Fastighets AB Balder (publ)

Morning, everyone. Welcome to Baldu's Comfort for the second quarter. Erik will first take us through some slides, as per usual, about the developments in the quarter, and then Eva will go through some financing, and we'll also talk some longer-term picture for the assets liability management side. But Erik, I'll let you start.

Thanks, Jonas, and welcome, everybody. Today we have our Q2 results. Looking at Valderona high level, we have 215 billion in property value, 96% occupancy. We are, as you know, a Nordic company with Nordic exposure, both in resi and commercial properties. And looking specifically at Q2, we had a rental income increase of 8%. And even the NOI is increasing 8% compared to the same quarter last year. Profits from property management decrease a bit. That is, of course, due to higher interest rates cost. Looking at net debt to assets, it's now 49.8. So that is a slight improvement from year end and previous quarter. like for like rental growth is now 3.6 percent and the nav 85 44. uh looking at the earnings capacity that we update every quarter more changes from last quarter but a small improvement even though so we have a bit higher noi income stable on administration cost And also on financing costs. So all in all, it leads us to slightly better earnings capacity than last quarter. So it's at 5.9 compared to 5.850. And per share, that's 5.03 in this report. Our portfolio is, as I mentioned in the beginning, diversified in the Nordic countries and also diversified in property categories. The largest exposure is towards capitals and larger cities. And looking at categories, we have resi for roughly half of the portfolio. And the other half is commercial. And then that is also diversified between office, retail, industrial, hotels and other properties. So all in all, a Nordic exposure. Resi is the most dominant category. And then it's diversified commercial properties. We also have property development, primarily in residentials. We have it in Sweden, Denmark and Finland. A little of it in Norway as well. There are two categories. One is that we build properties and we keep them for the long-term holding period. And the other one is that we build and sell. Building and selling is primarily in Sweden, where we build apartments and sell as condominiums. While in the other countries, the norm is that we hold for a long time the majority of what we build. Not everything, but the majority. So it's sort of two different categories in the P&L. This quarter, you can see a decrease in investments. And that is as expected, since we've been very slow on starting projects for a while. So this will continue to slow down. even more, and year-end we have not that much actually under construction. Long-term, we think this is an interesting segment to be in, and we continue with zoning plans, so we have a long-term view on it. Our building rights are concentrated to Stockholm, Gothenburg and Helsinki.

So this is just to show you a little bit about the long-term development. And here you obviously have the value creation. But perhaps even more interesting is the next slide showing that over time, we have not only increased the value of the company and our earnings capacity, but also there's been a slow but fairly consistent reduction of our debt to total assets. And we've also seen a very stable occupancy rate. I think you've heard us talk about before that we will prioritize the leveraging a bit in the coming quarters and years. I think that's really nothing dramatic compared to what we already have seen going back a few years. I think occupancy rate as well remains very stable, which I think speaks to the diversified portfolio that we have involved there. And even in times like these, when we see different developments in different segments and geographies, we're seeing a very uneventful development. I think in this context as well, we've talked about before as well that our Finnish portfolio have seen slightly weaker development, in particular on the rental growth side. In the quarter, we actually had a slight increase in occupancy in Finland. It's very marginal, but still, it's a stable sign. And as we communicated before, we're now seeing the peak of new housing units coming to the market. And we should see a more stable development of rental growth and occupancy sometime next year, probably. I think looking at the other segments, it's a fairly stable picture overall and nothing that really stands out.

