Earnings Call: Q3 2019

Oct 18, 2019

Ladies and gentlemen, welcome to the Castellum AB Q3 Report 2019. Today, I'm pleased to present CEO, Henrik Saxborn and CFO, Ulrike Danielsen. For the first part of this call, all participants will be in a listen only mode and afterwards, there will be a question and answer session. Speakers, please begin. Thank you, everyone. Welcome to this Q3 report 2019. We will start looking at the 1st page. You can change page, please. So this last 3 months has been a quarter where we continue to concentrate on all our core business, meaning simply asset management and projects. It has been the quarter where we rented out in the same pace as last year. It has also been the quarter where we continue to renegotiate more contracts than ever. It has also been a quarter where we took the next step into the eurobond market and benefited from the attractive interest rates and long duration. It has also been the quarter where we've proven that we are one of the best in sustainability. So it has been an active quarter. And regarding the market, we can conclude that we have been living with stable to strong and in some cases, very strong markets, both when it comes to rental as well as the real estate market. And to date this year, the growth in the rental levels like for like in the portfolio has been 5% like last year and October, of course, the top level for the seller. In that figure, renegotiation represents approximately half of that SEK 100,000,000 This means that on average, we have raised rents with approximately 18% in the renegotiations we have concluded in the end of last year and the beginning of this year. So that is a trend that we expect to continue. This in a combination with the program of continual efficiency, it will mean that we continue to have effect going forward, which shows that we can, on a firm basis, continue to have earning growth. So in total, income from property management over 3 quarters totaled to 7% or if you want to, SEK 8.71 per share, despite that we still are affected on the sales we did in the beginning of last year in the beginning of this year, sorry. It's also a quarter that valuation increased and the property values added additionally another SEK 6,000,000,000 in value. It means that we continue to decrease the LTV and are now on 43.6%. So that means that we have lowered LTV since that we bought Norborden in 2016. So with this short summary in the beginning, just to Ulrike going into the figures. So to the next Slide 3 is on the P and L. As Henrik said, the growth in income from property management is 7% for the 9 month period and 5% is 30 quarter. But if you convert that to absolute amount, it's roughly EUR 160,000,000 more that Castellum earns this year. And that is with roughly SEK 145,000,000 is coming from the like for like portfolio of pure asset management. And this was mainly driven by good rental uplift due to CPI and renegotiations made, but also lower costs if we do exclude the high property taxes that was put down to us. SEK 60,000,000 from the project portfolio, SEK 40,000,000 from debt or interest rate management, where lower interest rate has contributed despite long duration for capital as well as interest rate. And then minus SEK 90,000,000 from transaction due to that we still are a net seller on a 12 month rolling basis. The property market is good, which in Castellan's universe needs an uplift of 3.1%. However, we have also sold 28 assets so far, which gives an unrealized gain of minus SEK 3.20 5. That is, of course, mitigated by deferred tax income that we need to account for due to selling those assets. So after some good write down due to selling assets in Frankfurt earlier this year, negative changes in value and derivatives due to mainly lower market interest rates, and taxes of roughly EUR 6.40 means that the last line ends on EUR 3.7 billion. And worth mentioning this quarter is that we have accounted for the new and higher property taxes roughly SEK 50,000,000 on an annual basis, of which 75% hit this quarter. That is, however, put on to the tenants, meaning that the rental values also has increased with the same amount. If we then go to the next slide and look into the NOI, it increased with EUR 137,000,000, of which the biggest contributor was the like for like with EUR 100 and 52,000,000 on the NOI line, driven mainly by top line growth and good cost control if we take, as I said earlier, the property tax apart from that. Furthermore, the developments contributed in a positive way while the transaction moves its NOI. The co working part of the United States has delivered a positive result. Even if it's small, it's still positive, which is important. And we will come back to that later in the presentation with the steps that we're taking. So if we go to the next slide and look into the rental income growth. The like for like growth was 5%. And as I've said earlier, this is a result of the CPI, the negotiations made and higher property taxes. And that is, however, taken down a bit to that. Last year, we had bigger lump sum from tenants leaving, slightly higher vacancies and incentives. And the losses of rental values due to being in NetSolah is compensated by increased rental values from the project in the United States. So if we then go to the rental market. Yes. And if we then look at Castell and Bjorgi period, we are, of course, not satisfied with the net