Prisma Properties have published a report for the third quarter of this fiscal year. Joining us here in the studio to present the quarter and answer your questions, along with the analyst questions, who are also joining us, is the company's CEO, Fredrik Mässing, as well as the CFO, Martin Lindqvist. Welcome.
Thank you.
Thank you.
You will give a presentation, and then we'll come back to ask a few questions. By all means, go ahead.
Thank you. Welcome to today's presentation of our Q3 report. My name is Fredrik Mässing. I am the CEO of Prisma Properties.
I am Martin Lindqvist, CFO.
Q3 has been a very good quarter for Prisma. We continue to grow with both profitable projects, but also very good acquisitions. I am happy to share this quarter that we have now doubled our earnings capacity since we listed the company in June 2024. Almost the same when it comes to value of our portfolio, from SEK 6.5 billion at the IPO up now to SEK 12.5 billion . We also reached one target that we set last year in October, that within a three-year period, our portfolio shall include 50% groceries and daily goods. Already now, after 12 months, we have achieved that goal. Very pleased with the team and what they are doing with the acquisitions and projects.
As of Q3, we see that the EPRA NRV per share compound annual growth rate, if we calculate since the IPO, has increased annually by 14%, which is very close to our target of 15%, which is quite a high ambition. We are proud to be close to that target.
This quarter, we have started four new projects totaling SEK 200 million . One in Næstved, Denmark, where we are developing discount retail and groceries. Then three QSR projects, one in Ikast in Denmark, and then two in Sweden, in Sandviken and Strängnäs. Both Sandviken and Strängnäs are previously building rights that we have owned for several years. I am very pleased that we have activated them. Both rental income and NOI increased this quarter. Rental income increased by 48%, and NOI 43% up. Profit from property management increased with 28%, up to SEK 78 million . When it comes to property yield, we had a compression of 23 basis points. Now we are on 6.25%. This valuation reflects the high interest and even increasing interest from Nordic and international investors within discount retail and groceries.
Our WAULT is eight years. We have had an uptick of zero point three years this quarter, from seven point seven to eight years. This is due to the latest acquisitions we made. Net letting this quarter was SEK 11 million . That is excluding the bankruptcy from NRG Pizza, which are the master franchise for Pizza Hut in Sweden. The bankruptcy of Pizza Hut has affected both the net letting, which is zero after the deduction of the Pizza Hut, but also has affected our occupancy rate with 1%, down to 97.6%. This is a short-term effect. We are planning to let all these units during Q4, and they are planning to open up all the restaurants during 2027.
As we see a continued discount in the share price, the board has decided to increase the buyback program from SEK 80 million-SEK 140 million .
Having a look at our top 10 tenants, we are growing together with Kesko and Rusta this quarter. Kesko is now our second-largest tenant, and we are planning to continue to grow with them on the Finnish market. The same is for Rusta, but both in Sweden and Finland. If we have a look at the rental income split, now groceries and daily goods are 50%. For the coming quarters and the years ahead, you are going to see that this segment is going to increase over time. This is due to several factors. First of all, in Sweden, there is high interest from all grocery chains to establish new stores, both ICA, Lidl, and Willys. We are planning to communicate several new projects the coming quarters. In Denmark, we are planning to go with Netto or Salling Group with both acquisitions and new development projects.
Then also the third factor is our largest building in Segmentet 1 in Kungens Kurva, which we are planning to communicate in Q4, now in November or December. We have an ongoing zoning process. We have signed an LOI with a tenant, and I am looking forward to present our plans for this asset. If we have a look at our WAULT, eight years, as previously mentioned, uptick of zero point three years. Now 88% of our leases mature 2030 and beyond. We continue to defend our long WAULT by trying to renegotiate all lease agreements expiring before the end of 2029, but also sign new long lease agreements, 10 years plus, with new tenants and in new acquisitions.
As Fredrik mentioned, the yield compression in the quarter versus Q2 was 23 basis points, representing a value uplift of SEK 465 million, or 3.8%. The yield compression is evenly spread across our different categories and also across our various geographies. Looking to the left there, we see that Finland is now actually larger than Denmark. Looking on the graph to the right, we see that we have made SEK 1.5 billion in acquisitions. We have made SEK 700 million in investments in held properties, so we are well on track to our SEK 1 billion target for the full year. As of this quarter, quite an uptick in value changes as well. We have had some tailwind of the currency as well this quarter. So, we are landing on SEK 12.5 billion as property value.
