Good morning, everyone. Welcome to Balder's call for the first quarter of 2025. We will have some introductory remarks from Erik and Eva, and then open up for questions. With that, I leave the word to Erik Selin, CEO of Balder.
Thank you, Jonas, and good morning, everyone. Balder is a real estate company with a Nordic exposure. We are one of the largest and most diversified real estate companies in the Nordic region. We've been active for 20 years, more or less now, and we have a mixed portfolio with residentials and commercial property, roughly half of each. We manage our assets ourselves. That is one of our fundamentals. Even normally, we buy and hold, but we can also develop and build and hold, and obviously also build and sell. We have had an average NAV growth of 26% per year since inception 20 years ago. We have an S&P rating, triple B flat, and net debt to asset of 49%. That is Balder at a glance. Looking at the first quarter, rental income increased 9%, and the NOI, net operating income, increased 10%.
If we then look at the profit per share, you can see an increase of 7%, and the missing piece is that we issued some shares during the year. So that's the difference from 10 to 7. Looking at earnings capacity, which will be in the next slide, it's now at SEK 538. So that's 8% better than this quarter last year. Net debt to asset, as I said, 49%, and like-for-like rental growth on average in the whole company, 2.9%. And NAV stands at SEK 89.55 right now. Earnings capacity is a slide that we show every quarter, and it's just more or less the figures on that particular date. So it's not a forecast, but it gives you a big picture of the overall figures in the company.
If you compare now year-end to quarter one, you can see a small decrease in rental income and further down also in profit from property management. That is because of the currency movement. On constant currency, we would have had a small increase, but this is always currencies per quarter end. If you compare year-end with quarter end, the Swedish strengthened quite significantly if you compare with EUR and even the other currencies. That is why I have a small adjustment in earnings capacity. Apart from that, it is very stable numbers, as you can see. Looking more specific of the portfolio, 80% is in larger cities and capital in the Nordic region. The biggest cities are then Helsinki, Gothenburg, Stockholm, Copenhagen.
If you look at property categories, we have resi with 53%, office 15%, retail 12%, and then we have some other properties including hotels. We also have a small part that is industrial and logistics property, 6%. Looking back on this slide, you can see the development of profit from property management going 10 years back in time. You can obviously see a good improvement, 16 to 22, and then a flat development. That is the shift from zero interest rate to gradually higher interest rate that makes the profit from property management be flat. In order to be flat, we had to have a very good development on the NOI, and that has actually compensated for higher interest levels during these turbulent years.
Looking at other metrics, you can see portfolio value last 10 years from roughly SEK 80 billion, SEK 90 billion to SEK 222 billion. The leverage has been around 50% or thereabout. Occupancy rate also very stable at 96. If you look at even smaller numbers, you can see that it is 95.5, 95.8 sometimes. One quarter, I think we also were below 95.5. We had 95 in the figures, but a very stable number over the years. The explanation is we have a very diversified portfolio on asset classes, countries, geographies. That makes it so it is very, very small changes up or down. That is on purpose. We like this to be very low operational risk. We think that this will continue to be stable over coming cycles as well.
Great. A short ESG update. In February, the EU Commission presented simplified rules for sustainability reporting through the so-called omnibus package. The proposal involved, among other things, changes in the CSRD and taxonomy, as well as a two-year delay in implementation for smaller businesses. These changes do not affect Balder at present, as the size of the group is included in wave one, which means that we shall continue to report in line with CSRD requirements for the fiscal year 2025. Our sustainability report has taken major steps towards the new reporting requirements in order to achieve full compliance in 25. Balder's sustainability work has developed during the past year, reduced energy use and greenhouse gas emissions, more charging points for electric vehicles, increased energy production from solar panels, and larger amounts of environmentally certified square meters.
