Earnings Call: Q4 2020

Feb 23, 2021

Thank you very much and welcome everyone. SPB presented Q4 numbers today showing that we are creating social infrastructure Champion in Europe. And next slide, please. At Slide number 2, You can see some of the highlights that we want to focus on through presentation. 1st, We have very strong, safe and stable cash flows backed by Income that is at the end of the day, ultimately government backed from AAA countries Sweden, Norway and Denmark and AA Plus Finland. We have very strong growth without competition in European Real Estate Market And the growth is fueled by our 3 value add strategies that all of them deliver over the targets in 2020, property development, renovations, investments and transactions. Point number 3, we are strong dividend delivery company. We are We have increased our dividend like 900% since 2017, and this year, we increased with 67%. So Proposed dividend is 1 Swedish Clouinter A and B Class Shares. Point number 4, rating. As you can see from the report, we have been doing Strong deleveraging, particularly during Q4. And we now count that we have Delivered all key ratios to achieve BBB plus as we have that has a target and long term target is A-. And finally, emphasizing strategic focus on sustainability as the core of our business model. Next slide, please. Here you can see snapshot about SVB, as I said in the introduction, operating in the world's safest real estate classes, community sales properties in the Nordics, where the tenants are government funding the highly regulated Swedish Residentials. On top of this safe cash flow from property management, The 3 value add strategies, delivering growth and additional profit. We have sustainability as the core of our business model. And we are also the 1st member ever of public housing Sweden, also emphasizing our focus on sustainability and our relationship with municipalities in the Nordics. Strongly safest cash flow in Europe, 99.8% rent collection during 2020. Looking at the property management assets, you can see the majority of the portfolio SEK 63,000,000,000 in Sweden, SEK 17,000,000,000 in Norway, SEK 9,000,000,000 in Finland and SEK 1,000,000,000 in Denmark. However, we see large opportunities to continue to grow both in Finland and Denmark. Looking at how the property portfolio has evolved during 2020, you can see that of our SEK 90,000,000,000 in assets. 75% is located in major cities and university towns in the Nordics with 22%, for example, in Stockholm. If you further look at our apartments in project portfolio, meaning in production prepared for the production, 5,600 additional apartments, 80% of those are located in Stockholm. Strong cash flow, euros €4,800,000,000 in passing grant. Profit for the year €9,000,000,000 Still relatively high, and you have heard me emphasizing this before, still relatively high Net initial yield bit large potential for value increase, 9 year worth or more exactly 9.2 years worth, length in the Nordics, 5,600 apartments in project portfolio of which 1700 apartments in production And 3,900 apartments prepared for the production and Strong deleveraging, net LTV on total assets, 35%, as we will show On S and P's measures, 45 percent on adjusted debt to debt plus equity. Next slide, please. On Slide 4, you can see composition of our income. We are continuing to derisk our portfolio even within our low risk portfolio by having more elderly care homes, more income from special partners for people with disabilities. You can see 18% of income coming from residential. And if you add the elderly care and the LSS to this facility. You will see that almost 40% of our income is coming from either residential or apartments for elderly and apartments for people with disabilities. Strong trusted partner for municipalities Continue to do municipal transactions also in Q4. And important to emphasize for people outside of the Nordics that legislation in the Nordics, for example, Sweden and Finland prohibits local governments from declaring default. So at the end of the day, our ultimate risk is tenant sovereign risk. You can also see that We have increased our rolling NOI every quarter with very strong increased growth. For example, Q3 2019, SEK 1,200,000,000 in rolling 12 months NOI to end of Q4 with SEK 3,500,000,000 in NOI. And this is to continue. Slide number 5, please. Emphasizing key pillars of our CIGI, as I said before, unique and difficult to replicate long term relationship with municipalities, creating stable AAA rated cash flows complemented with additional income from our value add strategies that are fueling fastest growing low risk European social infrastructure property portfolio with compelling and growth in the earnings per share. So if you look At the slide, you will see that we have increased our profit with delivering 1 crown in 2017 to delivering SEK 6.4 for 2020. At the same time, having 100% growth in property portfolio with more than 40% CAGR last 4 years. And at the same time, combining this