Great, and over to some financing. Funding conditions have continued to improve, and it seems that things are slowly but surely normalizing. The margins in our new finance contracts are on the same level as our average margins in all our loans. We have continued to be active in our interest rate hedging, rolling or increasing swaps during periods when rates have come down. And while our average interest rate fixing is pretty constant since last quarter, the proportion of debt with fixings rolling over in 2024 and 2025 has decreased with another 2%. And as you can see to the right, our average interest rate is at 3%. All financial targets are in line with our goals, and the new financial target of net debt to EBITDA of 11 times continues to improve towards our target. And here you can see our available liquidity is 19 billion SEK. And as we have mentioned before, that number will fluctuate a bit between quarters, but the ratio between available liquidity compared to maturities within the next 12 months is unchanged since last quarter with 1.3 times. During the first quarter, we issued a little bit over 2 million SEK in the SEK market with maturities of two and three years. And during second quarter, we have continued to increase our presence in the Swedish bond market with issues in three different maturities, totaling another 2 billion SEK. And here you can see our ratio of secure debt to total assets is still low. And as of Q2, it was 23.6, which is a large headroom to the 45% we have as a financial covenant. Net debt to total asset, as Jonas mentioned earlier, is 49.8 as of now, so slightly lower than last quarter. And 71% of the debt is hedged with interest rate swaps and fixed rate loans. Here you can see an overview of the debt maturities per bank loans, bonds, and commercial papers. For 24, debt maturities amount to 3.6 billion. Of these, maturing bank loans amount to a little less than 2 billion, outstanding commercial papers is 1.4 billion, and maturing bonds is 306 million. In 2025, we have a larger bond maturity in euro, but as you can see, our available liquidity covers bond maturities in 2024, 2025, 2026, and a big part of 2027. And then I also would like to highlight that we have a slightly special situation in the euro market where we have benchmark bonds in euro that mature every year until 2031. And we have more euro debt than we have euro assets. So there is no need for us to issue in euro just because we have a maturity in euro. The only thing that happens then is that we reduce our swap book a little bit. So with that said, we can have every opportunity to look flexibly at the different markets and also the mix between bank and the capital markets.

And so taking the slightly longer term view and looking a bit more forward, So starting off with the capital position, we've mentioned that we're currently deleveraging a little bit. I think it's also interesting to note that quad loss has already started to happen. So year over year, we have an increase of the operating profit that we show in the earnings capacity of 7%, but at the same time, the net debt has decreased if we adjust for the re-classification of the hybrid and security movements. So it's already a fairly, I think, convincing trend, and we'll continue that for a few more quarters. And as you know, net debt to 28 or 11 times, looking at a slightly less volatile metric. So just take the operating profit and the earnings capacity of the net debt. It shows a similar trend where we've come down from 13.7 to 12.2 in the last year, and we expect that to continue down as well. The way we look at things is really from a capital allocation standpoint, but for as long as valuation yields remain a little bit more unstable than we've seen in the last couple of quarters, we need to channel more of the cash flow into advertising debt, and that's also what you see in the first half. As soon as yields stabilise and net operating income translates into value increases, Let's see how long that takes, whether that's early next year or whenever it happens. We get quite a lot of questions as well on the funding strategy, and Eros obviously talked about what we've done in the first half so far. But looking a bit more from a structural perspective, we feel that roughly a 50-50 split between bank and bond financing is where we are currently and probably will remain. However, as Eva mentioned, we've been fairly active in the euro bond market, which means that we already have an established curve that's pretty long in euros. Whereas in the SEC market, we've been a little bit more underrepresented, and we feel that we want to increase that presence over time. So our aim is to establish a liquid curve in the Swedish bond market out to five years. You've seen us work on that in the first half already. And that work will continue slowly but surely. And we'll ensure to try and issue at certain maturity points. And then even if we do prior placements, we will do that on the same maturities and ising codes, so that we get a liquid curve that is fairly transparent in its pricing as well. I think if you just backtrack the numbers, so if we have 130, 135 billion of interest-bearing debt, and you say half should be in the bond market, we already have quite substantial amounts outstanding in euros, and then the remaining part will be in the second market. I think we also, over time, will work to reduce the concentration of maturities in individual quarters in even years. In the picture that Eva showed before, you can see that there's a little bit of a lumpy situation in the coming couple of years. I don't think that's necessarily a big issue, but it's something that obviously costs quite a lot from a liquidity standpoint to hold the extra liquidity to cover the upcoming maturities. Many of you know that we have a target to keep 1.25 to 1.5 times the maturities that we have upcoming for the coming 12 months. I think in the Swedish banking market, as most of you know, by its nature, a fairly short-term financing market. So I think that maturity structure will remain fairly similar to what it is today, but what we can work with is obviously the bond side. Yeah, that's sort of how we envision our financing structure going forward, and that's how we will consistently work in the coming quarters and years as well. I think that concludes the presentation. So with that, we'll open up for Q&A.

if you wish to ask a question please dial pound key five on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key six on your telephone keypad The next question comes from Lars Norby from SEB. Please go ahead.

