Earnings Call: Q2 2021

Jul 8, 2021

Welcome to the presentation of the first half year of twenty twenty one. If you have any questions, please click on the envelope here on this page and I will answer them later on. Please turn to Page 2. During this quarter, we further strengthened our balance sheet and report an equity assets ratio and LTV of 4% to 5%. This has been done for example through the sale of buyback shares and also some selling of properties. Now we are even more equipped for future investments. Turn to Page 3. So what has happened in quarter 2? We continue to strengthen our project portfolio for the future, partly in the form of a land allocation in Central Naka and also the acquisition of land in Roesendal in Uppsala. In December last year, we agreed with in Gothenburg, which SPB took over on April 1. We have also sold another central property on Lennartusktersonskartan where we once had our office. They took over in the middle of June. By the end of April, we have sold the 7,000,000 repurchased shares that we had in our own custody. We sold at the price of 127 and after the sale, the outstanding shares amount to 330,000,000. During this quarter, we agreed about the 1st office rental in the commercial new construction on Tri Candelbeck. It's with the biotech company, Selinc, that will move in early next year and will be the anchor tenant. Yes, the stock exchanges has gone up sharply recently and our share has also reached the peak for the period of NOK 148.8, which means that it has passed NOK140, which meant that our synthetic option scheme for all employees fell due to redemption. But I think the most important thing that happened this quarter was that our CEO, Hans Wallenstamm, has been the CEO for over for 30 years. So a big congratulations to Hans and to the company. Now turn to Page 4. We have other property portfolio still concentrated in the growth regions of Gothenburg and Stockholm Uppsala. The share of in the total rental value has increased marginally since the previous quarter and amounts to 51%. We are also self sufficient in renewable energy. And if we look at where we have our wind turbines on the map, they are more spread out than the concentration strategy we have in terms of our properties. Turn to Page 5. Some words about how we are experiencing our markets now. If we start with the commercial holding, the most of the area are offices. We see that during this quarter, we have made several lettings and have a stable demand. We have let about 15,000 square meter during this quarter and our letting organization has worked fantastically well. We see that companies appreciate having their offices in inner city locations. There is still a lot of thoughts about what offices will look like in the future. We also believe and notice with our tenants that the offices are important, not least for the brand. It becomes an identification of your company as well as having a meeting place for your employees where you build your brand and company culture, which is extremely important. When it comes to retail, we see that it is still tough and the stores that survive are the one that understand why you choose to go to a physical store and not choose to shop online. Service is important. We are continuing our work to remove 2 floor stores And right now, Avenir is up for it. Now from 1st July, the restrictions have eased and the restaurants are allowed to stay open longer. And that is absolutely fantastic for our brighter times and you can already see that more and more people are out eating. Then as I've said Several times, we see a huge demand for housing and we now have 150,000 in our own queue for new construction. All apartments are fully leased and the total occupancy rate in the property portfolio is 98%. We go to Page 6. This graph shows passages in the whole inner city. We see from this graph that the flow has increased comparing the previous year at the same time and that is good for all our tenants. It's the green bar compared to the blue bar. Please turn to next page where we can see the passages along Avenue. So go to Page 7. Here we see what the passages along on Ebenin looks like and it has also increased since the corresponding period last year. But of course, it's not as high as before the pandemic, but it's going in the right direction. So here, it's the orange bar, it's this year and the blue bar is previous year. Now turn to Page 8. During this quarter, we have again completed many apartments. This quarter, it's 335 apartments and on the next pages, I will show you which ones. So please turn to Page 9. Now we are in Stockholm in Harningen where we have the 2 projects Parekstokit 12, where completion has taken place out of 90 apartments this quarter. We have completed this fully in this quarter. Now turn to Page 10. In the project Alim in Tirasur has 66 apartments being completed during the quarter and it's also fully completed now. Just like umami Phase 2 here on the right part of our urban development project in Sundweberg which I will talk more about later. So turn to Page 11. On the