Welcome, everyone, to today's presentation of our Q1 in 2025, where Martin and I will take you through the key events and financial highlights from this quarter. We kicked off 2025 with strong momentum. Our strategy continues to deliver results, and we're growing in both scale and quality. If we look at our highlights, after closing the quarter, we've entered into an agreement to acquire three properties from MP3 for a total of SEK 463 million, further strengthening our footprint in key regional cities with both grocery and discount retail. In Q1, we continue to see strong rental income growth with a 20% increase year over year. Our rental income reached SEK 113 million, up from SEK 94 million. This growth was driven by acquisitions, completed projects, and CPI-adjusted leases. Net operating income increased with 16%, reaching SEK 94 million compared to SEK 81 million in Q1 2024.
Property costs were temporarily high in the quarter due to provision for bad debt, a minor non-core tenant, and increased cost in our property in Häggvik in connection with a transition to in-house management. Adjusted profit from property management increased to SEK 45 million, up from SEK 25 million last year, an increase of 80%. Property valuation yield remained unchanged compared to December 2024, and unrealized value change amounted to SEK 56 million, reflecting the continuing strength of our portfolio. We made acquisitions of total SEK 108 million during the quarter, and this involved five properties with Dinners as tenants and the acquisition in Laxå. This quarter, we have continued to sign several new long lease agreements, strengthening our presence in both Sweden and Denmark, and net letting this quarter amounted to SEK 17 million. WALT decreased slightly from 8.7 to 8.4 years, and our occupation rate remained strong at 99%.
In February, we successfully renegotiated approximately 70% of our loan portfolio, as communicated earlier. This would strengthen our financial position. We have also this morning communicated that ABG Sundal Collier has been appointed as our liquidity provider, effective as of today. Currently, we have 136 properties with a total valuation of SEK 7.4 billion. We've added six properties this quarter, five properties strategically located along the highways with Dinners as tenants, and a property in Laxå, where we have already started the construction of a new Willys store. There have been no major changes among our top tenants and rental income split, but we continue to grow with Willys, and combined with City Gross, Axfood do now represent 15% of our total rental income. Our property management team continues to maximize our WALT by renegotiating all lease agreements that expire before the end of 2028.
Property values increased with the acquisitions that Fredrik mentioned earlier in Laxå and the Dinners portfolio, SEK 108 million. We have investment in the portfolio in projects of SEK 63 million, which is a low number if you compare to the forecast of SEK 1 billion per year or SEK 250 million per quarter. There is no red flag here. It is just that we finalized a lot of projects in Q4, and we have started up a number of new projects in Q1, so there is no reason for alarm here, but the Q1 number on the investments is on the soft side. Unrealized changes in value, SEK 56 million with underlying stable market yield. This is basically all project profits and also partly a positive revaluation of the acquisitions that we made in Q1 in Gothenburg and, sorry, Q4 in Gothenburg and Höör.
We have quite a substantial currency effect with the SEK strengthening quite dramatically in the end of the quarter, which also affects partly the financial net and the earnings capacity. We come back to that.
When it comes to our ongoing projects, this quarter, we have started another four projects. Currently, we have seven ongoing projects with an expected average yield of 7.8%. The new projects that we have added this quarter are Laxå, where we have an ongoing construction of a Willys with an estimated completion during 2025. In Gothenburg, we have already started the construction of a Dollar Store with an estimated completion by the end of the year. In Mora, we have started construction of approximately 5,000 sq m with Lidl, T-Hansen, and Jysk as tenants. Lastly, in Hjørring, in Denmark, we have started construction of a new store, Lager 157, on 2,500 sq m. When it comes to our upcoming projects, our project development organization continues to perform. All announced projects have been initiated this quarter.
We continue to ramp up and added some new projects that we plan to start the coming quarters. We can look at Vagnhärad, where we are planning to start a construction of 3,500 sq m of discount retail. In Jönköping, we will start a construction of fast food in Torsvik in Q4. In Karlskrona, where we currently are in an ongoing zoning process, we are planning to construct a hub of fast food restaurants on 1,000 sq m. In Laholm, a project concerning groceries, we are also there in an ongoing zoning process that we plan to start construction in Q in 2026. We have taken away a fast food project in Värnamo that we mentioned in the Q4 report. We aim to start that project, but the timeline has not yet been set. We are planning to start that project sometime in 2026.