Well, thank you and good morning. I guess for the sake of continuity, I'll ask a similar question that I asked in connection with the last interim report regarding expansion versus holding back on expansion. I see your capex is course sharply down compared to the same quarter last year at the same time net debt to EBITDA is improving how long do you think you will stay in this sort of holding back on expansion mode and when can we see you pushing the accelerator again

Hi Lars, good morning. So I think what we try to, the way we try to think about this is that we have a certain cash flow that we can obviously allocate the way we want. And for as long as we see valuation yields creeping up as they have during the last year, we're not getting any leverage help from increased values. And that means that we will direct more cash flows to debt amortization. As soon as yields stabilize and net operating income translates into value increases, we have more equity creation, so to speak, to allocate. And then we can have a slightly more growth-oriented capital allocation attitude as well. Now, let's see whether that's a couple of quarters away or how long that's going to take. But that's sort of the way we're thinking about it. Does that make sense?

Absolutely. One additional question. You may have mentioned this earlier in the call, but in the euro bond market, when do you expect to get back in the euro bond market issuing new bonds?

I think what I alluded to, that we have a lot outstanding already in euros, means that we don't have to issue for a very long time. At the same time, if you're long term committed to market, you need to be present at some point. But we can choose when that point is. I think that's what we're trying to say. I don't think we can stay out for another two years of the euro market because then people will start wondering if we are committed for the longer term. But I think for this year, probably our focus will be on the SEC market. And then we'll see what happens towards the end of the year or early next year.

Perfect. Those were my questions. Thank you.

Thanks. The next question comes from John Vong from Van Lanshot Kempen. Please go ahead.

Hi. Good morning. Thank you for the presentation. Just in light of asset liability management, a follow-up question there. Could you perhaps talk about the investment markets? Do you see any scope for some asset rotation or perhaps some disposals on your side?

We don't feel the need for doing disposals. I think we will basically see In the short term, the same behavior as we had the last couple of years that we complete projects. There are still some completions to do. We get cash from selling condos. And then maybe, as Jumna said, in a couple of quarters, we can see how the situation is. But I think it will be not so much activity in the short term from our side. focusing on what we have and improving what we have.

Okay, that's clear. So then debt amortization is really much more driven by retaining cash flow from my understanding.

Yes, and it goes pretty fast as you see the combination of debt amortization and growing NOI, the combination is quite effective. So if you just look at the earnings capacity, I mean, that's not a forecast, but it's just a situation. At a given point in time, you can see the improvement the last year from 13.7 to 12.2. So, I mean, it goes both ways, you know, cash flow and increased NOI. So it's quite effective. But exactly how fast, we cannot predict because we don't know exactly rental levels, vacancies, and also currencies can make it go a bit faster or slower. Time is on our side.

OK, that's clear. And then moving on to the Helsinki residential markets, which is a large exposure if you are . The market seems to remain soft. I think that you mentioned that earlier in the presentation as well with peak deliveries right now. One of your peers also gave a profit warning earlier this week. Do you already expect any improvement over the summer given that that is generally a seasonal effect or is this really much more of a 25-26 story?

I think it's likely to be better 25 but I mean nobody knows exactly but if you look at Satto specifically we have slightly lower vacancy than last year but it's very stable compared to last year but slightly lower vacancy and NOI is also better than last year. But the trend is not so strong yet. And I think next year will be having better, I think it's likely to be better 25. And it's easy to forget, you know, if you think that all the companies more or less stop building or start projects on a very low level, you have a time lag of about maybe two years approximately. So if you look now, you have a lot of completions, more or less a record, but you have very low building permits. I think the time lag is very easy to miss it. But next year, the completions will go down dramatically.