with strong financial position, demonstrated stability of the cash flows and also by this report, Credit Matrix for BBB Plus. Next slide, please. Important to emphasize that we, during 2020, have almost doubled Our team, we are today almost 300 professionals with the Vodaf team focusing to unlock full potential to our shareholders through 3 value add strategies beyond traditional property management. We have SEK 4,800,000,000 in passing rent, Very stable and safe cash flow from property management. And on top of that, we have the target to deliver €1,000,000,000 to €1,400,000,000 in income from property development. We are exceeding that in 2020, delivering more than EUR 2,000,000,000 in profit from property development. We have the target to deliver EUR 600,000,000 from the innovations and and part of that is targeting 600 apartments in renovation. We are exceeding that in this quarter. And very strong team of real estate transaction. Just to give you a flavor, Last 2 years, we have done transactions for EUR 90,000,000,000 Swedish Cloud. This is next largest real estate company in the value of the total assets of next largest real estate listed company in the Nordic. So from this business, we are expecting to deliver SEK 400,000,000 on a yearly basis. We have always delivered much more than that. Next slide, please. On Slide 7, just to give you a flavor how we are running our platform for value creation and how our value add Strategies are, how to say, built in our total value creation, maximizing shareholder value. At the next slide, I will go Slide 8 to give you some more details on property development. We have the strongest probably the strongest property development team in Europe now also So, Enlarge with strong team from 3 of us here and this team is to deliver a target of €1,000,000,000 to €1,400,000,000 on yearly basis. And we have seen that in 2020, we have had Strong over delivery from Property Development. Today, we are probably another one of the property developer. And as I said, on top of Portfolio of 34,000 building rights on all the balance sheet. We have almost or more than 5,600 apartments that are either in production for own management for prepared for production within project development. And we are also publishing scenario analysis in the for showing that our development property portfolio has estimated value up from competition of zoning of €8,600,000,000 which is exceeding book value of SEK 3,300,000,000 Next slide, Slide 9, please. As I said, number 1 property developer in the Nordics with 34,000 Apartment at the book and additional 7,600 apartments in joint ventures. And on top of that, as I mentioned, strong delivery by Almost 17,000 apartments right now in production and 3,900 apartments prepared from production. We have also through acquisition of Svea Pass Theatre expand our focus on developing sustainable apartments throughout Stockholm region and are going to be probably the fastest growing residential business in Stockholm in next few years. Estimated and EUR 1,000,000,000 to EUR 1,400,000,000 which was exceeded strongly through 2020. Next slide, please. Next slide, focusing our second value add strategy on property renovation and sustainability with team focusing on delivery through our vision, 2030, to make SVB more sustainable property company in the world and doing value enhancing renovation across community service and the residential properties. We have the target to deliver to renovate 600 apartments on yearly basis. In 2020, we exceed the target with 16% and renovated 6 95 apartments. We have highly experienced team with strong relationship that work close with our tenants to understand their needs and requirements. At the same time, delivering on sustainability with 100 percent renewable electricity, 95% for the social impact of total rental income, sustainable financing through social and rebonds and also in terms of lifecycle sustainability values, Investing in new production in the boat. Currently, 52% of new production in progress We constructed in both. Next slide, please. Giving you some more flavor on sustainability and renovations and investments. Energy From renovation, averaging 28%, having strong value creation with 8% yield on cost from energy reducing investments. And also within our refurbishment projects where we refurbished 695 apartments in 2020. You also at the same time done environmentally decontamination of the buildings by also in that way Improving environment for 86% of the refurbished apartments. That means all apartments that have been needed there have also all materials have been exchanged. And they still have large asset potential with 75% of property portfolio, non renovated, which is both significant value upside potential, but also very good potential for decreasing effect on environment by to energy reductions. You see that we have continued to deliver strong margins from our refurbishment and with 6% to 7% net yield and the cost Also delivering profit that is going to