Earnings Call: Q4 2020

Jan 22, 2021

Thank you very much. Good morning, everyone. So yes, this is the Q4 for 2020. And if I take the next slide, please. We will go through the in four parts, January is port and up to, of course. And then we will go to the markets, the property and rental market. We will also look into our development pipeline and ongoing developments. And finally, of course, comment on the Entra deal and what that is for the Capella owners as well as the Entra owners. But if you take the next slide please, we will start with the year end results for 2020. So we can summarize it very shortly that it was very strong and good result for Castello and that we have proven this through following numbers. If you take the next slide, please. So let's start from with the income from property management. I mean, we have increased the property management with 7% in spite of the ongoing pandemic. And also the last quarter isolated has a growth of 3%, even though we suffered from the pandemic 9 months. So the results shows the efficiency we have handled the ongoing pandemic on both the income as well as the cost side. And we are, of course, very proud that we can do this under these circumstances. On top of that, I mean, we this is down to 2 or 3 reasons. It's of course the quick reaction time we had and adjusted when the pandemic came to our knowledge, let's say. It was also because we have a good portfolio with a good tenant mix. But that will shown in a very few bankruptcies and that actually is lower than last year and very limited rental losses. And thirdly, I think this shows that the property and especially the office market in the Nordics is resistant and very strong. Looking at the value, I mean, we increased the devalue with 10%. And that was built up with the cash flow developments and yield compression. And the last quarter, it was of course mostly affected by the Blackstone deal that we have partly in the valuation and we will come back to that. So the NAM the NRV, more correctly said, and the year end was SEK2.14. But we have already secured another SEK2 per share because we have not calculated in the portfolio premium in the Blackstone deal. So we are at 2.16 and we will come back to that. So and we will, of course, already we can already guarantee that we have a very strong balance sheet coming out of Q1 because we are even if they only the first part of the Blackstone deal and then we will be lower than 40% on the LTV side. And shortly the markets then. This report and also looking at the market at total. We can conclude that it's no drama in the Nordic office market. The evidence is the stronger lettings for us, of course, and the last quarter compared with last year. Sort of SEK 239,000,000 net leasing is, of course, very strong, but it's also strong on all lines. We have rented out more in the existing portfolio and more developments. And on both terms, it's stronger than in isolated Q4 than last year, the same thing. And if you look at the rents levels then, we are offering the same rent levels that we did before the epidemic. Looking at what we can see into the market, that is also what's occurring. So I think this proves that so far the office market has been very strong and we can discuss that later. But will not the office market change then? Yes, of course, it will change, but it will develop. And the winners, I think, is the ones that are already prepared in a very strong balance sheet and a good position, and Castellum is definitely one of that. And then to the logistic market. The logistic market is very strong and that is, of course, driven by the accelerating e commerce. Then we are now changing with the sales to Blackstone that we will be even more active in the logistic market on the new developments. And we will show in this presentation that we have the capacity of building approximately 1,000,000 square meters already on already owned land. That will be done with approximately profit and redevelopment of 50%. And we have the capacity of taking 30% of all that's a build in Sweden the next coming years. And this market is strong in rents and it's also a market with very strong interest, as you can see, in the deal with the Blackstone, Stonewell, and we was able of increasing the value with 20% from what was booked in the book value. And then the Entra deal. If we are able of securing the deal, it will be very creative for the Castellum shareholders Endeentra's shareholders. So this is 2 winners in this game. We are the only one that are positive and the possibility to create the prime office real estate company that are the strongest in the future as well as creating a strong logistic company. And Kristall has the strength to now do that with the strength of the balance sheet and not we need any more capital. So we are prepared to go ahead and simply close the deal on Entrance. Should the deal go through, the shareholders of Castellum will still be in the golden seat. So the shareholders of Castellum is the winner, whatever happens. And that's why that is what we have traded simply with the Blackstone deal and this big structure. Okay, Ulrikka, I leave to you to the going to the next page, please. Yes. And then to the income statement for For 2020. 