We are going to continue to include new projects to the list the coming quarters.
The list of owners as of March 31 is basically unchanged, both in terms of large owners and the rate that the Prisma Properties employees hold. Some financial numbers. Sorry, I need to back up one. There we go. Healthy growth continues, as we talked about in the beginning, 20% growth year over year in the quarter. Surplus ratio is on the soft side in the quarter. We do stand by our ambition to have 90% surplus ratio in standing assets if we exclude the Huddinge property segmented, where we provide the numbers separately in the report. Even with that, the number is soft in this quarter, and that is due to the temporary effects that Fredrik mentioned in the beginning, mainly coming from a bad debt provision from a non-core tenant and also some maintenance repair connected to the takeover of Häggvik property in own management.
This is not a cost that should be extrapolated into the future. Looking on the profit from property management, we're up from SEK 25 million to SEK 45 million. The central administration is front-heavy in the year, so it's SEK 12 million in the quarter versus the SEK 40 million provided in the earnings capacity of January 1, 2023, in our previous report. Again, that number is the current state of the central administration, the organization that has been built up at that date. It is not really a budget, but you should not assume any huge increases in that number either. The fact that it's SEK 12 million in the quarter is more due to the fact that the SEK 40 million is front-heavy. As you see in the earnings capacity data, we have increased it by SEK 2 million, and that is a strengthening of the organization in the M&A function.
Looking on the financial net, we have two small items that are on the burdening side. It's the Danish crown weakening or the SEK strengthening that we have assets that are revalued at approximately SEK 1 million hitting the financial net. With the low investments in the quarter, we are not able to allocate linearly the number that we plan for the full year for the allocation to the project. That hits the P&L instead. Those are not large numbers, and it's rather temporary. On the capital structure, this is basically exactly in line with what we have already provided in the statements surrounding the renegotiation about Nordea Swedbank. The average interest rate is 4.43%, but if we also include the reset of the variable rates as per 31st of March, it's also down to 4.35%.
The debt maturity has now been increased, as previously communicated, to 3.2 years, and we're happy to see the ICR or the interest coverage coming up, and it should continue to go up going forward. The earnings capacity, if we look sequentially from Q4, the rental value has come up with the inclusion of Dinners, with the inclusion of the Rusta project in Eksjö and the inclusion of the project in Ljusdal and the Dollar Store project in Backa. We also have a negative component with the Danish crown weakening or the SEK strengthening that hits the rental value from the Danish part of the portfolio with quite a substantial amount, this 5.5% difference versus the Q4 number. As I mentioned, the central admin is up slightly due to that we're strengthening the organization on the M&A function. With that, operator, we go into 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 David Flemmich from Nordea. Please go ahead.
Thanks. Good morning. I have a couple of questions. I can start off with just to confirm, do you expect any of the temporary costs we saw in Q1 to spill over into Q2, for example, the increased costs in Häggvik?
No.
No. That's clear. Do you have an update on the Segmented One project? If I remember correctly, you said in conjunction with the Q4 conference call that your aim was to communicate additional news before the summer. Do you still believe you will be able to do so?
We aim to do that, but we're starting the zoning process together with the municipality, and we aim to communicate this before the summer, or it could be also in Q3, but we aim to do it before the summer.
Okay. That's great. In terms of the value changes, I think you mentioned in the report, it's a split between projects, acquisitions, etc. Could you elaborate on the split, how much of the value change attributes to projects so we can get a sense of the return on investments on your project investments?
The majority is the project profit, but it's quite a slice of the investments or the acquisitions made in. Let's say 60-40 from the acquisitions, 40, and the project profits, 60 or 70-30, somewhere there.
Okay. Great. On that note, I calculated the yield on cost on the project in Mora to 6.5%. It is a split between discount retail and grocery retail, but is that sufficient to achieve above 15% return on investment?
Did you go for the yield on cost?
Yeah.
Yeah. Yeah, we have.
Yeah.
Yeah, we followed our requirements when it comes to profits from projects, yes.
That means about 5.5%-5.6% yield upon completion in Mora and Laxå.
It's higher than that, but we achieved the profit margins that we require, so 50% grocery and 20% discount retail.
Okay. All of your ongoing projects fit that return requirement?