continue to fuel our growth with estimated Total recurring earnings effect per year from refurbishments and investment of €600,000,000 Next slide, please. At Slide 12, some additional flavor on our sustainability work, our Vision 2,030. We are, as you will see from the report, continuing to do large investment in sustainability to new installation of solar cells to different energy reductions, measures to building in the wood and in that way also offsetting CO2 emissions, but also building new buildings that are not only having very low CO2 emission, but even being part and having 1 of in one of the our buildings, the first ever largest energy positive positive building. So sustainability is important parts of our business model and not only ecological and environmental part, but also social part by us issuing the first probably the First social bond in the Nordics and probably one of the largest social bond issue in the world and fueled by different investments that we are doing in our communities, all from offering summer jobs to young people in our communities to supporting UNAHCR to better shelter for refugee homes and collaborating with our municipalities to deliver affordable housing and housing for people with disabilities. On Slide 13, Our 3rd value add strategy focusing on real estate transaction. We have the number one real estate M and A team in the Nordics. And as I said before, we have local people in different markets that are long term working, knowing market and delivering good profit from transaction. And at the next slide, Slide 14, you can see that We have an unprecedented track record in both divestments and acquisitions. And the last 2 years, we have done SEK 90,000,000,000 in acquisitions. And last year, the 2nd largest Swedish to the estate company values the value of total assets of €90,000,000,000 So that is just to give you a flavor about the amount of the transactions that we are doing. And this is, of course, Important value add strategy for our continuing growth where we have before Announced target of SEK 125,000,000,000 in property value by 2025, supported by BBB plus Rating estimated recurring profit from transaction is €400,000,000,000 on yearly basis. We have been delivering more than that every year since start. Slide number 15, Just to give you a flavor how this work in practice with different models with the life cycle of one of our properties that we acquired in 2016. And We applied this safe cash flow with rent regulated credentials. We applied all of our to value add strategies. And at the property, we developed 20 7,000 square meter building rights that we still own and that we will use for new development. We did renovate with strong Rent increases and strong reduction in CO2 emissions in this portfolio. We reduced CO2 emissions with 75% and with total 10% yield on cost. And then we sold the residential portfolio with great profit. So this is just giving you flavor how this to the Board's in practice. At Slide number 16, a few more details on Our honest capacity Rolling 12 months, we are estimating having Income of EUR 4,800,000,000 and having adjusted operating profit of EUR 3,000,000,000 from property management, EUR 2.3 krones per share and after profit from our value add strategies of EUR 2,200,000,000 and after deduction of dividend to equity instruments like V Shares, hybrid convertible bonds. We are counting to have adjusted operating profit to ordinary A and B shareholders with €4,200,000,000 or SEK 3.2 per share. And this has, of course, can be compared to our delivery in 2020 when we delivered profit after tax of €9,100,000,000 and also having very strong cash flow with The adjusted for nonrecurring cost amounting to SEK 2,500,000,000 in cash flow, which is increase of 166 percent to 2019. So if you look at the earnings capacity, 12 months, And we are expecting to deliver SEK 3.2 per share, including income from add value strategies and after dividends paid to in Asia's Hybrids and Convertible Dom. Next slide, please. At Page 17, We are elaborating and giving you opportunity to scan through the numbers showing that we are delivering Numbers for CKB plus rating with adjusted net to that to Total Capital 12 months forward at 45% and in at the numbers for presented right now at 50%. So we opt on very strong deleveraging during particularly Q4 of 2020. And this is supported by high quality Lawrie Scott that in during the pandemics have been proven to be Europe's most secured with rent collection of almost 100%. At the same time, we are continuing to rise in the coverage ratio. And then 2020, we had ICR of 4.1x. I see here 4.1%. It is ICR 4.1x. We have SEK 70,000,000,000 in unencumbered assets, and we have Very strong cash position, but we and continue to grow and combine the growth with having BBB plus rating in short term and Looking forward to achieve our long term objective of A-eighteen. Next slide, please. To summarize, profit after tax per ordinary share of Class A and B increased to 6.41 clients and