Currently, we have 11 ongoing projects of an average yield on cost of 7.4%. In this slide, I would like to highlight the benefit of being a developer. So, 70% of our current portfolio is newly developed by us. We have the target that the EPC shall be 90% A to B before the end of 2028. So, in today's market, in all the discussion, people focus on cash flows, and cash flows are important for Prisma, but also all other real estate companies. But the benefit by doing development is that in the end, we get a modern portfolio, long cash flows because we sign 10 to 20-year leases, and we have a very good EPC. So, in the long run, we will benefit off our good EPCs and very low deferred maintenance compared to our peers.
When we have a look at our construction starts, we have started four new projects in Q3. For the coming quarters, we are set to start seven new projects, in total, SEK 717 million. We are quarter- by- quarter going to add many more new profitable projects to this list.
On the shareholders as of September 30th, we see that Per Arwidsson of Arwidsro has entered the owner list as the second-largest owner after Alma Property Partners, holding 9.1%. Other than that, we can comment that Prisma Properties now holds 1.4 million treasury shares, representing 0.9% of the capital. Rental income up 48%. That is mainly driven by the acquisitions we made in Finland early in the third quarter. It is also due to the projects that we started in Q2 that will have a full quarter effect now in Q3, and also a bit of projects that started during Q3, and also acquisitions. That is a smaller part. The main part here is the large acquisitions in Finland in the beginning of Q3. Looking at the NOI and surplus ratio, we see that the surplus ratio is on the soft side in Q3, only 86%.
That is mainly driven by the fact that we made an investment of roughly SEK 2 million in inspecting all our roofs in all our buildings to make sure that they are weathertight. We have also a bad debt provision from the NRG Pizza bankruptcy. If we adjust for those two factors, and as we usually do, also adjust for the NOI in Segmentet 1, we actually are at the 90% surplus ratio that we usually report. On the income from property management, CA or central administration is on the run rate where it should be. We are a bit front heavy on the lending or borrowing side as we made a big renegotiation of the debt portfolio in Denmark at good rates in the Realkredit system. So, a bit of uptick on the interest cost.
We also wrote down accrued arrangement fees of SEK 2 million in the renegotiated part in Denmark. On the capital structure, SEK 6.8 billion liabilities, representing a net LTV of 51%. With the renegotiation and we enter the 20-year loan in the Realkredit system, we increased the debt maturity basically to two years. So now landing on four point four years. Average interest stable versus Q2, where it was 4.19%, now 4.17%. The interest coverage ratio is stable at 2.3x . Please also note that we have made a correction. Due to a systematic calculation error, the average interest rate of the swap portfolio was understated from Q4 2025 through to Q2 2026. See the official report for details. There is no other impact in the financial statements or other key figures other than in this table.
Earnings capacity came in a bit higher than what we promised in the Q2 report, and that is due to that we closed the projects in Ylivieska and we closed the acquisitions in Raasepori and Vaala earlier than we planned in Q2. So, the Q3 number is a bit higher than what was said in Q2, and that is offset by the exclusion of the rental value from NRG Pizza. So that is why we see the Q2 2027 number being at the same level as in the last report. We have some additions of projects and acquisitions. But also the exclusion of the SEK 11 million from NRG Pizza, which is working the other way.
To sum up, Prisma is in a good position to continue to create value for the coming quarters ahead.
Thank you very much, Fredrik and Martin. We will soon hear from our analysts, but while they prepare their video feed and sound feed, I thought I could begin with opening up with this question. If we look over your portfolio, grocery and daily goods continue to grow, now making up 50% of your rental income. Why do you choose to focus on that segment in particular? Is that a defensive, profitable, or growth exposure?
I would say it is all of these factors, but mainly we would like to have a better split in the portfolio. Initially, when we started Prisma, we were mainly focused on discount retail, and now in these days when the grocery chains want to continue to grow, especially in Sweden and Denmark, it is a good thing that we have increased that exposure. So, we want to be the preferred partner when they want to establish new stores.
We turn now to our analyst, and we open up with Oscar Lindquist from ABG Sundal Collier. Please go ahead and ask your question.
Hi.
Hi.
Just to start off, on the NRG Pizza units, what is your expectations of signing replacement leases here, and what sort of timeline can we expect?
We are planning to do that during Q4 this year, and all the new restaurants shall open up during 2027.
Okay. Good. On the value changes in the quarter, how much of that is derived from yield compression and projects?
