Eastnine - Warsaw to become the largest market

• Q2 report broadly in line with expectations
• The Bridge deal is the largest incremental news
• Significant earnings growth in 2027/2028e

Q2 report wrap

Eastnine's Q2 report saw rental income and NOI in line with expectations, while rec PTP was burdened by the large cash position and costs related to build-up of the organisation in Poland. The occupancy rate surprised positively and came in at 96.5% (+0.9pp q-o-q) while earnings capacity contracted sequentially on the Riga divestments, as expected.

The Bridge drives estimate revisions

As we highlighted in our fast comment last Tuesday, Eastnine has acquired The Bridge in central Warsaw with a rental value of EUR 18.2m at an underlying property value of EUR 300m. The occupancy rate is 92% and the deal will be financed with existing cash, new debt, and refinancings of the existing portfolio. We understand that the purchase price of EUR 260m is lower than the property value of EUR 300m due to remaining tenant adaptations (~EUR 15m), deductions for initial vacancies (e.g. Visa will move in during 2027) and rental discounts. Management sounds confident that the letting ratio will surpass the current 92% at completion (Q4'26e), but tenants will move in gradually, meaning that the reported occupancy will come down initially while the full effect from the acquisition will only start to show in 2028e.

Prime assets but with high yields

Unlike the Swedish office market, Eastnine's core markets are seeing strong GDP growth, low office vacancies and positive rent reversion. Supply growth is falling and demand remains solid. We expect this to fuel stronger like-for-like rental income growth than Swedish peers, and significantly better cash flow, especially after maintenance capex. At a normalised cash ROE (CEPS/EPRA NRV) of ~6.7%, the returns are more comparable to Swedish industrial companies (Catena/Sagax/SLP at ~7%) than office companies (Atrium Ljungberg, Fabege, Hufvudstaden at ~3%), but with prime CBD assets.