Good morning, good afternoon, and good evening, and welcome to the Catella Q1 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to hand the conference over to Mr. Christoffer Abramson, CEO. Please go ahead, sir.
Thank you. Good morning, everyone, and welcome to Catella's 2023 first quarter interim report. In addition to myself, with me today is Michel Fischier, our newly appointed Chief Financial Officer and Head of Investor Relations. I'm sure Michel is familiar to most of you, as he's been with the company since 2021 as part of the leadership team in the role as Head of Investor Relations and Group Communications. As usual, we'll go through the main events and the financial performance of the last quarter. After the initial discussions, we'll take questions on the phone and online. Of course, our financial reporting and these presentations material is available on the web.
I'd like to start the presentation on page three with a brief overview of Catella, although most of you are likely familiar with our strategy and operations by now. To reiterate, Catella operates in three property-focused business areas, investment management, principal investments, and corporate finance. We manage over SEK 140 billion in our Pan-European investment management platform. About 75% of the assets under management are managed in property funds, and the other part in a significant number of asset management mandates across Europe. Principal investments is where we invest our own equity into a broad and diversified portfolio of European investment projects together with partners. In corporate finance is our real estate advisory and brokerage arm with leading positions in large European markets.
Corporate Finance is also an important internal advisor to our other business areas, Investment Management and Principal Investments. With that brief introduction, let's move on to page four for a summary of the key operational highlights of the first quarter. In summary, it is, as most of you probably are aware, it's been a calm quarter in a very cautious property market across Europe. This has, of course, affected all our business areas during the quarter, and our financial results reflect this. However, during this slower period, it's important to note that we continue to invest, we continue to develop, and we continue to position Catella for growth.
Our focus, as I've mentioned many, many times, is always on long-term value creation for our shareholders, and not on quarterly earnings volatility and specific results. With a very strong 2022 behind us and a continued strengthening of our liquidity and financial position, we believe and feel that we're in a good position to continue growing the company. We do that through investments in digitalization, investments in capital raising, by evaluating M&A opportunities, by making opportunistic investments together with our partners, and by launching new products, tailored to the new market environment, and obviously continuously with a clear sustainability profile. I wanna point out also in April, we announced that Gianluca Romano started as Head of Capital Raising, a new global position at Catella.
His role is aimed at strengthening our institutional capital raising capacity at group level and to help display the strength we have as a Pan-European company with our unique local expertise and companies on the ground, and also, of course, to support our existing and new investment strategies across Europe. Another event at group level was the decision to sell our shares in Catella Hospitality Europe. The decision, it's never easy, but the decision to sell the platform to our former partners was based on growth and profitability not meeting our targets. It's as simple as that. Our view is that the divestment will support a stronger underlying operating margin going forward, and we firmly believe that we can focus successfully on the hospitality segment within our other asset management platforms.
The exit also generated a modest profit for the group. The divestment, of course, impacted AUM in investment management with about SEK 2 billion. At the end of the quarter, our overall AUM was unchanged since the fourth quarter. Continuing a little bit more with investment management. Even though the transaction market has been and is very quiet currently, we are, of course, encouraged by the capital commitments that we have of close to SEK 10 billion in our funds, and the fact that we have several development projects in the pipeline to finish this year that will support AUM growth going forward. Principal investments entered an agreement to sell a logistics property in Sweden during the quarter.
The sale will result in a modest profit that will be recognized in the second quarter, however. More importantly, it frees up significant further liquidity for new investments. In today's market for principal investments, we expect divestments of completed projects to be limited during 2023. However, we are in a position where we can postpone divestments of completed and importantly, cash flow positive properties, while we are flexible and ready to utilize our liquidity for other investment opportunities that we are, of course, actively working on. In corporate finance, in general, the first quarter is seasonally the least active over the year. This quarter, 2023 was, we have to be honest, exceptionally weak.
Not just of course for us, but with transaction volumes down about 67% across Europe, in the industry. The pipeline of complex mandates and portfolios is reasonable, however, but of course, the timing continues to be uncertain and closing transactions take longer than it has been in recent quarters. Let's move to page five, and a summary of the group's consolidated financial results. Year-over-year revenues decreased by about SEK 120 million. The main driver there being the 2022 divestment of the logistics property in Mölnlycke, which contributed over SEK 100 million in revenue and also a profit of SEK 98 million in Q1 2022.