Almost all of it is yield compression. You see it going down by 23 basis points in the quarter. The vast majority of it is the yield compression, and that's spread basically in mainly Denmark and Sweden, not so much Finland, but also across the categories. We're making normal project profits, but that's not the large number here. It's the yield compression.
Also, if you could add some comments on what you're seeing in the transaction market, and given where rates are at now, how far are you willing to go on LTV?
[uncertain].
When it comes to the market, we see today that the yields are going down, especially in Sweden and Denmark. An increased interest from both the Nordic and international investors. I am happy at this moment that we also have this project development part of our company. Now when we do not see so many attractive deals, we can focus on project developments on attractive yield and costs.
Okay. Thanks. That is all from me.
Yeah.
Thank you.
Thank you very much, Oscar Lindquist. The next analyst that joins us is Staffan Bülow from SB1 Markets. Go ahead.
Good morning. Hello.
Good morning.
I hope that you can see and hear me.
Yes.
Starting off with the target to reach a property value of SEK 16 billion by 2028. How important is it to reach that target in terms of absolute numbers? I am thinking that you are saying that the market is strong. Could you perhaps be open to sell properties to fund high-yielding acquisitions in Finland and Denmark, and high-yielding projects or share buybacks instead of reaching the SEK 16 billion target?
That's correct. The SEK 16 billion, it's not an ambition in itself to have an absolute asset number. The profitability is the main point. We wanted to convey our sort of speed forward when we conveyed that SEK 16 billion. It was also at that time, going from SEK 8 billion-SEK 16 billion, a doubling of the asset value. We saw also that we could, within the current financial policy, if you calculate with the project profits and the value uplifts from the inflation and the 55% LTV target, we should be able to make that SEK 16 billion without going to the market for additional capital. So that was the basic idea behind that, is to show you the way forward, and the tempo forward. We are ahead of that plan. We are already at SEK 12.5 billion.
But if we see a good opportunity, we could absolutely sell a low-yielding to replace with high-yielding projects or acquisitions. Any further comments?
Yeah. We're going to focus on profitability before volume. So yes.
Okay. Yeah, that makes sense. In terms of the buyback program, you almost doubled the buyback program. When you complete the program, do you think that you will renew it, or should we view this as a one-off program?
For now, you should view it as a one-off. We will come back to any decisions by the annual meeting and the board regarding buybacks going forward. With the share price and the discount where it is, it is a sound capital allocation. It is not competing dramatically with projects or acquisitions. We can do both the growth part and the buyback part, and that is a wise capital allocation as we see it.
Okay. Thank you. In the last months, you have made property acquisitions in Denmark, two quite minor, but to my understanding, you have described Finland as a prioritized growth area in terms of acquisitions. How would you describe Denmark? Would you say that is a prioritized growth area, or are the last two acquisitions more that you have found attractive properties at attractive yields?
I would say at the moment, we see most attractive acquisitions in Denmark at the moment because the spread is better in Denmark compared to Finland at the moment. It was a good thing that we decided to enter Finland last year, and that we now have built up a portfolio of around SEK 2.7 billion. If we started today, we would not be able to do that. At the moment, we see not so many potential transactions on the Finnish market. We can do some selective acquisitions of discount retail in Finland. Otherwise, we focus to buy and build up our portfolio in Denmark, especially with groceries in combination with our pipeline in Denmark.
Okay. Thank you. A question of the occupancy rate decline. Is that fully attributable to Pizza Hut, or is it something else?
I think if you exclude the effect of Pizza Hut, which is 1.5% in relation to the current volume, it was 1.7% in Q2, but we have grown since then. The decline of 1% actually represents an increase if you exclude the effect of Pizza Hut. I think we would be quite
Yeah.
Just a tenth above 99%, actually, if we exclude that one.
Okay. That is very clear. Then finally from me, I just wanted to make sure that I heard it correctly regarding the Kungens Kurva property, but I think you said the ambition is to give some more information in Q4.
Yes.
Did I understand it correctly?
Correct. Yeah.
Oh, okay. All right. Thank you for answering all my questions.
Thank you.
Thank you.
Thank you, Staffan Bülow. The final analyst joining us here is Emil Ekholm from Pareto. Please go ahead.
Hi. Hope you can hear and see me.
Yes.
Just a follow-up on the NRG properties. Is that one tenant taking all their premises, and will that likely be on the same rent level as NRG?