leasing. But if you look at into it, we can conclude that the cross leasing in the existing portfolio was in the same level as last year and consists of actually leased output SEK 230,000,000 in that part of the portfolio. But there is a moment this is in the at this moment, it's less development to rent out for us compared with last year. But that will not if we correct that, we could add the rent agreements for the Swedish National Court's Administration in EON on the headquarters in Malmo. The 2 agreements that adds up to approximately €150,000,000 in rental value that will occur in the end of this year or the beginning of next year. The reason behind the larger number of tenants giving notice is that in some extent to us, it's already known as larger short office leases that were terminated and also our own activity where we're moving around larger logistic tenants in Gothenburg. But of course, there is a market that is calmer than a year ago. But on Zai, it's also, at the same time, very lack of good spaces for office and logistics in CBD 4 ks, for example. And if we then take the next slide, It's even interesting to look at no, we can okay. I could say that before on the next slide actually. I mean, we can go back on the slide, if that's possible. On the right side down that slide, you can also see that we have divided the net leasing into different sectors. And the conclusion of this is that we can see on the right hand side that the government's contracts are expanding, that the retail and the banks is decreasing, And we can also see that we have a larger contract from the car industry that is actually one off for us that are leaving. And so this is showing us a picture that we think is or less like the market is moving right now. And then we can change to the next slide, please. Looking at the supply, we have shown this market before, but it's very interesting to see that the construction of new developments are less than the group and are still under 1% in the most of the accounts. So even if we see a lot of if we see a lot of movements simply into the market or new construction into market, it still gives us a market where there's not so much supply as we wanted to. And if we look at rental levels, in the we can see that we have a rental market that is very robust, and we have today rents of in Stockholm, for example, SEK 9,500, that's higher than last year. We are in Helsinki SEK 4,500 a square meter. Copenhagen, SEK 2,400 a square meter, same as last report. So in average, we can say that the market is stable to strong still. And we as we said, I mean, during the last period, we have negotiated renegotiate the rents. We're up with 18%. So it's a strong to stable market in our universe, and this limited supply simply continues. Then we can go into the balance sheet on the next slide. Erika. Yes. The balance sheet of Castellum is strong and the LTV continues downwards and was at the end of September for 43 0.6% despite leaving dividend in the end of the period. The valuation yield was unchanged compared to Q2. This strong balance sheet gives an NAV as at the end of September of SEK 886 SEK 186 per share, which indicates a growth of 11% despite the dividend compared to 1 year ago and 6% compared to the end of 2018. And if we look into the property value and the property market on the next slide, please. The valuation yield is unchanged at 5.1 percent on a portfolio level. The unrealized valuation at risk of 3.1 percent is roughly equivalent to SEK 2,800,000,000 of which SEK 1,600,000,000 is due to yield changes for logistics, public sector in good locations with long leases and offices in good locations. The risk is made up of better cash flow, project gains and acquisitions. And if we look back this year to each quarter, the yield shift was really the big contributor in Q1 and Q2. It still contributed in Q3 but with much lower numbers. So the cash flow that ticked up in Q2 valuation still continued to be a good contributor this Q3 despite the negative netlisting that is taken into account in valuation. So regardless causes to the uplift, all in all, logistics is so far the segment with strongest uplift this year, followed by offices and public sector. And if we go to the market, then we can conclude that we are still in a very strong property market. There, we see stable tool actually yield compression going on. And that's of course because of the strong interest compared with the strong interest and demand. It is, of course, in the traditional CBD areas, but also if you look at stable cash flow portfolios, higher yielding portfolios or correct or right located logistics. To compare with the yields you have in the portfolio, we can compare with some of the lost deals done. In Stockholm, CBD actually outside just the CBD area, where deals done on 4.35 to 4.7. We are in midsized towns on somewhere right now in the CBD area is on 4.5 to 4.7 in yield. And in Helsinki CBD area, we're down to actually 3%. And looking at warehouses, have are, of course, attractive, as Rick has said, and are moving, and we have seen evidence in the market right now with yields down to 4.4 to 4.7 in the best cases. But we can move on to the next slide, please. It's important to conclude when we're looking into our strong development pipeline that it's never been larger. The pipeline is not only large, it's also divided into so many midsized projects that we are not depending