Ladies and gentlemen, welcome to the Samhällsbyggnadsbolaget Q1 Report 2020. Today, we're pleased to present CEO, Ilija Batljan. For the first part of this call, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. Speaker, please begin.
Thank you very much. Welcome to presentation of Q1 for SBB. This is the first quarter, how to say, the full effect from the new SBB, including Hemfosa, could be seen. If you look at the main messages, the first is actually our strong financial position. At the end of the quarter, we had more than SEK 50 billion in unencumbered assets, strong bank relationships, and also access to European credit markets that we could show by issuing 10-year bond at late of March. We are coming into the crisis with strong cash position, but also with very strong earnings capacity that will be delivering strong cash during the year. We can go to the slide two, please. At the slide two, we are presenting our earnings capacity for 12 months rolling.
You can see that just purely mathematically, we are expecting to deliver profit of SEK 3 billion or SEK 2.36 per share ordinary plus A and B shares from property management. On top of that, income from our other income streams, which is expected to total to close to SEK 4 billion or SEK 3.12 per ordinary A and B shares. That is very strong profit expectations from earnings capacity. If we look at the quarter, we deliver profit after tax of SEK 1.4 billion or SEK 1,373 million, which adjusted for non-recurring costs relating to through transactions, refinancing and the repurchase of the bonds amount to SEK 1.5 billion, which is strong increase compared to the corresponding quarter of the previous year. I will comment later on this one-time cost related to the Hemfosa transaction.
Important thing there is that we had to take almost all transactions cost through P&L, which is affecting profit from property management negatively and increasing unrealized value changes. Our strong net operating income is important message from this report. Net operating income increased year-on-year with 273% to SEK 895 million. Also where we deliver strong margin of 67%, which is increased with 11 percentage units in relation to the last year. Finally, this is of course affecting cash flows. Our cash flow adjusted for non-recurring cost amounted to SEK 591 million. Also that very strong increase in relation to the last year. Next slide, please. Our income is nine of 10 crowns coming from the world's most creditworthy counterparts from Swedish, Norwegian governments and from Swedish integrated residentials.
You can see that we have income on earnings capacity of SEK 5.2 billion, of which 88% is coming from government direct or indirect or from Swedish integrated residentials. The other message here is the same as always. We are long-term partner to municipalities, and we have, as I will show forward in presentation, also in those times, working together with municipalities to deliver to them special apartments for people with disabilities. We are building the new buildings for municipalities across the aisle. In those times, we have probably one of the most secured income in the space. Of our income, 1% or even below that is affected by coronavirus. Despite that we have a low exposure, we are humble and trying to help those that are exposed.
That is why we are counting to have deferred payments or change the timing for the payments of SEK 12 million and are giving the support to those who need SEK 1 million in discount. That is less than 1% of our total income. Next slide, please. Financial performance, as you can see, very strong increase in rental income from SEK 453 million to SEK 1 billion 341 million. Particularly strong increase in net operating income. This is slightly affected also downwards by, how to say, catastrophic development for the Norwegian krone. This is really strong message from this report. Increased margins and net operating income that is beating even my expectations. I'm really happy that we can integrate property management in the way that we are doing and that we can deliver a strong NOI.
If you look at EPRA NAV, that is in our report presented according to new EPRA definitions. We are landed at SEK 34.8 billion, which is slightly less at the end of the year. The main reason for that is changes in Norwegian crown. However, we feel comfortable to continue to deliver also in increasing NAV and our message to the market that we will be the company that is performing highest increase in NAV 2019/2021 is firm. If you want guiding, that is firm guiding. We feel pretty comfortable with that. Increasing equity ratio and loan to value slightly affected by paying the rest of Hemfosa. However, when we look at our assessment where we are in 2020, we still feel comfortable on our way to BBB+ within the next 12 months, which is our goal.
