WOOD Flash – Atrium: 3Q21 – re-opening driving improvement in earnings, transition to resi started

The results seem slightly stronger than we expected. Still, at 0.86x P/NAV and what seems to be a mid-single digit FFO yield on this year’s figures, Atrium is trading well above its historic multiples, as the earnings – albeit improving vs. last year’s levels – remain affected adversely by the pandemic. Atrium started the transition to resi for rent with a purchase in Poland and the launch of the first phase of a large, multi-year residential development, adjacent to its Promenada SC in Warsaw. The transition to resi could, eventually, warrant a multiples re-rating, in our view; however, given that it could take some four-to-five years, or longer, before we reach the targeted 4-5k apartments, we believe it would be premature to price this in now. Given where the sector is trading, we believe Gazit’s offer looks reasonable: except for NEPI Rockcastle, all the remaining large European shopping centre landlords are trading at a discount to book and relatively high FFO yields, reflecting the market’s concerns that the earnings may decline in the mid- to long-term, under pressure from the rising share of e-commerce.