If we summarize the quarter, comparably at least, modest profits in principal investments, significantly lower variable fees in investment management, but continued strong fixed fixed fee income. Of course, very low revenue in, and volumes in Corporate Finance took us to a roughly break-even result for the quarter. Not of course, where we want to be or intends to be in coming quarters, but given the market environment, you know, not too bad, and we have a great starting point with a lot of capital going forward. Investment management, if we go into that, first, has delivered a substantial AUM growth of SEK 15 billion over the last 12 months. Quarter-over-quarter, as I mentioned, assets under management was unchanged following the divestment of Catella Hospitality Europe.
However, due to our long-term AUM growth, our underlying income from fixed management fees is strong and very, you know, the operating profit of over SEK 30 million in this segment proves the resilience of the underlying business model with a solid profitability despite a very slow transaction market and thus variable revenues during the quarter. In principal investments, as I said, no divestments were recognized in the quarter, but the business area has contributed substantially to operating profits during the last 12 months. Our focus continues to be to develop the current pipeline of projects, albeit again at a prudent pace, and to pursue co-investments aimed at creating new partnerships and revenue streams. Long-term, we are working on new opportunistic investment strategies together with partners to meet the changing market dynamics and investor demands.
More of that to follow. The slow transaction market naturally affected revenue and Catella Corporate Finance as well, which led to a negative SEK 20 million EBIT. Which actually was slightly better than last year, due to the decision to close the loss-making platforms in Germany and the Baltics that year. We move to page seven to discuss investment management in detail. Since the inception of investment management, we have delivered a strong average annual growth rate of 24%, and assets under management also grew by SEK 15 billion during the last 12 months. As mentioned, the decision to divest Catella Hospitality Europe did not meet our return criteria, ultimately led to a flat AUM development quarter-over-quarter. Of course, we work very, very hard with our existing investors.
Looking ahead, we view 2023 with a certain optimism, as we continue to have a large pipeline of transactions to complete and capital commitments of approximately SEK 10 billion ready to be deployed in our funds, just waiting for the right transaction pricing and entry points, just like most other competitors and partners. Realistically, 2023 will have somewhat limited new capital inflows into property funds. The focus is there on the existing pipeline to complete them and on deploying the committed capital, which is it's gonna be a lot of work to commit that amount of capital even in 2023.
However, we are much more optimistic regarding asset management, as the pipeline for new mandates is very strong with both now opportunistic investors more active in the market and a lot of existing owners out there in need of our expertise, as seen in many of our existing partnerships. Good discussions ongoing across Europe there and hopefully, a lot of the growth in investment management will come from that segment this year. Let's move to page number eight, a little bit more on investment management. The continued underlying AUM growth drives increased fixed fee income. Again, this is our key underlying investment management metric and a main long-term profit driver in Catella. As you can see, our fixed fees have increased by over 50% just since 2020.
I'd like to point out, just like I did in the fourth quarter, that our fixed fee income materially exceeds our non-variable operating expenses. Critically now, in the continued slow transaction market without significant variable fees, our investment management business will continue to generate solid operating profits. In Q1, variable fees such as acquisition, disposal, performance fees were limited, especially compared to Q4, where we divested a large portfolio of residential assets in Germany and the Netherlands to release liquidity for new investments, both at a new market price entry point and with improved sustainability profiles. As I mentioned earlier, our broad offer in asset management provides critical competencies in these turbulent markets to reposition and develop assets, which balances out our AUM growth in economic downturns and slower transaction markets.
Let's turn to page number 10 for an overview of principal investments. We continue to have a diversified portfolio of projects in different asset classes across Europe. Portfolio consists of 10 active projects as well as some projects in pre-development phases in six European countries. In addition, we have a portfolio of smaller co-investments that both meet our return targets and importantly create new partnerships with investors and generate new revenue streams through asset management mandates. It's our firm belief that this portfolio of smaller co-investments and more opportunistic strategies will increase this year as our main focus currently in principal investments. Operating profits during the quarter was mainly driven by rental income from our Kaktus property in Copenhagen and finalized installation of solar panels in the previously divested logistics property in Norrköping.
