Samhällsbyggnadsbolaget i Norden AB (publ) (STO:SBB.B)

CMD 2020

← View all transcripts

Jun 17, 2020

Welcome, everyone, to Samuel Spigna's Vloggett's Capital Markets Day, which is the grand finale of what has been a highly exciting first half of twenty twenty. I'm Adrian Westman. I'm Head of Investor Relations and will moderate today's session and where you will meet with the full management team of SPB and other selected key people from our organization, everyone will present themselves when it's time to enter the stage. Looking at the agenda. We will start off with an introduction from our CEO, Ilja Wattland and CEO, Lasse Tageson, followed by a walk through of our unique business model, which is how SPB creates value. We will then round off with a financing section and conclude with the new targets that were announced yesterday in a press release. And last but not least, we will have a Q and A session with the full team on stage. During the Q and A session, everyone who is here in the room will, of course, be able to ask questions. And for those following the webcast, if you have preregistered, you can write questions in the message board tool and make sure to use the same name as when you registered in order for the questions to come through. Our aim is to finish the day at 4 p. M. By the latest, and we will try to answer as many questions as possible. If time runs out, we might have to get back to some of the online questions by e mail. And the full webcast will be available to see afterwards on our website. So I think that's it for the introduction. And I give the floor to Ilya and Lasse, please. Thank you very much, Adrien, and thank you all for calling coming and listening. I will give you a short introduction to SBB. I am Founder and CEO of the company. And together with me, I have Lars Tageson that is one of the most experienced professionals in this business, of course, our Chief Operating Officer. Concerning SVB, we do operate in the world's safest drill assets classes in terms of social infrastructure in the Nordic countries, Sweden, Norway, Finland and Denmark and Swedish Rent Regulated Residentials. And please observe the word rent regulated residential. Rent regulated residential in Sweden are mainly owned owned by municipalities, and those municipal companies have also an association, which is Public Housing Sweden, and SBB became the first ever private member of Public Housing Sweden in late last year. We have and as you have could seen during the corona crisis, and I will come back to that, among the strongest cash flows in the Nordic regions. As I said, properties in the Nordics, mainly in Sweden, 76% of the total portfolio then Norway with 15%, Finland 8% and Denmark 1%. We have SEK 5,200,000,000 in running rental income, NOI of SEK 3,700,000,000 and very strong net yield. We have net yield of 4.7%. And as you can see on the slide, 66% of our assets are located in the Nordic larger cities with Stockholm and Oslo as our largest regions. We have been performing well last year. And one of the reasons why we are performing well and why we have strong outlook going forward is on this slide. We are in the space that is very favorably affected by demographic changes. All of you understand changes in increasing number of elderly people and demographic aging, but those are also the regions with strongest demographic development in Europe. And for you that are not familiar, Stockholm and Duslo have been the fastest growing cities last 10 years in Europe. If we then look at COVID-nineteen, big crisis that is affecting all of us. Also during this crisis, our assets have shown amazing resilience. We reported in the Q1 report that we, in Q2, have only SEK 12,000,000 in deferred payments and only SEK 1,300,000 in rental discount, which should be related to SEK 5,200,000,000 in rolling income. And we also see that those rental discounts, despite that those are very small, that is our way to support society to manage the crisis. Probably one of the most important points at this slide is at the down of the slide, showing Sovereign Credit Rating. We are exposed to government backed income from 3 of 10. 3 of 10. There is 10 countries in all of the world that have AAA rating. 3 of those are Sweden, Norway and Denmark, our biggest markets. So our income is governed back from AAA Sovereign rated countries. Some of you that have been following us have seen this slide focusing our pillars of strategy with our unique and difficult to replicate long term relationship with municipalities and other market participants that, at the end of the day, has been delivering the strongest NAV growth in the sector and in Europe last 3 years. So you can see at the figure below 73% on yearly average. After the acquisition of Hemfusa, we became the Nordic and Nordic Champion in Social Infrastructure, the largest company in the space and also the 3rd largest in listed real estate space in the Nordic. You've heard me about telling about our safe assets, social infrastructure in the Nordics, rent regulated residential in Sweden, backed by government backed income from AAA rated countries. But probably our most important asset is our team. And I will start with our Board. We have Lennar Schuss, Founder of Cattella, Senolu Fuwans, Founder of Fast Partner, Fredrik Svensson, Board Member of Baldr since 2005, the 2nd largest owner, Eeva Sart Grimaldi that has been CEO, Chairman of the Board for both listed and non listed companies, Anna Gretta Stremerksen that has been having long experience from business and politics, also been a member in different Norwegian governments as both Health Minister and Defense Minister and Hans Roesten that was involved when SAGAX has been founded. And with me, I have probably the most knowledgeable person in this space in the Nordics. And it is Lars Tagesson, my mentor and my teacher that have been teaching me almost everything since 2,005 to 2,006 that is now mentoring our young professionals. You will meet some of those here today. You will see that Lars is very successfully transforming his bread knowledge to our extended management team and created new champions in this space. And Lars has actually focused all of his life since he left primary school when he was 14 years to today to work in real estate business. So he's the person that has done the most deal in Nordic transaction market without anyone coming close. And because of being focusing on doing deals, he has missed his English. But for you that or some of you that are Swedish speakers, you can always reach to Lars, and I'm sure you will get the best insight in this very special asset class. The rest of the team, you will meet through the presentation, and you will also heard through the presentation what we are planning to achieve or where we are going forward. But it's always important also to remember how we have delivered off our EALIAR targets, and we have always over delivered. 1 of the most beautiful part of this slide is actually us delivering our first investment grade rating after announcing target in 2018 and delivering on that in 2019 and in that way creating a lot of value both for our equity and for our credit investors. Today, we will also focus to explain how we are creating value for both society and for our shareholders. And we have a unique business model not only to be exposed to AAA credit rated countries, but also in the way that we are delivering income from 4 different income streams, from traditional property management where we have SEK 5,200,000,000 in almost fully government backed income from Property Management and 3 additional income streams. The first one, property development, where we are also announcing the new goal. Christian and his team will tell you more about that. But I just want I don't know some of you have missed the news yesterday that Vadek is selling their business their property development business. They have sold property development business for SEK 7,700,000,000. They have 15,000 building rights. I can repeat once more: €7,700,000,000 for 15,000 building rights. Christer will tell you how many building rights we have, but you can be sure that it's more than 15,000. The next is our team working on property renovation and combining that with sustainability, where we have been showing a large decrease in CO2 emissions. And finally, we are a transaction intense company. And our transaction and M and A team will give you insights in how we are creating the income from our transaction business. And finally, I'm not good, and I have to admit, my only qualification for this business that I have some grades in mathematics. So I'm not good on real estate, but you will meet many people that are good on real estate. But when you work with mathematics, there is always plus and minus and then you have the results. So I like to focus on results. So on this slide, you will see one case study that is delivering from 4 income streams. We bought almost 500 apartments in 2016, and short time after, we agreed with the Tenant Association the new rents after renovation to SEK 12 50 per square meter. And we start to renovate. And up to now, we have renovated 100 and 4 apartments, creating income from those apartments, both increased rental income and also increased value. At the same time, our property management team, on top of having income from property management, also used actually some few liters color to draw the new parking lines. And from that work that took I think it was 7 liters of color and 10 hours, now they are collecting SEK 800,000,000 in income every year. Shortly after, our property development team focused on that property, and it's now in planning to deliver 20,000 square meters of building rights. So that means we have made money from property management. We have made money from refurbishment and investments. We have made money from property development. And at the same time, we're working with refurbishment. We used our green bond framework to decrease CO2 emissions with more than 50%. And in that way, add value to society, make the money. And finally, I was not for that, but our transaction team, they are always lucky to make some money. So they sold it for double the money. So this is how it's working in the real world. And I hope that you will learn more about it and understand more about SBB. Thank you for coming. Thank you. Great. Thank you, Ilija and Lasse. So now we will look into the different parts of the value creation model, and we will start off with the foundation that is the property management. And we have Anneke and Fredrik, who will join us on stage, please. Thank you. My name is Annika Ekstrom. I have 24 years in the industry, 20 years as a head. I worked at Hemphusa since 2010, where I built up the asset management team to, in my opinion, the best in Sweden. Now, I. N. Fredrik has integrated Hemphusa and SBB into 2 asset management teams, 1 for community service properties and 1 for rent regulated residentials. In this way, we get 2 very efficient teams with high competence in each business. We also increased