We also have a higher proportion of properties that have undergone climate risk analysis and are aligned with the EU taxonomy. These are just some results that we have achieved in 24. Over to some financial information. The equity asset ratio has increased by 0.7% up to 38.7%, and net debt to total assets has decreased by 0.4% to 49%. The ICR is at 2.7, and in the quarter, it is 2.8. If you look at net debt to EBITDA on a rolling 12-month basis, it is 12.0, down from 13.5 when we introduced it ahead of 2023. Also, if you look in the current earnings capacity, we are now at 11.7 times. We are working our way down to the target of 11 times.
If you look at available liquidity, as of Q1, it is a little bit more than SEK 23 billion, and it is well above the criteria from S&P regarding 1.2 times for the coming 12 months, according to S&P's methodology, and that level is unchanged since Q4. To the right, you can see the interest refixing structure. Also worth noticing is that the average interest rate for 25 includes the margin for the floating part of the debt portfolio, and the average interest rate is 3.1. Here you can see the long-term trend of the portfolio value in relation to net debt to total assets. As I just said, net debt to total assets has continued to decrease a little bit, and secured debt to total assets is at 24.3. That current encumbrance level is reasonable expectations going forward as well.
Here is the usual overview of the debt maturity structure split by bank loans and bonds and commercial papers. During the quarter, we have been active in both the Swedish capital market as well as the euro bond market. We issued a seven-year EUR 500 million bond. At the same time, we repurchased EUR 250 million in maturities 26 and 2027, as well as the hybrid. We also did a five-year SEK 1 billion bond. If you look at the bank side, it is more or less business as usual, rolling maturities, and this has been done with slightly lower credit margins than last quarter. I think that was it from my side.
Thank you very much, Eva. With that, we open up for questions.
To ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from John Vong from Van Lanschot Kempen. Please go ahead.
Hi, good morning. Thank you for taking my questions. In the report, you mentioned that the distribution of Nordnet shares is dependent on a safe margin to credit ratios. Could you perhaps quantify this margin?
We've chosen not to do that in exact terms, but also because these metrics move a little bit up and down with currency movements and other things. If you look at the important metrics that we have from S&P, it's our ICR, where we have ample margin, and that is not really impacted by distribution of the Nordnet shares. Then we have the debt through debt plus equity measure, where our limit is 60%. We're currently slightly below 57. We have a good margin, but a Nordnet distribution would obviously worsen the debt through debt plus equity a little bit by about one percentage point. Let's see in time. We have chosen not to quantify exactly what headroom we want there. It might depend a little bit on other deals and transactions that we do as well.
It's difficult to give an exact forecast.
Okay, that's clear. Does it mean that you haven't really necessarily changed the way you look at investments, given that you also at the same time want to distribute these Nordnet shares? Has it changed your timeline over which you see this delevering process towards an 11 times net EBITDA?
No, not big changes. This is more fine-tuning. The big picture is not changed in our view. It's just that if you have credit metrics, you should always have some safety margin because otherwise you could risk to be in an unnecessary stressful situation. That's why we want to have some margin. It's not a big thing, but we think it's better to communicate how we view this. I mean, you can see that we could obviously sort of afford to distribute today. That would not be a problem at all with the numbers. It's just a matter of how much safety margin do we want. Yeah, that's how we think.
Okay, clear. Just the last one on this topic. Have you explored other options that would be less on your leverage, such as a sale of the stake, for example?
I think our holding in Nordnet is more than 40% of the company. I think a placement of that kind of stake might be a bit challenging. It's probably a more disruptive market event for the Nordnet share than a distribution of the shares. Each shareholder can choose to do what they want with their shares.
Yeah, exactly. We think it's a very good company. If we distribute, everybody can do what they want. It wouldn't feel right to sell at a discount.
Okay, clear. Thank you. That's it from my side.
Thanks.
The next question comes from Lars Norby from CBS. Please go ahead.
Good morning. I see in the CEO statement when you're talking about the geopolitical and the economic uncertainty, you say you're not directly impacted. At the same time, we hear from a number of other real estate companies in Sweden, I would say that there is a among tenants, decisions take longer and are in some cases put on hold. Do you see any such an effect out there?