Besides the agreement to sell, one logistics property in Sweden during the quarter, no substantial transactions were made. As I mentioned, in the current market environment, we expect divestments of completed projects to be somewhat limited during 2023. However, our strong financial position and liquidity is key to giving us the flexibility to warehouse these cash flow positive properties and to be ready to utilize our liquidity in pursuing new investment opportunities as they emerge. As I mentioned in 2023, primarily focus on big opportunistic co-investment strategies with new partners and existing partners, of course. Let's focus on Corporate Finance on page 12. The current pipeline of transactions confirms that Catella Corporate Finance maintains a strong market position on our five markets. However, the volatile and uncertain market is pushing transactions forward.
The traditional core transaction market was exceptionally slow in Q1, with volumes across Europe down almost 70% in effectively the weakest quarter since the global financial crisis over 10 years ago. As I mentioned earlier, a slow and hesitant market affects all our business areas, but especially Corporate Finance. Until the bid-ask gap between seller and buyer closes, in many markets, we expect continued low transaction volumes and thus revenues, in at least the coming quarter or two. In the meantime, however, we show strength as the demand for valuation services continues to be very strong, as well as the demand for more complex capital markets and restructuring services. The pipeline of complex portfolio and restructuring transactions is strong, but it's a complex environment and it takes a longer,
takes a long time to close transactions at the moment. We're as well-positioned as we can be. Also, as seen in the operating results, Catella Corporate Finance has an improved starting position, given that we no longer are burdened by the previously material loss-making operations, which now will serve us well in this environment with a slightly slower, smaller footprint. All right, we'll go into page number 14, and I'll hand over to Michel. Welcome, our new permanent Chief Financial Officer and Head of Investor Relations for a brief financial summary.
Thank you, Christoffer. To start, I am very pleased to take on the challenge as CFO of Catella. Having worked with you, Christoffer, and the company for two years, I feel strongly committed and look forward to lead the finance department and continue working with the leadership team to execute on our growth ambitions, strategy, and vision. With that said, I'd like to do a brief summary of this quarter's financials. To be honest, this might not be the best starting point in my new role. I say this as same quarter last year gave us strong comparables in a different market backdrop. Year-over-year, EBIT ended at -SEK 2 million compared to +SEK 111 million last year. The background which Christoffer already has elaborated on is a weak transaction market which affected all our three business areas in the quarter.
In investment management, we see limited variable revenue. However, the fixed fee cost coverage resulted in a positive EBIT of SEK 31 million, where the growth in assets under management over the last years have resulted in a solid base of revenues and profitability, even in a slow transaction market. The main reason behind the strong comparables, however, lies in principal investments. The business area divested a logistics property same quarter last year, yielding both significant revenue and profit contribution. This quarter, no divestments were made, and bottom line EBIT of SEK 9 million was primarily generated by rental revenue in completed residential section of the Kaktus development project in Copenhagen and final payment for installed solar panels in named Norrköping sale. As seen in corporate finance, revenue decreased by nearly SEK 20 million in a slow transaction market.
The lower revenues were mitigated by the decision to discontinue loss-making operations in Germany and the Baltics, leading to an operating loss of SEK 20 compared to SEK -22 last year. On group level, fixed payroll increased due to an increase in employees as we continue to invest in critical competencies, and some items affecting comparability also impacted the quarter. Looking below the EBIT line, financial net improved as an effect of improved intercompany lending structures, the divestment of Catella Hospitality Europe, fair value valuations of our holdings, as well as some currency effects. To conclude with earnings per share, it ended slightly negative and was primarily driven by the described drop in revenue year-over-year. Continue. We continue to page 15 and to look at our financial and liquidity position.
