Ladies and gentlemen, hello and welcome to the Catena Q1 report for 2020. Throughout the session, all participants have been in listen-only mode, and afterwards there'll be a question-and-answer session. I'd like to advise all participants that this conference is being recorded. Today, I'm pleased to present CEO Benny Thögersen. Please go ahead with your meeting.
Thank you, and welcome to today's presentation. I would like to present the ones around the table at our headquarters in Helsingborg. We have Peter Andersson, the Acting CFO, and we have David, who is taking care of our support and helping out. Last but not least, I would like to introduce Sofie Bennsten. Sofie is the successor of Peter as CFO, and she will start with her new role on Monday. Welcome.
you for joining this morning, everyone.
Yeah. And as already been communicated early on, Peter will continue as the head of treasury. So then you know who is in this room. Welcome. I would like to move forward to the slide contents over there now. Yes. And I will walk you through the presentation, and we could then go to the next slide. Slide three, please. Highlights. In the viewpoint of markets, the first quarter is divided in a before and after the pandemic outbreak of COVID-19. As we focus on public health needs during this outbreak, it's important that we address the long-term societal and economic implications of the global pandemic. Catena, we came out strong in the first quarter with limited impact from the ongoing virus pandemic, with key numbers overall satisfying and with projects running according to plan.
During the second part of the first quarter, evidence of caution was all around spotted. Financial markets, as well as other market participants, became selective overnight. Still, discussions and negotiations are underway, but it's a little bit of a wait-and-see mode. This translates into the fact that there is capital waiting for the right moment. Next slide, please. A little bit about COVID-19. No one is to blame for this global ongoing crisis created by the COVID-19 virus, and it's everybody's responsibility to react and limit the damage the best we possibly can. Catena has set up a program to cope with the situation, to safeguard our employees, and to provide efforts to help communities and customers that might experience difficulties amid the virus outbreak. We are continuing to explore ways to address the challenge faced by our communities, and we'll keep you updated with new developments.
Still, for the first quarter, the COVID-19 has limited impact on Catena regarding numbers and revenue. In the first quarter, SEK five million was reserved as revenue loss. Impact during the rest of the year, given the uncertain situation, is by this time difficult to estimate. We entered the COVID-19 crisis in a position of financial strength, and we feel comfortable about the overall financial position. We have, among things, mitigated the risk of refinancing with the expansion of an existing backup facility to cover for outstanding capital market raised funds, and raised funds should that be necessary. Next slide, please. Results and balance overview, and Peter will step in on slide six.
Thank you, Benny. I think this is my 58th report on a real estate company on that stock market, so I've done a very lot of this one. If we go to the income statement, I have some comments, and we have some one-time effects on the income statement. Under rental income, there is a positive one-off effect of approximately SEK 14 million, and it's related to rental compensation for early redemption of rental contract in Linköping, and second is that we have a reservation that has been made on the rental receivables of about SEK 5 million, and I will comment also the third one is a repair and maintenance cost is very low on the quarter. We have approximately something where around SEK 8 million-10 million lower in the individual quarter.
It's dependent on the mild winter we have in Sweden, but it's also that we have not been able to carry out maintenance measures due to the corona closure. We're not coming into the real estate in the same time as well. Under other operation expenses, we also have a very small one-off effect of SEK -1.5 million, which is related to a write-down of inventory that has been rented out before. Income from property management, approximately SEK 177 million, is increased by 14% from last year, first quarter as well. And the change in value regarding property is included with about SEK 11 million, and from the derivatives of about SEK -6 million. Slide seven. The balance is about SEK 18.4 billion. It's up approximately SEK 1.8 billion since last year regarding the property value. No further comment on that side. Back to Benny and slide nine, I think.
Yeah, we'll move forward to slide nine. Rental growth like for like. Rental income amounted to SEK 350 million in the first quarter. The total growth in rental income was 7% year over year. Project developments contributed 2.2%, and like for like growth contributed 1.7%. Net transactions had zero effect in the quarter. There were also one-off effects related to prepayment of an early lease expiry, as well as reserved credit loss net amounted to 3.2% in the period. The facility related to the early lease expiry has already found a new customer. Slide 10. Cash flow maintained at a stable level. Our strong first quarter operating performance is a result of our long-term focus. While the current environment is challenging, we are happy to deliver a sound first quarter. We have confidence in our team, our strategy, and in the strength of our portfolio.