There's a sharp fall of incompletions towards the end of this year and into next year. And if you look at new construction starts, I mean, we're currently looking at probably a third or even less than a third of the number of units that we did get. That's a pretty sharp decline. But there was obviously some inventory that needs to be worked out before the market finds a balance and clears at a better level from a rental perspective. But I think it's worth pointing out as well that I'm not sure how much the timing matters here. I think it's also important to remember that during the last four years or so, we haven't really seen any rental growth in the Finnish market. At the same time, during that time, you've had, what, 25% disposable income increases. You've had continued inflow of people to the regions where we are present. And so you have all the preconditions in place for a very healthy development once the market clears at a better supply and demand balance. And I think whether that takes two quarters or four quarters or six quarters, let's see. But once it happens, you know, the fundamentals are in place for pretty healthy development, I think, for some time. Because it's also going to take a lot of time before new constructions sort of picks up again and new supply comes to the market once it starts balancing out.

Okay, that's very clear. Thank you. That's it from my side. Thanks.

The next question comes from Jan Eiffelt from Kepler-Covriax. Please go ahead. The next question comes from John Vong from Van Lanshot Kempen. Please go ahead.

Seems like something went wrong with the auto voice there. Is someone on the line now?

The next question comes from Marcus Henriksen from ABG Sundal Collier. Please go ahead.

Good morning. Moving rapidly today. I'll take my questions while we wait for Jan. First on, dividends from joint ventures were 615 million in the quarter. Could you highlight a bit from which companies and also highlight any potential inflow in the second half of 2024. That could be good for us to know about.

Yeah, it's a combination from a couple of companies, but we don't see the same big inflow in the second half of the year. But that can change, obviously. But right now, I think it would be more or less this level, or maybe some small. We don't know exactly, Marcus. But If you take the big picture, the joint venture is sort of a similar state as Balde. You have complete projects. It gets cash flow instead of projects. And late this year, it's not much construction ongoing in joint venture. So it's kind of similar if you take the group as Balde. Kind of similar. Some projects in 2025, but it's... Yeah.

Thank you for that. Then the current tax increase a bit, 116 million. It was 42 million last year and 37 million in Q1. So have you reached a new level or is this quarter more exceptional? So we should look at the first half as a better reference for going forward?

Yes, I think look at the first half is a better approximation.

Thank you for that. Dan, there's been a few questions on investments. If you were to increase your investment base already in the second half of this year, where do you see best risk reward? Is it within projects? Would that be new constructions or renovations? Or would it be acquisitions?

I think, Marcus, in that case, I will look for smaller deals. in all our markets, you know. There I think you can actually find some value, especially if markets is a bit illiquid. You can, as a buyer, get a better return, but it's very hard to predict, you know, before what will be the best. But it's very hard to guess that actually, Marcus. I wish I knew exactly what was the best to buy. If I'm guessing, maybe you could find some sort of good yields in Finland and also in Norway, I would guess. Copenhagen is still very strong and high competitive. But it's on the other hand, a fantastic economy there. And I feel in Sweden, we really don't see anything that cheap, actually, but not expensive either. But it's more of a mix here. And I think project, we have so much building rights if you look ahead. We already have, and we are assuming a lot. So in the long term, we have a huge potential in our building rights for SC, especially in Stockholm, Gothenburg, but also in Helsinki. So I don't think we will buy more of that. We have so much actually already.

Thank you. Makes sense. Those were my questions.

Thanks, Marcus.

The next question comes from Mary Pollack from Credit Sites. Please go ahead.

Good morning. Thanks for taking the questions. On the first one, I just wanted to ask a follow-up on the funding strategy and appreciate the slide and the color. Just so I understand correctly, it sounds like you want to increase your presence in the Kroner market likely after the five-year and also want to smooth your maturity profile. And I guess when I'm looking at your maturity structure today, I'm sort of curious what that will look like in terms of what maturities you would look to issue in. Is it mostly like 25, 26s, 29s? And then also, I mean, as part of that smoothing maturity profile, would that also include a long Euro bond to push out some of the 27, 28 maturities? And then I'll add one more follow-up.