Finally, probably the most important for our shareholders, that we deliver strong earnings per ordinary share of classes A and B of SEK 0.94 per share, which is almost five times comparing to the last year when we had SEK 0.2 per share. Next slide, please. Concerning our business, 94% of the portfolio value, social infrastructure with 77%, community service property and 17% Swedish rent-regulated residentials. Strong and increased presence in the largest city in the Nordics, 66% of total property value is in the largest cities in the Nordics. Next slide, please. More in detail concerning portfolio, SEK 61.5 billion elderly care homes, schools, LSS housing, and municipal government buildings, 17% rent-regulated residentials. In the quarter, we increased our presence in Malmö region by buying from the municipality of Kävlinge, which is a fast-growing part of the Malmö region.
Our property development which is within this other segment of SEK 5.2 billion, is continuing to deliver and also delivering casual properties in our property management portfolio. Next slide, please. There's still two things that it is important message to repeat every time what kind of underlying mega trends are shaping our growth and are shaping output for our company. Demographic change is important one and also connected to urbanization, and we feel pretty comfortable that those trends will continue also in post-COVID-19 world. In COVID-19 or in pandemic world, I should say that sustainability is even more important than ever. We are in the report showing that we are continuing to invest in energy efficiency. We deliver. Now we can actually in this report present the first results from that job that we are delivering strong decreases CO2 emissions.
We also invest in social sustainability that is very important in those days. We founded together with Nasos Economou Food for Heroes that up to date has delivered 7,000 meals to people in need together with Stockholms Stadsmission and The Salvation Army delivering food to the elderly. At the same time also trying to support our municipalities through the crisis. We order respirators, masks to municipality of Gotland, and we are also through different initiatives supporting small businesses in our municipalities. Even more important, we continue to invest. During the quarter, we invested SEK 380 million in that way saving jobs and supporting growth in our municipalities. Next slide, please. Our property development is doing a great job.
You will see in report now when we have a portfolio of 1.8 billion sq m, which is like 25,000 apartments. In the quarter we delivered from our building rights cash flow properties in our portfolio. We will see more of that going forward. That is why we in report do some scenario analysis to give you a flavor concerning value creation potentially in our portfolio. Just to mention the ongoing projects we are working the rebuilding of City Hall of municipality of Nykvarn with 25-year new lease. We are next year in two next year expecting to have our cultural center in Sollefteå with 50-year lease being finished. We are delivering new buildings for social services in city of Västerås with 15-year lease.
In one of the Stockholm municipalities, municipality of Haninge we are expecting to deliver 17-year lease on a school and 10-year lease on elderly care home. At the same time in the pipeline, six new group housing units for people in disability and all of those will be on 15-year lease. We are going to see strong inflow of cash from our building rights, but also strong inflow for long leases coming from our property development portfolio. Next slide, please. To summarize, as I said before, the important message is that despite the times, delivering strong profit after tax per ordinary share of that A and B of SEK 0.94 per share, which is almost five times last year's SEK 0.2. Our earnings capacity amounted, for property management, to SEK 2.9 billion at the end of Q1.
If we look the change in relation to the last year adjusted for our cash position, we can see increase of 274% year-on-year. As I said before, also earnings capacity is likely affected by development in Norwegian crown, which has affected more our net asset value and also in that way affecting EPRA NAV per share that is landed at 19.52 per ordinary A and B class shares at the end of the first quarter. Profit before tax SEK 1.7 billion and after tax SEK 1.4 billion and adjusted for non-recurring costs for repayment of expensive loans and also deductions for profit paid to preference shares, D shares, and hybrid loans. We have adjusted net earnings for the year of SEK 1.06 per ordinary A and B shares.