We continue to strengthen our already strong balance sheets and equity ratio to have the dry powder necessary to support our growth plans. The equity ratio has increased by five percentage points year-over-year. More importantly, our cash position has increased by over 50% to 1.7 billion SEK. To conclude and reiterate what we have said previously, we are comfortable with holding a larger proportion of cash in this market. A good capital position and no short-term refinancing needs makes it possible to further explore both long-term value creation opportunities and also have the power for opportunistic ideas. Our objective is to focus and engage in the most value-creating solutions for our shareholders. It is important to have the right balance. If we find opportunities to create shareholder value through acquisitions, we will naturally consider them.
Although they are likely to be of smaller complementary nature to realize synergies or accelerate our growth. We also understand the importance of shareholder dividends, and we'll continue to aim for stable and growing dividends over time. With that said, I'll conclude and hand back over to you, Christoffer.
Thank you, Michel. Appreciate that. Welcome again. It's a tough first quarter, but the only way is up now, so that's great. Before Q&A, I'd like to briefly summarize the quarter, as we normally do from our perspective, on slide 17. For everyone in the property industry in Europe, the quarter was characterized by exceptionally low transaction volumes, which naturally affected all of our business areas. Before buyers and sellers expectations align, and there's a divergent of views on when and how much that gap really is. We will continue to adapt to the market conditions, and focus, as Michel said, on the long-term value creation initiatives, which are backed by our sound financial position.
This is about creating long-term growth and essentially the variable revenues and performance fees and gains in the future. AUM was flat quarter-over-quarter. Not terrible in this market environment. We again had continued solid operating margins in investment management. Looking ahead, we have accelerated our work in launching the next generation of funds, investments, and asset management mandates to meet investor needs in this evolving market. To complement that with Gianluca on the team heading capital raising, we can further promote our unique local expertise and Pan-European investment strategies to unlock growth opportunities. Hopefully in the coming quarters, there's gonna be a lot to talk about in this area.
A significant part of our growth ambitions lies within further development of our sustainability offering in funds, mandates, and advisory. Is one of our unique selling points, and we've been in this field for a long time, with some first-class products. With a strong 2022 behind us, with a solid financial position, and strong liquidity and significant capital commitments, I feel that we're in a good position to continue to capture growth opportunities as we invest for the coming years. We have to be somewhat patient quarter-over-quarter, we're entering new entry points here in investments and new mandates, and we feel very good about the position that we're in. With that, I would like to thank you all for listening and open up for questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star and then two. Your first question comes from Patrik Brattelius from ABG. Please go ahead.
Thank you. Thank you for the presentation. A few questions from my side. If I start off with investment management, if we look at the fixed revenues in comparison to the fixed cost, where would you say the current run rate level is? If we exclude any variable and performance-related fees, where would the run rate level be?
Well, Patrik, I think we're pretty much where we are. I mean, there was a very, very low level of variable revenues this quarter. At the same time, those limited variable revenues that we had in the quarter were offset by a little bit of catch-up in the cost base. I would say if we have low thirties in EBIT in investment management, that's pretty much the base run rate. Of course, it's highly unusual to have a quarter with hardly any variable revenues. We have reiterated previously, and we still do, and we believe that if a run rate with a low and slow market, you know, we should be at about SEK 200 in investment management or SEK 50 per quarter.
This quarter was exceptional. I think this quarter is probably a good indicator of where that fixed fee coverage lies.
Perfect. Thank you. Just for my clarification there, this SEK 5 million that you mentioned in the CEO slide on, in the report, is that included in investment management, or is that in other?
Sorry, did you mean hospitality?
Yeah, yeah.
Oh.
the profit that you generated from that transaction.
No, you will find that figure included in the financial net.
Okay. Okay. Yeah, that was just a clarification. Thank you.
Yeah.
Given this environment that we're now in with the lower transaction, how do you adapt your cost base to this? What, what kinds of levers are you pulling within the company?
First of all, I think there are two answers to that. In these type of times, you always have to make some difficult decisions of, as we've already done, divest or downscale some underperforming units. We are also of course, looking ahead, looking across our businesses, you know, stopping recruitment or, downsizing and consolidating in back offices and looking at operational efficiencies. That's natural. I think, anyone in the industry is looking at that right now, as you will have seen, clearly on, in the press. We are no different, although we, What I would like to say is that we invest in the future.