this is with full dilution for convertible bonds. Three points to be emphasized, our strongest stable cash flows backed by AAA countries. And here, just to give you a flavor, I mean, if you look at we have a vote for 9.2 years for our community service properties, our elderly care homes, our schools, our special apartments for people with disabilities. And just assume 20 years for residential despite that in the Nordics, You can just assume much longer. Then you can see that we have more than EUR 50,000,000,000 in contracted income without break clauses. That is, I should say, unpresented number. Having this large amount of cash that is secured fully CPI linked with strongest rent collection in Europe. And on top of that, 4.5 years in fixed interest rate duration. So very stable basis with safe and secure the long term boxed in cash flows. Next highlight is that, that safe cash flow is combined with Growth delivered and fueled by our 3 valuable strategies, where project to the development delivered profit of EUR 2,200,000,000 in 2020, exceeding our targets of generating an average of to €1,000,000,000 to €1,400,000,000 annually in profit from Property Development. Also continuing to focus on constructing environmentally friendly rent regulated residential in Stockholm and Gothenburg having 681 Apartments in production and continuing to increase and found our Building Rights portfolio to 2,500,000 square meters, approximately 34,000 apartments, making us to be one of the leading, if not leading, property development in the Nordics. And on investment and the establishment side, we exceeded our target of 600 apartments annually by 16% in 2020, completed renovation of 695 Apartments. And of 695 apartments, you know, within 2020, 86% have been also applied for different environmentally improving improvement measures. And as a last highlight, I mean, starting with strong cash flows, topping with the growth and this combination is, of course, also delivering strong dividend to our shareholders, proposed dividend of SEK1 per share A and B class is 67% increase since last here and 9% since 2017. And at last, SPB continues to deliver strong cash flow, profit and growth. And we have best in class people that are ready to compete with whoever is out there. Thank you very much. Questions, please. Thank you. Our first question comes from the line of Tobias Kai from ABG. Please go ahead. Thank you and good morning. I would like to ask you regarding Ofeentlichiosis. I think you owned 44% Of Antlerheus at year end. Does that mean that Antlerheus has booked as a JV or is it Still consolidated in the balance sheet? Ofentes is booked as interest company. And we have In our profit has been decreased with 4,000,000 Swedish Clans because of Entireus has negative profits for 2020. So it's decreasing our income with 4,000,000 to Klauz. Okay. And what has happened since year end? Do you own 54% today? If that's correct. We will come with update on Ophentriah, on Ophentriahus, but we feel pretty comfortable to complete the deal in next a few months. And have you So had any indications from any of the larger or of the other larger owners within Ofeentes whether they are willing to accept the bid or not? Yes, we have and we think that people are selling the shares to us every day. So we will follow-up that in the next few days and update our numbers regarding how much shares we do own. And can you say anything about the status for the bid on Entra? Have you had any indication there about interest from shareholders in NAND, try to accept your bid. Yes. We have to shareholders that we have active discussions. And we at the same time, as we have said before, Entre is relatively small deal in our view. So we are seeing that as long term race. And as I have commented before, we have all time in the world to acquire the assets that we want. And given that owners with almost 40% of the company have said that they are not willing to accept the bid, If you would get like, for example, 40% acceptance, would you still continue with that and accept to that? Or do is it a requirement to get to 90% to buy any shares, I'd say? We will come with updates to the market on that in due time. However, We are pretty comfortable with the work that we have done on Entra. And Entra And the share price has been completely driven by our bid and we have We have put very strong offer to all shareholders. And We have time to wait as long as it is necessary. And you're saying that you are fulfilling the requirements for higher rating, but Still you haven't been officially upgraded. Can you say anything about the reason for that? Is the outstanding bids for Fremtzehoos and Entra One reason, for example, that we don't really know what the balance sheet will look in a couple of quarters from now. We our job is to deliver the numbers and then It's up to rating agencies to implement that in their models. And We also acquisition of Entreus and Entre is they are structured in the way. So we keep the BBB plus rating. So