Welcome to Catena Q1 Report 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO Jörgen Eriksson, CFO Sofie Bennsten, and Chief Treasury Officer David Silvesjö. Please go ahead.
Hi, and welcome, everyone. The agenda today is the same as we used to have: short summary, business overview, and update, followed by sustainability, finance, and a short takeaway before ending up with Q&A. Next slide, please. Let's dive into a summary of Q1 2024. We report 11% increase in rental income, ended up at SEK 493 million , driven by acquisitions, projects, and stronger like-for-like numbers, driven by our CPI-linked contracts. Profit from property management increased by 3% in total, and per share, it was unchanged at SEK 5.58 per share. The balance sheet is very solid, with an LTV at 34.1% as an effect of the equity raise in March, which we will come back to later on. We report an increase in NRV per share up to SEK 399 .
With all this in mind, we are comfortable to grow further, and we have already, during this quarter, added three acquisitions, summarized to almost SEK 1.2 billion. Next slide, please. For business overview, and next slide again, please. So an update from the market. Regarding the transaction market, we can see that it has opened up again, and we expect the optimism is here to stay. The activity is for sure, much higher now compared to latest years. The numbers for e-commerce for the Q1 2024 shows a positive trend and is up 11% compared to the first quarter of 2023. Although, compared to very low digits, 2023, we are not back at the levels from the pandemic, but it's a good signal, and it gives some optimism within the segment.
Generally speaking, one can say that there are quite many players asking for new premises, but the processes do take longer time than it used to be. We have patience and are confident that we can be successful and present new projects going forward. And lastly, as far as we know, there is the same situation regarding vacancies around the Stockholm, Mälardalen region as in previous quarter, actually. Next slide, please. Looking into our customer base, there has been a minor change regarding the top 10 customers that now stands for 43% of the contractual value, and as before, logistic and transport, together with food and beverage, are the two big segments in our portfolio. Next slide, please. Talking about our portfolio and the regions, since the beginning of this year, we report in four different regions called Sweden, South, West, and East, and then Denmark.
South is former Malmö and Helsingborg, excluded Denmark. West is former Gothenburg and Jönköping, and East is former Stockholm. The fair value and lettable area has increased due to acquisitions, projects, and amounts now to SEK 32.5 billion and almost 2.4 million sq m . Next slide to the business update further on. In March, we carried out a directed share issue, which they would-- we'll talk more about. The proceeds will be used to, to shift up a gear, and we have identified attractive opportunities in the acquisition market, as well as we see good chances to start new projects on our land bank. The goal is, of course, to increase the earnings per share as soon as we can. Next slide, please. Our ongoing project portfolio totals to around SEK 3.4 billion, where SEK 1.5 billion is remaining investments.
When all this is completed, we will add another 290,000 sq m to the portfolio. The yield on cost on total is around 6.5%, and for new projects, we are aiming for around 7%. Next slide, please. In this quarter, as I said before, we have acquired some properties, and one is a Danish property in the Copenhagen area. The land area is 81,000 sq m , where one part is a building right, enabling 17,000 of new lettable area, and the existing buildings have a GLA of 32,000 sq m , and Scan Global is the tenant and has an 11-year lease. Next slide, please. Just before closing the quarter, we acquired a new produced property in Helsingborg via a sale and leaseback transaction, and DSV is a tenant for a 10-year lease.
Both Scan Global and DSV are new into our customer portfolio. Next slide, please. With regards to the land bank and future development, there are no updates and processes for getting zoning plans are ongoing. Next slide, please. Some words about the leasing update. And looking into that operation, our net letting was SEK +8 million in the quarter. Our WALE is now at comfortable 5.4 years. The letting ratio is actually down to 95.6%, and it's not dramatic, and it's due to one, it's a step-in area in the Scan Global property. Two, a completed project in Malmö, where one part was on speculative basis. And third, we also terminated one contract from our side to get a better solution in place after the summer, and this was in the Region East.
With that said, next slide, and please, I hand over to Sofie.
Yeah, thank you, and good morning, everyone. I'm going to next slide. We have now reached 44%, and have over 1 million sq m of our lettable area as environmentally certified. We continue to maintain a high level of EU Taxonomy alignment. For example, our CapEx of 56%, although this is lower than last year due to that the property we acquired in Denmark wasn't certified. Work is in progress to align this property as well through a coming certification. Going over some financial figures, the next slide, please. Next slide for some income. Rental income for the first quarter came to SEK 493 million, a growth of 11% since last year. The increase was driven primarily by indexation, some larger acquisitions and projects being finalized.