1 year ago sitting here, we did not know what was coming. Another good year of delivery, maybe in a more softer market was our belief. But then the black swan came flying with the name COVID-nineteen. And suddenly the gain was another for a couple of months. It was more about asking faster than normal, Trying to understand the impact on our tenants, increased liquidity control, working more remote, digital and even more flexible And then the humble. However, we're closing 2020. We can say that it was not such a bad year anyway Based on delivery of our results, it is even a really good year with a strong result bottom line. And I think the cities speak for themselves. An increase in income from property management was 7%, and that is the same as the average yearly effective increase the last 10 years. And change in property value of 3.9 percent or 3,900,000,000. And worth mentioning is that the Blackstone contributed with EUR 1,600,000,000 in this number. And more is to come during Q1 this year, but I will get back to that. A negative change in derivatives, some taxes and that lands in the bottom result of €5,600,000,000 And based on this, the board suggests an increased dividend for the 23rd year in a row up to SEK 6.9 per share, and that's an increase with 6%. And if we go to the next slide and look into pure management or you could say like for like growth, The like for like portfolio, you could say, contributes with almost 6% of the growth of 7% that I just mentioned. And the big contributor is, of course, still rental growth, but also a good cost control. The average increase in like for like rental levels were 2.8% consists of 2 things. To simplify it, the CPI uplift of 1.7 and made renegotiations at 50 PML. Then we had, of course, some high vacancy and a little bit more incentives and that's mitigated. So the net like for like growth is 2.2%. But more interesting is to look into the different Asset classes because they hit a little bit differently. As you can see, all is doing well regarding rental level increase Except retail that has a negative development. That is, however, not a big part of our portfolio. And I also want to highlight the highly discussed office market that we are strongly levering. And as you can see, we have rental growth. And what takes that down is mainly a little bit incentive That was a deal done before COVID-nineteen. And worth mentioning is expenses. That was moved in the right direction. It's down over 6% in like for like and that is based on hard work with our cost In order to be a much more efficient company, but of course also a milder year compared to 2019. And then let us change picture on slide and talk a little bit about the COVID-nineteen. I could summarize the last quarter 2020 with it is more of the same. The volume of liquidity help has not moved so much. However, the ones that needed help earlier in the spring Needs further help into 2021. And the industries that need help are not surprisingly, you could say, finding the service sector or service provider such as restaurants, hotels, retailers, etcetera. And this is not a big part of our portfolio, but we do have it. The payment pattern is still very good. Followed the early quarters, 99% is on the bank. Bankruptcy is still very low. And back with that said, this is not over, we say. But up until now, we have not had so much impact and we keep our humbleness. If we then change slides and go to the balance sheet. The balance sheet at Castellum is strong. The LTV at the first glance is higher than this Q3. But then you have to keep in mind that in our calculation, we are a little bit prudent or cautious, you could say. We don't take into account the end of stake of SEK 2,700,000,000 on the asset side. So if that is adjusted Or the LTV is really is one of the loads we have had. It's down 43%. The NRV at the year end, which Today, the balance is history of SEK 2.14 per share. That is an increase of SEK 19 SEK 10%. And on top of that, the shareholders have that dividend last year with SEK 6.5 per share. But if we change slide and look at Go from the history of the NRB to the future. We already know that when the Blackstone deal is closed, we can take into our NOV the portfolio premium that Henrik just mentioned. And that has a value of roughly SEK 2 per share. On top of that, Castellan has ongoing developments of roughly €5,000,000,000 but we also have a really big pipeline In front of us. And if they only take the pipeline in near term, say, the coming 3 years. And on top of that, take the ongoing development. Our estimate now is that, that To create another SEK 16 per share in growth in NRV. And this indicates continued value creating in this company. And when we go from that part and the balance sheet and the NRV. We need also of course to address the valuation on the next slide please. And a good uplift of 3.9%, mainly driven by yield shift project gains, but also better cash flow than in our early evaluation. And the main contributor in the yield movement has, of Corte being the Logistic, Warehouse and Light Industry segment. And of course, we have the impact from making our long and hard work visible From a valuation point of view, by selling a fully developed and mature portfolio to Blackstar, way above our own valuation at Q3. As Mona said, SEK 1,600,000,000 is in our numbers at the year end. And as said, roughly €0,600,000,000 will hit the NOV when this deal are closed. As always, we do an external valuation of roughly 50% of the portfolio, more specific 54%, that's like a sanity check. And the gap between Castellum's valuation and the external one is 1.4%, Where our valuation in Castellan is above the external, and that is SEK 700,000,000 Out of the portfolio, EUR 50,000,000,000. That is the lowest gap since 2017. We have never been so close. But with that said, there is differences between the different asset classes. While we are more positive towards Logistic, warehouses like industry versus the external one. But on the other side, we are more Cautious or negative towards retail part. On the office, you can say that we are spot on on a portfolio level. If we go from the asset to the funding side on Page next slide, You could say that 2020 has been a year where we have proof tested our financial policy And our review on access to liquidity. We stand strong. We have