on one single project, one single zoning plan or some political decisions. And the yield on total cost is very attractive compared with the market yields. Offices that are completed now, I have an average yield on cost, total cost of 0.5%. And the one we have under construction is calculated on ending up on more or less a little bit lower figures. Looking at logistics, we can still produce logistics around a SEK 7,000,000. And if you take the next slide, As said, the pipeline is large. At the end of this slide, you can see that we are stating that we have now a pipeline of approximately SEK 10,000,000,000 that is able to start in the next coming 2 years. And of course, after that, we have more or less the doubtful volume that is identified that is not, of course, concluded that we can start in 2 years or in the exact start. So the pipeline is huge or at least the biggest we ever had. So and this was a very important step for us in a short term basis last quarter when the 3 largest developments got their zoning plant permission approved and where the new larger developments will start in the end of this year or in the beginning of 2020. And the approximate volume of that is SEK 3,000,000,000. If we go to the next slide, please. We are showing the airport, Zwerve, again, and that's because it appears to hold even more potential than we first saw. From the original intent, it in the beginning, it was just a pure logistic hub, but we see even more potential now. We learned that it's possible to develop the EWE into a high-tech center in many types of transportation solutions. The likelihood thereby increases that logistic facilities will also be supplemented with some offices. And if we only build on 50% of the land bank in here, it will still be possible to produce somewhere around 800,000 to 850,000 square meter over this fleet and still keep the airport intact and have the possibility to develop further of this space. We can take some more examples on the next slide, please. Just showing some examples what's ongoing. We have what's called the Niehamnen. It's we are in Malmo. Here, we have the 2 big projects. We're talking about SEK 2,300,000,000 in project and will start this winter. It's 51,000 square meters together. What is called the emigrant is actually where the Swedes emigrated to U. S. In the early days. And here, we're building for a smaller project, but high quality project of 4,000 square meters for approximately SEK 230 1,000,000, and that's under production. And further on, we have the meat packing districts in south of Stockholm, where we are under zoning plan, early start of zoning planning. Here, we calculate that we have a possibility to produce for SEK 1,300,000,000 approximately a little bit less than 40,000 square meters, just to give you some examples from this fantastic development pipeline. So if we take the next slide, please. And then we have United Spaces. Ricker commented on it. And as you have seen, we have turned United Spaces into positive figures already in less than 9 months. This is a very positive and sustainable. We're also succeeding in winning the contract with Geely in their new research and development facility that we will be building in Gatlinburg. Here, we will develop a new flex space arena on at least 4,000 square meters together with Geely. And from here, we're now planning with new locations, both where we are and into other Castellan towns. So U. S, United States is simply will be a very interesting drive in our development going forward. And then we will, Richa, continue with some funding. Yes, on the next slide. The funding side of the market. At the moment or over the last period, we have felt that the bond market is attractive, not at least the international ones, since you can find longer capital duration for bigger volumes to reasonable cost compared to the Swedish bond market. We are seeking a reiteration on an unsecured basis. And so far, we can find the volume outside Sweden, but would be very positive if the bigger volumes were accessible also at home. We continue to see the CP market as a cost arbitrage compared to lending in banks and has a volume outstanding of roughly SEK 5,000,000,000 that, of course, is fully booked up by unsecured unused credit facilities. Regarding the interest rates, we, as many others, still believe that the coming years will be characterized by low underlying interest rates. But regarding the credit spreads, the uncertainty is somewhat higher since they are affected by the economy as a whole, which can have increasing impact as well as quantitative market operations from ECB as well as the Swedish Riksbank could have an impact the other way around. And if we go to the next slide, we can look at Castellum in Castellum's activities. So far this year, we are a net issuer in the Swedish bond market. We have issued NOK 850,000,000 for a 10 year bond and NOK 400,000,000 Ebro for 7 years. The last one we did the Q3 this year and all in landed on a fixed euro coupon of 75 basis points. At the moment, we do see that even if we have issued a lot of bonds that we still will have a considerable volume of bank debt, mainly in RCF since they offer good liquidity, preparedness and flexibility for us. And regarding the city market, we still continue that market for cost reasons and on the bond side with this weakly federation 5 year plus. On the next slide, we can see that Castellum has not