that should not be at least if you do the math, that should not be an issue. But We will wait and see how the rating agency will follow-up on this. And one final question for me, please. Just when I look at the report, I get the impression that A big part of the future growth will be from development of residential units. Can you Give an indication of what kind of yield we should expect that you can deliver on the production? I mean, if you look at our portfolio, which I think is unique and which this report is showing is exactly what you are emphasizing that The large growth is going to come from our add value strategies, leading by our property development. And I mean, already this year, we delivered over the target by delivering profit of EUR 2,200,000,000. And We are able to deliver new buildings to levels that are slightly below 5% to 5 point 5, which is very strong. When in the market, you have to go down for the newly with apartments to 3.5% and for all departments even below 3%. So there is very strong value creation in years to come from our Property Development portfolio. Okay. Thank you. That's all for me. Thank you. And the next question comes from the line of Victor Friedberg from FCX. Please go ahead. Thank you. The EPR amount per share is NOK 28.21 compared to, I think it was 24.36 in Q3. Can you comment on this Quite spectacular increase from Q3 to Q4. The main reason for that is combination of the strong profit and also at the same time that we are continuing to issue new shares. In Q4, we bought issue new shares for €1,400,000,000 and are delivering very strong profit. So it's a combination of those 2. And You have building rights regarding about 34,000 apartments and a lot of square meters of community properties in production. How important is your property and projects development for the company as a whole, would you say? It is part of our add value business and it is also what is differentiated SBB from traditional real estate business that we have Move with number 1 property development team that is creating value in a sense that is stronger than many traditional property developers. I mean, if you look at SBB and our lot of companies, we are past yet. We are among the builders in Stockholm winning the most competitions for new sustainable rent regulated department. So that is, of course, important part of our growth and important part of our value creation. That was my question. Thank you. Thank you. And the next question comes from the line of Simeon Mortensen from DNB Markets. Please go ahead. Hi, Helene. Just a few technical questions from my side. In terms of the financial fixed assets of at market fair value. Is that Aufentigerfus or what is it? Yes, that is listed shares and listed bonds, mainly listed shares. Okay. And also, this is then classified as financial investments per year end, if I'm correct. Yes, that is related to listed shares mainly at least you don't. Okay. The convertible bond, just wondering how is the dividend there Reflected in the EPRA EPS, the dividends for the convertible bonds, especially the EPRA EPS on Page 42 and EPRA NAV, which I see there is a reversal effect stated, but what how is the main elements of that convertible bond reflected It is done according to IFRS and you can reach to Evolopta that is our CFO to get exact details, but APS is Diluted for amount of the shares that will may or will be should in the convertible. Okay. My last question is just if you have any comments on the economic to letting ratio, which was down 120 basis points year on year. Yes, that is related to our property development. We see that we are taking a large amount of money from property development. So we are focusing on to create new building rights and in the way switching the properties to get Rent regulated residential and increasing part of it. So We actually almost don't have any vacancies. The main Part of our vacancies is related to rent segregated residential, where we have, in 2020, increased number of apartments with 16% and also the number of apartments that is Decated in order to be prepared for refurbishment has increased and then property development on top of that. Thank you. Those were my questions. And the next question comes from the line of Jan Yefel from Kepler Cheuvreux. Please go ahead. Okay. Thanks for that. I actually have three questions. And the first regards your rating. You said that you have Every reason to believe of an increased rating to BBB plus Could you tell us just the effect that would get on your average interest rates cost in terms of basis points. How much lower will it be with fluctuating? For the new issuances, Increasing rating from BBB- to BBB plus will be probably between 25 30 basis points and going to BBB plus will lead to additional 25 to 30 basis points, but that is one part of the coin. The other part of the coin is that will already be BBB flat. It will be a very strong de risking in in the company and access to much broader investor base, which is, of