good access to capital. At CRM, we had EUR 18,000,000,000 unused. However, EUR 9,000,000 of that is a backup of outstanding fee fees. That gives us SEK 9,000,000,000 left, so to say, to invest or to use. On top of that, the first The Blackstone means that another SEK 5,000,000,000 will flow into our accounts in the beginning of February. And this strong liquidity, together with our belief that this company can create more value going forward and increase the NRE further, Means that the mandate to sell them half of buying back shares up to 10%, which the board announced in the spring Is an important tool for Castello to have the possibility to do a smart investment and invest in Castello. And then finally about our figures, the next slide to give a perspective. We can probably say that we put another value creating gear to the custodian history. To give you perspective, we are here for the long play. When this company was listed in 'ninety seven, the portfolio was around SEK 10,000,000,000, the income from property management was SEK 300,000,000 And the shareholders' capital was €4,000,000,000 Through financial discipline and hard work, Castellan has increased the shareholder capital or value to €59,000,000,000 and at the same time giving dividends back to the owners of €15,000,000,000 The property portfolio at the same time has increased to SEK 103,000,000,000 while the income from property management is at SEK 3,400,000,000. And it's always good to have perspective and just not only look 1 year at a time. But with that said, Henrik, I Leave it to you to talk about the market. Okay. If we change to the next slide, please, then we will talk now about the rental and property market. And so please go to the rental market, picture 14, please. Then back to what I said in the ingress is about the office market. We can now conclude no change in market trends. The normal volume on notices for Katteller our see the same for like the last 2 years and for the last quarter the same. If we are offering anything in the only market that we can see some experience of soft the raw stressed market. I would say that maybe it's in the CBD of Stockholm. We are not exactly in the middle center of Stockholm CBD. So we can't say that is an adjustment there. So we simply offer the same rents that we did before. So our rents are going from SEK 6,000 per square meter for an offices and downloads in our portfolio. Looking at the net take up, we also proven in this page that is no drama in there. It's some offices being built right now. We have some colleagues in the market that have larger office developments ongoing under construction. But that has been needed for years because of the growth. So we actually before the pandemic had more or less a problem. It was hard to find the space for office tenants in attractive location. So the conclusion from my side is simply that the market is resistant. And that is in better their shape than any analyst that I have seen so far and maybe that we expected. And then looking forward, if we're going to the next slide, please. We have done some researches ourselves and we are going through whatever research that we can find about this of the segment in the Nordics as well as in Europe. And we I think that you can say that simply the one of the most important figures is, of course, approximately 90% of the staff want to go back to the office after the pandemic. The driver of that is, of course, efficiency and meet maybe you want to meet your colleagues again. So that's, of course, understandable. But I think in one way also that the Nordic market sticks out because before the pandemic, it was as much as 50% was already used to that from time to time work from home. We also estimate that the larger cities is the ones that more benefiting from working remote because you don't need to commute to the work simply. And there are very few places in Nordics with long commuting times. So our conclusion is simply there will not be any drama about spaces used in the Nordic cities in the office side. And then getting back to the question, why not more companies was giving us notice for leaving at year end? We also our conclusion is that the cost for the space is a very small portion still on the total cost side for its Nordic company. We have experienced that in earlier crisis and we are back to this conclusion. We also see that it's made in some way too early to take a decision to conclude how will you change in your organization or how will you change your simple way of working. So it's still extremely important for us to be prepared and help our customers and that's what we are doing right now for change for uses of the space construct structure, of course, offered more than one solution and measurements than we're doing earlier. So it's extremely important to be on your tune, but there's no drama in the market at all at this point. And if we go to one of our items then and or our tools. It's United States, a co working company. And we can go to the next slide, please. As we said before, we are strong believers in the expansion of using flex space and are therefore investing more in our new sites for United Spaces, our co working company, that we will double it in this year to come. And we have done a loss on it this 2020 results. But just before the COVID, we was on black figures after 9 months of ownership and are now, of course, experience some downturn on the income side. It's mostly that we don't have meetings and other services sold. We have absolutely the main part of the tenants left as numbers. And we are expecting us due to expansion on this and the membership. And therefore, we doubled the size of the business going forward and has in January opened 2 new sites, 1 in Uppsala and 1 in Stockholm. And then if I jump then