Colonial (COL.MC): Office market strength with development inflection to earnings

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Colonial (COL.MC): Office market strength with development inflection to earnings

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29 Jul 2026 12:50:10 ET │ 21 pages

Colonial (COL.MC)

Office market strength with development inflection to earnings

CITI'S TAKE

We maintain our Buy rating on Colonial with the company approaching a

2028 positive development-led EPS inflection. Stock upside in the lead up

to this inflection is supported by strong rental growth in its prime office Buy

portfolio, with Paris release spreads reaching +26%. We trim our price target Price (28 Jul 26 17:30) €5.64

to €7.25 due to near-term headwinds from geopolitical risk and higher rates

but nearing EPS growth. We reduce our EPS and NAV estimates to reflect Target price €7.25↓

lower development income and higher debt refinancing rate estimates, from €7.50

however still estimating growth. Leverage metrics are set to improve, and Expected share price return 28.5%we believe the stock is attractively valued at a favorable point in the real

estate cycle, with a transition to growth poised to drive significant upside. Expected dividend yield 5.7%

Expected total return 34.2%

Approaching a Development-Led EPS Inflection — We forecast a positive EPS Market Cap €3,456M

inflection coming into the investment horizon, supporting management's 2028

US$3,936Mguidance of €0.39-€0.41. Growth will be driven by our estimate of development

pipeline rent contribution, of c€60m 2027-2029. We estimate rental growth to

outpace rising interest costs, leading to higher net earnings.

Strong Fundamentals in Prime Office Markets — Colonial's prime office portfolio Price Performance

shows strong underlying performance. H1 2026 rental income rose 5%, with robust (RIC: COL.MC, BB: COL SM)

growth in Madrid (+8%) and Paris (+4%).