course, given our profit, very good for our development. Okay. And you're also targeting an A rating at some point in time. Could you just Tell us approximately, is it in 2 year, 4 year or what time frame do you have for this A rating? Yes, we see that we given the assets that we should be able to with increasing size of the portfolio and The increasing size of rent regulators, residential, elderly care homes, special partners for people with disability schools, This kind of core social infrastructure properties together with BBB plus Leverage numbers should lead to a minus rating. So in 3, 4 years, we should be there. Okay. And I'm also interested if you could give us the split in terms of net initial yield of your community service properties versus your residential properties. What could you give us a ballpark figure for these 2 segments? Yes, we I think that Our rent regulated residential are at the levels like 3.7, 3.8, and that means that community sales properties are at 4, 5, 4, 6, which is still relatively high. So in both segments. We see large potential, particularly after we have moved having more and more apartments in in Investity Cities and particularly Stockholm. Okay. And my final question regards your building right portfolio, this 34,000 building rights that you have. And I just want 34,000 apartments. Is it how much Are you going to develop yourself? Or how much are you going to sell? Or how much are you going to do with the JVs? And just give us a flavor on that, please. We are focusing to have like more and more in the normal management because we have very strong margins on those and it's very Difficult to buy new apartments. And we have traditionally said that we will have 50% of the portfolio in joint ventures and The 25% in bidding for our own book and 25% selling. We do think now that we will continue with having 50% in in joint ventures. However, we will build more from the book and because we see that we have both strong value creation and at the same time securing long term cash flow from lower assets. Okay. Thanks very much for taking my questions. Thank you. And the next question comes from the line of Berthu Nilsson from Call Square. Please go ahead. Yes. Hi. Previous questions have been about property development, which I'm also interested in. If you look at the market as such and also that around 50% of the value increase in Q4 was residential for your Portfolio, only 20% of the total market cap roughly. Would you say that If you look at the market as a whole, the production on new residential are in line with demand or could increase, so to speak? Yeah, I mean, we delivered strong profits from all three of to our value add strategies and there is Strong demand from for rent regulated credentials. And we are guiding that we should be able to deliver €1,000,000,000 to €1,400,000,000 from our property development, which includes delivery from building new apartments. So that is our view. Yeah. Second question, if you look at important Events after Q4, you referred to value increase of 1.2, which has not been in the result so far. When I read it, does it include the franchise, that figure. No, I mean, who's delivered the negative profit for 2020. So They are punishing us with minus €4,000,000 count in our profit numbers. The result of NPL is we should have the 4,000,000 small employed. Okay. Thank you. And the next question comes from the line of Fredrik Zjorn from Carnegie. Please go ahead. Yes. Good morning. A few questions from my side. So starting off with the last point that was just mentioned, the SEK 1,200,000,000 for order value uplift that's going to happen in the next couple of quarters. So how much of that stems from projects and how much is actual acquisitions? And the second part of that question is, is the majority of that going to fill through already in the Q1? That is from the properties that are from the contracts that will be in how to say that will start in next the numbers for this calculation is maximum 12 months forward. So it is the majority of this It will be done at the latest in Q3. So it's in next three quarters that it is and it's related both to the properties that are under the construction and the properties where the new contracts will start within this period. But the majority is not related to any acquisitions you've done? It's either The majority is Not related to any new acquisition. Majority is related to property development in the new context. That's clear. And with regards to the earnings capacity of Fenkelheus, has that been taken into account, The 44% that you already own? Yes. That is taken into account in right now in earnings capacity as a part of income from joint ventures, let's say. That's clear. And then with regards to your cash position at year end. It was more than SEK 13,000,000,000 which is obviously a level you would not like to see that. Should we expect Has that cash position materially changed already by now? Or do you anticipate to have a higher cash position in