In the first quarter, we attained 56% of all income in the company before value changes and including one-off effects. Slide 11. Peter, I'm not sure the comment on that. We are organized in five regions, and this slide shows you find the detailed figures for the regions. So this is for you to study on your own. Slide 12. Some key figures on the property portfolio. Over 40% of our customers are related to third-party logistics providers, where PostNord and DHL are considered critical to society as service providers. Over 21% is related to groceries, perishables, and home retail, all of whom experience accelerating growth at the moment. Slide 13. We have an average net initial yield of 5.9% in the property portfolio, and the yield on valuation has remained unchanged since the year end of 2019. Back to Benny and slide 14. Rental market.
We continue our focus on raising the quality in our portfolio, translating into the growth of rental value per square meter. We are underway with several energy efficiency projects, including seven large solar panel installations. They will, in turn, and along with other projects, serve as a push towards cleaner energy and provide for long-term cost efficiency. The rental market is currently in a stable mode, and as the world is coming to terms with the coronavirus, focus will once again be drawn to fundamental factors driving the market: the scarcity of land in populated regions and continued structural demand for more logistics space. With the overall letting ratio over 95%, we feel we're currently in a comfortable position. Slide 15. Leasing activity and contract maturity. The quarter provides for SEK 22 million worth of new leases and net SEK 0 million.
The extension project at Tower in Jönköping became final at year end, and our customer Procurator was moving in this January. The maturity of our contract remains well distributed over time, averaging approximately five years. Almost all of this year's contracts have now been extended and renegotiated. We move forward to capitalization and to slide 17. Peter.
Yes, we have an average LTV level of 54.6%, down from last year's first quarter of 56.1%. And all our finance is still secured through mortgage. We are moving on to slide 18. We have now a debt maturity of 2.3 years on the balance sheet date, which is up from the year end of 2019 from 1.3, and it's up above the target of two years. We have done some renegotiation and signed a new few agreements of approximately SEK 3.1 billion of the loan portfolio during the first quarter, and this was set before the corona crisis was, yeah, ongoing. The bonds amounted to approximately SEK 840 million that we set in February. We had also signed a new swap agreement for about SEK 1.2 billion to year 2027 and 2028 on a very low level.
We had also renegotiated SEK 1.1 billion swap contract, which has been extended to 2029 and 2030. The average level of the swap portfolio is now 1.7% from the previous 2.3%, and the interest maturity is now 3.7 years, up from 2.3 years at the year end of 2019. And we have also lowered the average interest rate. It's now 2.5%. It's coming down from 2.6%. The discussion with the banks is going well, and hopefully, the capital market will return to more normal conditions during 2020 and forward. Back to Benny and slide 19.
And from capital deployment, slide 19, we move forward to slide 20. Capital deployment year to date. During the first quarter, we have invested a total of almost SEK 560 million. Three properties were acquired, totaling SEK 307 million and adding almost 30,000 square meters and SEK 20 million in rental value. Development capital expenditures amounted to over SEK 250 million. Next slide, please. Development projects in progress. On balance date, we have five larger projects under construction, and all of the projects will move forward as planned. Overall, there is SEK 540 million left to invest under the existing development pipeline, which, when finalized, will add another 102,000 square meters to our portfolio. Slide 22, please. Market and outlook. And from there, we go to slide 23. Some voices from the market.
PostNord has published the first quarter numbers and confirmed an acceleration in parcel home deliveries, offsetting a slow pace in servicing traditional retail. Catena and PostNord have had a long relationship, and with PostNord and several other third-party logistics providers, being customers to Catena, their businesses provide for mission-critical service to society. Several have taken notice of the fact that e-commerce is accelerating, providing tailwind for logistics properties ahead. ICA, Sweden's largest grocer and one of our largest customers, have experienced a huge upturn in March sales figures. Due to the coronavirus, customers' behavior has changed. Part of the explanation comes from the tentative hoarding and switch to home cooking, but also because of an increase in online orders. While we may never return to a pre-COVID normality, the new normal will certainly offer an interesting alternative scenario, coupled with new opportunities and a catalyst for new invention. Slide 24.