from the office market to the logistic market on Page 7, please. The logistics. Here we have experienced a very strong market because of the expanding e commerce, but it's also a lack of good infrastructure and new efficient sites. This is an interesting market. And therefore, we now change our strategy to even focus more on it, the new developments and leave some part of the old stock. We will have €5,000,000,000 left in the balance sheet after selling everything that we have said to Blackstone if they also did 2 tranches of Blackstone sales go through. And here it's so important to see that the markets can be divided into parts where large national and national sites and then last mile locations. We will focus on both. We will have the capacity of building approximately 1,000,000 square meters of logistic on already our existing land bank. And here we can say that both sides of that is extremely important for investment of the last mile as well as the larger logistic blocks, of course. The rents are different. In the last mile, we see an increase up rents to new maximum levels that we haven't seen before. And the last mile in the last mile and on the large sector is more stable but positive on rents. And I will come back to why this is so interesting in investment when we're looking at the development side. So if we go to our net leasing then and move to the next slide, please. Then you may be this is was maybe one of the most unexpected strong figures. Because we have shown that it looks better it was better than last year by the full year when we rented out €239,000,000 in net leasing, stronger on existing portfolio than last year and stronger on development side. An isolated quarter. We can also conclude the same thing. It was better on both lines. And also and we can also conclude if everything is better and the bankruptcies are on an annual basis down SEK 9,000,000 compared with SEK 16,000,000 for the last year, to just give you an example. And then I think this is an effect of 3 things: the composition of our portfolio, the good work and excellent work by the team, that also a much, much better than expected resistance in the market as said before. And then moving to something totally different, the real estate market, the property market. How has then the investor acted during this crisis? We can say that we are having a very active Nordic market. If you take the Swedish figure, we are up to a volume of €180,000,000 almost €200,000,000,000 in sold assets. It's more or less the same figure as last year. The number of larger deals are more or less the same. So extremely interesting that the property market has been so active. Looking at the yields. We have experienced lower yields on offices, especially central and long leases offices. And we also experienced, of course, then as I said, lower yields on the logistic assets. And that is, of course, reflected in our balance sheet, as Ulrike already said. In our acquisitions, Dan. If you take the next slide please with acquisition 2020. I mean, you can't have missed that it has been a special year for us. We have been very active. And I'm not only thinking about the Entra deal. I'm also thinking about other acquisitions we've done. And we're showing some parts here. But we have truly been benefiting from having local teams everywhere. And one of the examples is, of course, the acquisitions we've done in Finland in HealthInfo that we have been able on acquiring new assets in 2 deals. And for the large one of almost SEK1.5 billion at the 5% yield is, of course, extremely attractive investment we was able of doing when a little bit less competition was in the market. But we also have been acquiring a very good position in the meatpacking district in Stockholm. And so will give us the opportunity to invest approximately almost 1 €1,000,000,000 in that region or that the meatpacking district going forward. Now we're having control of more than NOK1 in there. And then we have continued to invest in the logistics opportunities. And the last example is the smaller investments we've done in the local market. And we are also planning to soon be able to announce new constructions Gens, 4 in this sector for a profit that are very good, as said before. And when we can build for approximately 6.5% yield and a market yield at 4.2% something like that, that gives at least 50% profit on the development. That. Then the sale of Blackstone, Ulrich, should we go into that on the next slide, please? Yes, the next Slide, just to dive into that, some of the information already got. But As I said earlier, the deal with Blackstone shows the value creating growth in Castello. And as you can see here, it's not only logistics According to our definition, that is sold. 5% is 3 ks, 5% is offices, 2 12% is light industry and 1% is public sector. And the portfolio is of mixed quality and age From assets that has been in Castellon from the very, very beginning to, of course, new production. And the deal, as you know, is divided into 2 parts. The first one we sell at the top sold of roughly €5,000,000 That will be closed in the beginning of February. And the second one of SEK 13,000,000,000 will be closed in the end of March, beginning of April. The SEK 19,000,000,000 in property prices was 20% above the Q2 valuation corresponding to SEK 3,100,000,000. But after deduction for cost for deferred tax and transaction, the net proceeds is 2.2, of which 1.6 is in the Q4 numbers. The rest will come during Q1 or when the deal are closed. So that is a short summarize Of that deal. And then Henrik, let's go to another value creating part in Castello, the developments. Thank you. So we take the next slide please, the development. We have created during the years larger and larger pipeline of development. And we can