preparation for any larger deals around the corner. We will have higher cash position. We still have to the high cash position, and we are expecting to have it during the next few months. And why is that? We think that we are delivering very strong profit and looking at looking how we are delivering from our property development and we see very good pipeline on all delivery levels from our 3 value add strategies. So we think that this cash is It is possible to combine with continuing to deliver strong profit. And we think we can find good use for it. Okay. I have 2 final questions So second last question is investments. You did if you look at the InvestmentX Acquisition, it was SEK 2,100,000,000 in 2022. And given how are you talking about the business, it sounds like you're going to step of that volume in 2021. Can you give us any idea of what that figure might look like when we summarize 2021? I mean, we are saying that or guiding that we should be able to deliver it in terms of profit, €6,000,000 from our refurbishment and the investments business. And that means if we say that we will deliver SEK600 €20,000,000 we used to almost double the yield, but I'd say that we have a margin of 70%. That means that we should invest there €800,000,000 €900,000,000 And on top of that, we will invest in continuing to to build new apartments, new LDCARE homes, new LSS properties. So that will be probably on €2,000,000,000 And then my final questions, and it relates to building rights in rental portfolio, how much is the book value of building rights in that portfolio? It is our book value is very, very low. We are averaging book value of SEK 13.60 per square meter, and that We are just to how to say to as a way to illustrate that we are publishing some Scenarios also in the report and showing that estimated value of those building rights Should be €8,600,000,000 versus book value of €3,300,000,000 So that is giving you some view there. Yes. And the reason why I'm asking is the SEK 3,000,000,000 and some of that those building rights, I would imagine, are not in the residential rental portfolio, but in the other segment. So I just wanted to know how much comes through in the residential rental portfolio and how much in the other portfolio. The majority of that, it is Like 80% of that is Okay. That is where where those are booked. And Prenic, let me come back with exact numbers, what is in in Northern Baptist at Residential in the Residential portfolio. Sure. Thanks a lot. Those were all my questions. Thank you. Thank you. And the next question comes from the line of Clark Macpherson from Pictet Asset Management. Please go ahead. Hi, good morning and thanks for taking my question. Just to come back to the rating. I'm just wondering what's changed since November last year at Moody's sort of did its last complete review. And in that they sort of mentioned a list of deliverables, which suggests that there might be a longer pathway for you to obtain the upgrade despite the fact that your ratios look very much like A better rated entity than the current rate here. I'm just wondering if you've had any engagement with Moody with S and P since November to suggest that maybe an upgrade might be coming sooner rather than later. We have today the rates from S&P and Fitch. And following our November results, We have done a large equity issuances on top of the very strong profits on Q4. So we are actually expecting rating agencies to act on this. But you never know before it is to Don. But we feel pretty comfortable with our numbers and we feel pretty comfortable with our ambition to to achieve TPLB plus as we have emphasized before. So we are awaiting the action. Okay. And just on the hybrids, I think under the Some key criteria, you have maybe a little bit of capacity for further hybrid issuance. Like my numbers suggest roughly are just short of CHF 300,000,000. Hybrids could have formed part of your possibly part of your rating strategy going forward, particularly with the view to trying to lift the rating To single A in the long term? Yes. I mean, we are a fast growing company and for the fast growing company, hybrid is also like a bridge to continue to build strong equity. And We as you said, we may be short a few 100,000,000 at the end of Q4. But If you just look 1 quarter looking forward, which rating should be looking at least 12 months looking forward. And in theory, it should be 12 to 18 months. So then We should even have space for more hybrid than the less. But We like the hybrids. We have good investor base there and we are going to use the instruments going forward, beating 15% of total capitalization according to the framework. Okay. That's great. Thanks for taking my questions. Thank you. Thank you. And the next question comes from the line of Paul Gouri from BMO. Please go ahead. Hi there. A couple of questions from me, Just building on previous questions. So now we've established that our FEN Tigavus is included in the earnings capacity. Can you just confirm what