left, we have our project Sarak Fatiyr in Ustorokar where we have completed 48 apartments and where there are about 60 apartments left to complete during the year. Let us then go to Gothenburg. To the right, we have in Isildal, a large project of 336 apartments, which with these 96 apartments has been fully completed. So, this was the completions this quarter. So now turn to Page 12. And then some words about the result. All these completions obviously have a positive impact on our net operating income. In total, NOI amounts to NOK 860,000,000 and this is an improvement of 10% compared to the previous year. In the current quarter, it has increased by CHF 50,000,000 which corresponds to an increase of 13%. Go to Page 13. So the net operating income increased by 10%. And if we look in more detail at what the changes consist of, we are beginning to recognize that it is new construction that has come into management that is the main reason of the larger increase. In total, for the first half of the year, almost 750 apartments have been completed. Of the total increase in rental income of NOK 95,000,000, €81,000,000 comes from new construction. In our existing portfolio, we haven't been affected by corona discounts to the same extent as last year, which has a positive impact on rents by NOK 90,000,000. Operating expenses increased by €17,000,000 and even there the majority of the increase is due to the fact that we have a larger portfolio to manage as new construction has come into management. Otherwise, it hasn't been as hot as last year plus more snow, which has affected our operating expenses by 9,000,000. So in total, it's up SEK 79,000,000. Now turn to Page 14. Here you can see how the NOI has developed over time and in 10 years we have increased our NOI by more than 60% and the surplus ratio has also increased at a good pace from around 65% up to 76%. Now turn to Page 15. If we look at the entire income from property management, this is an improvement of NOK 60,000,000 10%. We have an increase in our administrative expenses of NOK 80,000,000 and this is mainly due to the increased number of employees and also some share of gifts. Our net financial items remain at the same level as last year. The average interest rate has gone down, but the average debt for the period is about SEK 2,300,000,000 higher. So in total, it remained at the same level. Now turn to Page 16. We have secured the interest rate this half year with more 10 year interest rate derivatives of a volume of NOK 600,000,000. Here we see that the average fixed interest term amounts to 40 months and the average interest rate during the period to 1 point to 1% which is 10 basis points lower than the previous year. Now turn to Page 2017. As I mentioned, our synthetic option scheme for all employees fell due for redemption, the cost this period totaling €90,000,000 if you add realized change in value of 103 and revenue of NOK 30,000,000 as unrealized value changes. It's totaling NOK 90,000,000. During the Q2, we only sold a few co ops in older converted properties. Regarding the result for energy, including financial expenses, its total of 14,000,000 minus. It has been 6 months when it has not been as windy as last year, which means 26% lower production. Now turn to Page 18. If we then go to changes in value and start with changes in value of properties, we see a strong property market with a great demand for residential properties. These are properties with a low risk. As a result, the direct yield requirements have been adjusted down for a number of residential properties by 10 basis points. Otherwise, the yield requirements haven't been adjusted. In terms of new construction, €389,000,000 is reported for the half year and €244,000,000 for the quarter and that is the successive profit of the ongoing projects where we recognize the estimated surface on the completion date in relation to the degree of completion of the construction. It also includes value changes in new constructions that have been in management less than 1 calendar year. Now turn to Page 19. In total, the properties amount to SEK 60,000,000,000 and this represents an increase of SEK 2.5 €1,000,000,000 since the beginning of the year. In addition to changes in value of €1,000,000,000 we made investments during the quarter of SEK 2,000,000,000 in total and sold properties at a value of SEK 0.5 billion. Now turn to Page 20. The property value is distributed to 36% commercial and 64% residential. Our average yield requirement in commercial remains unchanged at 4.5% and residential at 3.1%. And our total occupancy rate is 98% and for residential it's 100% and commercial it's 95%. Now turn to Page 'twenty one. During this first half of the year, we have invested SEK 1,700,000,000 in our new construction and also SEK 300,000,000 in acquisitions of mainly land. So here on the graph, you can see for just this first half year, but the other years is for a full year. Now turn to Page 22. We have started construction of 4 21 apartments in this Q2 and just over 600 apartments in total throughout the year. What we