Important message from the report, as I said before, that we are continue to build a strong cash flow machine with our scalable platform and that can be very clear from our NOI development where we are delivering margins of 67% and the NOI of SEK 895 million. You can see that our cash flow is increasing with SEK 300, cash flow from operation increasing with 358% before SEK 144 or adjusted for non-recurring cost to SEK 591 million. We see still continuing strong increase in cash flows going forward. Our portfolio with building rights of 1.32 million sq m, as I mentioned before, is going to continue to deliver both in terms of cash flow, in terms of the building rights that have been sold before, but also in terms of delivering new cash flow properties with long leases to our property management.
You can see from the report, from the scenario analysis that show that we have strong value potential that is much, much higher than the valuation of the books in our property development portfolio. Sustainability, we focus to be 100% climate neutral by 2030. In the report we show that investments within our Green Bonds framework already have proven significant reductions in energy consumption and carbon dioxide emissions. In those times, social sustainability probably very important. As I mentioned before, we initiate in collaboration with Stockholm Stadsmission during the first quarter to help mitigate the consequences of the spread of COVID-19. We also found Food for Heroes together with Nasos Economou, and Food for Heroes has until now delivered almost or probably by today more than 7,000 meals together with Stockholm Stadsmission and Salvation Army.
We are also supporting our municipalities both by making sure that our social infrastructure properties are working well. We have a contingency plan in place and have good support for the municipalities. We also are helping in other ways, among others by ordering respirator masks for healthcare workers in order to make them safe. Probably even more important in long-term plans is that we are continuing with all investments. We are holding our promises, including also our promise to our shareholders to pay the dividend. Through different initiatives, we are helping to mitigate negative consequences for the groups that are most affected of COVID-19, which are elderly, small businesses, and we have workers.
The point five, as I mentioned in introduction, we have a strong financial position, more than SEK 50 billion in unencumbered assets, strong bank relationship, and we see strong access to European credit markets, and our focus is not changed. We are continuing to work to achieve BBB+ rating within 12 months. That we see as a prerequisite for strong growth, and in the long term, the goal is to achieve an A rating. This is important if you compare us with our peers, Hemsö and Rikshem, that both are rated in public rating category. We have much stronger key ratios without comparison. Please just put those in the table so you will see. We think that we have even today stronger property portfolio, higher quality, and still there is unjust difference in rating.
We will work hard to show this for investors. We will work hard with rating agency. We will ask to get independent study of this because this is not fair, and we have to do work here to inform the market. We have one of the strongest balance sheets, if you look at unencumbered assets, if you look at our credit quality, at our safe income in the Nordics and in Northern Europe. I'm just looking at, for example, Deutsche Wohnen and the companies that have problems in Germany with future rents and so on. We have to do the work to inform the market, to get the right peers and to get the right comparison, and to not be compared with the commercial real estate, which we are not part of.
Finally, we have had a very clear message that for the period 2019-2021, our assessment is that we will be able to deliver the highest annual increase in net asset value among all Swedish-listed property companies. We feel pretty firm on that. This will be underpinned by strong potential from organic growth and high NOI margins. As I mentioned its introductions to Q1, NOI margin was 67%, which is 11 percentage units higher than the NOI margin for Q1 2019. This is also higher than our earnings capacity. I'm writing here finally, because in those times, many companies are afraid to give the guidance. We have a strong financial position. We are humble, but we are not afraid.
We continue to work, and as I'm writing in the outlook session, given the profits for Q1 and given our earnings capacity, just mathematically, we see that we will be able to have total earnings capacity for the 2020, like SEK 3.28 per ordinary A and B shares. I will stop there, and please come with questions. Thank you. Next slide, final slide.
Thank you. Ladies and gentlemen, if you have a question for the speaker, please press zero one on your telephone keypad. Our first question comes from the line of Simen Mortensen from DNB Markets. Please go ahead.
Yeah. Hi there, this is Simen from DNB. I have a few questions, actually. First of all, congratulations on the solid report. Just in terms of the rent link, I see in the quarter it's roughly SEK 50 million higher than what you can read off your earnings capacity. The reported rent in the quarter is actually higher than the rental capacity figures. Is there anything behind that, roughly SEK 50 million?
