Atrium Ljungberg AB (publ)

Welcome to this report presentation for the second quarter of 2025 by real estate company Atrium Ljungberg. Presenters are CEO Annika Ånäs and CFO Anna Jeppsson. And by that, please welcome Annika Ånäs, CEO, go ahead with your presentation.

Thank you very much. The headline for this report is increased net operating income in the comparable portfolio, a sign of strength. I would like to begin by summarizing the main content of this report. Overall, it is a quarter in line with our own expectations, and I think it's a strong report considering the market conditions. Our net letting amounted to negative 9 million in the second quarter, but the first half of the year, positive 14 million. I will come back to this in more detail later. Our net operating income, like for like, increased by 1% in the quarter and 2% during the first half of the year. A good number in the current market condition. Profit from property management decreased by 13%. The biggest effects are that we last year sold properties to strengthen our balance sheet and that our interest costs have increased. We see unchanged yields in the market and we have invested 1.4 billion during the first half of the year and the property value adds up to 60 billion in the end of the quarter. We have ongoing projects with an investment of 9.6 billion of which 5.6 billion remains to be invested. Our focus is primarily Stockholm with 80% of the property value. If we look at the portfolio composition, it consists of 65% of the value of offices and 20% retail. Vacancy was stable 9% from last quarter and our LTV was 42%. Economic and geopolitical uncertainty continues to impact companies' willingness to invest and their ability to plan. While there are no clear signs of an economic turnaround, there is increased activity among companies searching for new premises. Several new leases were signed during the second quarter with a strong rental level driven by our attractive locations. There's a lot of talk about the vacancies increasing in Stockholm, and that's true. But as I said last quarter, it's less talked about why. Statistics shows that 44,000 office jobs have disappeared in Stockholm since 2022, during the recession. And we know that the recovery is fast when it gets going and lands in growth. In the retail market, we see that household finances have improved, yet ongoing anxiety and uncertainty have led to many households to prioritize saving over spending. It appears that consumer behavior is being shaped by more psychological factors than economic fundamentals, resulting in damped consumption. Despite low levels of consumer confidence, sentiment showed a positive trend in both May and June. As the year progresses, consumption is expected to rebound, supported by elevated savings and a rapid increase in real disposable income. In the residential market, it continues to exhibit a wait-and-see sentiment, while the supply has reached record levels. In recent months, metropolitan regions have expected modest positive price development, and household expectations regarding future price trends remain high. The Riksbank's policy rate was cut in June, coupled with the government's proposal to ease credit restrictions, is expected to foster more favourable conditions for the housing market going forward. Finally, the renegotiation with Ericsson in Gothenburg was completed. We have signed a new six-year lease starting April 2026 of 31,500 square meters. Of the approximately 5,500 square meters that Ericsson will vacate in April 2026, around 1,400 square meters are currently leased to other office tenants. So the negative net letting in the quarter of 9 million is entirely caused by Eriksson's decision to vacate premises in Gothenburg. New lettings that I would like to highlight is Green Cargo in Hagastaden, a grocery store in Mobilia of approximately 1,500 square meters, and Coop Östra, which is establishing its office in Hagastaden. And not the biggest lease when it comes to square meters, but the very important one is letting in Mälarterrassen of approximately 400 square meters. It is a well-known and respected restaurateur. We will communicate this lease in more detail after summer. And then a reminder regarding our tenants. We have a well diversified contract portfolio where our 10 largest customers accounts for 21% of the contract value. Of this 21%, 9% is contract value from state and municipalities. The average contract period was 4.9 years. Offices are our largest source of RenovU with 53%. Consumer durables, our second largest share, account for 20% of the total RenovU. If we look at the maturity structure of our leases, we now see that termination will not have any revenue impact in 2025. 41% of their maturity is from 2030 onwards. And I think it's good that we only have five leases, which to our offices is more than 10,000 square meters. And overall, we have 2,000 contracts excluding parking. And a few words about the retail. So we have a wide range in our retail portfolio. Fashion accounts for 14% of sales in our retail locations. And I think we have a very attractive retail portfolio. Food, alcohol and pharmacies accounts for 40% of the turnover in our retail locations. And with that, I hand over to our CFO, Anna.