the GAAP with 2 15 percent from 25,000,000,000 to 80,000,000,000 and on the other hand, the number of employees with 91%. So we gain considerable economies of scale as well. This team and, of course, all employees behind makes my and Fredrik's job very easy. We have taken the best regional managers from Hemphusa and SBB and put together a dream team. I worked with this, a lot of many of these for several years, so I know them very well. They are all very experienced, very business minded. They know their markets, and they like to make business. New lettings, renegotiations and of course, take care of the tenants, Sitter Urigmarjen, as we say in Sweden. And we have many local property management offices with dedicated employees who knows their region and tenants and have a strong local contact that generates new business. So with these key employees in place, we are up and running, and we are more than ready to continue to create value. We have a fantastic portfolio of community service properties with a value of €61,500,000,000 93% of the rent comes from government funded tenants, 93%, meaning very low risk tenants, very secure rental income. And as Ilya told you before, you see the countries, they are all triple rated, Sweden, Norway and Denmark. Sweden is the largest market, but we have in all Nordic countries a strong foothold in the metropolitan regions. We have long leases. We have 7 years as average. And we also know for a fact that a majority of our tenants, they renew their leases. They don't move that easy. When we make tenant improvements, we have lease length of 10 to 15 years, and we, of course, get higher rent as well. And regardless of the state of economies, schools and elder homes are needed. So the economy only has a small impact on our properties. Then Fredrik? Thank you, Annika. Hi, I'm Fredrik Holm, I'm property manager for our rent regulation resident portfolio. I have 24 years in real estate business and more than 15 years was only for residential. As we can see, we have lots of regulated residential in many good location in medium size and major cities, especially middle and south part of Sweden. And here is the numbers for our portfolio. And as you can see, especially for the rent, there is still lot of opportunities for us for activities and good investment for increasing the rent. And my colleague, Peter, will tell you all about our unique residential renovation well working business model later on. And the best part is only 25 percentage of our portfolio is renovated, so we still have the best part in front of us to make business. Thank you. Okay. The last slide. So to summarize, we have built a dream team in social infrastructure asset management. And you have heard it before, and you will hear it now, and you will hear it later, we have the safest assets in the world and clear economies of scale achieved as well. Thank you. Great. Thank you. So as stated in the beginning, we will round off the agenda with a Q and A session. If you are following online, you can already now type your questions in the tool, and then we will collect and save them for later. So that was the foundation. Now it's time to start these 3 additive recurring income streams. And we will start off with property development. We have Christer joining us here, and we'll start off. And then we have Erik and Jenny also joining on stage. Please, Christer. Thank you, Adrian. Hi, everyone. I'm Kliese Karlsson, Head of Property Development. And my experience is 24 years 22 years in the construction sector within NCC, in the Nordic countries and in the Baltics. And then I joined the IXM at the same time as Ilya, and then I joined the Samrissingerasplagate when it was founded by Ilya. As Adriaan mentioned, SV has 3 additive recurring income streams, and one of them is the property development. And now me and part of my team are going to introduce you to that one. So what do we see? We see a huge undersupply of when it comes to community service properties. And we see as we can see, the red one is the needs and the gray one is the planned. So we are now planning and building for less than half of the need when it comes to elderly homes and less than a 4th of the needs when it comes to high schools. On top of that, we see the Nordic region are growing. We're growing with approximately 2.4 inhabitants within 20 years from now. So we this altogether gives us a huge demand. And from an SV point of view, we have the solution to those demands with our land bank, with our organization and with the balance sheet. And what do we have? Compared to other companies, we have an extremely strong land bank. We have 25,000 apartments within the land bank. As you can see, we are in front of Bnava, G and Piab, for example. And as Ilya mentioned earlier, we have 15,000 apartments where we stand out with our 25,000 apartments. And I will guide you through our portfolio later on. And I would also stress the fact that we are the only company in this picture that works with both development and management. Okay. The past years, we have focused on the left side of the picture. We have focused to create a rock solid building right portfolio. And now we have about 500,000 square meters that are legal force. So we think it's about time to move on to the right part of this area to construct for our own balance sheet and for our own management. Erik will tell you a little bit about that process later. And to mention a little bit about the planning process, as such, we are working we are when we present our portfolio, we are working within 4 phases. The first phase, we are working with a concept and internal decisions to start, etcetera. And then we sent this to the municipality and get and after that, we get a decision from the planning authorities to start up with the planning phase. And when that's ready, we have a sooning place legal forced. And for those of you who think this is quite an easy job, when I'm talking about it, I would say that this is quite a complicated process. This is a chart from a municipality that describes the same process as I just described. So each and every we didn't translate it. But I want to stress the fact that each and every of these bubbles contains a lot of things to be done and acts to be taken. And also, I think it's important to stress the fact that once you have the zoning plan legal force, you could apply for a building permit at the municipality. And the municipality, due to law, must grant this application within 10 weeks. So the crucial part when it comes to property development is the building rights. This is a very important slide, and I'm proud of it. I will stress some facts here. On this row, you see our volume of building rights became illegal force. So this is the volume where we can just send in an application to the municipality and get a building permit in 10 weeks. So we have proven evidence that we have done this, so to speak, 400,000 square meters. And if you add the 400 square meters to this 760,000,000, you get 1,200,000 square meters. This is the volume that we have an agreement with the municipality to start the zoning work, so to speak. So SEK 1,200,000, we have an agreement with the municipality to work with. I would also like to stress the fact that we have in total 1 point 8,000,000 square meters corresponding with the 25,000 apartments that I talked about earlier. And this correspondent will have value on the balance sheet of SEK 14.20 compared to what we have sold for that you have here. It's nearly 3,500 square meters. So this is the value uplift that we see ahead of us. And the last thing I want to stress on this picture is that we have this 1,380 square meters that we can develop for our own management, so to speak. And just to give you some short examples, we have made ABC three examples. The first one, if we just act in the area that I told you that we have been in the past, if we sell our building rights, 100%. This would then we have a result of SEK 3,400,000,000 And if you we assume that it takes 4 years to deliver this, then we have a result of SEK 850,000,000 per year by selling the building rights that we have already in our portfolio. Then we have the other way to do it, the right way to do it, the right way to do it. And that is if we start to develop for our own balance sheet and we can do it either 100% or like fifty-fifty percent. And we have made up an example here. Here, we have the example. This could be like an ordinary school, an ordinary residential, an ordinary home for elder somewhere in the Nordics. And we have calculated an estimate that the profit would be 8,500 per square meter. And if we do it 100% by ourselves, it will correspond with SEK 10,000,000,000 in total. And if we assume that it would take us 8 years, it will be SEK 1,300,000,000 per year. And if we do it fifty-fifty, you have it right in between, it will be 6 years and SEK 1,200,000,000 per year. And I would like to stress the fact that this is only, so to speak, within the Building Rights portfolio that we are working with as is today. So now when we have our Building Right portfolio under control, I would like to welcome up Jenny, who takes the Building Right portfolio into long term lease agreements in this project. Okay. So short introduction. I'm Jennie Asmanson, and I am Head of Business Development in this project development team. And I'm happy to have joined SPB earlier this year. I've been with Hemfossa as a business head of business development, and I also have a background as a property director at the municipality of Naka. I have a good orientation around community properties and the challenges facing the municipalities. For example, timing the capacity, financing and not the least, the process of public procurement. And to give you a short glimpse of our project portfolio, I'd like to highlight 2 of our ongoing projects. We're building for the city of for the municipality of Vasteras an office for their social department. It's about 8,000 square meters and will be ready until next fall. For the moment, we're also in the making of a new city hall in the municipality of Nikkarn. And that's around 4,000 square feet of new and updated space. And we have both these projects are built from our own building rights. Those are two examples. We have more projects in the pipeline. And my main responsibility is to transform the building rights into new projects and also to bring in new projects from the start. We see many requests at the moment. And as we have heard earlier, there's a growing demand for expanded capacity and also for reconstruction and modernization. A lot of new schools are needed. There's a huge need for more elderly care and also new police stations. And I'm not sure if you have read or caught that, but I'm happy also that we have just recently landed the opportunity to build a new police station in Sallen. And that's also connected to the Swedish government's new strategy to add 10,000 more policemen until the end of 2024. It's also feels good for us because the Swedish police force is one of our large