drove that, I think, spasticity down 5% quarter on quarter in terms of the per share Measure, is it the cost of the hybrids and the issuance of new shares? Are they the key drivers? Or is there anything else? I do not actually see Where do you see that Sorry. Yes, okay. So on Page 45, 1.52 is the Earnings capacity per Class A and B share adjusted. So that's Page 45 of the results. And then if I take the Q3 report on the same table, which is on Page 41, it was 1.6. So it's now EUR 1.57,000,000,000. It was previously EUR 1.6 to see because the earnings, this is affected by us In December, issuing a large amount of issuing 45,000,000 B Shares and also issuing B Shares and new hybrid in December. So that is On the property management level, earnings capacity is actually increasing. But given the short time of the short time of dilution. You have some effect there. Yes. Okay. Yes, that's clear. Thank you. And just a follow-up to Frederic's question about cash on the balance sheet. Is part of the strategy there to keep more cash on the balance sheet to yes, to help LTV. It's obviously a very In the way you calculate it, it's net debt and total assets. So you kind of you get to count the cash twice. So it's a very beneficial way of keeping the LTV reported LTV figure down. Is that part of the strategy? Or is that not relevant? Paul, as you know, cash is expensive. So we have only one strategy and that is to deliver value to our shareholders. Okay. Yes, okay. That's clear. And then Finally, just we've done this a bit, but on the rating agencies. Again, you obviously meet the metrics And the ratios as required. But there's been some talk of the ratings agencies being a little more, How to say, some of the softer elements around more creative capital structures that the high use of The shares of hybrids as kind of debt instruments, even if they're not calculated like that, They started to take a slightly more critical view. Based on your conversations with them, is there any element of that? Is there any element that they're now being a little harsher when it comes to this sort of instrument, Even if you meet the metrics at face value? Well, those instruments are using by largest the real estate companies in Europe. And I have not seen I'm not seeing any changes in how the hybrid instruments are treated. And And it has never been discussed in any discussions that I have been within concerning treatment of the hybrid instruments. Okay. Yes. Thanks for listening. This report is published today. So we will see what will happen in the time after the report. Yes. Okay. And last one from me is, I was interested under the prospects of the company, the table you provide, you compare yourself to Cinch and Billfront and companies like that, are these genuinely companies that you kind of analyze as peers? And you think that the rating is equivalent should be equivalent to your own and that the profits that they report is equivalent to yours. I like your question very much because that is personally important for me because my point is, at the end of the day, It is not about the properties or always owning the most beautiful house. At the end of the day, it is about people and it is about infrastructure and it is about team. So that is my point. I'm arguing that I have a world class team on all positions. And that is why I'm doing this kind of comparisons, and I will be happy to continue with this. Okay. Okay, great. That's all my questions. Thank you. Great. Thank you. And we have one more question from the line of Axel Osen from Nordic Property News. Please go ahead. Hi, that you saw growth possibilities in both Denmark and Finland. I was wondering a little about what kind of possibilities and where in those countries do you see We are currently having discussions to acquire new portfolio in Finland. And we are also looking at social infrastructure in Denmark. So we will see new deals in those two countries before the summer. Okay. Are there any particular regions or cities or interests or is it just depending on the portfolio? I mean, we are focusing on social infrastructure and the largest part of our portfolio is in the in university cities in the Nordics. So it is there the targets are. Great. Looking at your report, in terms of property value, Finland is 10% of your portfolio in Denmark is at 1%. Where do you see those figures going like when we sit here next year talking? I mean, we are doing the deals where we create the best to value for our shareholders. So we do not have specific targets based on the countries. Great. That's all the questions. Thank you. Thank you. And as there are no further questions, I'll hand it back for closing remarks. We have received a few questions by e mail as well. But as time is running out, we will get back to those in writing. Yes. And I think we had one from Barclays. I think that has been responded to through other questions. We will Good. Thank you very much. And as We try to be very clear on it is all about people. Thank you.