Not very big, Lars. It is always difficult to know why and what is the exact reason. I think if you have a very large part of office in some places, it is much more affected. That can be also why we do not see it in the same way. Yeah, let's see what happens. We are quite optimistic in total, actually. Short term, there is some maybe softness in the office market in Stockholm, a bit in Gothenburg.
A few other companies have experienced quite material terminations from tenants in the first quarter. I mean, you do not disclose your net leasing numbers, so it is not as explicit in your figures. Have you had any such experiences in the first quarter?
No, nothing material. We do not have so many big sort of dangerous contracts. I think it is also an explanation. It is a bit different composition in our case.
Okay, thank you. That was for my questions.
Thanks, Lars.
The next question comes from Jan Ehrfeldt from Kepler Cheuvreux. Please go ahead.
Okay, good morning, everybody. I have a couple of questions here. I start off with your earnings capacity. I see that the annual margin comes up from 75% to 76%, a 1 percentage point increase. My question is, have you cut your operational costs or what is driving the uplift there?
It's a very small adjustment, but we think we can perform slightly better than if you go look backwards. This is also very fine-tuning on where we think we can do a bit better. That's why you have a percent . Nothing dramatic, but there are some.
Yeah, but still, it's 100 basis points, so.
Yeah, but that's not much.
Okay. Okay. Second question here, the Finnish residential market, how has that developed during the quarter? Has it been stable, better, worse?
Swedish. I think for selling.
No, Finnish. Sorry. Finnish.
Finnish. Okay. Finnish res market is still slow, we believe. More competition from Kojamo than before. It has been a bit delayed in the improvement, but we still think the second half of this year will be better. We have been thinking that for a while now. We still hope that we are right. We have like-for-like plus in the Finnish portfolio. I do not remember exactly, maybe 1.6% or 1.8%, something like that. At the worst point, it was actually negative by, I think it was 23 basis points or something. It is not good, but it is not worse either. It is competitive, but we think it will be better second half.
Okay. You made a comment in the CEO wordings about the project starts, a little bit delay there. Is this more a question for next year or will something happen late this year?
Let's hope that we do something this year, but we are a bit cautious, Jan, because we have to feel that it's worth to invest. It will not be big as a couple of years ago, but we hope we can do something. That's our hope. Yeah, let's see.
Okay. Your property revaluations, were there any specific there in terms of geographies or segments?
No, it's very, very, very small changes. For example, when we made some assumptions year-end, and then we could see that the outcome is slightly better than the assumptions a quarter ago. If we do not change anything, you have a small revision upwards. It is like 0.3%, 0.4%. It is very small, but it is performing slightly better than we thought year-end overall.
Okay. Final question from my side. Bank margins, how has that developed during the quarter?
It has been slightly better than last quarter, I would say, on average, 1.10.
Okay. Okay. Thanks for taking my questions.
Thank you.
The next question comes from Staffan Bülow from Nordea. Please go ahead.
Good morning. I have three questions. I'll ask them individually. Starting off, you mentioned in the CEO letter that you see opportunities in the transaction market, both as a buyer and as a seller. Should we view the comment as Balder being a seller as defensive or offensive? I.e., are you looking to sell to allocate to new investments or to reduce leverage?
Our leverage will reduce automatically. If you do not do anything, that happens sort of by itself with cash flow. It is more that I see a lot of interesting opportunities in general. If you are a seller, you can actually sell at reasonable prices. If you are a buyer, there are also interesting stuff out there. I have a feeling that if you want to, you can do some good transactions in general. That might not be the case that we do a lot of transactions. We have to see. It is more of a general statement. If you start out, let's say that you have a fund or start a company, whatever, you have a lot of, I think you can do good business now. If you want to sell, there are actually buyers on quite okay price levels also.
It's more a general comment.