tenants. We have 40 plus police stations throughout Sweden. We're also working with 2 new schools for the moment. We have one in Jarfella that's in the zoning phase. And we also have another one on our own building rights in Haninge. That's currently under construction and will open up for new students in the fall of 2021. So I have a very positive outlook. I find that we're attractive in these processes. I feel that we have a competitive offer. And our strength is often our local property management. Our head of regions are well connected and business driven. And we also build trust with our keen and competent project team. And that makes my job a lot easier when I have solid colleagues. And so my work is to bring in and to start up these projects. And when the lease agreement is set, the project moves on to the next phase. And it's my time to introduce my colleague, Erik. Thank you, Jenny, and hi, everyone. My name is Erik Kavenmark, and I am Head of Project Development. Project Development is the implementation phase of the property development business illustrated in the on the right side of the figure Krista previously showed you, also shown in the lower right corner in this picture, a phase that ends with a completed fully leased building for own management. I started at SBB in January this year, and I have previously worked at NCC, EM, Riksen and Vedecker. I have 17 years of experience in the building and property industry, both as developer and contractor. At Riksen, I was responsible for developing new residential buildings and a procurement which resulted in an agreement with a contractor, including 2,000 500 apartments built with a modular building system. I'm very happy and inspired to now be part of this very competent and experienced team at SBB and get the opportunity to work with this fantastic building rights portfolio with its enormous potential, which Kiste just told you about. At SBB, we are now working on a procurement to find a contractor that, in cooperation with us, can develop several new residential buildings in Sweden with rent regulated apartments. This approach will give us a lower cost compared to signing an agreement with a contractor for each project individually. And it will also enable us to, in an effective way, focus on sustainability issues such as the completed buildings, energy consumption, building system, building material selection and so on. The project development team at SBB consists of 7 persons. This team has great expertise in developing community service and residential buildings. And our projects are guided by a defined process with established routines for managing and monitoring the ongoing projects. Our projects are on land and buildings that we own. So all the technical conditions are known to us. And the buildings we develop are largely regulated and therefore, basically designed and constructed the same way. So the cost level, unknown to us for the projects. And in addition to that, the contractors are fully responsible for the project implementation. Finally, our projects in community service properties are based on tenant agreements And our residential projects with rent regulated apartments are based on the structural undersupply of housing in Sweden. So we are not affected by market fluctuations. So to sum it up, in our project developments, we know the revenue, we know the cost and we have the tenants. Thank you, Erik. And to sum up the whole part of property development, I would say that we can see that we have undersupply of community service properties and also of residentials. So we don't see any market risk in this. And as I have told you, we have 1,800,000 of square meter building rights in our portfolio. We are of 400,000 is already legal forced. So we have a proven track record from Suning. At least we have skilled and experienced people, so we can manage to develop for our own balance sheet. Thank you. Perfect. Thank you, Tim. So while we change some microphones, that was the 1st recurring income stream. That is the property development. We will now move on to property renovations and sustainability. And I hope that you also that we presented new sustainability targets for a sustainability vision earlier this year for 2030, which Marika will tell you more about. Then but we will start off with Peter, who is our Chief Technical Officer, and he will dig into the details concerning all the renovation related business. And we'll see when he joins us. In the meantime, once again, I can just say that for those following online, you can continue to type questions as we go along, and we will get back to questions in the end. So Peter, welcome. Thank you, Adrian. Thank you very much. Hi, everyone. My name is Peter and I'm a CTO at SPB. I joined the company in November 2016. And today, I want to talk about how SBB is creating value in our existing property portfolio. We have a handful of different strategies that we use to increase value. 2 examples of that is our renovation process in community service properties and, of course, our apartment renovation program in our rent regulated residential in Sweden. But first, let me start here with our residential conversion. This is when we create income bringing apartments out of non income bringing square metres within existing buildings. And of course, this is not possible everywhere, but it is in our DNA to search for this type of potential. And if there is a hidden potential, we will find it and we will execute it and we won't miss the opportunity. Until now, SPB has created almost 70 new apartments within existing buildings without adding any extra square meters. And that is apartment that people, families and students are living in right now, and I think that's quite amazing. But our most important process to create value in our residential building is our apartment renovation program. And for that, we have an industrialized process, starting in a new location when the existing tenant is moving out. We take that apartment and we renovate it and use it as a prototype to show the union of tenants in the negotiation where the goal is to set the new normative rent level. And in Sweden, we have a quite unique rent regulation system, which is good for us because it gives our visibility and the new rent levels after renovation is very predictable. But I will go through how this system works on my following slide. But let me first finish this. Once the normative rent level is agreed, SPB proceeds to renovate apartments as a tenant terminator lease. And by that routine, we minimized the vacancies due to renovations. And about our projects in community service properties, we have several projects underway. Some examples is the rebuilding of Arlovskorden in Malmo region in order to create more elderly care units for private public founded operator in Urdlandia with a 15 year lease. We have a tenant improvement project for the municipality of Haningen, where we modernized the school with a 25 year lease. We have a conversion and extension of the City Hall of Nykvaan in Stockholm Region with a 25 year lease. And as the Nordic region largest actor in group housing, SPB has multiple group housing units under construction, and we always negotiate the rent levels before we start our projects. But now let me clarify how our unique rent regulation system in Sweden is working. We negotiate a normative rent level. And to calculate the rent level for a certain apartment, the system is building on this formula. And the input in this formula is the normative rent level and the apartment points and the apartment size. In this example, we have a 2 room and kitchen of 62 square metres and a rent level before renovation of 8.50. It gives us annual rent of about 55,000. And if we, in this example, agree a new normative rent of €12.50, we get a new annual rent of €81,000 Most of the company, they're working like this. And most of the company, they think that the apartment size and the number of room in the apartment are fixed figures. But every time we renovate an apartment, we look at the floor plan, we look at the layout and we try to find ways to make additional rooms. So we are working in this box. And as you can see, if we can make an additional room, we increase the apartment points and the annual rent will go up even more and still with the same agreed normative rent level. As you can see on this picture, we illustrate from a project we made how the standard of the apartment is. And as you can see, this is new production standard. In Sweden, for the last 20 to 25 years, the rent level has increased in average between 1% to 3% or 1% above inflation. And on top of that, if we invest SEK 5,000 per square meter, we can increase the rent level with SEK 3,000,000 to SEK 400,000,000. And in addition to that, our costs will be lower due to lower maintenance costs. So the NOI will be even better. As you can see on the picture, our average rent level before renovation is €962,000,000 and the potential after renovation is 13.83. And if you compare that to rent levels for new build apartments, you can see that it is still very cheap. We have a target to renovate 600 apartments a year and we have still 75% of the stock remaining with this potential. And by this type of projects, we estimate our recurring earning effects to be €600,000,000 per year. Thank you. Now I will introduce my colleague, Marika, who will talk about sustainability. Good afternoon, everyone. My name is Marika Deming. I'm Head of Sustainability. I joined SPB in July 2018. Prior to joining, I was at a Swedish bank where I worked with their green bonds. And prior to that, I worked for many years as a Capital Markets Lawyer in London. In February 2020, we launched Vision 2,030. Our aim is to become the world's most 1,030. Our aim is to become the world's most sustainable property company. We're governing the company's operations in line with the following UN Global Sustainable Development Goals. 5, gender equality 7, affordable and clean energy 8, decent work and economic growth 11, Sustainable Cities and Communities 13, Climate Action and finally, 15, Life on Land. We've selected the following ecological sustainability goals. 