Fastighets AB Balder (publ)

Welcome to the Boulder Q2 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the speaker's CEO Eric Sellin and CFO Eva Wasberg. Please go ahead.

Good morning and welcome to Balder's presentation for the second quarter. Presenting is me, Eva Wasberg, CFO, and Erik Selin, CEO at Balder. After the presentation, we will have a Q&A session.

uh yes hi everybody uh baldo the big picture is that we have a property value of 222 billion 96 occupancy rate it's been stable around there for many years we have a mix between commercial and resi and on the commercial side the biggest leases are on average 11 year long Net debt 49%, interest cover 3.6. We have 20 billion in liquidity and NAV stands at 91 per share. Moving over and looking at Q2, we had a rental income increase of 15% and even NOI on 15%. Profit from property management, though, didn't decrease that much, but 3%. And the explanation is that we have higher costs for interest rates, obviously. Profit from property management, looking at earnings capacity, now stands at 504, which is 4% lower than last year. Also, the explanation is higher interest rate cost. And like for like, rental growth 5.4, which we think is good. And NAV, as I said previously, 91 per share. Looking at the portfolio, this has been quite static for many years now. 80% is located in capitals and larger cities in the Nordic region. And then we have the cities Helsinki, Gothenburg, Stockholm, Copenhagen as the biggest in that category looking at property type it's a bit more than 50 percent is resident residentials and then we have a diversification on the commercial side so we have office retail hotel industrial properties so a little bit of everything so all in all a very diversified portfolio looking at categories and geography uh besides holding a management portfolio we have some property development we are focused on residentials we can do commercial if we have it pre-lit or to a special customer but the big part is residential development and this comprises two different categories one where we build to keep and one where we build to sell to consumers retail selling this part of the company is decreasing right now quite rapidly because of three factors basically we have higher construction cost and we also have higher interest rate and the rental level haven't gone up in the same pace so it makes it less profitable and also looking at selling apartments is a bit tougher situation with slightly lower prices and higher construction costs so this part has been declining or is in decline for the time being and right now we have a lot of completions done in q2 there will be a lot q3 q4 q1 and then there will be quite slow pace in this one but over time it holds a good potential later on so we will continue to develop the land bank sooner or later it can be interesting again and there are no big book values on it so long-term potential short term it will be a smaller part of the business looking back we have the main goal of increasing cash flow or as we call it profit from property management and the long-term trend has been promising there but year by year it can be very uneven increases and right now we're more at a flat level due to the higher interest costs but this is the long-term goal to actually increase earnings power and in that way increase the value of the company over time other metrics of course is important to think about debt to asset occupancy rate and so on occupancy rate been very stable for many years at 96 back in time it also happened it was 94 95 long time ago but normally a very stable level there and we don't see any big changes in the foreseeable future either net debt to asset is slightly increasing and that is more linked to a bit lower values than than that we increase the debt that much it's increasing in swedish kronor but that is uh that's weakened currency, so calculated to kronor is a bit more debt. But on the same exchange rates, it's not an increased debt in Q2. And we see the trend going down. With lower investment activity and good cash flow, it will automatically slowly decrease in constant currency. We also have a slide called earnings capacity. It's not a forecast. We have a forecast as well. We had a forecast for the first time in 23. It hasn't changed from previous quarter, but we thought it was a good idea to have a forecast since there were a lot of other uncertainties around. But this slide is updated every quarter. So this is more of how it looks at that particular day. So everything moves around, obviously. But here you can see how it looked at Q2 with rental income, cost, financial cost, and so on. And we have the profits from property management slightly lower than last quarter. And once again, it's the financial cost that is going up for obvious reason. Otherwise, the underlying business is performing well, as you can see, with increased earnings before financial cost. And that seemed to be a trend that will continue.