Atrium Ljungberg AB (publ)

and welcome to this English broadcast together with Altrum Ljungberg. Hello, everyone, and welcome to this English broadcast together with Altrum Ljungberg as they have closed their books now on the third quarter of 2023. And with me here to present the report, I have CEO Annika Ånäs, as well as CFO Ulrika Danielsson. Welcome. Thank you very much.

The heading for this report is strong quarter with a good cost control. I would like to start to summarize and highlight a few things from this report. Our property portfolio looks very similar to last quarter with 80% of the value in Stockholm. The biggest segment, office, stand for 63% of the total value. Our net lending amounted to 42 million in the third quarter and 78 million the first three quarters. Terminations from Our side, due to upcoming projects, amounted to 3 million the third quarter and 8 million the first three quarters. Our profit from property management increased by 26% in the third quarter and for the first three quarters, 22%. And the like-for-like figure for operating net increased by 15%. This is really an excellent performance. We have today ongoing projects with an investment of 7.3 billion, where 4.4 billion remains to be invested. Of the projects being completed in 2023 and 2024, the pre-lating is 86%. As I mentioned in the beginning, we have a big focus on Stockholm, both in our existing properties and in our upcoming investments. The major areas are Hagastaden, Slussen, Slakthusområdet and Sickla. All areas where we have a subway in Stockholm or where there will be one in the coming years. I think we have a unique position in our locations in Stockholm. We still see a demand for office space in location in greater CBD in Stockholm, where the highest demand in Atriumberg is in Slussen and Hagastaden. We have some quality discussion with potential tenants, but the inflow of leads has been weaker after summer. We see a cost efficiency focus among tenants, but also the trend that companies want to be located in areas with a context and where I think our strategy is a perfect match. Retail comprises approximately 20% of the company's total property value and represents a large diverse range. We have a good performance in our retail hubs and have a higher number of both footfall and turnover now than before the pandemic. Our mix in the retail hubs makes them more resilient during tougher times. The Swedish condominium market shows a big portion of uncertainty due to higher interest costs and inflation. We are continuing to see low number of sales launched for new builds, far below the average over the past years. The number of apartments sold are at low levels, and we see that our competitors are doing some price adjustments. We have sold six apartments in Uppsala during August, and three apartments in Siksla. But as you know, we only have two ongoing projects. During the quarter, we have signed several new contracts. As I already mentioned, net letting ended up at 39 million in the quarter. We have had a very big interest from new tenants for Katarinahuset. since we acquired 50 of the co-working and event company a house before summer it was obvious for us to prioritize a house and broaden our offer both in katarina huset but to our tenants overall since the location of katarina huset is very strategic the lease amounted to five five thousand square meters other major leases were Innestads Press, 1,400 square meters in Liljeholmen, and 1,700 square meters to the Stockholm auction hall in Sickla. We have a well-diversified contract portfolio, where our 10 largest customers account for 20% of the revenue. Of this 20%, 7% is revenue from state and municipalities. The average contract period was 4.5 years. Office is our biggest source of revenue with 56%. Customer durables, our second largest part, represent 15% of the total. If we look at the maturity of leases of the last quarter this year and 2024, it's only 11% of the total annual contract value and since most contracts have a nine month notice period most of this is already handled let's take a closer look at our retail portfolio i know i showed you this image even last quarter but i think it's very important to understand the mix in our retail hubs Somehow people tend to think that retail is only fashion, but this is not our case. We have, during a long period of time, worked to diversify our retail hubs to have a wide range of different players. Fashion stands for 14% of the turnover in our retail hubs. I think we have a very attractive retail portfolio. And as I mentioned in the beginning, both footfall and turnover is higher than before the pandemic. Food, alcohol and pharmacies stand for 39% of the turnover in our retail hubs. And by that, I hand over to Ulrika to comment on our financial performance.