now proudly present that we have SEK 20,000,000,000 in front of us to invest with a good yield. So if you take this example that's ongoing, we can take to the next slide with the map with ongoing development. Here you see 17 of the largest investments. And as said so many times, this is the backbone of it going forward. And it's very important to say it's not 1, it's not 2 development the large pipeline on big, but also midsize ones that gives very ordinary risk and very interesting geyser forward. But this you see on the map is SEK4.7 billion in pre let to 85% on an average yield of almost 6%, to be more correct, maybe 5.8%. And that are on the yield on market and valuation 4.2. So please calculate that and come back on the profit. Because here, we're hidden for the future that we haven't relieved in the released in the balance sheet more than SEK1 1,000,000,000 in profits coming from this just this provision here. And some examples then, if you take the next slide, please. Here you see 4 examples on ongoing developments. If you take on the left hand downside. It's the very beauty of the Rodhuset in Uppsala that we bought from as a retail asset and now has converted into the new co working arena in the absolutely center of Uppsala. Good returns. It's going to be a fantastic investment when we're coming out of the COVID. Then you have the 2 courts on top line. It's investments together on SEK 1,600,000,000 and of course, on a very good profit and return on long contracts. Those ones are just under the beginning of the production and will be finished 2023 will be effect. And then on the right hand side, we have the headquarter for EIA, an investment of SEK 1,300,000,000. But if we look at pipeline going forward, we have some examples what will come and that we have announced then. First, if you take the next slide, next slide, please. Then in the pipeline, we have Hagastard in Stockholm on the left hand side. This is our product in Infinity. It's an investment approximately for SEK1.7 billion. It's now 100% clear that we can start the production of this and it will be ongoing to 2025 because it's built on a tunnel, but it will also be 1 of 3 new developments in this area. So we will be the one of the biggest owner in the absolutely good CBD or hogash ordinary and Stockholm, and we will continue to invest there. So this is only the first of 3. Then going to the meat packing rig stick in stock, I'm on the right hand side. As said, we did the last acquisition here to be 100% certain that we can create approximately 25,000 square meters of new offices when the zoning plan and everything is done there. And of course, this is for all the developments, you can pencil in between 30% to 50% profit in the developments going forward. And if you take the next slide, please. We have chosen to show the 2 parts where we have the volume. The one is I mean, we have the 1,200,000 square capacity already on our land. The large part is, of course, the airport of Serbe that you see the volumes skips on the left hand side, what will come there. This is under zoning planning, but we are, of course, running as fast as possible, already into the market and offering it to the e commerce and other actors on the market. And then of course, we have the capacity of continual already prepared land in North Stockholm. And here we are starting the next phase of development because we are 100% leased out. And then selling. And all this we do here, we do it with a 50% profit on all investments, let's say. So we are not leaving the logistics sector. I will say that again. We are investing for and changing our structure and will be a very, very interesting partner for the e commerce going forward with a strong capacity and a good key. And with that said, Ulrika, I leave to you to go through the entry, I think, on the next page. Yes, have to unmute, please. Sorry. And then we go to the ENDRA, the combination with ENDRA and let us Yam Q reply. Let's start with disposal proceeds. And let me start with describing the strong financial position, Castellum Ari and the choices this company has. The net LTV is 44%, as I said earlier, but that is based on our rather conservative definition, which only include profit split on the FX side, Meaning that the interest stake of SEK 2,700,000,000 is not included. Adjusted for that, the RPV is 43%. If we take into account the disposal of EUR 5,000,000,000 to Blackstone that is close to the beginning of February, The LTV will be around 39%, everything else equal. Already there, this company is in a very strong position. When the deal number 2 is done, it will become even lower, 29%. And what we and Castellum intend to do is to use these Proceed to finance the cash portion of the offer, invest in combined platform, return cash to shareholders Up to our target combined leverage level that allows us to achieve leverage neutral transaction And target rating of BAA1. So that is our thought, strategy and plan. And then if we go to the next slide, please. Let me remind you of some of the great parts with this combination. The combination with ENDRA will provide an excellent platform for creating continued shareholder value, And it is logical from an industrial standpoint. The major Nordic property company with a portfolio value of roughly SEK 140,000,000,000 Will be created. We focus on offices, warehouses, logistics. Active property Of high quality in combination with a shift in the portfolio to both project development Transactions will enable increased income from property management and net asset value. Government authorities and agencies comprise roughly 40% of the massive income And continues with long duration in the contract portfolio, providing conditions for stable earnings. And the company will have one of the strongest balance