Next, operating surplus follows this development and rose 10% to SEK 394 million. Profit from property management grows 3% to SEK 285 million. And next slide, please. And rental development. Our CPI-linked contracts that came to effect in January gave a like-to-like growth of 6%. Acquisitions contributed with SEK 11 million with through the newly acquired Jernholmen in Denmark and the smaller Esketorp in Kungsbacka. There were no divestments during the quarter, and in project development, the finalized project to Läke in Malmö and to SGD in Norrköping were the main contributors during this quarter. And now handing over to David for some comments on financing, and next slide, please.
Thank you, Sofie, and good morning to everyone. Our capital raising efforts during the quarter across both debt and equity, highlights our strength in the market. Assessing the capital structure, I would like to start by addressing the current environment briefly, specifically marked by volatile interest rates during the quarter. For markets anticipating 6% or even 7% rate cuts from the Fed in the beginning of the year, U.S. market sentiment has shifted, indicating only 1% or 2% cuts this year, if any. In the Nordics, the landscape differs, with less sticky inflation, less aggressive fiscal policies, and more moderate growth and resource usage, the likelihood of rate cuts in the near future is higher. Regardless of this, we remain confident in the robustness of our business fundamentals.
This conviction drove our decision to amplify equity during the quarter through a targeted share issue, raising a total of SEK 2.1 billion, as Jörgen pointed out earlier. We were very pleased to observe the interest coming from both new and existing shareholders, highlighting our reputation in the market. On balance day, the equity ratio adds up to 53%, leaving room for capitalizing on investment opportunities. As always, we continue to prioritize the safety of margin for any environment. Passing on to next slide. On balance day, our financial KPIs comfortably align with our policy and covenant parameters. Following the directed share issue, along with new debt, the loan to value remained comfortable at 34.1%. Our net debt to EBITDA amounted to 7.3x , and our interest coverage ratio to 3.6x .
The secured debt-to-value ratio reached 26%, while while our unencumbered assets offer flexibility for tapping into capital market if deemed sufficiently attractive. Next slide, please. On March 31st, the company's weighted average interest rate on total debt was 3.8%, with a weighted average term of 3.6 years. During the quarter, we successfully secured new debt totaling SEK 1.2 billion, which was utilized to finance two strategic acquisitions. The average cost of this debt was 4.5%, inclusive of interest hedges. Simultaneously, the capital market expanded as optimism grew, and uncertainty regarding real estate market diminished. Credit spread has gradually narrowed over the quarter, mitigating elevated market rates. After the share issuance, our liquid funds, including debt commitments, totaled SEK 4.6 billion on the balance day. This means our 12-month liquidity coverage ratio is well covered.
Passing on to next slide. Average weighted cost of debt was 7 basis points higher compared to three months ago, driven by the leveraged acquisitions taking place in the quarter. The timing of revenues from the acquisitions will, to some degree, catch up the additional costs from the new debt. During the quarter, we utilized what we measured to be a window of lower rates during March, and obtained interest rate swaps and forward starting swap, totaling SEK 1.3 billion, carrying fixed interest of approximately 2.5% fixed, with tenors of between 6 and 8 years. Our consolidated interest maturity structure implies we have currently 69% of our total debt fixed, with an average term of 2.9 years. Our derivatives portfolio and fixed interest loans combined have a mix of maturities up to 9 years.
Now, passing over to Sofie for the next slide, she will lead us through capital deployment and valuations.
Thank you, David. Our capital deployment divided into acquisitions of SEK 1.2 billion, with Jernholmen in Hvidovre, south of Copenhagen, and a sale and leaseback with DSV in Helsingborg. The small Esketorp in Kungsbacka, and also a piece of land in connection with our existing logistic position, Tostarp, also here in Helsingborg. No divestments during the quarter, and the development CapEx ended at SEK 592 million. These investments related to our large ongoing projects with Elgiganten in Jönköping, a project that are to be finalized during Q2 with Menigo in Landvetter, and a project at Segermo in Jönköping. Total CapEx for the year rounded up to SEK 1.8 million so far. Next slide, please. Our property value was written down with SEK 199 million due to a higher yield requirement.
The value changes corresponded to 0.6% of the total value before adjustment. The average weighted valuation yield for the portfolio is 5.8% by the end of the period, and the net initial yield came to 5.6%. 22% of our portfolio was been, have been externally evaluated. Moving to next slide, and some closing remarks from Jörgen.