Thank you, Annika. The third quarter is financially very strong, and I would say probably the strongest of all three quarters this year. where the company's cost control and financial position are clarified even more. Certainly, we have continued to have declining property values, but the last line of this quarter still ends up in black numbers. Profit from property management for the third quarter amounted to 366 million Swedish crowns and grew by 26%. As earlier this year, this is explained by good NOI growth and stable net financial items. We do have a one-off item of roughly 13 million in the third quarter in form of electricity subsidies that companies received here in Sweden. Adjusted for that, we still achieved a very good growth of 22%. I would like to take this opportunity to clarify how the electricity subsidy behaves in our income statement. We have received a maximum of 20 million in support to reduce tariff-related costs. That is accounted for at the line as a property cost. We have made a settlement against customers which results in credit of seven million and that has reduced the rental revenues the high growth rate of 26 percent to 22 percent depending on how you want to look at it will not last in the last quarter although we believe in growth this is partly due to the fact that q for last year had non-recurring income in the form of pension repayments and partly also because our work on cost tightening was already starting to bite. NOI growth in like-for-like amounted to 15%. In that figure, we do not include the electricity subsidy, but treat it as a one-off item, just like the redemption of leases, in order to get a fair assessment of underlying management and rental work. This means that we are maintaining the strong trend from the first half of the year. Even the revenues and expenses are developing in a slightly different way. And I will come back to that. As I just said, net financial items are stable and should remain so as no major volume changes occurred during the third quarter. And our exposure to variable interest rates is limited at the time of writing. Property yields continue to move upwards in our portfolio, roughly six basis points in the third quarter. And that means that we have adjusted our yields upwards five quarters in a row from 4% in Q2 2022 to 4.6 now in Q3. We continue to have positive cash flow into the valuation, which however does not fully mitigate the yield increase. And that means a net write-down of roughly 450 million in the third quarter equal to roughly 1%. And as a result, we have written down 2.5% this year. We completed our condominium project in Uppsala in Q2, when we recognized a profit of 54%, corresponding to the proportion of apartments taking positions at that time. more apartments have been taken possession of during Q3, which is why we receive a further profit of 4 million. And after positive changes in value of derivatives and tax, the result on bottom line shows black figures of plus 36 million. But since we have red figures in nine months as a whole, the NAV has decreased slightly by 2% adjusted for dividends. Our credit-related key ratios remain stable, and LTV at 41.8% is unchanged since Q2, and in line with the year and outcome, or the beginning of this year. Despite falling prices, we have been able to fend off major blows in the key figure through good earnings and financial discipline. The ICR is related quarter amounts to 3.8, and it is an improvement compared to Q2. Accumulated in Q2, however, it is 3.6, which is due to a weaker first quarter this year. And the net EBITDA continues to improve from 15.6 at the end of last year to 12.7 in Q2 and 12.5 in Q3. And you already know that we have good liquidity buffered. At the end of September, it amounted to 8 billion. So all in all, I would like to say that Autumn Ljungberg is putting another strong quarter behind us. In like for like, our rental income increases by 11%, which is slightly lower than in Q2. And this is mainly explained by the fact that we charge lower cost as a result of the fact that we ourselves have lower cost. And we can see this in the fact that the cost increase is slowing down and that the NOI growth is basically unchanged versus Q2. All segments continue to show good NOI growth, with offices having the strongest development in isolated quarter with both higher revenues and lower costs compared to Q2. We can note that the revenue growth for retail is declining towards Q2. This is not because retail is doing worse, but because retail went very well in the corresponding period last year, much better than offices. And to remind you, offices had a like-for-like rental growth of 2% last year, while retail had over 6%. Of the total revenue growth this year, of 11%, roughly 7 percentage points are from index, and the rest are mainly an effect of lower vacancies and discounts, as well as completed negotiations. Shares costs are marginally higher, but not much. The business has continued to have a very good cost control. In the first half of the year, we had an increase of 6%, which now has decreased to 2% in nine months, and this means that we have reduced our cost compared to Q2 last year by as much as 6% this quarter. Certainly, we had a very high electricity prices last year, which explains parts of this development, but we have also worked hard in the business. All in all, this means that our NOI is 163 million higher in like-for-like, equal to 15% growth so far this year. The project portfolio is developing according to plan. Live sitting by Sparker B, which were completed in Q2 last year, with gradual occupancy, will result in increased rental income of roughly 45 million. The emptying of PV Palatset and Söderhällarna prior to project development has resulted in a loss of revenue of roughly 27 million, most of which is in Södertäljerna. In Katarina, which is expected to complete next year, customers have started to move in, as we told in Q2, and the project contributes with 26 million more in revenue this year so far compared to a year ago. On a net basis, the project development does deliver a rental growth of 36 million and an NOI growth of 51 million. Our two acquisitions in Slakthusområdet and Hagastaden, which we took possession of in Q2 last year, contributed with roughly 83 million in rental growth, while the sale of Skotten in Q1 this year means that we lose income of 31 million. And this means that transaction contributions are decreasing, which is natural as time passes. Just as in the first half of the year, all parts of our value chain, property management, leasing, projects and transactions contribute to increased rental income of 233 million or 12% and increased NOI by 254 million or 20%. An already restrained transaction market noted its weakest quarter, with a transaction volume of 14 billion. This is 60% lower than the corresponding period last year, and 70% lower than the average for the corresponding period over the past five years. Our assessment is that there is continued upward pressure on yields, which in our portfolio means that for the fifth quarter in a row, we are increasing our yields. In the third quarter by six basis points, which means that this year's yield increase amounts to roughly 25 basis points. And as a result, since Q2 2022, we have increased yields by roughly 60 basis points, equal to a decrease in value of 10% in our portfolio. And that decline has been mitigated by 5% due to stronger cash flow, which you can see in our NOI growth for this year. And that means that the net decline five quarters in a row is total 5%.