Yeah. The main reason there is, Simen, as I said, that we see that we are negotiating new leases. We are also being able to move some of the properties from building rights to property portfolio. That is the main reason is organic growth.
Yeah. Why is it SEK 50 million higher in Q1 than your earnings capacity guidance you just gave?
Our earnings capacity, Simen, is just pure mathematics. We do not have any rent increases, and we do not have any properties that we know that we have new leases for. We are very conservative in our earnings capacity. That is only this.
Okay. Can you also comment on the quarterly increase in the vacancy? You can see roughly it is up 90 basis points Q on Q. Can you tell us a bit what is behind that?
The reason for that is that we are going to continue to invest. That is the main reason and 0.1% is Norwegian krone, because in Norway we have, how to say, much higher markets.
Okay. Higher occupancy in Norway.
Yeah. Because in Sweden we have the Swedish regulated residential that we use for refurbishments. In Sweden we have also the property development portfolio that when we see a facility to do establishment, then we use that by letting tenants leave in order to have increased income when the property is refurbished.
Okay. To follow up on in terms of vacancies and stuff. I read several times in media locally in Norway about OsloMet which clearly did not, despite of those negotiations, extend the lease with you, and it seems to be there'd be a legal dispute between you and that tenant. Can you please give us an update on the status there?
We feel that we have a right there and our property management in Norway feel that also OsloMet has to fulfill their obligations. We feel pretty confident about it.
Yeah. What's behind because they seems to not be a tenant?
But we are-
What the legal case is about.
We just want to discuss our tenants outside of the direct discussion. We feel that is long story from Hemfosa a time, but we feel that we will find a great solution, and we feel confident with our case.
It seems NOK 640 million is in dispute and it's a quite significant amount. You don't care to give us any more detail?
That is not significant amount for us. That is dealt by the local team in Norway and we still own the property and we will not comment our tenants outside of the direct discussion.
Okay. In terms of the payable tax in the quarter, I also note it says in the report it is SEK 48 million. Based on earnings, profit from rental operations, it amounts to roughly 16% payable tax ratio. Could you give us a detail on the payable tax and what to expect in terms of payable tax ratios?
In long term, we are expecting to have payable tax around 10%. That is still our expectation. However, after Hemfosa transaction we will, during the year, do even more analysis on that. We have not changed our view where we should be.
Just also to follow up a bit more. Sorry to take so much time. In terms of your earnings guidance, you guide in terms of financing SEK 736 million. When we look into the Q1, we see despite those extra charges, you're at SEK 292, which is quite significantly different in terms of financing costs. Could you give us a clarification of what's behind and what the difference between those figures we saw in Q1 as a financing cost and those costs you guide in the earnings capacity?
Our guidance is pretty mathematic. Our interest rate is 1.52% at the end of the quarter, the rest is not. However, we came in Q1 with a relatively high interest rate from the Nyfosa transaction and also some additional costs from that transaction. We did large bond issuances in order to repay bank debt, we have some overlapping there. We have also probably some non-recurring costs also in that number. We think that we had a strong report, we didn't invest any more time to explain that. The message there is that we feel pretty confident with our earnings capacity.
To try to sum up now. I just noticed a very solid value uplift in the quarter. Could you tell us where and what kind of asset we found this one, and also how that value uplift can be seen in relation to Nyfosa not wanting to step up in the LOI? Just to help us understand where has the value increased been and how we can see this in association with Nyfosa not stepping into the transaction.
There is no association at all concerning value increases. It's very easy. You could conclude that our income is SEK 50 million higher than earnings capacity. That is, of course, explaining the value changes. We also have some of the costs that we had in the quarter P&L should be in value changes, because the way how the Nyfosa transaction was classified. The main reason is that we have much higher income that we had in Q4 earnings capacity, and that is, of course, expressed in value change. Concerning Nyfosa transaction, we stopped the Nyfosa transaction on 31st of January when Nyfosa didn't succeed to fund the equity for those actions.
