Year-end Report January – December 2025

Atrium Ljungberg closed 2025 with broadly stable operating metrics: rental income totaled SEK 2,957m (prior SEK 2,988m) with a comparable portfolio increase of 1.3%, and net operating income was SEK 2,124m (SEK 2,150m) with comparable +1.4%. Income from property management fell to SEK 1,307m (SEK 1,425m), corresponding to SEK 2.07/share, while net profit was SEK 823m (SEK 850m) or SEK 1.31/share; unrealised property value changes were negative SEK -89m (including SEK 127m project returns) and derivatives revaluations were SEK -138m. Investment activity remained high at SEK 2,895m (acquisitions SEK 86m) and no property sales; management highlighted completion of PV Palatset and seven additional project completions in 2026, and the Board proposed a SEK 0.74/share dividend after a 5:1 share split.

Analysis

Market structure: Atrium Ljungberg (ATRLJ‑B.ST) benefits from near‑term rental tailwinds — Q4 rental income/NOI rose ~3% and comparable portfolio +1.3–1.4% — and a SEK 40bn project pipeline that should phase incremental cash flows through 2026–2028 as seven projects complete. Winners are developers with owned landbanks in growth submarkets (Stockholm/Hagastaden); losers are secondary landlords with weak demand or heavy near‑term refinancing. Mark‑to‑market derivative losses (SEK -138m) and modest negative property revaluation (SEK -89m) highlight rate sensitivity; a sustained 50–100bp move in Swedish 10y can reprice NAV by mid‑single to low‑double digits.

Risk assessment: Tail risks include a sharp Swedish rate re‑reset (+100bp) that forces deeper valuation write‑downs or triggers covenant tests on development financing, and project execution overruns on the SEK 40bn pipeline that compress returns. Near term (days–weeks) focus is on funding/hedge MTM; short term (months) on rental uptake from project completions; long term (quarters–years) on realized cash yields from completed assets. Hidden dependency: earnings hinge on timely leasing of new space and capital markets access; derivative losses suggest hedging mismatches that can reverse quickly. Key catalysts: Q1 trading update, 7 project completions through 2026, and Riksbank rate moves.

Trade implications: Tactical long ATRLJ‑B.ST into anticipated NOI upside from 2026 completions (6–12 month horizon) but hedge interest‑rate tail risk with put protection or by shorting rate‑sensitive REIT peers. Relative trade: long ATRLJ‑B.ST vs short CAST.ST (Castellum) if you prefer development optionality; or vs FABG‑B.ST (Fabege) if you prefer concentration in Stockholm CBD. Options: buy 3–6 month put spreads on ATRLJ‑B.ST to cover 5–15% downside; consider selling covered calls after a 10% rise. Rotate modestly from highly leveraged developers into large listed managers with completed pipelines.

Contrarian angles: Consensus underweights the optionality of Atrium’s SEK 40bn pipeline — if leasing velocity matches 2023–24 prelets, NAV upside could be 10–20% as project returns (already SEK 127m included) crystalize. Conversely the market may underprice embedded hedge/derivative risk; a repeat of larger negative MTM (>-300m) would be a catalyst for multiple compression. Historical parallel: cyclical developer rerating post‑rate peak (2010–2012) shows outsized recovery once yields stabilize; watch for overdone selloffs that create buying opportunities.

Key Decisions for Investors

• Establish a 2–3% net long position in Atrium Ljungberg (ATRLJ‑B.ST) within 2 weeks, horizon 6–12 months to capture NOI uplift from seven 2026 project completions; trim if comparable NOI growth falls below +0.5% on next report.
• Implement a hedge: buy 3‑month put spread on ATRLJ‑B.ST (buy 1x 10% OTM put, sell 1x 20% OTM put) sized to protect 1% of portfolio against a >10% downside driven by rate shocks; roll or unwind after Q2 2026 results.
• Relative value: enter a 1–2% pair trade long ATRLJ‑B.ST / short CAST.ST (Castellum) to express development optionality vs core landlord exposure, review after 3 months or if Swedish 10y moves ±25bp.
• If Swedish 10‑year rises >50bp OR aggregate derivative MTM on Atrium worsens to <-300m, reduce RE/ATRLJ exposure by 30% and redeploy into quality logistics/industrial REITs (e.g., ITEK/FABG‑B.ST) with lower development risk.