100% renewable energy in the entire property portfolio and also minimizing carbon dioxide emissions by reducing the emissions by at least 5% per year. Promoting renovations. We're promoting renovations instead of demolition. All properties held for more than 3 years must be environmentally inventoried at least every 10 years. Increased wood usage. At least 50% of our new production is to be comprised of buildings built of wood. Reduced water consumption. We are continuing to contribute to reduced water consumption in our properties with a goal of 1% water savings per year. And finally, integrating public transport access. We're managing and creating housing in locations close to public transport, which contributes to reducing the transport sector's environmental impact. We're also using sustainable financing sources by issuing green bonds. On the 1st June this year, we integrated our green bond framework with Hem Forsa's green bond framework. Our green bond framework has received a medium green rating from Cicero, and we now have CHF 10,000,000,000 eligible for green financing. We issued our first green bond on 14th February 2019, and it received a rating of E2 from Standard and Poor's. The following are our selected social sustainability goals. We are a member of Public Housing Sweden. We will continue to be a member of Public Housing Sweden and we will participate in the residential social work of the municipalities. Youth employment. We will continue to contribute to young people's occupation by offering at least 100 summer jobs every year to young people who live in our residential areas. Refugee assistance, We will annually contribute at least 10 better shelter refugee homes and 100 tents through the UNHCR to help improve the housing situation for refugees. And finally, inclusive employment. We aim to be the most attractive and inclusive employer for the best and most professional employees regardless of gender or background. A few short words about our summer interns. We offer summer jobs to youth living in our residential areas, which connects all of the dimensions of sustainability. Nice external environments in our residential areas, we reduce wastage of our shared resources and we contribute to our long term operating net profit and create a link to the youth employment in the market. So to sum up property renovations and sustainability, Sweden has a unique rent setting model based on utility value. We have a large remaining value potential in our portfolio, and we are fully committed to supporting the transition towards a more sustainable world with very clear targets. Thank you. Great. Thank you, Marika. Thank you, Peter. We have received questions on a question on the webcast if the material can be found anywhere. And you can find the PDF file with the full presentation on our website, spbnorden. It's available both in the Capital Markets Day section and in the Reports and Presentations section. So the that was the 2nd recurring income stream. And now we have come to the transactions part. So Oskar will start off going through both the market and the transaction recurring income stream. And then we will round off this part with a positioning review of SPV in SPB in comparison with some selected reference listed peers in Europe. So but Oskar, the floor is yours. Thank you, Adrian. Hi, everyone. My name is Oskar Ekander. I'm the Business Development Manager at SPB. I have worked for the company since it was founded and previously worked at Riksen among others. I'm going to talk about our 3rd income stream transaction, but first I'm going to give you some insights into the market where SPB is present. SPB is present in the community service market where we have a Nordic focus, a focus against some of the strongest economy in the world. Almost all countries are AAA rated. They have a solid GDP growth historical. But at the same time, the countries have some demographic challenges and also a growing population. This gives SBE a great opportunity of growth. If we look into Sweden alone, we see that we need an additional 7,700,000 square meters of additional community service properties until 2,030. In Norway, we have the need of an additional 6,200,000 square meters in the upcoming 20 years. And as you can see on the right side here, the market is currently not able to build the elderly home cares and the schools needed. Less than half of the elderly care homes needed is being constructed and less than a fourth of the schools needed. As you all can see on the bottom right side of the slide, this can be constructed at attractive rent levels. Also rent levels that indicates that SPB have some rent potential within the current portfolio. The community service market is a market with fairly high barriers of entry. Looking into the different companies in the market, we see that several of the largest companies in the market has been built up by SPB employees such as Hemfusa, Hemse and Riksen, among others. If we also look into the most mature community service market, which probably is Sweden, we still see that the municipalities and the states holds almost 80% of the total stock. This also gives SPB a unique opportunity to grow into the market. This is a market where SPB is the preferred buyer, and we see an increasingly willingness from different municipalities around the Nordics to make more transaction. We have ongoing discussions with municipalities in all different Nordic countries. The second market FSB is exposed to is the Swedish rent regulated market. And this is probably one of the safest assets in the world. As my colleagues previously have pointed out, our book value is less than half of the replacement cost. Our current rent levels is less than 60% of the market and of the rent in new construction. Also here we see that the large owner of Swedish Rent Regulated Residential is the municipal companies. Companies where also SPV is the preferred buyer, we did our 1st municipal transaction just 3 months after the company was started. SVB tries to make win win transaction with the municipalities. And here we have a case study of such a transaction. Northvolt, which is going to build the largest battery factory in Europe was looking for an establishment. They met with several different municipalities around Sweden, which of Kolefti was 1. The demand they put on Kolefti to choose Kolefti as their location was that the municipality should build a new Culture House and Congress Hall. SPB therefore together with the municipality created a new Culture and Congress Hall, which has 26,000 square meters and is built completely in wood, which makes it the largest building in Nordics in wood of its kind. In connection to this, the municipality of Hoeliskio signed the Nordics' first ever 50 year lease, 50. A part of our business model and our recurring earnings is transactions. We are one of the most active players in the market and we have, during the last 2.5 years, made transactions for more than SEK 82,000,000,000. We have made acquisitions for approximately SEK 62,000,000,000 and disposals of SEK 20,000,000,000. We estimate that we're going to have recurring earnings from these activities of at least SEK 400,000,000. We have historically delivered more than SEK 700,000,000 from this income stream. And SBB is a company that we deliver on our promise. And in connection to the Hemfos offer, we said that we were going to dispose properties for SEK 11,000,000,000. As you all are aware of, we have had some of the most challenging times for decades due to the corona pandemic. However, by the 12th June, we communicated our latest sale and we have now achieved sales of SEK 10,900,000,000 and all the sales have been done at a least book value of Q1 or above. This is also something that the rating companies is giving us credit for, and this is also the credit is given before we made the last two disposals of total of SEK 5,000,000,000. To summarize this part, we are an active player, we will keep being an active player in the transaction markets, both on the sell and on the buy side. We will keep earning money from these transaction activities. We are the preferred buyers from municipalities around Nordics and we see a great deal flow coming from these municipalities. We have probably or we have the strongest transaction team in the market. Now I'm going to hand over to my colleague, Karl. Thank you, Oskar. I'm Karl Lund Mortimer, working with Business Development at SB. I joined the company in 2016 and before that, I was at Riksand together with quite a few of my colleagues here today. Ilyas showed this slide before, but it basically shows SB's position on the Nordic real estate market. You can see that SBB is the 3rd largest listed real estate player on the market, and we are the champion when it comes to social infrastructure and community services. And due to that very strong position, it's hard for us to find relevant peers on the Nordic market. So we looked outside the Nordic market to find a relevant peer. As a relevant peer for community services, we think that a Belgian company, IDEFICATE, is a good peer. They are active in community services, mostly elderly care in Belgium, the Netherlands, Germany, U. K. And also in Finland after recent acquisition. And as a peer on the resi side, we think that the Finnish resi play, Kogjem is a good reference. If we look at some quick property metrics, the property value is quite the Sbis is the largest one, Kojemo SEK70 billion and IDEFICA SEK 36. And in terms of value per square meter, SB has the lowest value per square meter in the books and relies in the middle when it comes to net yield. If we continue on to look at the leverage metrics, the companies are quite similar. LTV numbers of 40% to 50%, we have 2 companies with investment grade from the rating agencies. It's Kodjamo and it's SBV, whereas IDEFICA isn't rated. And average cost of debt, you can see that SB has slightly lower cost of debt compared to the peers. But I would say that the major differences, they come when we start to look at the quality of the assets that these companies hold. If we start with Community Services, SBB, as Annika told you, we are having government funded tenants in that portfolio. 93% of the tenants are government funded whereas for IDEFICA, they mostly have private tenants that are partly funded by the public. And on the residential side, I would say that the differences are even more substantial. As you know and as some of my colleagues have told you about, SB are active on the regulated Swedish residential market. And due to the regulations, the rents are kept low, whereas Kojamun, they are active on the Finnish market where they have market rents, meaning that the rents are higher. And the most obvious consequence of that is that SB has a rent per square meter of slightly over SEK 1,000 per square meter, whereas Koyamu, they have rents of over SEK2,100 per square meter. And that basically means that for every Koljemo apartment, you can rent 2 SB Apartments and still have some money left. To summarize here, I think this is 3 companies. They share some similarities, but also some major differences in favor for SB when it comes to stability in rental income, predictability in rental income and the quality of the tenant base. It's regulated residential and is 93 per cent government funded community service tenants. And on the next slide, we will look at how are these companies actually traded at the market. I think this slide is quite self explanatory. It shows that SB has been able to over time, over the last 3 years, we have been able to deliver a net asset value growth per share of 42%, compared to the peers, 14% for Codjemo and 10% for IDefica. And despite that, SBR traded at an FOV yield of 8.4%. So it's twice the FOV yield compared to the peers. And this is without taking into account what makes SB True unique, the ability to create additive recurring income stream. So in this FFO, we haven't