We have been very clear that we will continue to sell some properties, but we are not going to sell in big pieces, because we see that we will make more money by selling assets by assets.
Just to clarify, you said Nyfosa didn't succeed and have enough equity to step in, so you stopped the deal. Just to clarify that was what you said.
That is very clear, Simen.
Okay. Just one question on the side. In terms of currency exposure and financing, first of all, the net debt increased of SEK 5.6 billion, and if you include the hybrids and everything, you're almost at SEK 9.7 billion. We noticed a lot of your debt is in euro. Perhaps, how is your euro debt exposure in total, and how is that being accounted in terms of writing the net debt versus the assets values? What is your debt exposure in euro and your assets value exposure in euro? Including the hybrids, please.
First, we do not include the hybrids because we treat the hybrid as our equity. The second here is that we feel pretty confident to have exposure in a liquid market, which euro is, to compare with Swedish krone or Norwegian krone. That is our strategic choice. Right now our exposure to euro that is not matched with assets is around EUR 700 million. We are following that closely and using hedging in order to safeguard us from that. That is why we are reporting some realized losses through P&L.
Sorry to interrupt you. How is that hedging being done, just to clarify? You will have realized financial costs when there's currency movement and financial gains exactly the other way in terms of zero exposure. Just help us understand the financing cost versus the hedging in general, if you can give me some details.
Concerning the Norwegian krone, we do not hedge anything, because that is not liquid market. We see the Swedish krone as our exposure to our shareholders. We hedge euros by FX forward, because that is from our perspective, because we are a growing company, we are going to grow our property portfolio in both Finland and Denmark, and that is why we use the instruments that we use.
Okay. How long is your fixing and hedging, just to clarify?
We are rolling FX forward on three months basis. That is how we are doing our hedging. We feel pretty confident with that.
Okay. Just what is the unrealized loss in FX like in Q1?
It is reported affecting the profit SEK 130 million in Q1.
Okay. I'll let the line go now.
Okay.
Thank you for taking my questions.
It is reported in P&L.
The next question comes from the line of Philip Hallberg from Danske Bank. Please go ahead.
Yes, hi. I only have two questions here. Maybe I missed this during your presentation, but in your earnings capacity, the financial income is up 75% quarter-on-quarter. Could you just elaborate a bit on what is included in the financial income and what is behind the large increase quarter-on-quarter?
We have income because we have a strong cash position, and we are, among others, lending money to our joint ventures, both in Sweden and Norway. That is the main reason.
Okay, thank you. Could you just give any figures, like how much have you lended out to your joint venture in this quarter? Is it long-term loans or?
No, we have been building strong cash position during long time, that is one of the reasons why we are placing the cash. At the end of the quarter, we had SEK 3.8 billion in cash position. As I said in my CEO letter, the cash is king, not only under the pandemic. Particularly when the times are shaky, it is for us efficient way to place the cash in different, in this case, in our joint ventures that have strong cash flow, both in Sweden and Norway. We had like SEK 1.3 billion in total shareholder loans, I think.
Okay. It's only interest expenses from the JVs that come in, that's financial income for you guys. You don't include your shares in, for instance, SSM or anything like that?
No, there is no cash coming. It's just real cash that we include.
Okay. Thank you. Another question regarding your earnings capacity. If you look quarter to quarter, you have managed to realize roughly SEK 170 million out of the communicated SEK 300 million in synergies from the Hemfosa acquisition. Could you just give us a favor regarding the remaining SEK 130 million? Is it still on the financing side you expect those synergies to realize, or is it mixed between several lines in the P&L? Just to know what we should calculate with here.
Yeah. That is from financing, we have done SEK 170 million. We still have SEK 90 million from financing and SEK 40 million from operations. That is what it is in this SEK 130 million. We announced that we did SEK 170 million already in February.