Right now, where we're spending our money on the cost side is investing, as I said, in digitalization to prepare for delivering the product and the cost efficiencies in the coming years. We're investing in capital raising to get ready and to really successfully launch our new strategies and our new products. That is natural. We have to do that. We feel comfortable doing that. We're using essentially our previous year's profits to reinvest in the future. Of course, operational efficiencies and some downscaling of costs is natural, both on the personnel side and on IT, maybe consultants. The standard approach, we're not gonna go across and cut heavily.
We invest in the future, we build going forward, but we're gonna do it in a smart way and invest cost, or put cost into where it matters, where it drives future value, and be very prudent on, sort of, let's call it non-front-end costs.
Adding to what Christoffer said and just bring some clarity in the quarter-over-quarter comparables. I mean, we've had some headwind in the exchange rate of the euro and SEK.
Where the SEK has weakened some 7% compared to the same quarter last year, which of course also inflates our operating costs reported in Swedish krona.
Great, thank you. These initiative that you talked about with cutting personnel, et cetera, not investing as much. What are we talking in terms of numbers here? Will we see a material difference in the cost base if we look one, two quarters out, what type of effect will this bring in actual numbers? Do we have any expectation on that?
Yeah. Patrik, I'd comment on that. And I would like to again point out and emphasize that we're not talking about cutting a bunch of personnel. We're talking about divesting units like we've already have, and being a lot more prudent on recruiting. We are not talking about large personnel costs. That's not the business that we're in. We're talking about operational efficiency and investing for growth. Do I see large cost reductions going forward? I see large cost efficiencies going forward, being smarter about IT spend, being smarter about consultancy spend, being smarter about Pan-European consolidation of processes. Large redundancies, absolutely not.
Thank you. That is fair. Zooming into Catella Corporate Finance, it was exceptionally weak transaction market. What is your view of this going forward? Do you believe that as long as we are in this increasing rate environment, buyers and seller will be further apart? Or, or what are you thinking here, when they will gradually come together? Is it, when we are seeing a stable rate environment, or do we have to see rates being cut? What, what do you envision?
I wish I knew. I wish I knew. I'd start with that. Look, Patrik, We're getting closer. But if you look back at historical cycles and corrections, it takes time. It just does. What we're seeing now is, which is normal, the first movers are the opportunistic investors. You know, significant return targets, high yield, high, you know, let's not call it high-risk strategies, but opportunistic strategies. That money is coming in and the rest of the market is remaining patient. You know, no one wants to be first. That's just a bit of an issue. But we're seeing activity and you're seeing activity across. You're seeing, of course, there are transactions. People need to refinance. People need to get liquidity.
You know, a lot of the transactions that are occurring today are at the high, high, high prime, super prime end, where, you know, the real more equity rich, cash rich investors are active. The levered buyers are remaining somewhat cautious. We don't see strong shifts, although I would say in April and early May, there's been a little bit more activity than it was in the first quarter. You know, all we can do is be the best at what we do, continue to be out there every day with clients, structure the smartest deals and offer the best quality to our clients. We can't do anything about the market.
That is fair. Thank you. Last question for me then. I always have to ask about Kaktus since it's such a big and prestige project of yours. If you look in the report, it's expected to be finalized here in this quarter, Q2. What is a reasonable divestment timeline from a shareholder's point of view, given that buyers and sellers are so far apart? Is it reasonable to expect that it can close in 2023? What should we think about this?
It could, again, we can't say that with certainty. We have good ongoing discussions. Whether that is enough to close in this year or not, we're not sure. The construction is going well. The occupancy again is, you know, virtually without vacancy, very high. The rents are strong on the residential side. From that perspective, the sort of the core underwriting is strong. As we've mentioned before, we're working to finalize the last commercial leases and then find a new investor for this fantastic property. You know, at the moment, we have strong operating income from the property and as you know, we have a strong balance sheet.
We're not concerned from that perspective. And, and we have ongoing discussions with buyers, but again, we said it takes a long time to close these transactions, especially one of this size at the moment. You know, we could speculate, but that wouldn't do you any favors.
Can you share any insights perhaps how your own IRR expectations perhaps have changed throughout the year in this project?