sheet in the Nordic property sector and has the objective of retaining mtrac BAA1 'eighteen. A new larger company will enable synergies of roughly €300,000,000 on a yearly basis, Which should be realized within a couple of years from consolidation. And by 2022, which will be the 1st year as a Consolidated fully consolidated group, positive growth in income from property management per share as well in net asset value per share Is expected, while the company will have a strong financial position. And let us show the offer update as it is At the moment on the next slide, please. Based on yesterday's closing price, delta was EUR 185,000,000. But to that, I think we should add the following. And now the EUR5 million The share was its cost of Castellan's NRE at year end, NOK 214,000,000 plus the NOK 2,000,000 for further disposal of Blackstone. You could call that Castello's pro form a NRE. Another NOK 11 per share as part of the synergies in the base case, shares and cash. For the ones who only show the shares, there is another 5 look. This means the total offer value of NOK 206,000,000. But finally, we can't forget The potential in ongoing development and pipeline in near time, which indicates an EBITDA for Castello as a standalone SEK 232 per share. Converted to NUK and into this offer, it has a value of roughly SEK10 per share. So all in all, a total offer of NOK 2.16 based on Schultein shares only. And then on the next slide, the intra offer and the timetable. Today, we'll release our re gearing result. The after period ends the 6th February at 6 CET in the morning. And the settlement will be done on or around 16th February. At the same date, we see this will be the sales trading date on the OCE, the Oslo Stock Exchange. That is summarized. So over to you Henrik to finally summarize where we are at the moment. Thank you. And we take the next slide, please, the Castello Mentes into 2020 1. Yes, as the headline says, we are in a very strong position. But that's the first with respect, we can say that the pandemic is not gone and the effect of the pandemic is not gone. But now we are preparing for going back in I mean, sometime during this year and the planning has to be done now. And we have also shown that the strength of Castello and the resistance in the market and that we will, of course, benefit from the strong net leasing and the development pipeline. We have prepared the company. We already designed sales and will be in a very sound position whatever happens. I should say the owners in Castello is already sitting in the gold seat. We have been very invested and we have put a very good bid out for for the benefit of this Castello shareholders and very attractive for the Entyce shareholders. So if everything is fine and we can conclude whatever happens, we have a strong company with the future ahead of us and capacity to invest and create value for our shareholders. And we're also now using the mandate we have in the share buyback program. So actually, with respect for the pandemic, we're looking forward to the 2021 out of a strong position and doing the adjustments we need to do Q1 capital in the future after 2021, and that's the work we're doing right now. Thank you very much for listening. And I leave for the next slide and open it for Q and A. Thank you. Our first question comes from the line of Markus Hendrickson from Pareto. Please go ahead. Your line is open. Good morning, Henrik and Ulrike. I have a question regarding net leasing in which property segments and industries have you seen the Strongest net losing during Q4. Okay. We see it in absolutely the OpEx market here. That is giving us a very strong net leasing. And then we are also having benefits from the logistics side. But in the 2020 figures is the office market that are strong. And if you look into the office sector, it's actually divided. A different region. So I can't say that this one was a number that's much, much better. But if it take something sticking out. It's maybe that our middle region or central region is going very well if you combine those, it's a mixture of everything in this figure. So it's a wide and strong office market, maybe stronger than expected that we're showing right now. Yes, yes. I could see the Mid and West looks very strong. But also if we look into the industries, do you see any certain industries within the office sector where you see a stronger or weaker demand here in Q4? I should go the other way around and saying the weaknesses is proven to be the ones you are pandemic affected and the REX is more normal in that respect. So it's not a prime winner. It's the losers you can see in because of the pandemic shown in the field. All right. Thank you. And then another one, Suppose the entry deal does not go through and you choose to divest the 2nd tranche to Blackstone anyways, which is the Most likely of buyback of shares, additional dividends or acquisitions during 2021? That's a very good question. And we are so strong. So sitting here today, I should advise the Board to do it all, to be honest, more than anything. But of course, we will take care of the value for the shareholders and do it in an efficient way. But that is a coming discussion. We are now focused 100% Hyundai entry. That's clear. My last one, it looks like your target net LTV is 42% here in the short term for 2021 according to the presentation. Is that correct? You could say that it's not a target in itself, but we have the same LTV policy. As earlier, we have the same view on the rating that we want. And of course, if the EMEA deal is going to be with look, it's more like we will be, you could say, GD neutral. So if it's land in the end of 42% or 43% where the real FGD is at the moment, it's not the you could say the most important question. So but it's more that