Atrium Ljungberg AB (publ)

Welcome to this live broadcasted report presentation regarding the third quarter of 2025 with real estate company Atrium Ljungberg. Presenting is Annika Åhnes, CEO and CFO Anna Jeppsson. Please go ahead with your presentation, Annika.

Yes, thank you very much. As a start, I would like to summarize a few things from this report. And the headline for the report is our high quality property portfolio delivers results. Our net letting amounted to 3 million in the third quarter, but if we take into consideration also contracts cancelled due to upcoming projects, the number is 9 million. And for the first nine quarters it was 16 million or 23 million. Our net operating income, like for like, increased by 4.3%, which is a good number, for the quarter, and 2.6% during the first nine months. Profit from property management decreased by 3.7% this quarter, and the biggest effect are that we last year sold some properties, but also that the interest rates have increased. A good part is that overall we see a very good cost control in the company. We see unchanged yields in the market but have increased changes in the value mainly due to project gains. Anna will talk about this more later. We have invested 2.1 billion during the first nine months and the property value adds up to 61 billion in the end of the quarter. We have ongoing projects with an investment of 9.8 billion, of which 5.3 billion remains to be invested. We have completed one project and we have a new decided one, so still 11 ongoing projects. If we look at the overall portfolio, it looks very similar to last quarter with 80% of the value in Stockholm and that we have 64% of the portfolio is offices. The LTV is stable of 42% and the occupancy rate 90%. And then a few words about the market. After a quite long period of uncertainty and waiting, we are actually now seeing signs of some stabilization and the confidence in the Swedish economy is beginning to return. The recovery is expected to pick up in 2026. after a prolonged recession, mainly driven then by the household consumption. The optimism is also based on interest rate cuts and large government spending boosts, factors that guarantee increased activity and the confidence in the future. This also improves the conditions for the companies, which is of course very important for our business. So we also see that many companies cannot stay still any longer. They need to do some kind of change when it comes to their business and that they need new space. So they're actually looking for more functional and attractive environments also for their business. So given this background, I'm cautiously positive about the market development in the near future. If we look at the tenant-owned housing market, it has been stable during the third quarter but still characterized some weighting. Activity has increased but buyers are selective and the price levels are being held back despite improved interest rates. Conditions from buyers are better than it has been for a long time. The new conditions market has had a clear restart after the summer, with projects with strong offers attracting the most customers. In our own project at Nobelberget, we see interest, activity and greater determination among stakeholders, which is very important. gratifying despite some concerns among consumers about their own sales but in the quarter we can see that we have done some business some business and the project sales is now 35 percent So in the quarter, we have done some important lettings. As I said, the net letting was 3 million. Haglöfs have signed a contract in Slakthusområdet, which means a new project start for us, and I will come back to this a bit later. Life City in Hagastaden continues to be a really attractive place for knowledge-intensive businesses. And here we have signed leases for a total of 1,700 square meters with Bristol Myers Squibb and Pro Pharma. And with this latest rental, Life City is now fully let. Interest in office space in Slussen remains very strong. During the quarter, we welcomed new tenants such as MyNewsDesk and the law firm Kahn Pedersen, while several existing companies chose to grow with us. Among other things, Guldjursgruppen GEZÖR has expanded their premises and extended their agreements, and Sony Music Group have also a new lease with music studios in Katarinahuset. This really confirms Slussen's attractiveness and the high demand, both for modern office solutions, for the vibrant urban environment that emerges here. In total, the new expanded agreements cover over 2000 square meters. Another major lease during the quarter is the agreement of 1,100 square meters in Vas Barkaby in Järfälla. And a lot of things have also happened in the restaurant side. Last spring, Matateljen opened in Slakthusområdet. And now the restaurant has also signed an agreement for an ateljenspizza in the neighborhood. And that's also the last premises in house 26 in Slakthushallarna. The new Söderhallarna will be inaugurated next autumn with several years of renovation and will house a market hall and restaurants in the new version, a cinema as well as a newly renovated office and roof terrace. At the end of September we signed an agreement with the restaurateur behind the GRÄND, a brand new destination for food and drink experiences with the focus of draft beer and international food. And I think it's going to be a very good addition to this building. Then a reminder of our tenant portfolio. We have a well-diversified contract portfolio, where our 10 largest customers account for 21% of the contract value. Of this 21%, 9% of the contract value is from state and municipalities, and we have an average contract period of 4.8 years. Offices is our largest source of revenue with 53% and consumer durables, our second largest account for 20% of the total revenue. And 44% of the total maturity is from 2030 and onwards. to take a look quick look on our retail portfolio also fashion accounts for 13 percent of the sales in our retail locations food alcohol and pharmacies stands for 40 percent of the turnover in the retail locations and we see a positive trend when it comes to sales in our retail hubs and we think that we will see a start of the consumption to start to pick up in the beginning of 2026 that of course will have a positive effect in the retail segment as well. And with that, I would like to hand over to Anna to talk about the figures for the quarter.