No. Not really. I mean, look, The exit assumptions and timing are very uncertain, so it would be unfair to speculate on that. I mean, what we can see is, you know, the current projects that are just completing or coming to completions are gonna be hard to meet the returns that we've had in the last couple of years. Clearly, you know, that's not the case. However, going forward, with new capital and new strategies, we feel pretty confident that with new entry points and repositioning assets and taking, you know, a very informed contrarian views at times is gonna be equally successful as the past, but in the next couple of years.
Sounds interesting. Thank you so much. That was all my questions for now.
Thank you, Patrik.
Thank you. Once again, if you do wish to ask a question, you can register by pressing star then one on your phone. Your next question comes from Jesper von Koch from Redeye. Please go ahead.
Hi, guys, and thanks for the presentation today. Also congratulations to the new fixed position, Michel.
Thank you, Jesper. Morning.
All right. Let's start with investment management, where it appears that AUM growth is moving from perhaps the public funds to partly private funds, but I guess primarily as a management. Could you just elaborate on the investor appetite for the different funds? Like, do you see any difference in the preference there?
Well, yes, as we've mentioned before, I think the investor appetite is, A, very clear into both funds and mandates with a high sustainability profile. That's one. That's, you know, works to our advantage. It's plays to our strength, and we will continue to focus on both our existing and new products. In the very core market, where we have a fair amount of AUM, the new inflows is, as the transaction market would suggest, limited. That's okay. We still retain our investors. We still retain their trust and confidence. We still retain their equity and our AUM, we continue to have more money to spend and invest.
While new investments in core might be limited currently in the short term, the assets that we hold are very, very good. They're exceptional assets of high quality in the right locations, and that's why the investors have been with us for a long time. You know, being in the right location with good assets is never gonna be a bad strategy. The short-term growth and capital inflows in those particular strategies is likely to be limited for, you know, a quarter or a couple of quarters, who knows? What we see is sort of the first movers coming into more opportunistic strategies. Obviously we don't talk about it until it's real, and we don't talk about it in earnings report until it's real.
We're working around the clock here behind the scenes on new investment strategies, finding the right investment opportunities, positioning it with investors. This takes time. I mean, look, it's gonna be fantastic when they come to market. It's gonna be really exciting. It's gonna generate profits, you know, probably not this year, but this is building for the future, building for many, many years to come. That market has, is ongoing, both in funds and in assets under management. Creating these funds take a bit longer, so I wouldn't anticipate that AUM growth in new funds to occur in the short term. However, separate mandates, specific vehicles, direct co-investments with, on a club deal or a single investor deal, I mean, that can be very quick.
That's, you know, where we anticipate seeing most of our activity, at least in 2023, as we continue to build more long-term products, also in the background, which we'll hopefully talk a lot about and maybe we'll give you the chance to sit down with Gian Luca over the coming months to explain our strategy and how we're gonna go to market.
Sounds good. Sounds good. I mean, do you experience any desire to withdraw any capital from your funds? I mean, how is the discussions going?
Well, it's, you know, you know, the fund withdrawals, since the last, there's no global financial crisis now, but since the global financial crisis, you know, the rules were changed. Most of our funds have a pretty long notice period and also withdrawal penalties if you do it urgently. You know, in a fund business especially, you have ongoing discussions, continuous discussions with all investors on how to invest, where to invest. Frankly, right now, a lot of the investors wanna be a little cautious and are happy with us to maintain a bit more liquidity and invest more slowly. We have had, fortunately, very limited capital outflows, I mean, too small to mention.
Frankly, also quite limited calls and the calls that we've had, we've managed to negotiate with investors and see if they're interested in alternative solutions. So for now, nothing material to talk about, which is, you know, frankly, that's a, that's a good performance in and of itself, to retain the investors' confidence in these times.
Okay, good. For asset management, any specific markets that that part is doing particularly well in?
I think what I would like to emphasize is the UK, simply because the UK market tends to move faster and first, it, this time has been no exception. The yield shift has been a little quicker, the capital, the more opportunistic capital tends to come into that angle of action, both on the investors and the investor market. Our UK business, Catella APAM are doing quite well. We didn't have any significant variable fees in the first quarter, the pipeline of potential mandates is really strong. We are also quite active, you know, we're pursuing equity opportunities ourselves in that region together with our team there.