We will get back where we are today if everything is going to be done as planned. Okay. And is it fair to assume also, say, that the deal does not go through, you sell your shares in Entra And you see the 1st branch in Blackstone, then you still deleverage quite significantly. And then you still want to go back up to 42% system of the distribution to shareholders that we might see during 2021. Yes. I think you could see it. In that position, Castello would have a lot of possibilities. We could accelerate our investments, To be honest, we could decide to give return to our shareholders by different ways. And of course, we could think of decreased LTV. But At the moment, as we see it, we are rather comfortable with the financial risk this company has. So I would say that Flexibility is my favorite world. We have many tools in order to create value and we will have all those tools on the table. Okay, perfect. Thanks for taking my questions. Our next question comes from the line of Tobias Kai from ABG. Please go ahead. Yes. Thank you. Good morning. I would like to start with some questions regarding your top line, Starting with the vacancy rate, which increased some 30 basis points in the quarter and 80 basis points in 2 quarters. Can you give some more explanations to this? And also, can you see something what you expect for the first half of twenty twenty one? Do you expect a continued increase in vacancy rate? I think if we look 1 year back, We could see this coming into the numbers because the report for 2019 showed negative net racing In existing portfolio. And that is, of course, will hit the P and L and the vacancy rate during 2020. And that's the time. Now we have a little bit debt net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net net And that is an indication of the opposite, of course. But that is a Time lag. So maybe you will see some further decrease during Q1, but then a Chetchat, the further you go into 2021. Okay. Thank you. And also regarding the outlook for like for like growth, I think you had 1.7% CPI revisions for 2020, but the October CPI was only 0.2%. Then I think you have a relatively high shares of minimum uplift of some 2%. But can you give an indication of what your average uplift will be From Q1? Yes. You could say we have I think that based on what We can see now, as you say, the CPI is very modest in general because the October CPI was modest. And the floor gives us some more increase, but that is only part of the portfolio. So if you do that combination, I would say the CPI, everything else equal, could give you around 0.6, 0.7 all in during next year, everything else equal. Okay. Thank you. You also gave rental discounts of SEK 31,000,000 in Q4. How much of that is related to co working? And what is the rest referring to? The incentives, you mean, it's not in the it's not nothing in that number is To co working because if you refer to United States basis, it's on a separate line. So that is only into our, you could say, other channel base. And that is, as I said earlier, deal done and that hits the P and L now, but it's deal and discussions that has taken play earlier, much earlier, but it's the P and L at the moment. And it's In different part of the portfolio, but a big part is in the office side and some of it is In the new constructions. But it's just temporary, you could say. When we go into 2021, That take another term. So there is no co working. It's no impact of what you could say COVID-nineteen into those numbers Isolated the last quarter. Okay. And if I move from the top to the bottom of the P and L and look at the paid tax, which obviously is very volatile on a quarterly basis. But also on the full year, it was a quite significant increase Compared to last year or compared to 2019, which also was quite much higher than previous years, I think you had around 7.5% paid tax for For the full year, should we expect that to continue on that level? Or can it even increase further? Or what do you expected Yes. The tax losses we do have now is locked in another couple of years. And that the tricky part that makes this volatile is the changes in derivatives since they are part of the interest rate Deductibility restrictions. But if we make that assumption that they are, you could say, the same, Then an efficient pay tax going forward, I would say, would be a little bit higher, maybe somewhere between 8% to 10%. And for make it simple, say 9% in average Based on what we can see now. Okay. And also, you had a Slide where you show that you expect SEK 12 per share in gains from your ongoing development pipeline. And you have SEK 3,100,000,000 left to invest in that portfolio and the SEK 12 per share is SEK 3,300,000,000. Is that a correct conclusion that you expect SEK 3,300,000,000 in value uplifts From the remaining SEK 3,100,000,000 in investments in your ongoing portfolio? Or is does that include anything else as well? Yes. It's include I think we mentioned that it includes both the ongoing because it's a little bit cautiousness In our balance sheet, but also the coming pipeline that we see that we can start the coming 3 years. So it's in 2 different buckets, you could say. It consists of 2 different things. Okay. And regarding the bid on Entra, have you had any discussions With Balder regarding their position and whether they have any interest to sell their 20% stake to you? Oli and I have discussed the employee with all the larger shareholders in employee and discuss the same question and giving them the same offer as everyone else. And based on that discussions, do you think likely that they will sell the shares to you and accept your bid. I expect 7,000 shareholders to sell to us. So that's my expectation with the bid we have in the market. Okay. Thank you for taking my questions. Our