Fastighets AB Balder (publ)

Good morning, everyone. Welcome to Balder's call for the first quarter of 2025. We'll have some introductory remarks from Erik and Eva, and then open up for questions. And with that, I'll leave the word to Erik Selin, CEO of Balder.

Thank you, Jonas, and good morning, everyone. Balder is a real estate company with the Nordic exposure. We are one of the largest and most diversified real estate companies in the Nordic region. We've been active for 20 years, more or less now, and we have a mixed portfolio with residentials and commercial property, roughly half of each. We manage our assets ourselves. That is one of our fundamentals. Even normally we buy and hold, but we can also develop and build and hold, and obviously also build and sell. And we have had an average NAV growth of 26% per year since inception 20 years ago. We have a S&P rating, BBB flat, and net debt to asset of 49%. So that's a baller at the glance looking at the first quarter rental income increased 9% and the NOI net operating income increased 10%. If we then look at the profit per share, you can see an increase of 7% and the missing piece is that we issued some shares during the year. So that's the difference from 10 to 7. Looking at earnings capacity, which will be next slide, it's now at 538. So that's 8% better than this quarter last year. Net debt to asset, as I said, 49%. And like for like rental growth on average in the whole company, 2.9%. And NAV stands at 89.55 right now. Earnings capacity is a slide that we show every quarter and it's just more or less the figures on that particular date so it's not a forecast but it gives you a big picture of the overall figures in the company. And if you compare now year end to quarter one you can see a small decrease in rental income and further down also in profit from property management. and that is because of the currency movements so on constant currency we would have had a small increase but this is always currencies per quarter end and if you compare quarter year end with quarter end the swedish strengthened quite significantly if you compare with Euro and even the other currencies. So that's why I have a small adjustment in earnings capacity. Apart from that, it's very stable numbers, as you can see. And looking more specific of the portfolio, 80% is in larger cities and capital in the Nordic region. So the biggest cities are then Helsinki, Gothenburg, Stockholm, Copenhagen. And if you look at property categories, we have Resi with 53%, Office 15, Retail 12 and then we have some other properties including hotels. And we have also a small part that is industrial and logistics property, 6%. Looking back on this slide you can see the development of profit from property management going 10 years back in time. You can obviously see a good improvement 16 till 22 and then a flat development. That is the shift from zero interest rate to gradually higher interest rate that makes the profit from property management to be flat. But in order to be flat, we had to have a very good development on the NOI and that has actually compensated for higher interest levels during this turbulent years. And looking at other metrics you can see portfolio value last 10 years from roughly 80-90 billion to 222. The leverage have been around 50% or there about. And occupancy rate also very stable at 96. If you look at even smaller numbers, you can see that it's 95.5, 95.8 sometimes. One quarter, I think we also were below 95.5. So we had 95 in the figures, but a very stable number over the years. And the explanation is we have a very diversified portfolio on asset classes, countries, geographies. So that makes it that is very, very small changes up or down. And that is on purpose. We like this to be very low operational risk. And we think that this will continue to be stable over coming cycles as well.

Great. So a short ESG update. In February, the EU Commission presented simplified rules for sustainability reporting through the so called omnibus package. The proposal involved among other things changes in the CSRD and taxonomy, as well as two year delay in implementation for smaller businesses. These changes do not affect Balder at present, as the size of the group is included in wave one, which means that we shall continue to report in line with CSRD requirements for the fiscal year 2025. And our sustainability report has taken major steps towards the new reporting requirements in order to achieve full compliance in 2025. Alder's sustainability work has developed during the past year, reduced energy use and greenhouse gas emissions, more charging points for electric vehicles, increased energy production from solar panels and larger amounts of environmentally certified square meters. We also have a higher proportion of properties that has undergone climate risk analysis and are aligned with the EU taxonomy. And these are just some results that we have achieved in 2024. And over to some financial information. The equity asset ratio has increased by 0.7% up to 38.7. And net debt to total asset has decreased by 0.4% to 49%. The ICR is at 2.7 and in the quarter it's 2.8. And if you look at netto to EBITDA on a rolling 12-month basis, it's 12.0, down from 13.5 when we introduced ahead of 2023. And also, if you look in the current earnings capacity, we're now at 11.7 times. So we are working our way down to the target of 11 times. And if you look at available liquidity as of Q1, it's a little bit more than 23 million, billion, sorry. And it's well above the criteria from S&P regarding 1.2 times for the coming 12 months, according to S&P's methodology. And that level is unchanged since Q4. To the right you can see the interest refixing structure. Also worth noticing is that the average interest rate for 25 includes the margin for the floating part of the debt portfolio and the average interest rate is 3.1. Here you can see the long-term trend of the portfolio value in relation to net debt to total assets. As I just said, net debt to total assets has continued to decrease a little bit and secure debt to total assets is at 24.3. And that current encumbrance level is reasonable expectations going forward as well. And here is the usual overview of the debt maturity structure, split by bank loans and bonds and commercial papers. And during the quarter, we have been active in both the Swedish capital market as well as the Eurobond market. We issued a seven-year 500 million Eurobond at the same time we repurchased 250 million euros in maturities 26 and 27, as well as the hybrid. And we also did a five-year CEQ bond of one billion. And if you look at the bank side, it's more or less business as usual, rolling maturities. And this has been done with slightly lower credit margins than last quarter. I think that was it from my side.