Yeah, exactly. Those were the pay down net price. Yeah. Okay. Thank you. Those were my questions. Thank you.
Thank you.
The next question comes from the line of Jan Ihrfelt from Kepler Cheuvreux. Please go ahead.
Okay. Jan Ihrfelt . Yes, I have actually three questions. The first one is actually going back to the first question, I didn't get the answer there to why the financial costs were approximately SEK 50 million higher than what was indicated in the earning capacity for Q4. Was it some non-recurring items in this SEK 50 million or could you just explain a little bit more into detail?
Yeah. There is still non-recurring items left in those SEK 250 million. Some fees from within Hemfosa portfolio, that is part of that. Then we have this overlapping by we first issued the debt, then we repaid the debt. That is also part of explanation because as you remember, we announced that we want to decrease because Hemfosa was fully bank-financed and had a relatively low level of funding capital assets. We do not like that. We have been working hard to repay a large part of bank debt. In order to do that, how to say, we first issued the debt in order to be on the safe side of the aisle then we repaid the debt. Then there is also a small effect from Euro because Euro stopped at the end of the quarter.
That is also affecting slightly. The main reason is overlapping of debt because we did large repayment. If you look you will see that we have repaid SEK 13 billion, SEK 14 billion of debt in Q1, which is a very large amount.
Okay. A very large portion of this SEK 50 million is more or less treated as non-recurring.
That is my view that the largest portion of that is non-recurring.
Okay, thanks. Second question also regards your financial net, and you stated in the report that your average interest rate was 1.52%. Looking forward and looking at your maturities, what you can get on the market, et cetera, how do you think your average interest rate will develop going forward?
We are going to continue to decrease our interest rate despite the crisis.
You think we will see a lower average interest rate at the end of December than you have now?
Absolutely.
Okay. My third question really relates to your property revaluations. Could you give us a split of how much was cash flow driven and how much was yield driven? This portion split.
I should say that it is more than 70% that is cash flow driven. Then you have 8% or 5% which is coming from the building rights. The building rights are actually also affecting the cash flow because some building rights are leaving building rights and coming in property portfolios. It's a relatively small part of this SEK 1.6 billion that is coming from the yields. It's mainly cash flow driven. That is also why we are presenting strong rental income, much stronger than earnings capacity.
Also final question, if I may, and also regarding your property value uplift, if you split that revaluation into your old portfolio, the SBB portfolio and the new Hemfosa portfolio.
Where the main property revaluations made in the old Hemfosa. Main part is coming from Hemfosa and portfolio and coming from higher income than having in the valuation by Q4.
Okay. That's my question. Thanks.
Thank you.
The next question comes from the line of Bertil Nilsson from Carlsquare. Please go ahead.
Hi. My question has partly been taken already. I can take a follow-up on the property market and valuation scenario. I interpret your answer that you say that property portfolios will be discounted for a while and you sell small assets, let us say.
Not quite. Not discounting. We are selling properties at higher levels than the book, and we are selling properties at higher levels when we sell property by property. That's the level that has been agreed with Nyfosa.
Okay. Sure. Do you see it like several other parties in the market being affected by this new situation on the financing side? There will be opportunities to buy more.
It's very important. As I said in my introduction, we need to do the work to inform the market, concerning differences and the category where we should be both rated and seen at the commercial real estate. There is still a very strong demand for our assets and those are still the most looked after assets. We do not see any, how to say. It is very difficult to buy these kind of assets, and we see that the transactions that are presenting are often targeting these kind of low-risk assets.
The building rights portfolio will not be much affected by this?
No, because we value our building rights relatively low before and we have been the only company that has been selling building rights also when the condo crisis started, and we still sell the building rights. However, the crisis creates opportunities for us to get good prices and to get entrepreneurs that can guarantee the construction cost. We will probably get properties from our building rights in our portfolios with value upside. There is an opportunity for us that we saw already before the COVID-19 crisis and hired a guy that has been chairing one of Veidekke's construction teams that has worked together with us before at 3XN. We are strengthening team there in order to continue to deliver stronger organic growth.