included profit from property development, profit from renovations or profit from real estate transactions. And if we are to add those income streams, the picture would look even stronger for SBB. Yes. So if we add those additive recurring income streams, the FFO yield increases to 13.5%. It's 13.5 percent despite a proven ability to generate a very high net asset value growth per share over time and despite the fact that we are holding the most secure real estate assets in the world. And I think I stop there. Great. So that was the full section on the income streams and value creation model of SPB. Thank you, everyone. Now we will move into the balance sheet and treasury, and our CFO, Eva Lotta, will start this section off. Welcome. Yes. I'm Eva Lotta Strid. I'm CFO of SPB, and I've been with SPB from the start. I have about 20 years experience from the property sector from companies such as Achilles and Riksen. I, together with my colleague Lotte, will talk about balance sheet strength and also give you a treasury update. SVB has a strong financial position and a solid platform for growth, as you can see in the balance sheet for Q1 on the screen. On the asset side, yeah, the asset side mainly consists of properties, of course, about DKK 80,000,000,000 in Q1. SPB also have investments in joint ventures and associated companies. That was DKK 2,000,000,000 in Q1, including the loans to the companies. Some of these companies carry out property development projects, but the largest holdings are in companies that owns investment which is connected to the Hemfusen which is connected to the Hemfuser transaction. SEK 2,400,000,000 of this is deferred tax, and that will decrease as a result of the property disposals, which we have announced. And the remaining parts are synergies. These assets are funded by diverse sources of funding such as bonds, bank loans, commercial papers, shares and hybrid bonds. However, 50,000,000,000 kronas of the properties are unencumbered. As you can see, hybrid bonds are reported as equity to 100%. There are rumors in the market that SBB has bridge loans in JPMorgan and from Goldman Sachs. I'm telling you now, SBB has never had bridge loans from JPMorgan and Goldman Sachs. And LTV was 50% in Q1. SVB has been successful in deleveraging over time, and this work continues after the Hemfossa acquisition. This is a key factor for our rating. SBB calculate loan to value by taking gross debt less cash and cash equivalents in relation to total assets. This is different from how the rating agencies including S and P calculates loan to value. S and P's loan to value is a debt plus in relation to debt plus equity ratio. And another difference is that SPP only consider 50% of the hybrid bond as equity and the rest is debt. In Q1, the loan to value by S and P was 64%, But after the announced property sales, we anticipate a lower rating which enables a higher rating. You can see the pro form a of the disposals number in the upper right on the screen. Let's now focus a bit on the hybrid bonds. SPB was one of the first companies in Sweden, property companies, I mean then, to issue hybrid bonds. They are quite common in Europe. SBB's hybrids are perpetual and are an attractive source of funding since they are 100% equity. They are also non dilutive. We think hybrids is cheap equity. In our last issuance, in the beginning of the year, the coupon was 2.624%. SBB also has a number of different share classes. The A shares are not listed but has a higher voting right than other shares. The B and the D shares are listed, and the difference between them is that the D shares only has the right to SEK 2 per share per year in dividend. AB and D Shares are ordinary shares and are classified as 100% equity, also according to rating agencies. To simplify the capital structure, we have decided we have the intention to redeem the preference shares, which has been announced yesterday. I will now give the word to my colleague, Lotta. Thank you. Hello. My name is Rosal Rangnason. I'm also called Lotta. And I started at SPB in January 2017. And prior to SPB, I was Deputy CEO for Stockholm Region Finance Company. And before that, I had several positions in Swedish, Nordic and International Investment Banks. I'm going to not to talk about this, I take next slide here. I hope I'm going to read from the screen here. So I hope that you can see here or at least if not, you have this compendium in front of you. We have a very strong I'm going to talk about treasury. And we have a very strong balance sheet with a low cost of debt. And we have a very long dated maturity profile. Our debt portfolio or debt structure is very diverse. We have non secured bonds, which is 61% of our debt portfolio. We have 29% bank loans. We have 8% commercial papers and we have 2% secured bonds. And if we look at the capital structure, we have 36% equity, we have 34% bond loans, we have 16% liabilities to credit institutions, that would say bank loans, and we have 4% commercial papers and others is 3% and deferred tax of 7. And up to the right, you can see our long dated maturity profile. Important here is to see the gray numbers with the ring in gray and the red numbers with the ring in red. It's inclusive and excluded included and excluded commercial papers. And the highlighted area shows that most of our bonds and our security and our loans mature beyond 4 years. And another important thing here, it's the first the maturity below or under 1 year, it's SEK 1,298,000,000, quite a high number. But remember that this number includes commercial paper of over SEK 4,000,000,000. And the chart under here, you can see the increasing debt maturity and progressively lower cost of debt. You can see our weighted average maturity has always been quite high, started at 4.5 in 2018 Q3 and is now 4.3. And important to see here is that Q4 2019, when we have when we acquired Hemphusa and we calculate the numbers Hemphusa numbers in this, we the average maturity was at 3.4%. But at that time, the portfolio was 56 1,000,000,000 and then you can see 2020, the Q1, the portfolio is 52,225,000,000. So we have bought back bonds and we have paid back loans for more than SEK 10,000,000,000 in a quarter. Latest development, which was last week no, it was 5th June, I'm sorry, SPB added a new credit revolving facility of NOK 2,000,000,000 into our commercial lines. And this means that SPB now has a total of 9.1 €1,000,000,000 credit limits and that means that all loan matures, including commercial papers, are covered for next 24 months. And then some information about the combined business profile, Hemfusa and SPB and together with rating agencies, which leading us towards lower financing costs. I will start at the text to the right hand side. As you can see, S and P emphasized in the text our safe assets in the latest rating report, which was due which was out on 12th June 2020. And also important in S&P's report was that they point out that our anchor rating is actually BBB Flat. And please also note that this report was published a week ago, and prior to announcement of our disposals of properties, which was 4,892,000,000, 10th June and add to that SEK 282,000,000, 12th June or 4,892,000,000,000, I'm sorry. And some important events in the capital markets, apart from BBB- rating with stable outlook affirmed by S and P in the report. We updated our green financing framework, eligible for green financing instruments up to SEK 10,000,000,000, which Marika told you about before. We have issued NOK 50,000,000 20 year unsecured bond at fixed interest rate of SEK 2.75 in a stressed market in March 2020. We repurchased most of the unsecured bond issued by the SPB and M FEMFUSA, which mature until May 2021 and the amount was NOK 3,362,000,000,000 repurchase of the total issue amount of NOK 3,724,000,000. We issued an unsecured bond of €750,000,000 with a fixed coupon of 1%, maturity 7.5 year in February, and we started the year to issue a perpetual hybrid bond of €500 with a fixed coupon of €2.624 in January 2020. And all these activities has led to a lowering cost of death from SEK175 in Q3 twenty nineteen to SEK152 Q1 2020. And here's some numbers of the capital market activities. As you can see or as you hear, we have a very robust access to funding. You can see in 2017, we started at 4 to issue 4,400,000,000 and that was equities, hybrids and bonds in red. And 2019, we issued bonds, hybrids and equities for 38,600,000,000. And then year to year to date today is NOK 14,500,000,000 in unsecured bonds, hybrids and equities. So the activity, you can see that in numbers here, unsecured bonds in total, we have issued 32,900,000,000 and we have issued equity and hybrids for 29,800,000,000. And the highlighted text, I've already mentioned all this issuing we've done. So to summarize, we have a very strong financial position, we have a diversified funding, we're deleveraging, I'm sorry, according to plan and we have full speed ahead to BBB plus Thank you. Great. Thank you, Lotta. And that means that we have reached the last section of the presentation, which is the new goals that were presented yesterday. So Ilya, you will once again come up here. And then when Ilya is concluding, we will go to the Q and A session. Thanks, Adrian. It has been amazing to listen to my colleagues. And as you mentioned, the Board decided yesterday to put some more pressure on us to be working even harder. And the new goals are also shifting focus in 2 areas, and I will emphasize both of them. The first one is the new growth target, which is expressed in terms that we will grow profit from property management with more than 15% on average over 5 years period and yearly growth of more than 15% on average. The other shift has been also on property development because you know before we were focusing more on selling building rights. Now as you have been aware from Christer, Erik and Jenny, we will be delivering stronger profit from property development. And the new goal is on top of profit from property management, additional SEK 500,000,000 to SEK 700,000,000 per year on average. Our LTV targets target is to achieve below 50% LTV, measured as debt adjusted debt through debt plus equity, which is in that way both clarification and also strengthening credit metrics by lower leveraging. It means counting hybrid as 50% debt and 50% equity. And secured LTV below 30%, as Eva Lotta mentioned before. We have more than €50,000,000,000 in unsecured assets or for Swedish audience, specified target is to achieve BBB plus in first half of twenty twenty one with having A- as target in the long term. Interest rate coverage ratio over 3x. Those targets together are also been summarized in that we will continue with growth. We will have a new target of having property portfolio of SEK 125,000,000,000 by 2025 with retained BBB plus BBB plus rating. Marika told you about our Vision 2,030, emphasizing our focus to be 100% climate neutral by 2,030. Peter told you about and Frederik about our amazing low risk rent regulated residential portfolio with good upside from