Thank you very much, Eva. And then with that, we open up for questions.

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 john vong from van lanchett kempen please go ahead all right good morning thank you for taking my questions um in the report you mentioned that the distribution of norian bunk shares

is dependent on a safe margin to credit ratios. Could you perhaps quantify this margin?

We've chosen not to do that in exact terms, but also because these metrics move a little bit up and down with currency movements and other things. But if you look at the important metrics that we have from S&P is our ICR, where we have ample margin, and that is not really impacted by a distribution of the Norwegian shares. And then we have the debt through debt plus equity measure where our limit is 60%. We're currently slightly below 57. And so we have a good margin, but a new distribution would obviously worsen the debt through debt plus equity a little bit by about one percentage point. So let's see in time. We have chosen not to quantify exactly what headroom we want there.

might depend a little bit on other deals and transactions that we do as well so it's difficult to give an exact forecast okay that's clear that doesn't mean that you're you haven't really necessarily changed your um the way you look at investments given that you also at the same time want to distribute these northern punk shares and Has it changed your timeline over which you see this delevering process towards an 11 times another DBDA?

No, not big changes. This is more fine-tuning. So, the big picture is not changed in our view. It's just that if you have credit metrics, you should always have some safety margin. Otherwise, you could risk to be in a unnecessary, stressful situation. So that's why we want to have some margin. So it's not a big thing, but we think it's better to communicate how we view this. So, I mean, you can see that we could obviously sort of afford to distribute today. That would not be a problem at all with the numbers. So it's just a matter of how much safety margin we want.

so yeah so that's how we think okay claire and just the last one on this topic um have you explored other options that weigh less on your leverage such as a silver stake for example i

No, I think our holding in Norion is more than 40% of the company. So I think a placement of that kind of stake might be a bit challenging. It's probably more disruptive market event for the Norion share than the distribution of the shares. And then each shareholder can choose to do what they want with their shares.

Yeah, exactly. We think it's a very good company. And then if we distribute, everybody can do what they want. So it wouldn't feel right to sell at the discount.

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

Thanks.

The next question comes from Lars Norby from SEB. Please go ahead.

Good morning. I see in the CEO statement when you're talking about the geopolitical and the economic uncertainty, you say you're not directly impacted. At the same time, I hear from a number of other real estate companies in Sweden, I would say that there is a, among tenants, decisions take longer and are in some cases put on hold. Do you see any such an effect out there?

not very big loss and it's always difficult to know why and what is the exact reason. But I think if you have If you have a very large part of office in some places, it's much more affected. So that can be also why we don't see it in the same way. But yeah, let's see what happens. We're quite optimistic in total, actually. But short term, there is some maybe softness in office market in Stockholm, a bit in Gothenburg.

And a few other companies have experienced material terminations from tenants in the first quarter. I mean, you don't disclose your net leasing numbers, so it's not as explicit in your figures. But have you had any such experiences in the first quarter?

No, nothing material. But we don't have so many, you know, big sort of dangerous contracts. I think there's also an explanation. It's a bit different, the composition in our case.

Okay, thank you, Lars, for my questions.

Thanks, Lars.

The next question comes from Jan Eerfelt from Kepler Shoebrew. Please go ahead.

Okay, good morning everybody. I have a couple of questions here. I start off with your earnings capacity. I see that the NOI margin comes up from 75 to 76 percent, one percentage point increase. My question is have you cut your operational costs or what is driving the uplift there?

it's a very small adjustment that we think we can perform it slightly better than if you go look backwards but it's this is also very fine tuning on where we think we can do a bit better so that's why you have a percent so not nothing dramatic but there are some yeah but it's a hundred basis points though yeah but that's not much okay okay uh uh second question here the finnish residential market how has that developed during the quarter has it been stable better worse swedish um i think for selling finnish sorry finnish okay finnish wrestling market is still slow we believe um more competition from koya more than before um so it's uh been a bit delayed in the improvement but we still think for the second half of this year will be better we thought that for uh i have been thinking that for for a while now and we still hope that we are right and we have like for like uh plus in in the finnish portfolio uh i don't remember exactly maybe 1.6 or 1.8 percent something like that and At the worst point, it was actually negative by, I think it was 23 basis point or something. So it's not good, but it's not worse either. It's competitive, but we think it will be better second half.

