WOOD Flash – Atrium: 2Q21 – restrictions affect results, flat valuations, transition into resi gathering momentum

Atrium’s figures and operations remained affected heavily by the restrictions on trading throughout 1H21. That said, the trends since reopening are encouraging, as tenant sales have, reportedly, rebounded to c.87% of their pre-pandemic level. Still, we believe the lower level of sales could put pressure on the like-for-like performance going forward; that said, with the very limited volume of new leases (as the discounts granted to tenants have been, by and large, linked to lease extensions), there is limited visibility on the like-for-like level of rents currently. The dividend has been maintained at EUR 0.27/share, with a scrip take-up of nearly 50%. Gazit’s stake has increased to 75%, through a combination of scrip and purchases. On the residential front, Atrium announced that it has a pipeline of around 4k apartments in its acquisition and development pipeline. The company is targeting to reach a 60:40 retail:residential split by 2025E, hoping to exit from Russia, Slovakia, the remaining non-core assets in Poland, and the landplot in Istanbul by then. As we highlighted in our latest update, we believe that, eventually, the market should reward Atrium, by applying higher multiples to the residential segment, but we see a risk that, during the transition period, the retail multiple may be applied to earnings that may be lower, as a result of the rotation out of the higher yielding non-core retail into the safer, but lower yielding, residential.