Yeah, thanks for the question, Mary. I think to begin with, the statement was a little bit more of a strategic nature rather than exactly having planned what Oceania's plans are sort of going out a couple of years. But I think if you look at the maturity profile the way it looks today, It's a little bit lumpy in 26, 27 with a fairly high concentration. Now, partly that has to do with the fact that we still have some outstanding volume in the hybrid with the call in 26. And then we have two benchmarks outstanding in the coming few years per year as well in euros. So the Swedish market works quite differently from the euro market in the sense that you don't do large book transactions in one go, but rather you do a small issue to establish a new node on the curve and then you tap that node with buyer placement so your first transaction might be 100 150 million euros and then you can sort of increase that over time um quite a lot and then you can even do buybacks in the shorter end of the curve to roll the entire curve in front of you on a more continuous basis if you compare to how you usually work in the euro market So when we issue in the SEC market, we've done transactions on four different maturities so far this year, and all of those have been fairly small volumes per maturity, but then we can obviously tap those going forward and establish new nodes on the curve as we go along. I think on the Euro market, I think you're right in your observation that we probably will target longer issuance there. I would say, though, that once you re-enter a market, I mean, we haven't issued in the euro market for some time. Once you re-enter a market, you might not want to start with a seven year, your first transaction. So there might be more tactical considerations once we come back to the euro market as well. as the most strategic ones. So I would say we need to do a probably slightly shorter one, the first transaction once we re-enter. But over time, I think the way we view it is that we'll probably issue new bonds in the Euro market sort of five to seven years continuously once we reach a more steady state and the point where we want to be.

Thanks. That's a really helpful color. Um, and then my other question was actually, um, separate, sorry, not follow up. Um, I just wanted to, I know you mentioned the remarks, there was no major changes in the portfolio outside of finish resi, but if just to ask again on the office portfolio, any changes in tenants demand, any tenants taking longer to sign leases, wanting smaller space, any impact from hybrid workers, it's still business as usual.

No, I would say it's very much business as usual. We don't see any big trends anywhere, actually. So what's been the bit weak spot, obviously, has been Finnish resi. We talked about that a while ago. We think it's better next year. And then we have office basically in Stockholm, Gothenburg. So some in Malmö, but mostly Stockholm, Gothenburg. And we haven't seen any big changes there actually at all. So The best guess is that not much will happen in our figures going forward. It's a huge difference if you compare small cities in Sweden, for example, with LA or New York. I think it's totally different, actually, the whole material. I think you will hear this from all the Swedish companies. You see in the figures the same trend, basically, that it's very... actually very stable with small changes from year to year. So, no, I don't see any big changes in our portfolio.

I think it's important here to try and separate any sort of more temporary cyclicality that you might see in the office market with the more structural trends that have to do with sort of hybrid or remote work habits. And I think, you know, obviously you know in some locations see that it takes a little bit longer to close a new tenant contract etc so we can feel that there is a slight different macro picture compared to a couple of years ago um but but it's uh it's very small numbers that are not really visible on the totality and the uh and the structural aspect i don't think we are seeing uh in our markets to not at all to the same extent as you see in in other markets around Europe, and particularly in the U.S.

Thanks. That's helpful.

The next question comes from Jan Eifelt from Kepler-Covriax. Please go ahead.

Okay, good morning. Could you hear me?

Yes.

Okay, great. Second time luck. Okay. I start off with Finland. And could you maybe elaborate a bit on the rent increases you see on rents in Finland for this year and also next year? What kind of level is it?

This year we have a quite low like-for-like rental increase in Finland, Jan. It's maybe 1-2%, something like that. But it's turned positive. It was actually negative if you go back one year. So it's getting slightly better. If you look at our portfolio, we have basically the same vacancy or slightly, slightly lower than one year ago. But we think that 25 is actually... the year when we can maybe see a bit better rental market because completions is very high right now but it will fall during the rest of the year and next year it will be very little and we still see the big urbanization trend so but it's hard to guess a figure for next year I think it's very hard but we're quite optimistic that next year is better anyway but I think a percent no I don't dare to guess Not now. Maybe later.