Yes.
Yeah. Two more questions. The provision for a potential rental loss that you took in Q1, what was that attributable to?
That was Lulus Sushi in Mjölby. A tenant that is not a core tenant for us, and we aim to find a new tenant in Mjölby. It is also a Mangal in Häggvik. They have vacated, and we have also communicated that we have signed a new long lease agreement with Mr. York there, and we have set up a payment plan for the loss of revenues for Mangal. They are planning to pay it back within six months.
Potentially upside there.
Okay. Was that included in the net letting in Q1 as well?
Yes, the New York.
Mr. York was included, yes.
Was included, yes.
Okay. Last question. We've seen more acquisitions lately. What do you see on the transaction market in terms of opportunities to grow via acquisitions?
All the discussions that we have currently in Sweden is off-market. There are some opportunities out there within all categories, both in grocery, in discount retail. We are in a moment where the sellers and the buyers are not, we can't agree on a certain figure. We estimate that we'll continue to do acquisitions in the coming quarters. We need to make sure that it's a perfect match with our current portfolio. We want development projects or standing assets, which are modern, long lease agreements and have the right tenant within discount retail.
Okay. Fair enough. I can just add one question on that topic. In Gothenburg, the project you started there implied a yield on cost of almost 12%. Is that the type of returns you see when developing on your acquisitions or on fill-in investments, so to say?
Yeah, absolutely.
Extraordinary.
We're going to, it's quite high. We've done even higher if you look back, but hopefully, we can do even higher. Normally, it's between 8-12. In this case, it was a good tenant to sign a 12-year lease agreement with Dollar Store, 3,000 sq m. We achieved good rent levels due to it's Gothenburg. Yeah, it's a very good project.
Great. Thanks. That's all from me.
Thank you.
The next question comes from Albin Sandberg from Kepler. Please go ahead.
Yes. Hi, guys.
Hello.
Hello. Three questions for me. I just wondered if you could say in absolute terms how much higher were your property costs compared to your normalized yield in Q1.
If you exclude the segmented property, you get to 85% surplus ratio. Without the sort of one-off effect, you should be able to assume 90%. The rest from 85% up to 90% is between SEK 5 million-SEK 6 million.
Okay. Perfect. Thank you. Then.
It looks a bit dramatic on the key numbers, but in absolute terms, it's, I mean, we're a small company, and it's one quarter, so a few millions can make quite a dramatic impact on the numbers. But we're not worried for.
The segmented sort of situation, that will continue until you come up with any news on that?
Yeah. I would say that the segmented will continue as of now, as we communicate with basically a break-even on the NOI with income and cost basically the same. It hits the key numbers and it hits the margins, of course. We have SEK 4 million in costs in Q1, but we also have revenue. That, again, just to be clear, the segmented is not included in the earnings capacity projections. That is on top.
Okay. Perfect. Also, on the just trying to follow the ongoing projects. I guess that during the quarter, just compare Q4 to Q1, Backa and Klippan, Eksjö and Ljusdal respectively. They were basically completed. I just wondered how much of rent they contributed to in Q1.
Eksjö.
It doesn't have to be exact, but is it just like half or was it moving end of quarter or early quarter?
The larger effect of Dinners is the largest, and then you have Vekkø. If we look on the earnings, was it earnings capacity or?
It was ongoing project. It was Backa.
You mean revenue or earnings capacity?
Yeah. No, I was thinking on the actual rental value or rental income that came in from Backa and Klippan, because I guess they were completed during Q1. They're no longer in the ongoing project.
The effect on Backa and Ljusdal, the effect is SEK 6 million.
6 million in Q1?
No, in the earnings capacity.
Okay. If I would just, what I'm trying to ask, my thing is just that if the combined rental value of these two as per Q4 was around SEK 6 million, as you mentioned, the question was just how much of the SEK 6 million were recorded in Q1. I mean, I guess did the tenant move in early during the quarter or late in the quarter?
Eksjö and Ljusdal, they were moved in Q1.
In Q1. Let's see which date it is.
If you look on the revenue, it's SEK 1 million basically from them.
Yeah. I guess what I'm after is that there will be a sort of a catch-up effect in Q2 when we have the full annualized impact of these two projects.
Yes.
Yeah. All of them were quite late. Backa, Ljusdal, and Vagnhärad were quite late.