Thank you, Annika. We follow up a stable first quarter with yet another solid quarter in line with our expectations. Rental income in the second quarter amounted to 725 million, a decrease of 4% compared to the second quarter 2024. However, like in Q1, rental income in the like-for-like portfolio increased. The total decrease is due to property disposal carried out in 2024, which were made to enable greater value creation through investments in our project portfolio. In addition, non-recurring payments decreased from 6 million to zero, and this is a positive development, as these payments typically occur when tenants move out early, and we would of course rather see our customers stay. The letting rate remained unchanged at 19.5% in the quarter. And the operating surplus amounted to 524 million. This also represents an increase in like for like portfolio, but a decrease in total due to the property disposals. And we can note that the properties in question were divested in June 2024, making this the final quarter in which these effects are visible. And I will turn to the effects of these disposals shortly. Net interest increased by 27% to minus 170 million. And we managed to keep the average interest rate in the portfolio at a very low level long after rates began to rise in 2022. And it's only in the past 12 months that we have fully adjusted to the current interest rate environment. The average interest rate at the end of June last year was 2.5% and it now stands at 3.2%. So this is clearly reflected in the numbers. And we now consider the adjustment to be complete. All in all, profit from property management decreased by 15% to 317 million, totaling 644 million for the first half of the year. Changes in value of properties were positive, amounting to 23 million in the quarter. Yield requirements remained unchanged at 4.7%, and the value of the investment portfolio was essentially flat. The value change is driven by project profits of 28 million, primarily related to our PV Palatset project in Hagastaden, which will be completed in Q4. We also reported project profits of 23 million in our residential projects, bringing total project profits in Q2 to 51 million. Earnings per share were 0.82 SEK, which was also affected by negative changes in value of derivatives. And this is, of course, due to falling market interest rates, which in turn is positive for us. Moving on to operating surplus in like-for-like portfolio. When looking at the like-for-like portfolio, rental income increased by 2.1% and the operating surplus by 1.8%. And this is mainly due to indexation, which landed at 1.6% for 2025, giving us an effect of about 1.2%. And not all contracts are indexed. Parking, operating supplements and turnover-based rents are examples of non-indexed contracts. As CFO, I want to see rental income grow faster than operating costs, meaning rental income should increase less than the operating surplus. That is not the case in these figures, so it's important to remember that 2025 is a property tax reassessment year, and property tax have increased more than income, both in absolute terms and in relative terms. Adjusting for property tax, property costs are flat and the surplus margin has increased by 0.5 percentage points. Looking at the different segments, our largest segment offices continues to perform strongly. Retail saw a slight decline in income due to weaker than expected consumption. In some cases, we have granted temporary rent discounts and this has been no development in turnover based rents. However, the operating surplus increased slightly, mainly due to lower customer losses. In June 2024, we sold two properties in Sundbyberg to free up capital for investments in our project portfolio. These properties generated rental income of 61 million and operating surplus of 47 million in the first half of 2024. This is the main reason for the decrease in the operating surplus in the first half of 2025. There is also a minor effect from newly acquired project properties, such as 1 million in property tax for Mälart Rassen in the first half of the year, corresponding to just under 2 million on a full year basis. And we will also see a similar effect from our newly acquired property, Kvarteret Ung Kvarn, amounting to just over 1 million per year. Moving on to our financial position, the value of our property portfolio increased by approximately 800 million to 59.9 billion in the quarter. And this is a result of investments totaling 799 million, of which 730 million were project investments and 86 million were acquisitions of project properties. In total we have invested 1.4 billion so far this year and our ambition is to invest around 3 billion annually and we are well on track. We have also had residential buyers take possession of their new apartments, which is reflected in the sales line in the table. We currently have 11 ongoing projects with a total investment of 9.6 billion, of which 5.6 billion remains to be invested. And seven of these 11 projects will be completed within the next 12 months, contributing to