next question comes from the line of Erik Grenstrom from Carnegie. I would like to start Just to ask a question about your expectations for investments in projects going forward. I believe you landed at €2,500,000,000 for 2020. But you also seem quite confident in your project pipeline. Should we expect something like $3,000,000,000 for 2021 or more than that? Or could you give us some sort of indication of what you expect in terms of investments? Yes. In the development pipeline, we have a good position. So You could expect more than this year's outcome. And the only thing that could have a tricky The part is more that we are waiting building permission for some of them or signing a tenant. So it's more a question do that Start 2020 or 2021. But if everything goes as planned, the development will be a much bigger volume of our yearly investment in the coming years than 2020. Okay. Thank you. That's clear enough. And also something you said during the Q and A, Obviously, your balance sheet is rock solid. But you also stated that as it strengthens with these divestments, You could consider accelerating your project investment pipeline. And I was just wondering Why would you need to wait for something like that to happen? I mean, if you do have the project pipeline and you do obviously have the means for it. Why not accelerate it already now? Yes, yes, yes. No, I think it's very simple. I mean, on the product pipeline, we will push as much as possible and we're doing that already now. So if that's taking it wrongly. That's something, of course, we're doing. And we are also keeping the logistic team, for example, even selling to Blackstone. And we increase the team with more developer knowledge there. But what we're talking about is transactions. The capacity of doing more transactions and looking at that opportunity. So that is what we mean actually. Okay. I get it. And speaking of the transactions market and the ability to make perhaps acquisitions, what How do you consider it right now? I mean, you were mentioning that there seems to be a rather strong property market in general. What kind of interesting areas are you looking at? Is liquidity back in the market and you're basically looking at it as you did in 2019? Or has anything changed? No, I think actually the positive for us with Luca like in the rest of the world is that it's very tough to fly in teams. And we're trying to benefit from that. As you know, the Swedish transaction or the real estate market is 100% international right now, which I think is that's extremely competitive. But we will try to find bits pieces that we benefit from by neighbor properties and so on. And it's a lot of groundwork done there. And in Finland, we experienced that it was a lot of flying in knowledge earlier and a lot of foreign investors that have so much teams and we benefited from that during the Lindstrom business as I see it. So we're really focused on trying to build big pieces, smaller ones than from the market and giving that value to shareholders. And then as known, we're looking at everything big as well. So if I place it in 2 tranches, that's what ongoing, but we're extremely active on the transaction market, Okay. Thank you. And then a final question was perhaps just a clarification of what you said during the Q and A. It seems like you almost stated that even if the ongoing bid for Entra fails, you will go ahead and sell the 2nd tranche of the Blackstone portfolio anyway. Is this do you consider the loss of running cash flow in such a situation an issue? Or is this simply a deal that you will have done no matter what happens in terms of entra? I see it as we have done a very good negotiation. We created SEK 3,000,000,000 in value doing that. But we are sitting in the gold seat. We have a buyer that want to buy for that price. We know that. So we have a floor on that deal. We will use that, of course, to if the end and maybe doesn't go through, we'll look into the opportunities we have and the options we have. But we know that someone will buy would like to buy for that price. And we will go into the market if we decide to sell and, of course, make a competition in there. So our view is that we are have given 3,000,000,000 to the shareholders and we have capacity to already state that and option going forward. But now is focused on EMRA to do that. Okay. Very good. Thank you so much. There are no further questions registered. So I hand back to the speakers for any closing remarks. Yes, go ahead, Rika. We have one question on the web, as I see it, Henrik. Should you ask maybe And it's 90% acceptance level. What possibilities do we have there? And we the answer is we have the 90% in the market and that is as the rest of the everything stated in the bid into the market. That's what's in the market center. And then I think we have a question about if we I can read the question. If the second part of the Blackstone deal would not happen, will there be a need to take back some of the value lift in this report or would you feel comfortable to keep them at a higher level. And I think, Ulrica, we are 100% clear on that we will this is a market valuation that we have done with cautiousness. And we will, of course, keep that valuation and continue to follow the valuation like it is in the market. So that will not be anything that goes away because Blackstone goes away. As said earlier, I just see it as an option. Maybe we will find someone someone who would like to pay even more if we enter that deal doesn't go through. Let's see if that's possible. But so the value will definitely hold in the budget. We can't find any other questions on the web either. So we thank everyone for listening. And we will be back in 3 months' time then, if not before. So thank you very much everyone. Thank you.