Earnings Call: Q1 2021

Apr 16, 2021

Welcome to Atrium Umber's Q1 Presentation. The heading for this report is stable profit and demand for our residential remains strong. As a start, I would like to update you on our overall key figures. The property value of the end of the quarter was SEK 48,000,000,000 and the contracted annual rent SEK 2,300,000,000 Offices are still our largest segment with 54% of the contracted annual rent and retail stands for 20% and the rest culture, education, FMCG, restaurants, health care and residentials according to our urban development strategy, and the gearing ratio was 42.6%. So what were the main events for the quarter? Well, we acquired 2 properties in Gothenburg on Lindholmen, in Eton and Central Stagunen with a total of 22,000 square meters. The investment was SEK448,000,000, and the deal is conditional on a new development plan, which is expected to take place by the start of 2024. We have also signed a cooperation agreement with Stockholm University of Arts to establish in Sluktusumrodat. The High School block will comprise 25,000 square meters, and the agreement is conditional of a land allocation and start of a detailed plan, which is expected to be in place during the spring. As of 31st March, we exceeded our goal for green lease contracts to account for 50% of our contracted annual rents. And Finally, for the 8th year in a row, Altery Njumbay was ranked as 1 of larger than Tabye On. For the 8th year in a row, Alter Mjungberg was ranked as one of Sweden's best working places in the great place of work employee serving. A few words on the market situation. For offices. We see increased activity on the market. Yield requirements have been stable, but we have adjusted the yield requirements on a few office properties and projects resulting in an increase in property value of SEK 167,000,000. In our retail segment, we still see a big difference in turnover in different segments. Demand for shoes and clothes have decreased. But on the other hand, businesses for groceries, home styling, sports and leisure and electronics are performing well. Market prices for the residential have increased in the big cities in Sweden. Our own sales have performed very well, and we will report the profits from this project in the Q2 of this year once we have completed our final handover to the association. Our project in Uppsala with rental apartments have been successful and is almost fully let. And on the financing side, we see continued favorable conditions on the capital market. Then a few words about the COVID-nineteen situation. Total sales at our 3 largest regional retail hubs during the quarter decreased by an overall 7% in like for like portfolio. In the Q1, additional rebates related to the COVID-nineteen pandemic and given total of SEK 4,000,000, and these rebates are not expected to be covered by the government. And there is a political consensus to extend the government rent rebates for Q1 and Q2, but we still refer to another supported package, which offers direct support to companies that have been affected in the pandemic. Our projects are progressing as planned with very low impact from COVID-nineteen. There is, of course, still an uncertainty related to the pandemic, but the situation is now expected to brighten, thanks to the vaccine program. And on the positive side, we see that countries that now open up, people go back to their offices and increase their consumption. And by that, I hand over to our CFO, Martin Lindqvist. Thank you, Annika. And I will begin by talking about the net letting, which amounted to minus SEK10 1,000,000 in the quarter. Newly signed contracts relate primarily to the Stockholm area and include both offices and healthcare, while terminations relate primarily to offices in the Stockholm area. If we look at the income statement, we see that the rental income is down by 12% compared to Q1 last year and this is of course largely due to the sale of Varta Centro. In like for like portfolios, rental income was down by 1.1%. Central administration is stable compared to the previous year and the project and construction operations are significantly up related to the previously communicated positive outcome in a dispute for our subsidiary, TLBOG. Net financial items are lower, primarily due to new practice for capitalization of interest cost linked to land acquisitions and project expenses, but also partly due to lower average borrowing during the quarter. The changes in value continue to make a positive contribution. And this quarter, as in previous quarters, It is mainly thanks to the office portfolio. If we look further at rental income and property costs, we see that Rental income in like for like portfolios decreased by 1.1% and property costs increased slightly compared to last year's 1st quarter, especially related to the fact that this quarter's winter was slightly more difficult than last year's mild one. So both temperatures and amount of snow come into play here. The vacancy rate remains at 9%, the same as in Q4 and customer losses were lower this quarter compared to last year's Q1. If we break down the