Logistics segment on a growth path. For the last six years, industrial and particularly logistics properties have witnessed a step up in the business transaction volumes related to it, and assets have become an integral part of the entire stock of real estate. What the pandemic will bring on future transactions is obviously difficult to assess, but logistics as a property segment has certainly earned a spot in terms of the new important role in society. Slide 25. Case Tostarp. Even if the business confidence in the overall economy is taking a huge hit due to the coronavirus, it feels important to notice that our ongoing projects currently are running according to plan. On logistics position, Tostarp in Helsingborg, the new PostNord terminal, as well as the new extension in Norway, is underway. Some acquisition land. Slide 26.
In November 2019, we announced the acquisition of a large piece of land south of Stockholm. The land is positioned about 50 km southwest of Stockholm and comprises 1 million sq m. The object is to turn this area into a perfectly fit logistics hub servicing the Stockholm area. During this quarter, we also acquired a property strategically located within the area, comprising 21,000 sq m of lettable area. Above all, this enables us to utilize the existing railway crossing the territory and presumably extending tracks. Slide 27. A little bit about Denmark. With three new facilities at the three different locations in Denmark, facilitating the distribution of goods to populated areas, I'm particularly glad to acknowledge the acquisition we announced in January. Through this very important transaction, we confirm our vision to interlink Scandinavian cargo flows.
The three properties comprise a total of 12,700 square meters of lettable area, and they are all fully let to PostNord, and I'm happy that we can continue to contribute to their business even outside of Sweden. One of the properties is under construction, and in the total transaction, also including building rights of almost 20,000 square meters for future development. Slide 28. Potential future development projects. We are working hard to get a whole strategic land serving our mission, and on balance date, we hold a potential of almost 5 million square meters of land. The land bank includes joint venture agreements and various conditional options and contracts. About 500,000 square meters are related to land allocation contracts made with municipalities, where one piece is located in Landvetter, Gothenburg Airport, not far from Gothenburg. The selling plan is ongoing and expected to become final in Q1 2021.
If we go to the next page, I will talk a little bit about another interesting piece of land. Slide 29. This piece of land is in connection to Malmö at the harbor, where we own a piece that comprises 40,000 square meters with a potential lettable area of 25,000 square meters. Selling plan is activated, and recently, we received from local authorities approval for starting demolition on the site. This forms an excellent location in the vicinity to Harbor and Malmö Central Station. We keep dialogue with a couple of potential customers. This was all for.
This picture we see in slide 29 is an animation. The building is not in place today. It's only land. Peter, thank you for the clarification.
Thank you for the clarification. That was all for the presentation, and we move forward to the question and answer session.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. If you change your mind or decide to withdraw your question, simply key 02. I apologize in advance if your name is said incorrectly. The first question we have is from the line of Niklas Wetterling from DNB. Please go ahead, sir.
Hi. Niklas Wetterling, DNB. I got a few questions for you. If we start off with the Q2 rents, how much of the Q2 rents has been received, and how much discounts have been given?
There has been given only SEK 1.2 million in discounts. However, we have given possibilities to move forward the payments during the quarter for approximately SEK 42 million. And of those, about one-third has already been paid right now.
I have a little trouble hearing you. Did you say one-third of the rent has not been received?
Yes. We've given our customers the possibility to move forward the payments of the quarter two rent with SEK 42 million. And of those, approximately one-third has been paid by now.
Okay. Yeah.
Great. And if we move over to you got one tenant in reconstruction, I read, Intersport. How big are they of your total incomes, and do you have more tenants in company reconstruction right now in your portfolio?
We have two tenants right now under reconstruction. The one is Intersport that you mentioned, and it's also Caliroots.
Caliroots .
Caliroots. Quite small one up in Stockholm. And that's what we got for the time being.
Okay. And.
If you're looking at the rental income total, it's somewhere around SEK 2.5 million for a quarter, but it's not all of the quarter. The reconstruction is they are paying when they're doing the reconstruction. They're paying us after the decision. So it's not going to be all of the quarter that we're not going to receive as rental income. I would say it's a very manageable level all in all.