only worked with moving the property portfolio, we have also worked hard with moving the funding side the last 5 years. We have moved utilized volume in relative terms as well in absolute amount from secured bank debt to unsecured funding, which consists of bonds, CP and in some extent, even bank debt. Our financial KPIs are developing in a good way, not at least regarding LTV and the portion of unsecured assets. The net debt to EBITDA has been rather stable despite increased interest bearing volumes in absolute amount. The average interest rate has been reduced, but that will be in the light of the last year's falling market interest rate despite that the capital as well as the interest rate duration has been prolonged. But looking forward now, Henrik. Yes, we can conclude on the next slide, please. Simply, we can conclude that we have a very strong position in some stable to a good market. We have both strengthened the balance sheet and created larger opportunities for the future. But it's also important that we are more and more productive and efficient, and we're working with that as you can see in the figures. I think that the strength of our size, our finance and our early leadership in digital solutions, we have a start over many of our competitors, and we intend to take advantage of the position we have. If you look into the markets, we can still see the Nordics looking just to be now in a stable position going forward, And we are depending on what's happening around us in the world, that's standing right now on a solid ground for the future. So with that, I thank you for listening. And if you have any questions, you can take them now. Thank you. Thank you. Our first question comes from the line of Andres Thomeir from Green Street Advisors. Please go ahead. Your line is open. Hi, good morning from my side. I was wondering, are you planning more aggressive external growth and potential non dilutive equity issue given the favorable NAV premium of the share price? And also, are you actively seeking acquisition opportunities in Finland? And would that be a preferred growth market as opposed to Sweden at the moment? Yes. So I can answer your questions. We have always it's only one time that we have raised equity, and that's when we did the acquisition of Norpooten. And I think we succeeded in doing that. But we did that because we saw a good deal. We have the same strategy now. If we see anything that looks very attractive, we're going for equity. But as I said, we only done that once. Finland. Finland has gone more and more expensive in yields. It's therefore more tricky to find something that's attractive. And we have a story of being very cautious on what we do in the acquisition side, and that's still the question. I'm positive to Helsinki Fosch as a town and not to Finland, to be honest, a more positive on Helsingforsch. If we find attractiveness there, we will definitely do acquisitions, but we are not in a stress situation. Thank you. And views on Sweden? You mean on acquisition side, sorry? Yes. I think that's the same answer. If we can find alternatives that gives us quality and more density by building it is preferred to acquisitions. But in the same way, some acquisitions, I think, is healthy, that strengthen the portfolio. And some sales also, All the time, it's healthy to the market. But it's, of course, more and more tricky to find good acquisitions compared with what we can build at this moment. All right. Thank you for that. And additional question on Sabah Airport. Could you just give a general update on the planning process and also maybe elaborate more on the kind of the mixed use that you outlined, potential office housing component and the economics of that versus logistics? Yes. First of all, survey is already giving us cash flow, and I think that's important to say. We are somewhere around the 5 on that one. The zoning plan is, I should say, if it's normal circumstances, I think possible to start the production in 2 years on that airport. If something special occurs, we will have a fast track through the planning process. And that has always been understood in the market because of this very lack of land. And what the fast track means, I don't even know myself, but it's a faster track than 2 years. On the new part that we are looking into right now with office part, That's an, of course, possibility that we see that we can develop it on more self driving cars, electrified and so on. And here, the industry needed more space and especially in the rest of Sweden. And combine that with an airport and logistic, that is something we'll be looking into. On that, if we could, that's a fast track because of the interest, of course, from the region. So the worst case scenario is a zoning plan that takes approximately 2 years from my point of view. Okay. And kind of the economics of the mixed use versus logistics, do you have any estimate on that? No, this is a simple calculation. It's an office building. We construct on a normal 6 and a logistic on a normal 7 to give you some guidance. Okay. Thank you very much for that. Thanks. And the next question comes from the line of Nicolas Freund from Nordea. Please go ahead. Your line is open. Yes. Good morning, Nicolas Heulen here. Three questions for me. First, you started with the rental market. You were talking about 18% renegotiations, which you expect to continue. Could you elaborate a little