development in rental income in our two main segments, we see that Office properties continue to have a positive development, more specifically plus 1.1%. This is related to new lettings and renegotiations, but also negatively affected by some premises in vacated in the office segment. For retail properties, rental income in like for like portfolios is down by 4.4% and This is mainly related to higher vacancies and to a certain extent lower sales rents. And the investments landed at SEK 485,000,000. So we are keeping pace with our full year financial goal of SEK 2,000,000,000 and still disruptions in the projects due to the pandemic are insignificant. Changes in property value continue up, as Annika mentioned, and are in Q1 as in the immediately preceding quarters primarily related to offices and partly also project properties. And a quick look at the consolidated assets and the usual reminder that our total Property portfolio consists of both investment properties under fixed assets and development properties on current assets. In the comparison period, you see SEK 4,400,000,000 under assets held for sale and that is, of course, Farfacentrum that is located under that heading. We look on the financing and we see that secured loans correspond to 14% of total assets and that green financing now accounts for more than half of the loan portfolio. And looking on the key figures, we see that the average interest rate is stable, that the loan to value ratio is up compared with the turn of the year, but then affected by the cash on hand where we were prepared for the dividend to be paid out on 1st April. If you look on the loan to value ratio, net of cash, it was 40.0%. And with that, I leave word to you again, Annika. Thank you. A few words about the project portfolio. We have a big and impressive project portfolio that enables investment of approximately SEK38 billion, where SEK2.3 billion is confirmed projects. If we're looking at potential projects of SEK 36,000,000,000, these investments will mostly be in SIKLE in NAKA, slaktusamrodot in Stockholm, in Gremvestadin in Uppsala and Slussen and Hagerstaden in Stockholm, and where offices represent 50% and residentials, approximately 40%. And a very portion of our project portfolio are situated near to existing or future underground station in the Stockholm area, and that's I think our product portfolio is extra interesting. We will soon complete our hotel project in Sichla, Papietta Bricken. This is hotel that will be next to Markus Plattsen. And the project is fully net to Nordic Choice Hotel and with a total of 236 hotel rooms in the public lobby. And the hotel will open in the middle of June this year. In Sichlaga Galeria, we're adding parking spaces that we need for the Health House Karanten and the coming projects back on Suezet, but also some more square meters of retail. For the additional space, we have signed the lease contract with the sports operator XXL of 3,100 square meters. And the project will be completed in the Q3 this year. In Nobelbaitin Sichla, we will build a total of approximately 500 Condominiums. And the project of Nobel Bayes Phase 2 called Concept, We had a good start. And today, we have signed booking contracts of all departments, and occupancy will is planned for the summer of 2022. In Kerendesstaden in Uppsala. We are building rental apartments. Kareldi Park District 1 comprises 44 rental apartments with the commercial premises in the round floor. Scheduled for completion is Q2 2021, and the apartments are now very close to fully net. And in Kjernde Park Block 2, We have decided to build condominiums. We will start the selling process in June this year, and the project comprises NOK98,000,000 residentials and completion is planned during the Q2 of 2023. Live City is our biggest project in Hagastarden, and The building is to be the clear choice of meeting place for everyone working in the life science segment in Hagerstarden. The major tenant will be academic work, and they will move in, in December this year. We have now signed a lease contract of over 900 square liters for the restaurant in the bottom floor, and the project will be fully completed during the spring twenty 22. Our project in Baas Barkabe in Jarfella is under construction, and the First phase comprises 24,000 square meters and includes an upper secondary school, health care, sports and businesses. And the major tenant is Jarfella municipality of 11,000 square meters. And during this quarter, we have signed a contract with a doctor's clinic of more than 900 square meters, and the project will be completed in spring 2022. Finally, we have the refurbishment of Katarren Nehuset in Slussen. And is underway. And after renovations, the house will be a future state of the art office with a unique view, hotel and several restaurants. And we have signed a lease contract with Eirik Skondonen of 1100 or emitters, and it's a very famous Swedish restaurant. And the refurbishment will be completed by summer 2023. And by that, we close our Q1 presentation. And if you have any questions, you can send Me or Martin an e mail. Thank you very much and goodbye.