both rental income and operating surplus. And Annika will return to this shortly. Interest-bearing debt has increased by 500 million in Q2 and 1.1 billion year-to-date to 25.4 billion, and the increase is due to investments in our projects. Financial key ratios have weakened slightly in the quarter, mainly due to both higher average interest rates and increased debt. The interest coverage ratio on a rolling 12-month basis is now at 3.2, and the net debt to EBITDA ratio is 12.4, and the loan-to-value ratio is 42%. Nevertheless, we maintain a strong financial position with a low loan-to-value ratio and high interest coverage. Net asset value per share has increased by 2% during the year to 54.53 per share. The second quarter began with trade war, volatile financial markets and widening credit spreads. And since then, financing conditions have gradually improved and bond spreads are now back at Q1 levels. Commercial papers are five basis points higher at 45 basis points for a three-month tenor. Interest rates have gradually declined. We have good access to financing on favourable terms, both from banks and the capital market. Capital duration increased slightly in the quarter to 3.6 years, mainly due to a new 10-year unsecured loan from Nordic Investment Bank used to finance our Södra Hallarna refurbishment project. In addition to a solid average capital duration, we have a healthy credit maturity structure. Very few loans apart from commercial papers mature in 2025 and just over 4 billion matures in 2026. Add to that 9 billion in available liquidity through revolving credit facilities and we have a very secure financing portfolio. We also have a stable interest rate position. Interest rate duration remains at 3.0 years and we intend to maintain it at that level going forward. 97% of our interest exposure is fixed through swaps and fixed rate loans, giving us low exposure to short-term interest rate movements. The table in the top right shows that 9% of interest maturities are in 2025. And in addition to 3% floating, we have 1.5 billion in callable swaps, corresponding to 6%. And these can be terminated once per quarter. Many maturities were handled in Q2, which is why the average interest rate increased from 3.1% to 3.2%, including unutilized credit facilities. and no further interest maturities remain in 2025. So we expect the average interest rate to stabilize at this level and we consider the adjustment to the higher interest rate environment to be complete by now. However, we will add depth and we continue to work actively with the portfolio to maintain a high interest rate duration. So minor fluctuations in the average interest rates may therefore occur. So to summarize, we have a secure financing portfolio and good access to capital on favorable terms. And this is crucial for financing growth through investments in our strong project portfolio. And with that, I will hand over to Annika, who will tell you more about the projects.

Thank you, Anna. So now let me update you on our ongoing projects. In the end of Q2 we had ongoing construction with a total investment of 9.6 billion, where 5.6 remains to be invested. In this picture you can see our 11 ongoing projects and completion dates. The two projects that will be completed this year is the school in Sickla and PV Palatset. The extension of the school is fully let and PV Palatset is 80% let to the Swedish Economic Crime Authority. The rental value excluding supplements amounts to 65 million for these two projects. For the projects that will be completed during 2026, the rental value excluding supplements is almost 300 million, but the magnitude of the effect depends on the rental situation in the coming months. The good news is that house 49 in Slakthusområdet now is fully let. that we have signed three out of six restaurants in Mälaterrassen and the first lease for the food market hall in Söderhallarna is signed in addition to the lease to Rambod we have done on the office side. During the quarter, we took possession of three development properties in Uppsala. The properties are located alongside the river and very close to the city center. The acquisition amounted to 86 million. And finally, a few words about our project portfolio going forward. We will develop four areas in Stockholm where there's a natural growth of people. The potential investment with projects start up before 2032 is 40 billion. All locations are selected where there's a metro station today or will exist one by 2030. In Sickla we plan to add 250,000 square meters with a total investment of 14 billion. And in Slakthusområdet, the meatpacking district, we are also planning to invest nearly 200,000 square meters which gives a total investment of 12 billion. Hagastaden & Slussen, a part of Stockholm inner city. We have projects for more than 130 square meters and a total investment more than 11 million. So that's all for this report. And overall, you can say that this report is just in line with our own expectations. And by that, I would like to say to all of you and have a nice summer.