bit more on that? Is it more continued for the 4th quarter? And maybe if you can also elaborate on your thoughts on the Swedish economy given that the leading indicators are clearly pointing down and CPI adjustments also looks to be well below this year and for next year at least. First of all, the renegotiation. I mean, the renegotiation we have in P and L right now is created last year, more or less. And that and we are in a situation that we'd renegotiate the same amount or more actually right now, and we have levels that have been stable to outgoing. It means that we should have at least that potential going forward that we present right now, under 18%. So that if everything stops now on the rent levels, we have renegotiation power more or less in the same figures, like 2%. Economy, that's a big one. I mean, you know that Sweden is depending on everything that happens around us. From my standpoint, my own small outlook around Europe, I think as a real estate company, we have a good position with a relatively stable to positive market compared with some of the colleagues out in Europe, and that's my view. Of the gross and offsetting numbers. Could you add maybe some flavor, which we did in the Q1? What's the reason for, I mean, the cancellation of contracts and maybe why you're not worried that the negative net net net debt will actually have a negative impact also on the sort of your renegotiation power going forward? Yes. I think that if you're looking into out of the 10 largest contracts that was giving us notice for moving, they were done in this quarter. 67% of it was done in this quarter of the 10 biggest ones in value. They consist of a logistic they've been moving around a logistic tenant. And there, of course, I'm and I'm not worried about leasing them out. We are losing some larger office tenants that are mid attractive locations, but they are not in the CBD of the towns means that where we have the renegotiations power, the most of the renegotiation power is in locations where yes, we have more negotiations power in elsewhere than where they're moving. So that's the difference. So no, I see most of it something that we simply can lease out. And I can't see it still affecting the renegotiating power because this will not, in our case, affect our the vacancy rate in the CBD areas, for example, that's down to 2%. It's really still going to be hard for our tenants to find somewhere else to rent. So that will not be the effect right now. So we will have still very low vacancy rates in the CBD of Gatlinburg and Stolt and so on. And the follow-up on the CPI numbers. What we got 2.3 in Sweden last year. And what's in your evaluators' expectations right now? And what's your thoughts ahead of the October to October number? The CCI in is at the moment roughly 1.5 if I look into the SIBD statistics. We have 1 month to go in order to see what the October CPI worldwide that is important for us. In our own valuation, to be honest, we have EUR 1.5 billion as inflation assumption when we do our valuation. Right. And then the final question, just tidying up my model here. Your pay taxes coming up quite substantially in the quarter. What's your sort of what's your guidance on the underlying pay tax here? Should we expect 8% going forward out of the property management? Or should we see a step up? That's a little bit tricky due to the interest that we're going to restrict some amount of the changes in derivatives that is included in that calculation. And changes in derivatives can go both ways, so to say. But if we exclude that, I would say that somewhere between 8% to 10% maybe from the knowledge we have today will be your guidance. Okay. So the underlying will be rather around 9%, okay? Yes. But as I said, the value changes on derivatives can have an impact on that. Right. Thank you. And the next question comes from the line of Simeon Mortensen from DNB Markets. Please go ahead. Your line is open. Well, 2 of my questions was already on the payable tax and the net letting. So I'm you can move on to the next question. They have been asked. The next question comes from the line of Tobias Kai from ABG. Please go ahead. Yes, thank you. I would like to start with a question regarding your net leasing and your view on the rental market. I mean, you have 2 quite big projects, 1 in Stockholm as Carret with 28% occupancy ratio, which was unchanged compared to Q2 and also most of getting Gatteberg with 0% net leasing, and both are completed in less than 1 year. Can you give us some more flavor as to why you haven't seen any activity in those projects and yes? Yes. I mean, it's simple. I mean, we have been both those projects has, of different reasons, gone a little slower and because of technical reasons and municipality regulations reasons. So actually, the real renting out, so leasing out now in this project is ongoing right now. So this figure will move the next 6 to 9 months. I'm definitely certain of that. And it's not something that it's not a market effect or anything. We can't see that. We're holding the rent levels, and we have a lot of interest. So we are unstable on those developments. And then in the Skate, what kind of rent level do you expect? We are at least assets on a 6 for average. So to calculate, if you're giving us a figure, which is talk about 6,000,000 square meter in year or less. Okay. And another question regarding your cash earnings. Year