renovations. We are we have as a target to renovate at least 600 apartments per year. And finally, dividend policy, we have been increasing dividend strongly all years since start. And the dividend policy is to generate a steadily increasing annual dividend per A and B shares. And then just to sum up the day with a few closing remarks. The first one, our target to achieve profit from property management based on worst safe assets with, as I mentioned before, counterparties that are AAA governments and us having government backed income from AAA governments and targeting an average growth of more than 15% per year per A and B ordinary shares. The important message from today is also our unique model with 3 additive recurring income streams, including new focus on using our building rights not to sell as before, but to deliver and to construct social infrastructure with safe cash flows. Or as Eric emphasized in his presentation earlier, we know the tenants, we know the revenue and we know the cost. That is a unique position. And one message that I hope that you have been able to take in today is actually breadth and experience and knowledge in our team. Some of the persons that I've been learning a lot and some of the persons that are today and tomorrow's stars and that I look forward to continue to work with together. However, being a trusted partner to municipalities is impossible without also today, also being important part of the society is impossible without not being fully committed to supporting the transition towards a more sustainable world with clear targets. And Marika gave you our targets not only on being 100% climate neutral, but also on focusing on society by delivering summer jobs or as we have been doing throughout corona crisis, financing together with others Food For Heroes that has delivered food to health care workers, to elderly people and to charitable organization. And finally, the our goal of BBB plus is actually not something that is, how to say, a long way from being reached. As you could have seen from Evolota's pro form a calculations, Already now, we are at the levels of adjusted debt to adjusted debt plus equity of 56.7%. And if you just use some math and apply that we are according to our earnings capacity making a yearly profit of about €3,900,000,000 And if you apply those €3,900,000,000 then with some additional plant sales of €2,000,000,000 then you will arrive at LTV measured as debt, adjusted debt to adjusted debt plus equity below 50% during first half year of twenty twenty one. So to sum it up, walk the talk, we will continue to deliver. And now I want to invite my team, so in front of you for Q and A section, please. Great. Thank you, Ilija. Everyone will come up on stage. And as I stated in the beginning, we will start off with any questions from the audience here. Then we will I will read out the questions that we have received online, and we'll try to focus on questions not already asked. We'll try to distribute the questions to the best way possible. We have received quite a few questions on the new targets. I think those will end up with you, Lilje. But apart from that, we'll try to distribute as we go along. But any questions from the audience? We'll start there. Thank you. I wonder if that if you next year get the rating BBB plus with stable outlook, what is the consequences? Can you elaborate on that with cost of debt, is it great? Can it go from 1.5% to 1% or what will happen? Can maturity be longer? Can you have more share bias? So what is the consequences? If you can someone can elaborate on that. Hello. Can you hear me? Yes. Yes, I can say some words about it. BBB plus no, we aim into BBB plus or even more or even higher rating, A- because that's what we have done so far. We have looked at good rated corporate companies and we've seen what spreads they issue at and what they pay to banks and so on. So therefore, we think that the financing costs will come down or at least the credit spreads. But then we don't know about the market, of course, the market risk and where It's the same. It can be 0.5 down or something. Yes, that's right. But we will compare we will be compared to the good to the high rated companies. Maybe I can follow-up on that. The SEK1.52 billion is from the situation in the last quarter, and it's been a little bit of a turbulence in the market. And I know this is a very difficult question, but just if you were to refinance as things looks today, what kind of direction are we looking at? And how big a change would that be? It's very difficult to say and to say where rates will be. But we have not of course, the market is closed for us. We will not issue in this market and we don't need to issue in this market. And we have our RCS or we have our commercial lines that we can draw on if there is a crisis and so on. But there we know our highest interest rate level, so we will never go over that. And then of course now in the stressed market, it has been some problems in the commercial with the commercial papers. And but we can see now the market is starting again. So we actually issued today commercial paper for and paid 60 basis points. So that's very good because we have paid more than that during this period. But you will see that in our report in 14 July, viva la France. Okay. And then another question. I mean, looking at the public sector, just guessing for the next few years, most likely the financial situation will be a little bit worse. Tax rates might I'm not looking at sorry for looking at you. You look nervous there. Maybe Ilya is the one who will take this one. I'm just thinking on the public sector in general, both high and low, there will be a little bit of a distress and financial difficulties, of course, maybe tax rates coming up. And in my world, there would be opportunities as well as risks. So maybe if you could elaborate a little bit on how you view that, what kind of opportunities you see? And if there is any risk, how you could mitigate those? Thank you, Stefan. And as Lotte mentioned, we actually have a very strong position in the financial market. We issued 20 years bonds in a market when no one in Sweden could issue any money at the end of March. And that is often forgotten. And as she mentioned, she is today able to issue commercial papers at 60 basis points. And you can compare with other BBB flat and even higher ratings, they probably pay a little bit more. And this strong financial position is and the strong access to capital market is also giving us opportunity to be supportive to as you said, Stefan, that is very important. The corona crisis has also emphasized that there are needed new investment in, among others, elderly care homes. And as Orsgaard mentioned, there is also lack of schools. There is lack of the space that is good for our children and at the same time, municipalities have to meet a new condition with, how to say, worsening public financing. And that is already creating opportunity for us. And I think Oscar mentioned that we are actually right now dealing with, I think, 3 municipal deals in Sweden and the 1 municipal deal in Finland, where we are actively helping municipalities to manage their balance sheet in order to deliver new social infrastructure. So this situation, it's very unfortunate for everyone. However, we see that we can be the ones that are also helping municipalities to bridge to better economic conditions. And then the last question on to Christa probably. Looking at the book value of your building rights and then comparing that to the market value, it's a big difference and it's significantly bigger than I see in Bonava, Vadeca or JM. Could you maybe elaborate a little bit on that? Why there's such a big difference? And maybe the key answer is in Phase 1, Phase 2, especially Phase 1, where you have quite a lot of building rights. What kind of situation are those in? Are they the zoning is not done, but is it I mean, we could go all the way to just farm is it farmland, so it's a big risk to get them sown? Or is it maybe if you could elaborate a little bit on what kind of land that is, just to explain the big difference between market value versus book value? Yes. Thank you for the question. Starting up with the last question, the building rights within Phase 1 and 2, I would say, and connected to what Marika told us about. We are never zoning like raw land or something like that. We are looking at centered places where you have commuting possibilities and where you can live your life without cars, etcetera, etcetera. So and then we do our homework and look into the possibilities and reach out to the first of all, we often meet the municipality and have a first discussion if our idea is possible, etcetera. So I would say that the Building Right portfolio within Phase 1 and 2 are to be decided to start up soon. But I would like to stress the fact that it's a very important decision, especially when you look at it from a valuation point of view, then I feel much more safe when we have this decision from the municipality. And regarding the book value, I'm not here to answer for Bonnava and our competitors. It's up to them. But from our point of view, I think we're quite conservative when we look into our values. Great. Any other questions from the audience? Yes, in the back. Bartel Nielsen from Carlscore Equity Research. First of all, you made a transaction of SEK 11,000,000,000 and one of the largest deals with Nifossa recently. When there is this kind of crisis you could compare with, for instance, last Lehman crash, could you see any changes or project any changes in if the process has changed in fully let, secure, long lease properties and or vacant properties or coming vacant properties due to leverage or debt financing from the banks? That's my first question. And second question is, if you look under operational goals, you say that you should be climate neutral in 2,030 and that's unchanged. But you assume that there is an income stream linked to that as well. Thank you. First question. We don't work that much with vacant properties. I cannot give you any insights there. But looking into our properties, we see a great demand of the secured cash flows that we have, and we see an increasing part of investors wanting to buy these state backed cash flows. So from my opinion, I would say it's the prices are likely slightly more up post corona than pre corona. And I think if you look at the real estate market as a whole, I will say that the yield spread has increased, but you're giving more credit to the good properties with the good tenants. And we can add, and as Marika shown, that is, of course, sustainability is also delivering money to us. And Peter has shown in our refurbishments projects that we have been in some places decreasing our energy consumption with 50%. That is great upside, both on value, but also on NOI on yearly basis. Are we missing an answer there or is it good? Any other questions? Shall we go to the online participants then? We can start I think this will be for you as well, Oskar. This was said by