started during the quarter would be on the next pages. So please turn to Page 23. Another start in our urban development project, Kalibekstrasse in Gothenburg, which I will talk more about later. In this project, 182 apartments are started. On the right, we have started a project further in Mannliche, Kvatjereskugsvakteren about 130 apartments. So now turn to Page 24. On the left in the picture, we have started almost 100 apartments in Uppsala, Peshon and to the right 11 Homes in Ustroke, Saara Hardhus. Now turn to Page 25. With these completions and starts, we now have about 2,200 apartments under construction where our urban development projects account for the majority. And now turn to next page. I thought I'd take the opportunity to sum up the stages of our 3 ongoing development projects. So let's start with Kalebig's Terracell Page 27. The one that are not white are those that are started in addition to those marked as school and nursery. They are not yet started. So we have 1200 apartments here now under construction. At the top Left of the picture, we have Fatiel 11 that will soon be completed. In October, the tenants will move in gradually in these 270 apartments. And in December, the Kvartir number 9, which is located with 1 block in between, then comes at Kvartere 10 where we have also signed an agreement with Koli for 12 sharing apartments. On the right in the picture, we have Antri Kalebek, which is our commercial property in this area. It was on this roof we recorded our video comment for this quarter. So if you are interested, you can please watch it. This is also where we have let 4,600 square meter to our anchor tenant, biotech company Selinc, and also 1,000 square meter to the Gym Nordic Wellness. Imagine that this area where Aula's old milk factory was located has been a place of homes for 800 families and other commercial activities. We are very proud of this. Now go to Page 28. We continue to our 2nd urban development project in the Gothenburg region, in Munich Fabryker. Here we currently have 430 apartments under construction. We have also completed the project in the middle Kvartiratruusengongen of 123 apartments. In the upper left, you will see the project that we started this quarter, Kvarteretskugzvaktaren. There are also many other things happening here besides residential construction. For example, we are building a garage with a solar facade and it also becomes a center for sports in the form of different sport halls and arenas. And this is a beautiful area, nicely located between 2 lakes. You can see one of them to the left. Now turn to Page 29 and go to Stockholm and stop at our urban development project, Umami in Sonbeberg. Here we have construction around the 2 commercial properties in the middle. There between these, we have built a large staircase that links the buildings together as well as the top of the area with a downside. Here we currently have 100 and 33 apartments under construction, Phase 3 at the bottom right of the picture. This is the next Phase 2 complete in November this year. We have also completed Phase 1 on the left and Phase 2 on the right, our total of 360 apartments. Walking around here in this area now gives a nice feeling from a boring parking place to filling the area with life and playing children at nursery. That feels great. This is the most sustainable thing we can do as a company, create these areas for the future of the inhabitants. Now turn to Page 30. On the balance sheet, our interest bearing liabilities amount to NOK 27,500,000,000 and as I said, this is an average increase of NOK 2,300,000,000 compared the previous year and an increase since the beginning of the year of approximately SEK 200,000,000. Now turn to Page 31. We are still mainly financed by bank loans. During the quarter, we sold our repurchased shares and this gave us a nice addition to the cash, which is why we didn't raise new financing during the quarter despite having invested at a high rate in our new construction. In the table, you will see that during the quarter, we have net reduced our interest bearing liabilities. We have reduced our bank loans by NOK 232,000,000 and reduced bonds by NOK 50,000,000 and increased our commercial papers by CHF 111,000,000 Now turn to Page 32. When these 6 months are summed up, we recognize these key ratios, all of which have been improved. We have an increased net operating income and surplus ratio, a stronger balance sheet with an equity assets ratio and an LTV of 45%. This gives us even more opportunities for the future. Finally, we have the net asset value, which amounts to NOK 100 and NOK4.5 per share. And on the next page, I show more. So please go to Page 33. In our current business plan for 2023, we have one goal and that is to create NOK 40 in net asset value increase per share. Through this second quarter, we have created NOK 25 0.3 kroner per share when we have 2.5 years left. So that was all for today and don't hesitate to send me some questions if you have any. And I will also wish you a very nice summer and thank you for listening. Goodbye.