Thank you, Annika. So let's take a look at the numbers. We are very happy to report a strong result for the third quarter, the best quarter for us in 2025. Rental income in Q3 amounted to 736 million, which is a decrease of 1% compared to Q3 in 2024. However, just like in Q1 and Q2, rental income in the Like for Like portfolio increased, which I will return to shortly. In 2024 we received larger non-recurring payments of 18 million in Q3 and this year the figure is only 1 million. This is a positive development as we prefer tenants to stay rather than pay one-off fees and move out early. Adjusted for these non-recurring items, rental income increased by 2%. The occupancy rate decreased by 1.8 percentage points to 89.7, mainly due to IBM and Fujitsu, whose previously announced lease terminations took effect on the 30th of September. Property costs decreased by 5% in the quarter, reflecting strong cost control and targeted efforts to reduce expenses, particularly related to energy consumption. And it's encouraging to see this reflected in both our sustainability metrics and our financial results. Overall, the operating surplus increased by 1% to 550 million and by 4% when excluding non-recurring payments. The surplus margin rose in the quarter and now stands at 71.8% on a rolling 12-month basis. Looking at the period from January to September, the operating surplus is slightly down overall, which is entirely attributable to the sale of two properties in Sundbyberg in June 2024. In the like-for-like portfolio, however, we see an increase for the full period. Net financial items rose by 11% and the average interest rate in Q3 remained stable at 3.2%, including commitment fees. And the increase in net interest expense is due to the adjustment to the current interest rate environment, which took place in the second half of 2024. Profit from property management in Q3 amounted to 352 million. We also recorded positive value changes of 79 million in the quarter, of which 62 million relates to yield adjustments. The average yield remains unchanged at 4.7%, with minor adjustments for a few properties, primarily a large mixed-use property where we applied a more granular segmentation of yield requirements in the property. Cash flow was positive at 84 million, despite a negative impact of just over 100 million due to a downward adjustment of the index assumption for 2025 from 1.5 to 1% in line with market practice. And commercial project gains amounted to 57 million in Q3, bringing the year-to-date total to 105 million. and including gains from residential projects, the total reaches 144 million. Earnings per share for the period were SEK 1.33. All in all, Q3 was our strongest quarter of the year. And at the same time, we know that Q4 tends to be weaker with a higher cost base. And in addition to that, the positive net letting seen during the year has been driven by project leasing, which will of course impact the occupancy rate in the short term. Looking at the like-for-like portfolio for the period, rental income increased by 2.2% and operating surplus by 2.6%. This growth is driven by indexation, increased charges for property tax and tenant improvements, as well as turnover-based rent for certain tenants, primarily in the office segment. What is particularly encouraging is that the operating surplus increased more than the rental income, meaning that revenues grew faster than costs. Total costs increased by just over 0.8% and within these figures we see a positive impact from reduced customer losses of 13 million and a negative impact from increased property tax costs of 17 million as 2025 is a property tax reassessment year. Adjusted for these items, costs remain flat, which reflects strong cost control and active efforts to optimize operations and reduce consumption and manage our properties efficiently. And in the third quarter alone, cost decreased by 3.8%, resulting in a 4.3% increase in operating surplus. And this is a figure that we are very pleased with. Looking at the different segments, both offices and retail showed an increase in operating surplus. And in both cases, the surplus grew faster than revenues, which is positive. However, the drivers differ. In the office segment, the increase is driven by higher revenues, with positive effects from indexation, additional charges and turnover-based rent. In the retail segment, the increase is driven by cost savings, and we don't see the same effect from indexation as more contracts are turnover-based in the retail segment. Consumption has not yet picked up in 2025 as we know but the conditions are in place and we hope to see improvement toward year end. On the cost side we're seeing the impact not only of strong cost control but also lower customer losses which is also a very positive sign. In June last year, we sold two properties in Sundbyberg, and the purpose was to free up capital for investments in our project portfolio. Starting in Q3, these disposals no longer affect quarter-and-quarter comparisons, but they do impact the year-to-date figures. And in the first half of 2024, the sole properties generated rental income of 61 million and an operating surplus of 47 million. And this is the reason for the decrease in operating surplus for the first period Q1 to Q3. And there is also a minor effect from newly acquired project properties, specifically Mälaterrassen in Slussen and Kvarter Ånkvarn in Uppsala. Moving on to our financial position, the value of our property portfolio increased by approximately 700 million in the quarter, reaching 60.6 billion. And this is the result of 652 million in investments in our projects and 79 million in value changes. And so far this year, we have invested 2.0 billion or 2.1 billion, including acquisitions. We currently have 11 ongoing projects. One project was completed and another started in Q3. The total investment volume is 9.8 billion, of which 5.3 billion remains to be invested. Seven of these 11 projects will be completed in 2025 and 2026. Once fully let, these projects will generate rental income of approximately 360 million. And we're not yet there, but these will still be valuable additions to both rental income and operating surplus. And Annika will return to this shortly. Interest bearing debt increased by 350 million in Q3 and by 1.4 billion year to date, totaling 25.7 billion in