Okay, understood. Another question on capital allocation opportunities. In Q4, you acquired properties from Centur. Do you see more opportunities to sort of acquire properties from JVs and dissolve those structures? Also, could you be open-minded to increase your ownership in Sato?
Yes. Yes on both of those questions. We always try to look at it in a pragmatic and rational way, like the Centur case when we could see it was better for both of the owners to split it. We are always open for that. We just try to create good values for the long-term shareholder. As it comes to Sato, I mean, it is just a question of price levels. If we think it is interesting compared to other alternatives, we can increase there.
Okay, that's clear. A question on Carla Tornet. In the end of last year, you acquired all unsold apartments in Carla Tornet. Is it possible to quantify the potential sales value of unsold apartments in Carla Tornet?
You mean going forward or looking?
Yeah, going forward.
Going forward.
What would be the potential cash inflow?
Yeah, I think it's SEK 1.3 billion, roughly, if I remember correctly.
Okay. And one final question from me on like-for-like rental growth. It was 2.9% in the quarter. If you look into 2025, based on what you know today on resident commercial, do you expect it to be higher or lower than that?
That was a tricky question. What shall we guess there, Eva and Jonas?
I would say that it would be in the same area.
Same area.
Okay. Thank you. Those were my questions.
Thank you.
The next question comes from Marcus Henriksen from ABG Sundal Collier. Please go ahead.
Thank you. Good morning, everyone. I have three questions. First, in the cash flow statement, you divested financial assets for SEK 1.5 billion, and then there is a received dividend from joint ventures of SEK 1.1 billion. So I'm just a bit curious if you could give us a bit more details on those cash flow items. Thank you.
Financial investments, I think it's basically bonds or certificates expiring. If we have over liquidity, we just don't have bank deposits, so we can buy commercial paper and bonds in other companies as liquidity. That decreased. I think that is the big part there. What was the cash flow? Yes, that's a Centur dividend.
Yeah. Yeah, right. Thank you. Liquidity is up around SEK 3 billion sequentially. You have almost SEK 24 billion in total liquidity. Any special reason for that? Any big upcoming refinancings or any other reason?
No, I mean, we try to think about the liquidity in relation to what maturities we have. If you look at the upcoming 12-month maturities, the liquidity ratio between the two is fairly constant compared to last quarter. There are no big changes there. It might go. The available liquidity, and I think Eva said this before, might go up and down by a few billion quarter by quarter as we try to match the liquidity with the upcoming maturities that we have 12, 15 months out. There is no.
The liquidity ratio is unchanged since last quarter.
Thank you. Do you have any major bank refinancings to be done in the second half or third quarter near term?
No, I mean, we do that on a regular basis. I mean, we roll the bank loans all the time. So nothing major out of the normal.
All right. Yeah. I'm just trying to fish if, yeah, because it seems like bank margins have continued to trend down. Nothing major there. All right. Follow up on Finland. I heard your answer there before, Erik, but just a bit more details. I saw Kojamo really improved quarter over quarter from 91.6 occupancy up to 95% here in March. They highlighted and Sato down around 70 basis points. You mentioned high competition from them. Is it mainly pricing or any other thing that they have been doing in the quarter and continue to do in the second quarter?
If I'm guessing, it's mostly pricing from their side. It can also be how you select tenants, but I don't have details on their operations, but pricing. This quarter, I think, I mean, I think their occupancy is soon up to a level where they will be more comfortable. You have to ask them, I think. I think they more or less reduced their vacancy 50% from the bottom until today. That's good. Of course, there are two big players, Sato and Kojamo. If one is very active and aggressive, you should have some effect. I think we've been more stable for many years, not moving up and down as much as they have. What is the best case? You never know until afterwards. In hindsight, you can see that you should have done this or that.
Yeah, I think it's actually good for us that they have lower vacancies.
I agree with that. Do you think that they need to come up a bit further? They're at 93.5 now. Do they need to reach you around 95% and then both of you together can continue to raise rents or are we currently at a positive enough level?