Okay. And what's your policy regarding reservation for expected credit losses? Is this ongoing company reconstruction included in the SEK 5 million you reserved this quarter?
Yes. We have the same principle regarding the reservation as we always do. So it's the same principles. So we have to take into consideration what happened within the quarter and before we put this report out to the market. So we have taken all of our valuation in consideration.
So the ongoing reconstruction is included in the SEK 5 million?
You can say we have taken it into account so much that we know those by the 31st of March; this is taking into account. We can't go into the details with the specific tenants. As you understand, there are some uncertainties in this progress, of course.
If we move ahead, I saw in your annual report that your book value is 3.4% below your external valuation. Why is that? And are there any specific variables you are more cautious of?
No. It's depending on any evaluation when you're doing it in a real estate business. We will evaluate every property and every contract. And sometimes we have a little bit more information than the external valuator. We know when the customer has maybe talked with us and they have lost a customer or they should increase by a customer. So that's nothing we can always say to the external valuator. So we have a little bit different viewpoint of view sometimes. And 3% is very small. If you look at the valuation from the external part, they have often somewhere around 7%-10% of an uncertainty in their valuation. So it's.
Within that range.
Yeah. Within the range of the uncertain valuations.
Okay, so you're within the range, but you got more negative information from the external valuations.
Every property should be evaluated. It's varying tenants and everything, and we do a little bit different calculation from our side to the external. It's not very much if you're taking this is a very low difference if you're looking at the whole portfolio. Sometimes we know yeah. Sometimes we take a little bit other consideration on the external part as well, and we can have a discussion with an external part, yeah, with price and sales and so on, but we can't inform the external valuator in that specific real estate, so we have a little bit different inputs in our calculation, but I think 3% is a very, very low range if you're looking at the external. If you're talking with an external valuator, they always said 7%-10% is an uncertain range.
Yeah. Fair enough, and if we move over to your like-for-like rental growth of 1.7%, which is pretty much in line with the indexation, can you please comment anything on that figure? Is that what can be expected ahead?
Yeah. That's expected as well. What we have done, we have increased our rental value when we build new buildings as well. So the whole portfolio is going up a little bit more. But if you look at the like-for-like, yeah, it's in the same for the same portfolio as we had before.
So no growth besides the indexation.
Yeah. Yeah. And we can.
Yeah. Go ahead.
Yeah. And just lastly, I wanted to ask about the group negotiation, if you are willing to take that one up again, or how's that one standing right now? I have to state it like I did yesterday as well. It's put on hold. And the reason for canceling the LOI is that things have changed. They have changed dramatically, the cost of financing. And we are in a very different situation. So right now, it's put on hold, and right now, there is no ongoing negotiations.
Okay. Thanks for taking my questions.
Thank you.
Thank you. The next question we have is from Markus Henriksson from Pareto Securities. Thank you.
Hi, guys. Markus Henriksson from Pareto Securities here. Just to follow up there on the Coop LOI. So it's mainly due to financing. So we could expect if, yeah, the turmoil stops here in the future, you're going to continue the discussion.
I am of the sweeping answer saying it could be because right now, we are not negotiating, and they are looking on alternatives on their side.
But it's not only the finance. You have the supply of the automation. We don't know if the factory can deliver the automation as well. So it's not only. You can't blame only the finance.
No, no, no. But there's a lot of different we can talk about their situation.
Fair enough. And then you said 8 million-10 million SEK lower maintenance costs. Could you specify what's winter-related and what's COVID-19-related here in the figures?
No. I should say SEK 2 million-3 million maybe regarding the if I should estimate anything, so SEK 2 million-3 million for a mild winter or something like that. But it's always very difficult to say what's normal in Sweden today. You get a warmer and warmer winter, so what's the normal? So I should say if you're looking 10 years back, yes, SEK 2 million-3 million, something like that. But maybe it's going to be the new normal if we're not going to get as cold winters anymore. So this is maybe normal. But I should say something like SEK 6 million-8 million is depending on the maintenance that we have ongoing.