interest bearing liabilities. And this increase is solely to finance investments in our projects. And we are investing at a pace that allows us to maintain stable financial key ratios at healthy levels. The loan to value ratio remained unchanged at 42%, which is a very good level for us. And the interest coverage ratio on a rolling 12-month basis is 3.1. That's down 0.1 in the quarter. And this remains a solid level, even though it has gradually declined during the year as we have adjusted to higher interest rates. The debt ratio increased by 0.2 to 12.6 in the quarter. And this relatively high figure is due to a combination of low yielding properties and large project investments. And many of our projects are in late stages, which adds debt, but not yet earnings. And we expect the ratio to rise slightly before turning downward as our ongoing projects begin to generate rental income. And net asset value per share adjusted for dividends has increased by 5% during the year to 55.21%. On the financing side, we continue to have good access to funding on favorable terms, both from banks and the capital market. Credit spreads in the bond market tightened during the quarter. In September, we issued a five-year bond at 120 basis points, which is 10 basis points lower than earlier this year. Commercial paper is back at 40 basis points for a three-month tenor. And our financing portfolio remains secure and stable. The average capital duration is 3.4 years with a well-balanced maturity profile for both bonds and bank loans. And we only have 300 million in bond maturities to refinance this year and a relatively limited volume next year as well. Available liquidity amounts to just under 10 billion and primarily in the form of undrawn revolving credit facilities. We also have a secure position on the interest rate side and the average interest rate duration is 3.0 years and 95% of our interest exposure is fixed through swaps or fixed rate loans. The average interest rate in the portfolio is 3.0 excluding commitment fees and 3.2 including them and that is unchanged in the quarter. Finally, in early September we received the welcome news that Moody's confirmed our BA2 rating and upgraded our outlook from negative to stable. And they also lowered our ICR requirements from 3.0 to 2.5. And what was particularly encouraging was that Moody's raised their assessment of our asset quality from BAA to A. And this is really a clear recognition of the quality of our property portfolio and property portfolio that delivered strong results in third quarter. And with that, I will hand over to you, Annika, to continue with an update on transactions and projects.

Thank you, Anna. Yes, during the quarter we signed an agreement to sell our development rights of co-ops in Hagastaden, the project quarter Stanford 1. The purchase price is based on a total underlying property value of 818 million. And before the transaction will take place, we will complete the underground garage. The property will be occupied in two stages, the first of which is in December 2026 and the second in August 2027. We are one of the largest property owners in Hagastaden and our ambition is to contribute to the long-term development in the area but with the focus on the offices that we have in our portfolio. And given our extensive investment pipeline totalling to more than 40 billion, we have therefore chosen to step away from this specific residential project in favour of other investments. that we believe will create greater value for the company. The transaction is expected to be revenue neutral for us. Then a few words about the completed project that we have in Sickla. It is Campus Sickla. It's a very fine project in many ways. One part is that it's the first completed project within our Stockholm Wood City. The project is both wood frame and wood facade. The students started after summer and have made the neighbourhood full of life and activity. It's not the biggest project but adds to our rental income of SEVEN million. Then I'm very pleased to announce that Haglöfs has chosen Slakthusområdet for the new headquarter. It is a brand with a strong identity and high ambitions, exactly the kind of player that helps us shape the character of the area. Occupancy is planned for the autumn 2026. The premises will be located in building 48 in Lilla Marknadshallen, one of the area's original buildings with a unique industrial historical architecture which is currently undergoing a careful renovation in condition with the lease. We will start the project and has a total lettable area of approximately 1950 square meters and an annual rental value of approximately 10 million excluding add-ons. And the occupancy rate is now 72%. So all in all, 11 ongoing projects with a total investment on almost 10 billion, where 5.6 million remain to be invested. So we have seven projects that will be completed during the end of this year and during 2026. Given the current occupancy rate, we have secured annual rents of 175 million, but of course they will not have an effect directly during 2026, since it's depending on when the project is completed. Sickla Central currently has an occupancy rate of 20%. The house has just opened with a house on the ground floor. And what a house, it's really fantastic qualities with a panoramic view over Stockholm. After a successful campaign, we have had about 15 to 20 viewings the recent week, and the response is very positive. The size of the space is aimed to attract small and medium-sized companies with a time horizon of six to nine months, which means that it's only now when there is actually an interest in line with our completion, which is expected to be in Q1 to Q2 next year. There's still a lot of interior work to be done before the customers can move in. And then just a quick reminder of the very big pipeline we have of projects where we have a plan to invest 40 billion in places in Stockholm where there is a subway today or will be one in the future. So that's Sickla, Slakthusområdet, Hagastaden and Slussen. And that's all for this report. In conclusion, I can state that it has been a very strong quarter if you look in the like for like figures, which is very good. So thank you and goodbye. And if you have any questions, you can email me or Anna. So we will respond for you as quickly as we can. Thank you very much.