Yeah. We opened up in Backa three weeks ago. In Ljusdal, we opened up the same day, same timeline with Ljusdal. Approximately three weeks ago, we opened up both. Jämjö, Fixte also, yeah.
Yeah. Okay. Thanks. The final question I have just on the numbers is, I look at your actual tax during the quarter, it's basically nil. I just wonder whether does that reflect an estimate for the full year, or is it a specific thing happening for Q1? Maybe if it is not an estimate for the full year, what is the interest on your actual pay tax rate?
That's a guess for now, but we should expect some tax.
Quite low for the full year as far as we can see now.
Yeah.
Okay. Thank you very much. That's all for me.
Thank you, Albin.
The next question comes from Marcus Henriksen from ABG Sundal Collier. Please go ahead.
Thank you very much. Good morning, everyone.
Good morning.
First, the question on M&A. Has something happened with your ongoing M&A discussions given the last three weeks' macro turmoil?
No, it's demand.
Yeah. We continue.
Okay. Then a bit on the rental losses. I heard SEK 5-6 million in taken cost here. Did that include segmented as well, or was that only the rental losses? What was the amount?
Five to six is excluding segmented, and not all of it is the rental. A small part of it is a rental loss, and it's maintenance or repairs in the connection with the takeover in Häggvik. It is not something that will be extrapolated into coming quarters.
Okay. Thank you. If we look at your project timeline, which I really appreciate, you have a lot of project starts here in Q2 and Q3. How certain are you about those upcoming project starts?
Q2 and Q3 would be.
Yeah, we're quite certain, but it's projects. Sometimes our projects, we start earlier than expected, and sometimes some projects will be started maybe a couple of sometime after expected. It depends on if a project are we included in a zoning process, or do we already have a zoning process. It takes time about doing the tendering of the construction. Based on the presentation, this is the best guess today, and we're quite certain the coming two quarters in Q2 and Q3 that we can start these projects. Also, we want to mention that we're going to add up new projects to this list also.
Of course.
All right. Thank you for that. Do you see any change in tenant behavior? Anyone that is new in terms of growth ambitions for this year and next year? You mentioned Jysk, for example. Do you have further ongoing negotiations with them? Any other one that stands out positively or negatively?
No, but we can discuss Mr. York. We have decided that at this moment, we can do Mr. York if we have a vacancy. We're not planning to do any developments from scratch with Mr. York at the moment. There we focus on the strongest retail tenants as McDonald's, KFC, and other ones. All discount retailers, all grocery tenants, especially Willys and Lidl, are extremely interested in identifying new locations in Sweden. That concerns all tenants in all categories.
Okay. Thank you for that. Last question a bit on net interest. You have in the earnings capacity, it is SEK 125 million. You had SEK 140 million in Q4. The run rate here was SEK 35 million, so we are at SEK 140 million in run rate in Q1. If you could just help me out a bit with the discrepancy here between the Q1 actual figure, the earnings capacity you show here of SEK 125 million, and the press release you sent out in February where you announced savings annually of SEK 15 million. You also highlighted an interest rate of 4.7%, and now it is 4.43%. If you could share any details on financing that could help us going forward.
Yeah. The higher number, 468, if I remember correctly, you should look on the forward number where we have also reset our paid variable interest costs, which is being set on the 15th in the month after the quarter close. If we look in the Q4 presentation, we actually include that number with smaller digits below the correct or the formal number, so to say. If you're looking forward at 440 that we communicated in Q4 or in connection with the refinancing, that is what you should go for in forward looking. That is the 443 we are reporting right now. This discrepancy versus the Q4 earnings capacity is partly a small chunk of FX effect from the Danish weakening or the SEK strengthening, but also that we cannot allocate as much interest cost to the projects with the lower investments that we had in Q1.
That is in the earnings capacity. It's an annual number, and it's not fully linear over the year.
Thank you. Could you help us a bit on the project? What is the drop there? Q1, Q4, I guess that will start to increase again as you start with more and more investments.
A couple of million coming back positively into the financial net. All other things are like.
Okay. Thank you for that. Those were my questions.
Great.
As a reminder, if you wish to ask a question, please dial #5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thanks for joining today's presentation, and we wish you all a nice day. Thank you.
Thank you.