I would highlight that market as being the first to really move, and we anticipate seeing similar moves in the rest of the continental Europe in the coming months.
All right. Also, I mean, what's your view on your current portfolio of assets in investment management? I mean, would you say that all the remaining parts all deliver like a sufficiently good profitability, or are there still some that you doubt?
Sorry, yes, I must admit I didn't hear the first part of that question.
What's your view on your current portfolio of assets in investment management?
The very
The assets or, I think you're referring to the platforms that we have. Is that correct?
Yes, exactly. Like, the French one that you divested now. I mean, are there more?
Oh, right. Okay.
Potentially, yeah, like this.
No. I think, we have. You know, the platform that we divested was a specialty platform, a specific asset class. You know, frankly, we have a significant competence and experience in our existing platforms, in that segment. We could, you know, we actually have a couple of ideas and strategies that we're pursuing in that segment. So I don't see it as a. It was a unique segment that we tried and didn't succeed to our targets. And we think we can pursue it in our existing platforms. I would rather say we are very.
I wouldn't say very aggressively, but we are very focused on growing our existing and remaining asset management platforms, which have been, you know, been a little behind, you know, in the shadow of our funds a little bit in the recent few years when, you know, the funds have been very much in favor and the growth has been exceptionally strong. Now it's time to shine for our asset management businesses, who have incredible local competence in finding and improving underperforming assets or repositioning assets. We have development experience across the board. I would say the opposite.
The focus is now on growing the remaining entities, and as we have alluded to in the past, maybe add a platform or two if we're lucky and a little bit good.
All right. Sounds interesting. Just in investment management again, I mean, you sequentially increased the number of employees by 11, I think. Is that mainly to like towards the like digitalization part and also, I guess, Gianluca Romano, if you could just like elaborate on like what functions and?
Sure.
On that they are placing.
Digitalization and then capital raising are actually not within investment management. That's at group level, which is, Those are two critical areas where we've added a very limited number of people. That, frankly, just a couple of people so far. But it is something where we intend to operate on a Pan-European and across all our businesses. That's number one. Where we have invested in investment management is predominantly in technical asset management and ESG expertise. We have a small new team in focusing solely on improving sustainability criteria and performance in all our residential assets.
We have added a few, strong new, people in technical asset management in our commercial area, to really, work on, you know, what's gonna be a much more active asset management approach to our entire portfolio going forward. That's really where the addition of people have been, in investment management.
Okay, fair. Just one last one, perhaps for Michel. Regarding the financial income, is that only from FX effects? With constant currencies like the quarterly net finance with these interest rates should be around minus SEK 40. Would that be like a correct assumption?
I think you can calculate on our, you know, interest cost on the bond. Then you will see some, as I mentioned previously during the call, that we have improved our intercompany lending structure, and there you see a substantial positive effects on the financial nets. Then the other parts, I think I described, we had some positive headwinds from FX, which you mentioned, some fair value revaluations as well. Yeah, I think I covered all of that.
Could you also just briefly comment on your project debt related to Kaktus Towers? What are the terms for this loan? I mean, or are you also doing, Is that part of where the intercompany lending comes into place?
Firstly, we can't comment on loans, external loans. What I would say is that the senior financing structure in Kaktus is exceptionally competitive, how I would describe it, with we consider a very competitive and compelling margin. Then it's a question of, for us, how much of our own equity versus further up the capital structure on debt we want to be, if we're gonna hold this for a little while. You know, we're in a good position, I would say at the moment, with a secure, very competitive senior financing, and that's the most important.
All right, good. Okay. That's all for me. Thanks so much for all the answers, and good luck going forward.
All right. Thank you, Jesper.
Thank you.
Thank you. There are no further phone questions at this time. I'll turn it back to our presenters for any written questions and closing remarks. Thank you.
Forward to speaking with you in the coming quarters. Thank you for our time today.
Thank you. That concludes our conference for today. You may now disconnect your lines.