self-funded development, more than fulfilling capex needs (c€400m to date). As these projects feed through the P&L, profits will pick up, driving a build-up of NAV, which looks poised to reach €14-15/share in nominal terms at the end of Phase 1 (2027-28e). Our key assumptions call for nominal net flows of c€2bn from the full Ellinikon development (vs. company guided €2.3bn).

Residential projects crystallize further value – The key value of the Ellinikon projects is predominantly derived by the residential developments (>50% of net flows), with the residential buildable area in Phase 1 >300K sqm (c200K sqm. of which already announced). Within phase 1 Lamda has yet to bring to market mainstream properties (in Alimos and near Posidonos avenue), with potential for further exploitation of land plots for sale, while another c900K sqm are dedicated to Phase 2 resi projects. Sensitizing these for sale prices €1K/sqm above current forecasts, we see c€2/share upside to our baseline 2025e NPV of post-tax residential flows.

Financial leverage remains manageable despite heavy Ellinikon capex – Despite the massive Ellinikon regeneration project, Lamda retains reasonable leverage, with the current net debt position at c€850m (incl. leases), set to rise to c€1bn by the end of the year and to €1.5bn by 2026e with the full development of the two Ellinikon malls. This corresponds to net debt to adj. EBITDA 4.5-5.5x, reasonable in our view given the >€8bn investments that will be required for the Ellinikon development. We expect leverage to start falling post 2027e.

Valuation – Updating our model and SOTP valuation for recent developments, we lift our 12m PT to €9.5/share, a c10% premium to our 2024e NAV. We maintain our WACC assumption at 10% for the group, reflecting the long-term nature of some of the Ellinikon project flows and the risks embedded in such a large-scale project. We estimate that the current share price values only the land & infrastructure value of Ellinikon, and as such, we expect the shares to move higher in the valuation spectrum as project implementation accelerates.