Okay. I think, Jan, the difficulty in the timing is obviously as well. It's hard to know whether the market will prioritize rental increases or vacancy reductions once the market starts clearing and some of the inventory is reduced. I think if you look ahead three, four years, I think both of those will improve. and how the two will go in tandem, I think it's impossible to say beforehand.

Okay, and then on the construction workers new build, when do you think it's the right time to start new projects? You were talking about Stockholm and Gothenburg, you have the building right there.

I don't think we will start anything this year. Next year, hopefully, some condominium projects can be interesting to start on. But we're not really decided on that. But I think during the autumn, we will know more. And hopefully, the market for condominiums continue to be more stable. Prices continue up a bit more. And then I think actually it can make sense to do some small things maybe next year. on the build to sell side. So and we have, as you see, we don't have much investments left in our projects at all, actually. So by year end, it's very, very little. And then maybe we can also have room for a couple of starts because I mean, we also have to look at the total volume of investments and buildings ongoing. So automatically it will be But maybe we can do something in Copenhagen next year, maybe something in Gothenburg, maybe something in Stockholm if the market continues the way it is now. But the good thing is that if it doesn't, we can just wait. So we have no downside on this. We have a potential, but there's no flip side to it. We can just wait. And at the time, we continue with zoning plans and so on. The long-term potential, I would say, is very good for us. But short-term, it will not be happening so much.

Okay. And would there be an option to maybe sell building rights? Is there a market for this?

On a small scale, it might happen, Jan. I mean, we look at it. We have some discussions. I think we even sold something in Finland and So we can look at that. But I think also the timing for selling is not so good. So, I mean, we don't have to sell. So then I think you could have better timing. But next year it might be the case that the timing is better. So we will compare alternative, do the projects or sell the building rights to a larger extent than before. Before we were more like hoarders. We didn't want to sell anything. Now we'll be more looking at it more I would say rationally perhaps so we can consider selling building rights next year if it's interesting for us.

Okay and last question from my side the bonds you have been on the bond market here in the quarter could you maybe elaborate a bit on the spreads there what you had what you got from that market?

Yes, we have seen quite tightening since our first bond we issued in January. It was 200 basis points and now last time we issued the same maturity was at 115. So pretty strong development.

And that's why you're looking for going forward and a little bit north of 100 basis points.

I think the market is strengthening all the time. So let's see when we go to the market next time. Can't really comment on when that's going to be. We don't have very much need for that as of now.

The credit curve is still fairly steep. So the credit addition that you need to pay about the swap rate is fairly So there's quite a big difference between a two-year and a five-year. But I would say if you look like for like, we've commented in the last few quarters where we do new bank financing. And I would say currently that would be 135, 140 basis points.

A little bit lower.

A little bit lower, 125, 130. And I would say that's on par with where we would see a uh swedish krona senior bond for the same maturity today as well so there's no big difference i think bank and bond financing are roughly the same and for a three year let's call it 125 basis points 130 basis points okay very clear uh thanks for taking my questions thanks

The next question comes from Andres Tum from Green Street. Please go ahead.

Good morning. Just a couple of questions from my end. Firstly on Helsinki, and you gave it quite a bit of color already in terms of what's happening in real time, but just wondering more structurally. So Helsinki recovery has been a moving target for years now, and we've had record net migration for two years in a row, but still the market hasn't, um, uh, stabilized or, uh, you know, gotten to an equilibrium. So, and obviously it was visible that supply was running high. So what do you think market participants have gotten wrong in, in sort of, uh, forecasting, uh, imminent recovery for the past two, three years? And then secondly, it seems that supply barriers in Helsinki are quite low. So is it really a market you want to be in in the long run? And is the market rent growth actually going to be quite buoyant even after the current glut of supplies is absorbed?