to date, it's down 3% due to the increased paid tax. You have never reported a decline in cash earnings per share before. Do you think it's a risk that we'll see that for the full year this year? Or do you think that Q4 will make up for the shortfall in the start of the year? The paid taxes is the reason to that. And this is the 1st year that Castellan can't use all the tax clauses carry forwards because they, you could say, are locked in, in some vehicles. So that's the reason. And from what we know now, you can say that the pace we are having so far 9 months is the direction we have for the whole year. But as I said earlier on another question, the change in derivatives can have an impact on the paid taxes. Okay. Thank you very much for taking my questions. We have the question from Simeon Mortensen from DNB Markets. Please go ahead. Yes, I'm coming back with a new question. And this is when Henrik spoke about the net lebting, which is right. But you gave a lot of details on tenants moving and terminating leases, etcetera. But you also gave the comment that, in general, it is calmer in the rental market when you spoke. Could you please elaborate on what you actually meant by that? Yes. I think that compared with last year, it is calmer. And I think it's extremely important to make that specification because last year was fantastic. And now we're more into a normal market situation. And the tricky thing is, I think, is to understand where we are right now. We have an undersupplied market, but in normal situation on the leasing out. So it's different from last year, and that's what I mean. But don't forget, it's still an undersupplied office market in good locations, can we do this now? Yes. And just a follow-up on that. Because when you see at your net lettings, which is a focus area for everybody here today, you have on reported 12 months minus €34,000,000 but we see that projects actually concludes roughly €64,000,000 and plus on that. So the like for like adds up to minus EUR 98,000,000 or roughly minus 1.9 percent of your annual rental income. How would you shall we look at that negative like for like excluding charge ex when you're talking about you're actually having an uplift of 18% when you re let because your net lettings is reporting quite differently? Yes. And as I said, I mean, mostly of that I mean, it's a lot of renegotiated contracts. And so the situation is that the rent is on an uplift in Sweden in general and especially in Gothenburg and Stockholm. And we have still benefited from in the short term basis that we have rents going up of 30% to 50% from where they were in 3 to 5 years. That's the reality. And at the same time, you as you see, you have a negative net leverage in index in the existing portfolio and then partly continue are because of that we have larger tenants moving around, changing their position or we are moving them around simply. So it is we are in a situation where, yes, it's a little bit calmer market, but we have higher rents and we have still a lack of space in some locations, very very lot of locations, I'm sure. But that is the day to day fact. Just a final question. In terms of your large investments, which is listed in the recording report, we see like those add up to below roughly million in terms of remaining CapEx for those developments. What do you expect to be using annually going forward in terms of development because what we see here on developments now is clearly on the low side? Yes. We are so what you're going to see is simply that with that increase get increases. And as we stated, we will start developments approximately for SEK 10,000,000,000 the next coming 2 years. And the beginning of the period will be a strong start because then we will start 3 we have started 1, and we have another SEK 2,000,000,000 to start of the 3,000,000,000 ones. That means that we will be a strong start. And from that, we will have a continue of increases on development. And to continue that question we had earlier on leasing, the majority of these projects is well leased out before we start. And can you just give us a time frame on the Zevi airport to give us the start, but how much time you expect to be producing on that in terms of developing that? It's really tough to say on the because it's a market situation, but we can conclude that if you look at the logistics side, this is approximately 8,000 to 850,000 square meters of logistics. In Sweden today, we produce somewhere around 500,000 to 600,000 square meters annually. It means that this is more than 1.5 to 2 years production of logistics. So I have respect for the time line on that one, but it's hard to say if that will take another 5 or 7 years or something like that to from the start of the production of that logistics side, something like that. Thank you for taking my questions. Thanks. And the next question comes from the line of Cobert Woodman from Kempen and Co. Please go ahead. Good morning. This is Robert Kempen. Actually, one question. Mr. Arnold is obviously becoming a larger shareholder, nowadays owning 10.9% of the company, putting forward Mr. Assenhorn in the board. Do you see any changes in the board with respect to future strategy? And let's say, more precisely, can we expect Castellum, for example, to go further on the risk curve knowing Mr. Arnold's, view on leverage and stuff? Okay. The procedure is like this. We have an election committee that