e mail before. How big is your current acquisition pipeline? Due to the fact that we are an active player in the transaction market and in the real estate space, our pipeline changed on a daily basis more or less. But if we look into the transaction pipeline as a whole, both disposals and acquisition, I would say that we have a pipeline of around SEK 7,000,000,000, including both acquisitions and disposals and where we see an increasing interest for our state backed tenants, especially within and then we will keep selling properties and the office properties with state contracts. Good. Then we received a bunch of questions relating to the new financial targets. So I think we'll direct them to Damian, and then you can include anyone if you want to. So first off, also by e mail ahead of this. In the context of the SEK 125,000,000,000 portfolio target, what is SBB's ideal capital structure, including LTV, hybrids, share classes? The answer to that is very easy. The capital structure is not our target. Our target is strong financial position that is in terms of having BBB plus rating, and that is why the growth is conditional by retaining BBB plus rating. And then that combined also with continuing strong growth in the cash flows through profit from property management because we are not here to play. We are here to deliver, and we are delivering value to the shareholders. And the capital structure and the rest is just a function of that. Moving up to that, can you please explain how to reach your growth target for 2025 with a rating of BBB plus What will it mean to your equity needs? We do not need any new equity. It is actually a relatively easy mathematics. If you make SEK 4,000,000,000 in profit and have as a target LTV of below 50%, that means that you can acquire SEK 8,000,000,000 the year 1, probably slightly more the year 2, a little bit more the year 3 and so on. So SEK 125,000,000,000 is not a number that has been, I would say, guessed by Lars Targesson or by Avalota Street. It is actually pure mathematics. What is possible to build up without issuing any new A and B shares through delivering of ordinary profit? Good. And I think that answered also another question here, if you plan to reach the new goals without new issues of equity. So I'll discard that one. We are always ready to issue new equity, but at premium. So you are welcome. You can just call Evolota. And we never have I mean, we are not afraid of issuing new equity, but we will always make sure that our shareholders are fairly treated and getting the best opportunity to get best return. So this is important message. We are showing what we can do given the profit that is from organic growth that we are always ready to access Capital Markets. Great. This one I think we'll take for you, Chris. Why shifting annual guidance from building rights disposals to property development gains? Is there any change expected in the level of construction costs you may accept to take? Okay. Thank you for the question. I mean the change is due to what we have been seeing and talking about today. We have seen that we have a shortage of residential and shortage of And we also have seen that we have 400,000 square meters of building rights, legal force, and we have 1.8 1,000,000 in total and we also have a skilled team. So from my point of view, it's for us not to give away the profit to Skanska, our NCC or anyone else. Good. You have divested SEK10.9 billion since December, but now state plans to grow assets to SEK 125,000,000,000, which gives a bit of a mixed picture. Can you please elaborate on this strategy? Maybe, Oskar, do you want to take that one or? Yes. I can take that one. As we said when we made the Hemfos acquisition, we said that we were going to sell properties of SEK 11,000,000,000. And Hemfos had a lot of office properties with public tenants. And our core focus is on elderly care homes, preschools, schools and LSS housing and such other specialized community service properties. So we will keep doing disposal of office properties related to the Hemfosse portfolio and keep acquiring community service properties, such as elder care homes, preschools and schools as well as residential properties. Excellent. Then on the LTV target, how come you define the adjusted net debt without hybrids bonds or D shares when there are payment commitments on this capital? Then how does this impact your LTV targets? Yes, but that is someone that is probably trying to play or not understanding share classes works. These shares are ordinary shares. And the only difference between A, B and D shares is in participating in profit generation. And that means that if that A and B shares get profit from value creation and small dividend on top. These shares get larger dividend that don't participate in the value creation. However, the dividend on these shares is conditional that company has profit to give the dividend to A and B shares. So that can never be a debt. So I understand that the person is not from Sweden and has not, how to say, study how the ordinary share structure may look in Sweden. Concerning the hybrid, there is a different situation. And the hybrid is an amazing instrument for a growing company because hybrid as a perpetual instrument is never needed to be paid back. And we are always, of course, because we have strong balance sheet and we have strong value creation, we will always pay back our hybrid at 1st call day. But in a crisis situation, you never need to pay it back. And that is, I should say, the big difference in treatment between ordinary debt and hybrid. To sum it up, I do think that S and P and also other rating, we are also rated by Fitch and both S and P and Fitch count hybrid as 50% debt and percent equity. And I do think that is a fair way to calculate LTV in order to understand and to compare to other companies that are not having that kind of instrument. But these shares are pure equity. Great. I think the last question then on the targets, then let's move on. But that's from the release where you stated that the board has decided to divert from the previous method of targeting growth by NAV and instead focus on profit from property management. What does this statement entail for NAV and NAV growth plans? That means that we don't care about NAV. And that is very important here because NAV is more for the company that don't have cash flow. But we are the strong cash flow company. We have a yield of 4.7 net yield of 4.7%. And for our international listeners, please compare it to German offices that are valued at net yield of 3%. And, I can assure you that our income from AAA Sovereign Credit rated countries Sweden, Norway, Denmark is much more safe than German offices. And at the same time, we are having a yield that is more than 50% higher, which means that our prices on the book are like 2 thirds of the assets that should not be comparable with our assets. So in that way, I do think that it's very important to leave NAV and to focus on cash flow because at the end of the day, the people are investing in the company in hope to get a dividend. And you cannot get dividend from valuation than from an NIV. You get dividend from cash flow. And that is I'm very happy that our board is, how to say, forward looking and focusing on cash flow. Great. Okay. So here's a question on the portfolio composition. 18% of the portfolio is residential. How will this change going forward? Any takers on this, Oscar maybe? Yes, sure. I can take that one. I would say that residential share of the total portfolio will be around 15%, and I think we will grow at the same speed as the community service properties. We will buy some residentials from the municipal housing companies, And we will also see an increase in part coming from Eirik and Christa with new construction. Perfect. Next one, this might be for Lotta. How do you hedge your euro debt? Yes, good question. Thank you. We are very active in FX risk, managed FX risk and we hedge the part of our FX risk that not is natural, we hedge with FX swaps. Perfect. Shall we stay with the capital activity? Can you clarify how SVB generates recurring income from its capital activity? Are acquisition yields higher than disposal yields? Yes, I think I will take the question then. We try to provide some profits from our transactions. So we try to sell our properties at least our book values. And when we make acquisitions, we are on the market, and we have to pay the market price, and we have to be fair against the municipalities and pay accordingly. Great. Are there any questions from the audience? Follow-up, yes, we can let's mix it up a bit. I just got curious about the D shares when you say that, yes, I know it's not a debt. But what happens? Suppose that you have a year when you have reduced property values and you still have a good cash flow, but the net result at the end of the year is 0. Does that give dividend to the D shares when? Or if it's not any dividend, does it accumulate? So it's double the year after, is it back to 50 euros? It is not at all. It is that is the important and that is why I will just let me just start with the point why the only companies with strong financial position and the strong cash flow are issuing D shares because people understand that those company will pay dividend. But in a crisis situation, the dividend for D Shares is expressed as 5 times total dividend on A and B shares. If the dividend and they on A and B shares is 0, 5 times multiplied with 0 is the 0. So this is very important because I these shares are good for fixed income investors, and they are good in the way that if you have the stable cash flows as we have, because then you know that this company is going to give the dividend and you will have the dividend. But there is no pressure on you if there is like Lehman Brothers or whatever it is? No, I understand, when you don't get anything. But the year after, when you have an excellent cash flow, you have an excellent net profit, you don't get twice when you're back to ZAR 50. I will explain that too. And that is also there is also a difference towards preference shares. And I agree on that with rating agencies that often give 0 equity to preference shares because they treat it as debt. Because in a situation when you postpone the dividend, if you have preference shares, then you will have some, how to say, punishment interest rate. But for these shares, you don't have any punishment. So in that way, that is really pure equity instrument that is good for fixed income investors and at the same time, shielding the company in a way of Lehman Brothers or that kind of very, very deep crisis. Great. Any other questions from the audience? We have a few more online questions as well. I like this one. So we'll see who I guess, Ilija will take this one. We'll see if anyone will want to add something. So I do mainly miss thank you for a very clear and well structured CMD. Great. I do mainly miss your assessment of the actual risks. I would like you to show what can go wrong and how you try to mitigate. Great people are