Something like that. I do not know exactly how they calculate if vacancy is that you actually are in the apartment. Let's say that you write the contract and then you move in two, three months later. I do not know if they have a time lag between the actual contracts and their reporting. Maybe you know.
I would expect that to be more of a kind of spot figure.
If it is a spot figure, my guess is that they will have an improvement in Q2 also. Quite good improvement.
Yeah, exactly. Exactly.
That's very likely.
Yeah. Thank you for that. Last question. You touched a bit on that before, but we saw negative top line growth here, of course, driven by FX, but it is not the norm in Balder. Do you see anything particular in your portfolio that can help lift top line growth already in 25 or foresee any decision-making near term that could help growth in Balder?
No, I think we will have some growth. When currencies move a lot, it has a short-term effect. In the long term, you do not have to bother about that. I am still very positive on long-term growth. This was very big movements in currency in our case. We have a lot of exposure to other currencies. Now overall, I feel reasonably optimistic. You never know the very short term. Otherwise, I think we have a lot of opportunities.
Sounds good. Thank you. Those were my questions.
Thank you very much.
The next question comes from Andreas Tum from Green Street. Please go ahead.
Hi, good morning. Just a couple left. Firstly, I guess, can you give a bit more color on the performance of the hotel segment? Have you seen any impact in terms of just the macroeconomics on your hotel performance?
No, that is too short-term to see anything special. In general, you can say the market is pretty good with the exception of Gothenburg, where we have a lot of new supply. Part of the supply is actually our own fault as well since we have been constructing hotels. To be super specific, I do not know. We have not seen anything special, actually. We have a big part that is fixed rent in Balder. We have a smaller swing factor than if you are a lot on variable rent. You will not see the big swings in our P&L as you can have in other companies. We have some turnover, but relative to other real estate companies, it is smaller. We are long-term positive. Short-term, Gothenburg is competitive, and the other markets are quite okay. Copenhagen is good. Stockholm, I think, will continue to be good. Helsinki as well.
Thank you. My second question was just on the earnings capacity as well. I was just wondering on the financing expenses. That has been fairly stable now for many quarters in a row. I guess with short-term interest rates going down and then swap rates probably have also come in, at least in the last year or so. On balance, do you see this item in terms of financial expenses coming down over the next few quarters? Or are, I guess, all the impacts you have seen just on lower interest rates already baked into this number?
No, so the earnings capacity is an eye shot when we released the quarterly report. I think we also mentioned last quarter that it will come down during 25, but it would rather be in the later part of 25.
Okay. So that would be basically the variable rate, whatever, three-month, six-month short-term fixes that are slowly rolling off.
Yeah. We also have some very low-interest bonds and loans that are becoming more expensive for us as well. You have two factors going against each other. We did a big Eurobond in, I think it was February or March, something like that. That was a higher coupon than the one we bought back. That is why it is sort of stable, even though short-term is down a bit. The average now is 3.1. If you compare that with the swap rates or central bank rates, we are more or less in line with what the market is now. Maybe slightly lower, but.
It's important to remember as well. Because we said after both Q3 and Q4 that we felt that financing cost had peaked. We were also quite clear that it might vary from quarter to quarter. Like in Q1, we had, as Erik mentioned, a Eurobond expiring. You're replacing that with a new one, then it jumps up a little bit. We can get back to the trend. Also be mindful that this is obviously when we talk about these things and give any kind of outlook, it's for the current portfolio of assets. Obviously, since we said it in Q3, we've acquired both Centur and Doxa, etc. Just keep that in mind as well that if we do continue to make acquisitions, obviously, that will impact the financing cost as well.
Understood. Thank you. That's helpful.
More questions at this time. I hand the conference back to the speakers for any closing comments.
Thanks, everyone, for listening in. We're obviously available if you have any follow-up questions afterwards, all of us. Just let us know. Thank you.