Earnings Call: Q1 2020

Apr 28, 2020

Welcome to the conference call where I will present the First Quarter twenty twenty. At the same time as this is being broadcast, we have a Swedish telephone conference where Hans is participating in the question session. If you have any questions, just click on the envelope on this page and we will answer them. All the questions will be translated into English and will be published on our homepage. However, I want to start by talking about what has affected us all lately, namely the spread of the coronavirus, how the pandemic affects Balintang and how we handle the situation. It's difficult at present to determine the consequences and the horizon of the pandemic. Now turn to next page. Valesan celebrated seventy five years as a company last year and that means that the company has been through many crisis. Valesan enters this crisis with a strong position compared to the crisis in the 90s, both in terms of financial stability and property holding. Many of the strategies we have today originate from these crises in order to be able to withstand as well as possible in a new crisis. For example, our mix and the centrally located property portfolio, but I will return more to it and to the other points on this page. We started early to secure operations in Voyage Way. Now turn to next page. One of the most important things is to have good liquidity at such an uncertain time we have ahead of us. We have focused early on securing our financing and liquidity and have secured our entire financing needs for the rest of the year as of today. This means that we have borrowed earlier than planned to secure our future needs. We have a good relationship with the banks and we have never left the bank even though the capital market has been cheaper. We like to have a counterparty to talk to and have a relationship with. This is especially evident in such time when the bank is there and the capital market is more difficult. We have agreed with the EIB to lift our loan when we have with them on the two occasions during the year when we have bond maturities of SEK 1,900,000,000.0. This we already agreed on in January and was the plan even if no corona had occurred. As for the framework of SEK 4,000,000,000 for the commercial paper market, we have a backup at Handelsbanken, which we will use when we do not refinance the commercial papers. We have refinanced some of the maturities, but not all of them. As of today's date, we have cash and an overdraft facility of SEK800 million of total over just SEK2 billion. Plus that we can raise SEK1.2 billion on our backup for the certification program, the commercial paper program. In addition, Hans, our CEO, has waived his salary from April and until further notice, an elimination committee has proposed the AGM unchanged board fees for 2020. In addition, the board has withdrawn its previous proposal for dividend to the ATM pending the effect of the pandemic. All of this together creates a good starting point for us to be able to continue to make investments and gain freedom of action if opportunities arise. Now turn to next page. Our strategy regarding our property portfolio is to be in the growing region Stockholm and Gothenburg. We also have a mix of commercial and residential properties. Half of our rental value comes from residential. Everyone needs somewhere to live and preferable in attractive residential areas. Generally, there are no problems with unpaid rents. Basically, everything is paid at the March, just as it usually looks. Now turn to next page, Page five. Now during the corona, we have provided extended information to our tenants as well as extended cleaning and cleaning our area that are most exposed such as elevator buttons and door handles. Our residential tenants have also received a lot of offers from our nearby commercial tenants. We have a lot of occupancies in our new construction during this year and in order for apartment tours to work despite corona, we offer digital tours instead of live. On the right hand side, we can see the digital tour of our project in Lunda, Elisabeth, where leasing manager, Luis Sommes, shows around the apartment. The interest in our rental properties remains high. Now turn to next page. We have also added a virtual tour with a three sixty photo where you can look around and see the apartment. This is the first time we're doing this. It will be posted on our website and anyone can enter. And this is also listed out in this picture. Now turning to next page. About half of our property holding is commercial. And as you can see on the map on the right, the main part of the commercial areas are in Gothenburg and in the central part. The tenants that are included in the list of those that the government has identified as the most vulnerable sectors make up 13% of our rental value. There are three fifty three customers and we have now made individual agreements with almost 200 of these tenants. We have different individual solutions per tenant, both in terms of discounts and adjustments from quarter to month. Of the expected payment of rent for the month of April, we have received just over 95%. Now turn to next page. We have a center of commercial property holding in areas where people move. In this picture, you can see how the flow has decreased in the inner city of Gothenburg from week ten to week fourteen. Week fourteen is 56% less flow compared last year. Although there are a few people, there are still people in the area. Now turn to next page. This is an extreme situation for many tenants. Many can handle a shorter difficult period, but no one knows how long this can last. We have a closeness to our customers, which has enabled us to work up and maintain good relationships. This is even more important in this situation and we have an ongoing and close dialogue with our customers to make different types of individual solutions. We started an early dialogue with our tenants. We have daily internal strategy meetings about our customers as we go through customer for customer. For example, some of the solutions we have made have been to buy food from restaurants and deliver to eight organizations. In this way, the restaurants can continue to run their business. The government has issued a support package where they pay half of the rent reduction that we as property owner make, up to a maximum of 25% of the total rent. However, some questions remain regarding this package. Now turn to next page. We have over 3,000 apartments under construction and we started early to ensure that different types of materials and resources would reach our production, so that we do not get unnecessary stock in our ongoing production. We can also coordinate between projects because we are in different phases in the various projects that are ongoing. We also have a