key, But please do not answer by repeating low risk. I want to understand the risks of the underlying assets. That is very good question. And I can first, let me start with the assets. If you own one building, then you have an amazing risk, despite that, that building is NK here in Stockholm. If you own 10 buildings, then you have slightly lower risk. But if you own 1500 buildings with 90% of income government backed by AAA countries, then that risk is very minimal on the asset side. However, our biggest risk, and that is always risk as soon as you have any loans, is refinancing risk. And that has been very clear in this COVID-nineteen situation, you have had the companies that have had difficulties to refinance itself. And that is the risk that we are trying to manage, not only by having we have a Lotta that is our CFO and coming from small land and keeping all money very hard, but also working hard to prolong our maturities. And that is what Eva Lotta and Lotta have been doing by showing before that when we issued our latest bonds in Capital Markets, we did it at 20 years and before that at 7.5 years. So that is our way to manage our main risk. Perfect. Then some questions on the tenants. So please elaborate on the value add above and beyond the financing solution that SBB brings to its municipal clients. Annika can tell you anything about it. Annika, that's one for you. I did not get the question. Could you take it? What value does SBB bring to its to the municipalities beyond the financing solution. Beyond financing. It's about the team again. It's the management team. We work very close to our tenants, and we have regular meetings with them. We always try to be ahead the tenants, not a step behind. So we have a lot of contacts with the tenants and with the municipalities as well. And the regional managers and together with Jenny, we have a very lot of meetings with them. Excellent. So this one, I think this is a question that we meet sometimes reading the papers. Please explain why the state does not ask for lower rents given the rating? Why do they hand over value to property companies so freely? And that is continuing on the points that Annika mentioned. I mean, it is not easy to employ this kind of very knowledgeable employees that Anika has succeeded with, to build a team of 250 persons that are serving municipalities is delivering extra value. And sometimes, we are also delivering to the municipalities our numbers, so they can benchmark and compare with the other part of portfolio that they are managing themselves, also in order to decrease their cost and also save taxpayers money. But on top of that, we have the work that has been done by Krista, Erik, Jenny and the property development team working very closely with construction company to get lower cost for new constructions. And I can tell you large targets on me and Oskar, we had a meeting with some large municipality in Gothenburg region. And actually, in very frank discussion, we shared our numbers with municipalities. And it was shown that we are building LSS buildings like it was 20%, percent, 25%. So our price of the new LSS building was 25% lower than the price municipality is paying to the construction companies. So, I should say, sometimes people are focusing on the numbers and on the buildings, but I should say, the people and the team's experience and competency is the most important part. And that is what we are offering to the municipalities. I think that ties into a question that we just received. What would happen to SBB if something would happen to ILEA? And I think the answer is on the stage. But do we want to elaborate anything more on that? I think we had actually that is elephant in the room. We had actually an accident here a month ago and where the team and the board showed in a very stressful situation that they managed the company very professionally. So I'm happy to work with those many amazing people as long as board want me to do it. But I can assure you those this company is very strong and with amazing people. Great. Anything more from the audience? Yes. Niklas Vettling, DNB. A short follow-up on the hedging cost. I wonder if the FX hedging cost is included in the average interest rate of 1.5%. Eva Lotte can answer The EUR 1.52 billion, that's the interest costs at the balance sheet date. And of course, I mean, that's the interest for the euro loans or NOK loans, they are converted into the balance sheet exchange rate. Okay. So the FX is included in Yes, more or less, yes. Okay. And you are doing a lot of transactions, so it's pretty hard to keep up with your assets. And I can't find a property list in the annual report or on the website. So I just wonder if that's something you could provide to the market? We have discussed it and maybe we will. We will likely do so. We can add Because the reason why we have not been when you grow as fast as we are growing, there is a large risk that someone forget to take away something from the website or so you need to deploy a new administrative resources to have it. If you have it, then it has to be updated. That is why Adrian is clarifying that we are working and trying to look at if we can have good automatized digital resources to have it as updated as it's possible. So that is the reason why we have don't have it at that place before. Two questions. In my opinion, S and P tends to be and also other rating agencies tends to be slow moving in upgrading ratings, particularly in the market conditions we are under right now. How are you going to be able to persuade them to move fast on your rating? Our view on that is, first, we agree with you. However, we do see that there is a lot of investor community also that during last week has been engaged and also directly contacting S and P because already today, there is at least we have talked to a few of the largest credit players that are not understanding why we not why we are not being moved already to BBB Flat because as I could shown according to all metrics, it's relatively easy to show that we will be there in next 12 months, and rating should be 12 to 18 months forward looking. So I do think that we together we do have good dialogue with rating agencies. And I do think that we together with investor community will get there. Okay. And one more question regarding refinancing that you touched briefly upon. What is your preference when you return to the market? Is it going to be Swedish krona, euro, other currencies? And what maturities do you prefer? I actually got the question because Lotta was working here preparing for presentation. So it was someone that reached out to me in the meantime earlier today. And our answer was very straightforward. We will never issued at levels that are below BBB Flat. So the same way, as I said before, concerning the equity, we are always open to discuss with investors, but we need that the price is fair to our earlier investors because we have the large investor community that has invested in our bonds, and we are not going to issue the new bonds because we don't need any money. And we are not going to issue the new bonds at the conditions that are worsening conditions for our secondary market. So if we and we can issue both in Swedish krona, in Norwegian krona, in Europe, but it has to be at BBB flat level. And then finally, also important because we often get the questions about euro. But I want to tell you that euro is our main currency, at least for SBB. And you know why. Just look at the markets. Norwegian market crushed, The Swedish bond market crashed. The only liquid market that had straightforward support by the Central Bank was euro market. So if you are a large player in real estate business today and you have not understand that you have to be exposed to the euro market, then you have a big risk. So hedging, that is also part of the math, and that is the work that has to be done. But that is very important work for liquidity and very important work for having low long term risk. Okay. Stefan, did you have a question? Yeah. Sorry. No, there's a question on the transaction with Nifusa. You also bought a property from them, which is SEK 400,000,000, I think, for the I think it's the SKF headquarter, if I'm thinking correct. Maybe need of renovation, maybe they are leaving in 2 years, I think. I know that Nifols has been thinking about residential in that area because it might fit. So my question to you, what is your thinking behind buying that property? Can we I will be very happy if Lars can tell you about that area in Swedish. And in Swedish, I will think that will be good also for our international viewers. But I will start and then Lars will tell you about all of the area. But I can start by telling you that Lars already had a bid to sell it at €450,000,000 And he said no. So please explain why do you like the And you're not building any additional you're just converting the whole that building, that's the whole plan? Or you're adding also But I can just clarify that the building right there is not only the existing property, but there is additional building rights. And with the plan that has been ongoing for the long time to get broad usage, including rent regulated residentials. Great. I think time is almost running up. We might have one more question from the online tool. Anything else in the room here? No, not at this stage. Then we'll take the last one. And we have received a lot of questions, and some of them are very technical details. So but we can see who has asked them, and we will try to get back to you online with a more detailed calculations. I don't think that really sits here on the stage. So just maybe then a clarification on the recurring profits from transactions. The guidance was for several SEK 100,000,000 per annum in recurring profits from acquisition and sale activity, but my understanding is that there is not much difference in the yield. So please explain where the profits are projected to come from in this activity. This is expected to come from that we have a yield shift compared to what we are buying for and what we are selling for. And as we said, we had done SEK 700,000,000 historical. We believe that we can at least do SEK 400,000,000 going forward. Excellent. So Ilija, would you like to say a few concluding remarks you already did before going into the Q and A session, but Yes, I can just emphasize that a few words that I started with and the main one is actually presented here. I mean, I'm always I'm not, as I said also before, not so knowledgeable on buildings and real estate. But I'm listening many times, many very smart people telling me that it's the assets are important and it is important if you are in City of Stockholm or if you are in City of Linkoping. And I should say, finally, and that is my real message for you that want to make money from real estate or whatever business you are invested in. The most important is here. It is the people. So that is my main message. The people, that is what counts. Thank you. Thank you, everyone. Thank you very much. Thank you.

• Slides