Okay. Thank you. And what can we expect going forward? You have other maintenance, of course, in other properties. So should we expect higher maintenance here going forward, or is it, of course, problematic now as well in Q2? But what can we expect for maintenance for 2020?
I should say maintenance should be the same level. If you put it out on a 25-30 years, then you usually get to maintain around SEK 20 per square meter. That's the normal on a long, long, long term. But if you're going for the Q2, I should say just at the moment, we are not going we can't get in our real estate as well as we want to do. We can't travel, and we are not able our customer is not allowed to have a person that's coming outside their own organization. So I should say Q2 is yeah. I think if I should speculate something, you got to understand what I'm telling you. So I think it's a bit lower than normal as well.
Yeah. Yeah. I get that. And then lastly, if you look at the project pipeline here, beyond 2020, it looks solid now in 2020 with a lot of finalizations. But could you compare your negotiations with possible tenants post-COVID-19 compared to pre, and how that is faring?
I could say that it's a little bit slower to sign in the contracts, but our sales funnel looks good. We are having a number of discussions, and we do expect some more to come. But of course, in this turmoil, we have to act in a good and careful way.
Okay. And just one more. Looking at that interesting property in Malmö and compare it to Västberga in Stockholm, for example, what kind of rental levels could you possibly get at that location compared to other parts in Malmö?
It will absolutely be higher what you see out in the Sunnanå area, but I won't indicate any figures. It's an extremely good location. You just fly over the bridge, and then you are at the central station in Malmö. So it's a very nice location for most Malmö City logistics.
Thank you. That was my question.
Thank you. The next question we have, I believe, is from the line of Brandon from Atkins Capital. Please go ahead, sir. Hello, caller. You've queued for a question. Can you please say your name and company and ask your question?
Yes. Ryan Brunet. And just one quick question with regards to the debt maturity for this year. Outstanding loans, whatever it may be, is around 3.4 billion SEK. Just want an idea of what that relates to, whether it's all bank financing or some bonds or including commercial paper. And with that being said, are you guys expecting the same rates as before, i.e., 1.6% with the margin or higher or lower? And how long would that be pushed outwards? Or what kind of terms are you looking at for those loans? Three years, four years, five years?
Yeah. Well, those we have done. We have done a bond. We did during the quarter [a bond] of 840 million SEK. That was two, three, and four years. And that was on very low level. I should say something around 0.85% or something like that, all of the three ones. And that was before Corona. We have the certificates. It was [at a] level around something [like] 0.4%, something like that. The certificate market is now not functioning as normal. So we are putting the certificates within our backup facility. So that's going to increase the rent level. The discussion with the banks is going very well. I should say [the] margin from the bank side [is] somewhere around 0.3% or something like that above. But we are not going for a long term. We have some discussion ongoing.
So we are not going for three, four, five years, but we are going for one, two years or something like that for the moment. So we have a very good discussion, and we have no financing problem with the banks whatsoever. We had a very good timing of our backup, and our swap contracts have been spot on, I should say. We have a very good timing on all of those contracts that we have done before in January and February.
Okay. Just so I can put an exact figure on it, so that 3.4 billion SEK that's due 0- 1 years, I mean, how much of that is with the banks?
The SEK 3.1 billion that we have discussed, you said SEK 840 million is bonds, and the rest is banks.
Okay. Perfect.
Yeah. That's everything I need to know.
Thank you.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. There'll be a short pause while we wait for any final questions. At this time, we have no further questions in the queue. I'd like to hand back to the presenters for any closing comments today.
There's one question here we received through email. It's regarding our projects. And the question is whether we should expect any delays in terms of equipment in any of our projects. Will there be any delays in terms of equipment?
There are no delays from Catena side. But what we do see, and Peter, you were touching that topic earlier on, is where they have automation. We know that we have a late software installation at one of our customers and also discussions with another about the automation part. But from the Catena and the building and to get access to the estate, we have no delays.
That was all from this investor. Thank you.
Okay. Thank you, guys, for taking part. Take care out there.
Yeah. Thank you.
Bye.
Thank you. Goodbye.
Thank you. Ladies and gentlemen, that concludes your call for today. We thank you very much for joining and ask that you disconnect your line. Thank you.