No, it is going to be a mix between tenants. We have shown a high interest from all the QSR tenants for these locations. We are currently in a discussion and negotiation with several QSR tenants.
But there might be one or two that will take more than one [crosstalk].
Yes.
Entity, but no one will take all of it.
And in terms of rent levels, would that be similar to NRG, or could we expect some improvements?
Maybe some improvements, but the assumption is that we can at least get the current rent level based on zero CapEx. So we are going to get maybe an uptick depending on how much CapEx we need to put into these assets.
Okay. Would you assume any discounts for the first periods, or is it full on right away?
We can disclose that during Q4 when we have signed all the lease agreements. At the moment, we are in a discussion and negotiation, so it is too early to say if or how many discounts are going to be the first year.
Makes sense. You have also been quite active in the transaction market so far this year. What is your expected investment capacity over the next 12 months?
At the moment, we see few possible acquisitions that we can do especially in Sweden and Finland. We see also some selective acquisitions that we can do on the Danish market. At the moment, we have put a little bit more focus on the project development, especially when we have a very attractive pipeline with a high yield on cost. So the main focus the coming quarter is going to be profitability before volume and focus on the right projects and the right acquisitions.
The net LTV as of Q3 is 51%. We have a policy of 55% with temporary deviation up to 60%. So, within that, we are able to reach the SEK 16 billion, all things else alike. That gives an indication of where we can go.
Perfect. Yeah, that's all from me. Thank you.
Thank you.
Thank you, Emil. Building on Emil's questions about NRG, I'm curious because you mentioned that you're currently in discussions and negotiations.
Yeah
With potential new tenants.
Yeah.
You're expecting to sign in Q4. Given that that timeframe holds, when do they enter the property?
June 2027, and it depends on which tenant it is. But our aim is that they open up as soon as possible. But what we can say today is June 2027, and from our point of view, as soon as possible.
I know you also talked about this with the analysts as well.
Yeah.
The share buyback program that you are increasing. You are almost doubling it
Yeah.
From SEK 80 million-SEK 140 million .
Yeah.
Why is the increase the right move for Prisma, considering the pace that you want to grow in?
On top of what I mentioned during the analyst session with the wise capital allocation, there is also an element of taking care of the liquidity in the share, both now and going forward. Because we see that the uptick since we started the buyback program is important. So that is a factor as well. But the main part is that we can buy nice assets at 30% rebates.
Yeah.
Precisely.
Yeah.
You mentioned in the presentation as well, selective acquisitions.
Yes.
Yeah.
Can you elaborate on that?
But it is important for us that when we buy something, it is going to hold for a very long time. So we want modern buildings with long and stable cash flows. So at the moment, we believe that we have the Nordic's most modern portfolio, and we cannot see any bigger acquisitions, a portfolio that suits Prisma. So for us, the best strategy is continue with developments, but also do these selective acquisitions across all the markets.
In the report, we can read that the LTV, the net LTV now exceeds 50%. In considering your long-term ambition to stay below 55%, how much do you feel that you are able to grow in this case without straining your balance sheet too much?
I think up to the SEK 16 billion that we talked about earlier in the analyst session is the same answer there. Yeah. So, we have further capacity with the 51%.
We will talk about interest rates in just a moment. But before we do that, I would like also to remind our viewers that if you have any questions, now is the opportune moment to ask them in the chat. Swedish Central Bank in the last rate meeting, they left the rates unadjusted, but they guided for higher rates in the future. How well prepared is Prisma Properties to handle another rate cycle?
We have a high share of the debt is secured by interest hedging. And of course, we take the interest into consideration, as everyone else, when we make decisions about our growth. But here now, our portfolio is delivering high cash flows. It is high yielding. Back in the day when we formed Prisma, we had an average interest of 5.3% versus the current 4.2%. So, we are equipped to handle a higher interest climate, but we will not make any foolish decisions on too high rates, of course.
You can sort of control how that impacts you, of course. But how well prepared are your tenants?
Yeah.
Should investors expect any impact on those reflected in occupancy rate, for instance?
I think the opposite.
Yeah. This is the asset class you want to own in these times. Yeah. Our tenants are robust, and they are performing very well in good times, but also in bad times.
I think with high interest rates, you also see high inflation, and there you see an inflow of more customers to these discount stores.
Martin Lindqvist and Fredrik Mässing, thank you very much for being here and answering our questions [crosstalk].
Thank you.
This evening.
Thank you