Thank you, Sofie. So the takeaways from today could be summed up in three points. For the first, Catena deliver a solid Q1 report. Secondly, we have very good opportunities to continue growing through acquisitions and new projects. And the third point is, with the latest equity raise in place, we have all conditions to shifting up a gear in our business. And with that said, we would like to open up for a Q&A.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from John Vuong from Van Lanschot Kempen. Please go ahead.
Hi, good morning, team. Thank you for the presentation. I'm looking at the like-for-like number, and I was wondering whether you could provide a bit more color on it. I mean, you have Danish exposure, where indexation is much lower than Sweden. At the same time, vacancy increased over the year, and still, it comes quite close to the Swedish indexation, 6.5%. So, what's the bridge here? Are you capturing some process of reversion?
We have had some in some contracts, we can see a bit higher rent, but that's, as we have said many times, on the margin. But we have completed projects, and there's no divestments in the comparison. So we added acquisitions, project, and then we also say that we have a total of 90% impact of the 6.5% indexation. So all that summarized is the numbers, actually.
But acquisitions is not in the 6.4% like- for- like, is it?
No, it's not, it's not. That's, that's a different. Those are included in the acquisition part.
Yeah.
No, but it's-
Yeah.
The Danish part is still so little compared to the Swedish one. So even if we, when we round it up, we end at 6% even so. Since we got some renegotiated contracts, even though they are not that big.
Yeah, that's in the 6.4.
Yeah.
Sorry, yeah. Sorry, yeah.
Yeah.
Yeah, okay. So the bridge between the 90% of the 6.5 to 6.4, so basically from 5.9 to 6.4, that's from the-
Yeah
renegotiated contracts.
Yeah.
Okay. That's correct.
Correct.
Thank you. And then moving on to the pipeline, do you have any update on Hus C? Because it's been paused for quite some time now, and I still see it in the report as one that could be completed. And maybe on a different development, on the Now aste development in Jönköping, which is going to be delivered this year. It still says 38% occupied. So from my understanding, there's an option to take the entire space for them. Just wondering on how discussions are progressing here.
Yeah. Good question, John. First, you see, there is the issue with the traffic department of—from the government. I don't know, a Swedish word, Trafikverket. Traffic government says that we have to wait to start that construction. Unfortunately, we have an ongoing discussion, but as we speak, we are not agreed on if we can start earlier than they say. So we don't have any update about that. As soon as we have, we will present it. About the Segermo or Now aste, yes, they have an option. We feel very confident that we have, when the project is finalized, at Q3, Q4, I'm very optimistic to have more or less all the lettable area signed with the lease agreements. But we have to come back with that as well.
Okay. That's very clear. Thank you.
The next question comes from Erik Granström from Carnegie. Please go ahead.
Thank you. Good morning to all. I have a few questions as well. Perhaps starting off with the acquisition pipeline you mentioned in the presentation, you see a short-term pipeline of around SEK 2 billion. Could you tell us something about, you know, where is this pipeline, and what kind of yields do you think that you can get in this market?
Well, we are focusing on the southern part, on the west part of Sweden and Denmark as well. It's tough to give any specific numbers about the yields and so on, but can mention that it's fair to assume that it's on the same levels as the acquisitions we have made in Q1. That's to give some sort of flavor on it.
Okay. That's-- that is clear. Thank you. And then also, you mentioned that your balance sheet now is obviously quite strong following the share issue. The LTV is at 34% now. What-- over time, what do you think, given your portfolio and the company as a whole, what do you think is a reasonable level for your kind of company over time to have in terms of LTV? I understand that market situations can change, of course, but what do you feel in terms of your LTV at this point?
Yes. Thank you, Erik, for the question. Well, that depends. As you point out yourself, we are very clear about the financial policy states. We will not overshoot 50% level. With that said, in this interest rate environment, it's quite clear that, you know, given that we also have a net debt to EBITDA target of 9x, I would say, we won't be able to reach over 45%, because then we will probably be somewhere between 8x and 9 x EBITDA to debt. But it all depends on interest rate environment, I would say, and how we value sort of the environment from time to time. It's very difficult to say, but we have been very clear, very consistent about the loan-to-value target of 50%. We have no thinking of changing that. That's the answer.
Okay, good. And then, regarding the vacancy, Jörgen, I believe you mentioned that you terminated a contract in the eastern region, and you're making some adjustments after the summer. Could you just tell us a little bit of what you're doing here and how you view your ability to fill out the space, first of all, of the projects that you've now included, but also this termination that you mentioned?
Yeah, well, when we do a termination, we of course, we do it because we can see something better is coming around the corner, and for sure, it will be in this case. I can give you numbers, but we are doing some adjustments, and hopefully, we have a new customer in place in Q3, perhaps, which will lead to better numbers for us. Did I hear you right? You were also wondering about the Segermo or the speculation or what? Can you take it again, Erik?