is under meetings right now. The election committee is elected by the 4 biggest owners. And as Mr. Essohoorn is the Chairman of this committee, that was pronounced. What that will be the conclusion of then that their meetings, I don't know and definitely can't comment on. And from that, we will see so simply, it's too early to comment, and it's an owner question, not a CEO question. Okay. That's clear. Thank you. And the next question comes from the line of Alwyn Senber from Kepler Cheuvreux. Please go ahead. Yes, hi there. I have only one question and that is on the yield requirements. And I think also you start off in the annual report with a question mark when the yields are coming down. From Castellum specific perspective, since you kept it flat quarter on quarter, Are you waiting for any further evidence before you're ready to put in a lower yield? Or do you think that the yields you're reporting are the right ones? My view on the valuation is that the valuation is correct with the knowledge we have, and the market has very similar market right now. The feeling is and what we want to say is that we can conclude in that we it's not possible that we will see yields go down in the future, calm and simply. And the feeling is that the next acquisition is a little bit more expensive than the last one, still in the market. And it's also in Swedish investors. So and in the Nordics, especially Helsinki as well. So it's a huge interest for the Nordic sector, and what I can feel is that we are on stable due to yields going down. But the valuation we have is to our best knowledge. Okay. Thank you. And the next question comes from the line of Philippe Alberg from Deutsche Bank. Please go ahead. Yes, good morning. So I have two questions. The first one is relating to your ZVE Airport acquisition. So what's your view on the competition out there? Obviously, Dabsear has a large amount of land to build on also. And how do you view that one? I simply think that it's a lack of efficient logistics assets close to Gothenburg harbor. And the land bank that are possible to build on right now is needed for the future growth on in the region and actually for the total Nordic sector since the harbor is the only transatlantic harbor in the Nordics. And we see the volume going up and needed to go up. And if we don't want to transport everything, we're going to buy like trucks going from south and upwards into Oslo Stockholm and so on. The harvest volume is going to increase. It's all about investments and the land that land bank is not we really need more land bank actually in total in Gatwick right now to support the harbor. That's my view. Okay. And is the municipality supporting you in this like planning processes? And are they keen to you building this as well? Yes. We are very supported by the municipality and also by the region and the harbor. Okay. And second question, I guess that everyone has already tried to ask you this, but could you give any indication of the net lease during the coming quarters if you exclude these like SEK 150,000,000 from the already announced project leases? I think it's we no, it's very tough to look into that figure. The only thing we know, as you indicated, is where we have already leased out in the project side. And so no, I can't give any more guidance unfortunately. Okay. But just to follow-up then. In the 1st period of this year, I think you mentioned that you had some leases that was terminated in the CBD of Stockholm and in Copenhagen as well. Has those been let out? Or are these those still vacated? Part of those I mean, first of all, the ones that are giving notice to moving, they haven't already moved. They are giving us cash flow. So that's very important to say. But they have part of that volume has been leased out. Okay. Thank you. And we have a follow-up question from the line of Niklas Horden from Nordea. Please go ahead. Yes. I just have 2 follow-up questions. Firstly, is it fair to conclude that the negative net leasing you are presenting right now will put a pressure on your vacancy levels in the coming quarters? That's my first Rob. I mean, it's if you're looking at that, I mean, we are looking for stable to some adjustments maybe on the vacancy rate or our occupancy rate as I see it right now. But you're on a very high level compared with Of course, you have a second, that portfolio. Yes. We are. So don't pencil into any dramatic figures. And of course, we have the new ones coming in later on in the portfolio. And then my final follow-up, maybe a little bit boring, but the credit duration is coming up a little bit. But I was under the impression that you're aiming for even a higher capital duration. Is that still the case? Should we expect your capital duration to move up to about 3.5 years over the coming quarters? I said earlier this year that we end up roughly 3.5 years because each quarter that goes means that we lose the duration, of course. But long duration is preferable, but then it's also there is a question, of course, of what the market can offer us at which price, so to say. But where we are now is roughly where we charge it for this year, and then we are still working on it. Okay. Thanks everyone. Thank you very much. As there are no further questions, I'll hand it back to the speakers. Yes. And we thank you everyone for listening. And yes, thanks everyone. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.