Okay. Thank you.
Thank you.
The next question comes from the line of Tobias Kaj from ABG. Please go ahead.
Yes. Thank you. My first question is regarding your income for Q2. You write that you have discounts of SEK 1 million and changed or postponed payments for SEK 12 million. Does that mean that you have already received 99% of income contracted for Q2? Do you have other late payments where you don't see any risk in?
We don't have any other exposure, and this exposure is actually we are making space. I think up to date we have SEK 400,000 in discounts or SEK 446,000 in discounts. We reserved to have SEK 1 million, and of those deferrals are right now 6.6 active and the others are those that we are expecting that we may help. That is our maximum exposure as you see.
Okay. Thank you. Regarding your gearing, you write that you have 50% net debt to total assets, but if we include the hybrid, you are at 55.5%. If we include 50% of the hybrid. What level do you need to keep your current rating, and what level would you need to reach to get to the BBB+ rating? Also how do rating companies view the goodwill position? Do they deduct for that or not?
We have in our rating focusing on S&P's view. According to S&P, we need to be below debt to equity below 55% in order to achieve BBB+. Below 50% in order to achieve BBB+, given our high-quality assets. There has not been any changes.
Do we have Standard & Poor's, do they not deduct for the goodwill in the calculation?
Their calculation is based on. They calculate on equity or adjust equity for the hybrid and then adjust debt for the hybrid and then the quote is debt plus equity, and in that way, indirectly, goodwill is accounted.
Okay. Thank you for taking my questions.
The last question is a follow-up question from the line of Simen Mortensen from DNB. Please go ahead.
Yeah. Hi there. Just my question again. I read in the report that you have some realized negative property changes of SEK 60 million, which means that you have sold property below book values, if I'm correct? Can you just tell us what's behind that?
That is value of the fair tax.
Thank you.
As there are no further questions, I'll hand it back to the speaker.
We have received two questions by email as well.
The first one comes from Michael Kardashian. He's got three questions. Can you talk about your liquidity situation? Cash on hand is small.
Cash on hand is SEK 3.8 billion.
How do you plan to stabilize your BBB- rating? Are disposals impacted by the environment?
Could you repeat?
Sure. How do you plan to stabilize your BBB- rating? Are disposals impacted by the environment?
We are not trying to stabilize our BBB- rating. We are going to get BBB+ rating. We are continuing to dispose as we announced before.
Third question, why is adjusted LTV so high at 67%? Adjusted LTV defined as net debt plus 50% hybrid over the investment portfolio.
That is because you can always count in the way you want to count. Our net LTV is 50% that we present in the report. On top of the direct ownership of the properties, we have also indirect ownership that is not accounting in that measure.
Thank you. The next question comes from Thakur Lakshay from Merian Global Investors. Congratulations on the quarter, and apologies if my webcast isn't the clearest. Just to better understand how you're planning on paying back your commercial paper program, could you give a bit more color on the backup facilities themselves, and if you would consider issuing further unsecured debt in order to buff your liquidity position?
We have strong liquidity position of SEK 3.8 billion, and on top of that SEK 7 billion in backup facilities, and which is almost two times our commercial papers. We actually issued commercial papers last week. We feel pretty confident with our liquidity position.
Thank you.
Great. Thank you very much. I can just close with actually the latest question that in those times are very important. Just emphasizing that we have strong liquidity position of SEK 3.8 billion in cash. We have SEK 7 billion in credit lines. We have more than SEK 50 billion in unencumbered assets and very strong bank relationship in the Nordics, and strong inflow of cash during the year, both from earnings capacity, if you look at SEK 2.5 billion, but also from the building rights that have been sold before. We feel both humble given the situation for our society, but also pretty confident to continue to deliver shareholder value and value to our bond investors. Thank you very much.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.