Yeah, it was the Scan Global. I mean, the project-
Scan Global. Yeah, Scan Global. Scan Global, we acquired that one. There was a smaller ongoing project, and they will step into that area also, now in Q2, actually. So, the one that we don't have the answer for is the part I mentioned in Malmö, in the Läke project that Sofie mentioned was finalized this year-end, where there was around 7,000 sq m on a speculative basis. That's-
Yep.
That's a vacant area at the moment.
Yep. Yeah. Okay, I got it. And then finally, perhaps, you can say something about yesterday, Boozt announced some investments plans for the coming years, including expansion of the facility in Malmö. Could you, could you say how you are—like, how, what is, what is Catena's role in all of this?
Yeah. It's, I think it's, quite tricky for us to mention about some specific projects that has not been presented yet. But of course, we have ongoing discussions with our existing customer, and Boozt is one of our big partners, so to speak. So, yeah, you have to do your speculation by yourself on that one. But, it was a positive press release from Boozt side that they want to grow, and we always want to grow with our customers.
Okay, that is very clear. Thank you very much. Those were my questions.
Thank you, Erik.
The next question comes from Markus Henriksson, from ABG Sundal Collier. Please go ahead.
Thank you. Good morning, everyone. First, a question on the ICA property in Gothenburg that we got news about last year. Any update to us regarding a breakup fee in 2024? And how is the interest for that property?
Good morning, Marcus. Good question. We have ongoing discussions with potentially new customers, and besides that, ICA is paying the rent, and we are pretty confident that we will find a win-win-win solution during this year. That's what we hope for and aim for all parts that are discussing that one. I cannot disclose more than that.
Thank you. Then, there's been a few questions about occupancy. Just looking at overall, since Q1 2023, it peaked at 97.5%, now it's 95.6%. There was some explanation for the decline here in the quarter, but it's a very high starting point as well. But do you think we should read anything into this change in the past year?
No, absolutely not. I think that we have the three explanations, and I wouldn't say that there is any dramatic things about this. So it's fair as to assume that we are hovering around those 96% that we have told the market before. It goes up a bit, and it goes down a bit, but we don't see any trends.
Clear. Thank you. Then last question, a bit on property values, very minor negative value change here in Q1. I've seen some consultants that have adjusted the yield requirements in logistics in Sweden and Nordics. What are you seeing in the transaction market? Do you see stabilized yield requirements, or are they continuing to come up slightly in 2024 so far?
I think, yeah, we have to wait and see. We are, of course, close to the market and have the ear close to the rail, so to speak. And we have been in some discussions where we, where there actually has been a bidding party, so to speak, where we can see that the yields have been very low, and then there have been other cases where it's not that interest for buyers. So still a bit unsure where it will end up, but for us and the external valuations we received in Q1, it's minor changes, some bits. But with the SEK 32 billion portfolio, some bits ends up at SEK 200 million in change. So as with the letting ratio, no drama at all.
Thank you. And then just one follow-up. I came in a bit late in the call, so sorry if this has already been asked. The outlook for your granted zoning plans previous quarter, any update on the potential signings here before summer or anything to highlight there?
I think it's the same situation. Not much has happened since the call for the year-end report. But yeah, we are working with the zoning plans that we don't have in place, and we are also working a lot to find new projects, to sign lease agreements with customer. And it looks positive, but things takes longer time today. It's just to accept it.
Perfect. Thank you. Those were my questions. Have a nice weekend.
Thank you. You too.
The next question comes from Emil Ekholm from Pareto Securities. Please go ahead.
Good morning, everyone. Only one question from me. You completed acquisitions totaling almost SEK 1.2 billion during this quarter. Should we assume that these acquisitions are part of the identified acquisition pipeline of SEK 2 billion, or is the SEK 2 billion excluding these transactions?
Well, that's a part of the acquisitions that we talked about, but what—where we will end up during this year, we'll see. I mean, there could be a case where we find and can sign a lot of projects, and then maybe there will be less acquisitions or vice versa. So just generally speaking, we have the capacity, and we will grow, and we will shift up a gear, and then it will—if it's a combination between acquisitions and project or it's more acquisitions or more projects, time will tell.
Okay, perfect. That's very clear. Yeah, that was all for me. Thank you.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
Okay, we cannot see any more questions. So with that said, we say thank you to all of you, and we wish you a wonderful weekend when it comes. Thank you, and goodbye
Thank you. Have a great weekend.
Thank you.