I think what might have been missed in the short term or until now is the time lag. from construction permit to completion, that can be actually three years. You normally have a building time of two perhaps, but then from permit to completion, it can be one more year. So I think that is the thing that is very easy to miss. Even surprised myself when I looked at it a couple of months ago that you had record high completion, because you would have instantly felt that it was low completion now, but that will happen next year in 26. I think the time lag has been underestimated. And the long-term trend is still Helsinki is okay. It's the capital. It will be growing and hopefully Finland's economy will be okay as well. So I think it will turn out okay. But there have been many years of slow development. I agree on that. But on the other hand, then it might be good to hang in there. So, no, I think we will have a better situation next year and 26 in particular.

Thank you. And then my second question is just thinking about capital allocation, you know, and you got a lot of questions in terms of restarting investments and thinking about acquisitions. I guess firstly, when you think about development and building rights, Are you actually seeing potentially even positive profit margins if you were to launch projects today? Or is that still not really viable and that's why it doesn't actually make any sense to start?

There are positive profit margins, but I think they are a bit, of course, lower than before. And if you still think that there overall is some uncertainty, I think it makes sense for us to wait, you know, so. So I don't feel that we are in any hurry. We can do it later. But we have on the long term a lot of building rights. And in Sweden, we will focus on build to sell, you know. And then if we have a reasonable profit margin, it's actually very interesting for us. And it turned out okay. If you looked, the result for 22, 23, 24 has actually been very good. But we have the flexibility to do a lot or nothing. It's easier for us compared to a company with only that business because it will be very dramatic to stop the engine, so to speak, if you have that as your only business line. For us, it's more of another way to allocate capital. So the volume of projects is actually depending on the alternatives as well. So, of course, it must be profitable, but also compared to other alternatives. And another thing you can also think about, Andreas, in Helsinki, construction costs have gone up there a lot as well as in all the other markets. So I think that will automatically, to have a high construction volume again, you need higher rents. Otherwise, it will not be profitable there. So that's also good to bear in mind if you think long term.

Understood. And then in terms of also, if you were to potentially pursue growth again, I mean, the share price has rallied a lot. So in terms of capitalizing on your equity base rather than financing things through debt, how's that thinking evolved?

I think we look at it case by case. It's hard to predict, you know.

Okay. Thank you. That's it from my side. Thanks.

The next question comes from Neeraj Kumar from Barclays. Please go ahead.

I just wanted to quickly check upon the S&P rating. I see the negative outlook is now there for more than one and a half years, and reading the last S&P report, it seems like they're a bit concerned on the liquidity and ability to fund these near-term debt maturities. So how can we... Sorry. So how does your new funding profile matches with that and when can we expect that negative outlook to be removed?

It's a bit hard for us to comment when S&P will remove the negative outlook. As we said before, we fulfill all the criteria. So let's see. I mean, the liquidity is in place and the profile is, of course, much better than one and a half year ago. So I would say it's a matter of time, but we can't really comment further about that.

I think what you mentioned about S&P focused on the liquidity, I think that was some time ago. I don't get the feeling that they've been concerned about that for the last few quarters.

I'm looking at a report from April actually, April this year. I think they're right that still, you know, we know always we always had a question mark on that because we never felt any risk of liquidity, actually. So we never agreed on that. But now it's obvious because bond market is very strong and bank market is also very strong. So I think. I mean, the reality is that there is a very liquid market.

But I think if you look at the key ratios that S&P focus on for us, I mean, we have been a little bit tight on the LTV metric or the debt through debt plus assets. And we've been a little bit tight on the ICR according to their way of calculating it since they adjust for associated companies, et cetera. I think we have seen those metrics. I mean, they've always been where they need to be, but we haven't had a huge margin to their and those have now turned for the better. So it should, as Eva said, be a matter of time, but let's see.

Got it. And also, secondly, just touching upon the valuations, I think I said we were referring to that given the valuations are internally appraised compared to other landlords which do it externally. Is there a bit of friction because of that as well in terms of the negative outlook? No.

I wouldn't say so.

We never felt that.

We do use quite a lot of external valuations, but we don't value 100% each quarter externally, but we use quite a lot of external valuations and have a sort of structure for how we do that and how those valuations translate into our benchmark with our internal valuations.

Got it. That's helpful. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, thank you everyone for taking the time and listening and as usual, just let us know if you have any follow-up questions. We're available for you. Thank you very much.