BIG Europe: The next growth engine, or an added risk layer the group is still carrying

The main article argued that BIG already recorded its 2025 step-up, but that the real test would sit in project deliveries, funding discipline and capital allocation. Europe is where those three lines meet. On one hand, BIG Europe is no longer an experimental outpost: BIG's effective-share NOI rose to €86.7 million in 2025, up 40.5%, and fourth-quarter NOI alone reached €23.1 million, up 23.5%. On the other hand, the next stage still requires €248.6 million of remaining construction costs across the development pipeline.

The easy mistake is to speak about "Europe" as if it were one thing. BIG Europe itself is mainly an open-air retail platform in Poland, Serbia and Montenegro, with average rent of €19 per square meter, 99% occupancy and an 8% WACC. AFI Properties is already something else: a much larger portfolio spanning retail, offices and rental housing across Israel, Romania, Serbia, Poland and Czechia. Anyone who puts those two stories into one bucket risks counting the growth engine, the funding burden and the risk layer all at once.

BIG Europe is already a platform, not a promise

The good news is that the base is already there. BIG Europe's asset value reached €1.245 billion at the end of 2025, up from €1.054 billion a year earlier, after climbing from just €229 million in 2019. What matters is that this expansion did not come with visible operating slippage. Occupancy moved within a tight 97% to 99% band throughout 2019 to 2025, and stood at 99% at the end of 2025. This does not look like growth bought through weaker assets or emptier centers.

That matters because it changes the starting point of the debate. Europe is no longer a theoretical option inside BIG's story, but a layer that already carries real weight. 2025 also marked genuine operating improvement: average rent in BIG Europe rose from €18 to €19 per square meter, while occupancy improved from 98% to 99%. At the same time, WACC moved up slightly, from 7.9% to 8.0%. In other words, the better result did not come from a more forgiving valuation backdrop alone. The operating platform itself improved, even under slightly tougher discount-rate assumptions.

But this is also where the analytical trap begins. Looking only at NOI and asset value can create the impression that Europe has already "made it." That is only partly true. The platform is already there, but the next leg of growth still depends on completing a large development wave, and most of it still sits ahead of delivery.

Poland is the 2026-2027 engine, the Balkans are the later and riskier yield layer

Once the development slate is split into two groups, Poland versus Serbia and Montenegro, the picture becomes much sharper. Poland includes 10 projects under construction, with total GLA of 156.1 thousand square meters, €38.8 million already invested and €163.7 million of remaining construction costs. Those projects are expected to generate €16.1 million of NOI, almost all of it already in 2026 and 2027. Serbia and Montenegro, by contrast, include only 3 projects, with 47 thousand square meters, €5.5 million already invested and €84.9 million of remaining construction costs. Their projected NOI is €9.0 million, but it arrives later, in 2027, 2028 and 2029.

That leads to a straightforward conclusion: Poland is the near-term growth engine, the Balkans are the later yield engine. Poland carries roughly two thirds of the entire European pipeline's remaining cost, and roughly two thirds of its projected NOI. More important, it is the part expected to contribute most of the new income already over the next two years, with €4.3 million in 2026 and another €11.8 million in 2027. Serbia and Montenegro look attractive on paper, with a projected 9.9% yield versus 8.0% in Poland, but most of that NOI comes later: €1.4 million in 2027, €1.9 million in 2028 and €5.7 million only in 2029.

That gap means the higher Balkan yield is not a free premium. It comes with longer duration, higher sovereign risk and heavier dependence on a supportive operating backdrop. Midroog is close to explicit on that point when it frames the group's activity in the Balkans, especially Serbia, as a factor that weighs on the operating environment. Serbia is described there as a country with improving economic indicators, but also with higher geopolitical and sovereign risk. Montenegro is mentioned in the same Balkan-risk context as part of the exposure that weighs on the stability of the operating environment.

So anyone looking for BIG's next European engine should focus first on Poland. Anyone looking for the maximum upside can be drawn to the higher Balkan yields, but should also admit that this is the part of the story that matures later and therefore carries a visible risk premium.

AFI should not sit in the same bucket

Mixing BIG Europe and AFI Properties creates a double distortion. It makes BIG's European story look broader and more diversified than it really is, and it hides the fact that AFI's European exposure runs on different engines.