continuous and closed dialogue, as always, with our contractors. So far, we have no interruptions in our production. Next page. We were very early in securing our workplace and quickly began to quarantine those who had been abroad or were chilled in some way. We also closed the office for external visitors and more employees work from home. It's important in such situations to inform politicians about the situation in the business world, So we have taken our responsibility and explained what the situation looks like for the industries that are mostly affected and they need help fast as they do not have enough resources to cope for a longer time without customers. Now turn to next page. So now let's move on and go into our results for the first quarter. Next page. When we started our production of airmen in Monrique in January, we made our first lift on our loan from the EIB with a total framework of SEK 2,500,000,000.0. The first lift was SEK $500,000,000 We also received land allocation in Elta, where we already own just over seven fifty apartments and plan to densify the area with another 700 new apartments. In February, we also became 25% owner of the company Colib, which works to offer shared housing through various Colib house. Next page. We have had a lot of occupations this quarter, four zero one rental apartments and I will show them on next page. Norwood Shifsen in Osterokker is now fully completed and it's our first property here in Osteroker. We have also completed Teratenenva to the right with 54 apartments in Tiresen. Now turn to next page. And more in Stockholm, Prolosoonskordal, where we completed 110 apartments. And to the right, Umami Park in Sonpe Valley, 1 Hundred And 9 apartments of 147. So then we have 38 remain. Now turn to next page. We report a net operating income increase of SEK22 million and a surplus ratio of 73.8%. On the next page, I will tell you more about the details. Next page. It's an increase of 6%. Rents have increased by $26,000,000 of which $70,000,000 is from our new construction coming into our management. In existing, the year's rental negotiations and index account for the increase of $7,000,000 dollars We have a total occupancy rate of 98%. Operating expenses increased by $4,000,000 a larger area due to the new construction leads to higher costs of 4,000,000 It has also been a warmer and less snowy quarter, resulting in lower costs of SEK 4,000,000. Maintenance increased by a total of SEK 4,000,000 compared to the previous year. Now turn to next page. We maintained the occupancy rate we had last quarter of 96%. And in this corona crisis, we have actually let out some new areas, mostly offices but also some retail premises. Now turn to next page. We are continuing to increase our surplus ratio and rolling full year to 75.8. So we have an efficient property holding. Now turning to Page 21. We keep our cost level in terms of administration at the same level as last year. Net financial items are SEK 7,000,000 higher than in the previous year and part of the reason is that we have SEK 3,000,000,000 higher average debt compared to the previous year and that the average interest rate for the quarter is eight points higher compared to last year, 1.23% compared to 1.15%. Now turn to next page. The average fixed interest term is as long as it was at year end, thirty eight months. We raised $550,000,000 in new interest rate derivatives of ten years during this quarter. Now turn to next page. During the quarter, four apartments in our project, Vasa Gautam 33, were taken over. In total, there are seven apartments left, of which three are already sold but not taken over. Other income and expenses consist primarily of our wind power. There has been good wind during the quarter and we have therefore produced more than last year, but the prices have been lower. Now turning to Page 24. We keep the valuation of our reinvestment properties in operation at the same value as the previous quarter. This is due to the fact that it's very difficult to value properties now with the current crisis. However, we gradually adjust the value in our new construction as we build, which amounts to $254,000,000 The value of our interest rate derivatives fell further during the quarter, totaling SEK 177,000,000. And if you look at the ten year interest rate, it has gone from 0.38% to 0.68% during this quarter. And in total, the profit after tax amounts to SEK $3.00 9,000,000. Now turning to Page 25. We have brought this value to SEK 54,000,000,000 and the increase is mainly investments we made during the quarter. Our interest bearing liabilities have increased by SEK 600,000,000 this quarter and in total we have a deficit in derivatives of SEK $533,000,000. Now turn to Page 26. As I said, we have not changed the valuation of existing property holding, but gradually in our new construction. We have direct yield requirements of SEK 4,500,000,000.0 in the commercial holding and SEK 3,200,000,000.0 in the residential holding. Now turn to Page 27. We invested SEK 1,000,000,000 during the first quarter, where most of it SEK $963,000,000 is in our new construction. Our equity assets ratio is maintained as we build to an excess value of about 40%. Now turning to next page. At closing day, we have excessable liquidity of SEK 635,006,000, where SEK 4,000 will cover as a backup for our outstanding commercial papers of SEK 3,600,000,000.0. Now turning to next page. At the end of the quarter, we have have 3,093 apartments under construction. We start with three eighty two apartments during this quarter. And on next page, I will show you which properties. Now turn to Page 30. Verven is the third project in Mondeleke, where we now have just over four twenty apartments under construction, including these 160 apartments. We have also started the third housing project in Kalibec with two two sixty six apartments in Quatera Costa. Here we have a total of 700 apartments under construction. Now turn to next page. And here on this slide, you can see our ongoing projects. And as you can see, we will have a lot of occupations during this year. Now turning to next page. And here are some of the key ratios. I mentioned the most of them during this call, and all of them are stable. And the net asset value per share is now NOK 92.6. Now turn to next page. Our goal in this business plan is to have an increase in our net asset value of NOK 40 per share. And this quarter during this quarter, we have increased SEK 1.25 to net asset value. And now it amounted to SEK 13.35. So we have some kronor left to reach those 40 kronor. So now turn to next page. This was what I wanted to talk about and now we focus to navigate through this crisis in the best way. And as I said in the beginning, we have a strong position from the start. And thank you for listening and have a good day.