That table makes clear why Europe cannot be treated as one number. BIG Europe itself grew close to 40% in both revenue and EBITDA in 2025. AFI, by contrast, grew at a much more moderate pace, but from a far larger base and with a business mix that includes offices and rental housing, not just open-air retail. AFI's 2025 completions underline the difference: an additional office building in Airport City in Belgrade, a rental housing building in Bucharest, a rental housing project in Warsaw and office building B in the T22 project in Warsaw. Those are different engines, with different capital cycles and a different risk profile.

There is another point the market can easily miss. Within AFI, Poland may be growing quickly, but it is still not the dominant geography. In 2025, Poland contributed NIS 113.6 million of revenue and NIS 51.0 million of EBITDA, versus NIS 212.5 million of revenue and NIS 130.8 million of EBITDA in Serbia, and NIS 533.3 million of revenue in Romania. So the geography that rightly excites investors inside BIG's own pipeline, Poland, is not automatically the same geography mix that dominates AFI. This is a separate platform with a separate center of gravity.

Midroog reinforces that distinction from a financing angle. For BIG's leverage, coverage and liquidity analysis, AFI is treated as an equity holding rather than as an operating cash source on which BIG relies. The reason Midroog gives is clear: there is no financing linkage between the companies, and BIG does not rely on AFI's cash flows. That is a material point. AFI may add value, but not every euro that sits there should be read as readily available parent liquidity for BIG Europe or for de-risking the parent.

FX, capital and the Balkans make the story less clean

The next European stage is not only a demand question, but also a funding question. Midroog's liquidity analysis for the four quarters starting September 30, 2025 is run explicitly without BIG Europe, and within that sources-and-uses frame it explicitly includes BIG's equity investments into BIG Europe. That may be the clearest sign that Europe is still consuming group capital, not only generating it.

Note 27 also shows that BIG's Serbian activity is not just a future promise. The three project companies pledged against series S, HVAC in Indjija, SEK in Kragujevac and NEPI in Krusevac, already hold investment property and investment property under development totaling about €111.1 million. In 2025 they generated €8.4 million of rental and operating revenue and €5.7 million of operating cash flow.

That matters, but it does not solve the capital question. Even if these companies already provide a real operating base, the Serbia and Montenegro pipeline still requires €84.9 million of remaining construction cost. In other words, the Balkans are not entering the next few years as a mature cash engine that can fully fund itself. They enter as an active platform that still needs capital to reach its next phase.

FX adds another layer. In the financial instruments note, the group describes active management of foreign-currency exposure, mainly against the euro, including swapping NIS debt into €55 million of euro debt at BIG level and currency transactions by AFI Properties against about €385 million of NIS liabilities. That matters, because it means the group is not indifferent to FX. But Midroog still highlights that the AFI holding increases the group's equity exposure to shekel-euro volatility. The conclusion is that hedging reduces liability mismatch, but does not remove the risk layer embedded in European assets, euro-denominated values and a balance sheet that is ultimately reported in shekels.

Anyone hoping for a clean European story gets a more complicated picture instead: strong operating growth, yes; a quality platform, yes; but also an ongoing capital need, FX exposure that does not disappear, and a meaningful difference between near-term Poland and the later Balkan layer.

Conclusion

Europe has already become one of BIG's growth engines, but it should not be given one flat multiple. Poland is the cleaner part of the thesis, because it carries most of the pipeline expected to turn into income already in 2026 and 2027. Serbia and Montenegro are the more complicated part, because they offer higher yields but require more time, more capital and a greater willingness to carry sovereign and FX risk along the way.

The second part of the conclusion matters just as much: AFI is not a simple extension of BIG Europe. It is a separate value layer, with different geographies, different property uses and a different financing logic. So the right question for 2026 and 2027 is not whether "Europe" will keep contributing. It already does. The real question is how much of the next contribution will come from BIG Europe itself, mainly Poland, and how much will remain tied up inside the group's broader risk, funding and FX layer.

What will determine the quality of the story from here is not European growth by itself, but the shape of that growth. If Poland delivers on time and turns the expected €16.1 million of NOI into actual income without another large step-up in capital needs, Europe will look more like a true engine. If the headlines are driven mainly by the Balkans, funding and FX, the market may conclude that the group is still carrying more risk layers than first read suggests.