Okay. And you made a comment in this year about the project starts a little bit delay there. So is this more a question for next year or will something happen late this year?

Let's hope that we do something this year but we are a bit cautious you know Jan because we have to feel that it's worth to invest.

so and it will not be big a couple of years ago but we hope we can do something and that's our hope but yeah let's see okay and your property revaluations were there any specific there in terms of geographies or segments or

No, I'm very it's very, very, very small changes. But for example, when we made some assumptions year end and then we could see that the outcome is slightly better than the assumptions a quarter ago. So if we don't change anything, you have a small revision upwards, but it's like point 3.4%. So it's very small, but it's performing slightly better than we thought year end overall.

Final question from our side. Bank margins, how has that developed during the quarter?

It has been slightly better than last quarter. I would say on average 1.10.

Okay. Okay, thanks for taking my questions.

Thank you. The next question comes from Staffan Bulow from Nordia. Please go ahead.

Good morning. I have three questions. I'll ask them individually. Starting off, you mentioned in the CEO letter that you see opportunities in the transaction market, both as a buyer and as a seller. Should we view the comment as rather being a seller as defensive or offensive? Are you looking to sell to allocate to new investments or to reduce leverage?

uh our leverage will reduce automatically you know so if you don't do anything that happens sort of by itself with cash flow so it's more that i see a lot of interesting opportunities in general if you're a seller you can actually sell at reasonable prices and if you're a buyer there are also interesting stuff out there so i have a feeling that if you want you can do some good transactions in general uh But that might not be the case that we do a lot of transactions that we have to see. So it's more of a general statement. So if you start out, let's say that you have a fund or start a company or whatever, you have a lot of I think you can do good business now. And if you want to sell, there are actually buyers on quite OK price levels also. So it's more a general comment.

Okay understood and another question on capital allocation opportunities in Q4 you acquired properties from Sanatug. Do you see more opportunities to sort of acquire properties from Jevis and dissolve those structures and also could you be open-minded to increase your ownership in Sato?

Yes, on both of those questions. We always try to look at it in a pragmatic and rational way, like this Centuri case, when we could see it was better for both of the owners to split it. And so we are always open for that. We just try to create good values for the long-term shareholder. And that's come to Satos. I mean, it's just a question of price level so if we think it's interesting compared to other alternatives we can increase there.

Okay that's clear and a question on Karl at Tornet in the end of last year you acquired all unsold apartments in Karl at Tornet is it possible to quantify the potential

sales value of unsold apartments in Carlatonet you mean going forward or looking yeah going forward yeah I think it's 1.3 billion roughly if I remember correctly okay

And one final question from me on like-for-like rental growth. It was 2.9% in the quarter. If you look into 2025 based on what you know today on resting commercial, do you expect it to be higher or lower than that?

That was a tricky question. What shall we guess there, Eva and Jonas?

I would say that it would be in the same area.

Same area.

Okay. Thank you. Those were my questions. Thank you.

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

Thank you. Good morning, everyone. I have three questions. First, in the cash flow statement, divested financial assets for one and a half billion, and then there is a received dividend from joint ventures of 1.1 billion. So I'm just a bit curious if you could give us a bit more details on those cash flow items. Thank you.

Financial investments, I think it's basically bonds or certificate expiring. You know, if we have over liquidity, we just don't have bank deposits so we can buy commercial paper and bonds in other companies as a liquidity and that decreased. So I think that is the big part there. And what was the cash flow? Yes, that's a Centur dividend.

Yeah, right. Thank you. And then liquidity is up around 3 billion sequentially. You have almost 24 billion in total liquidity. Any special reason for that? Any big upcoming refinancing or any other reason?

No, I mean, we try to think about the liquidity as in relation to what maturities we have. So if you look at the upcoming 12 month maturities, the liquidity ratio between the two is fairly constant compared to last quarter. So there's no big changes there. Michael, the available liquidity, and I think Eva said this before, might go up and down by a few billion quarter by quarter as we try to match the liquidity with the upcoming maturities that we have 12, 15 months out.

So this ratio is unchanged since last quarter.

Thank you. Do you have any major bank refinancing to be done in the second half or third quarter near term?

No, I mean, we do that on a regular basis. I mean, we re-roll the bank loans all the time, so nothing major out of the normal.

All right, yeah, I'm just trying to fish if, yeah, because it seems like bank margins have continued to trend down, so nothing major there. All right, then a follow-up on Finland. I heard your answer there before, Erik, but just a bit more details. I saw Koyamo really improved quarter over quarter from 91.6 occupancy up to 95% here in March. highlighted and thought down around 70 basis points. You mentioned high competition from them. Is it mainly pricing or any other thing that they have been doing in the quarter and continue to do in the second quarter?

If I'm guessing, it's mostly pricing from their side. It can also be how you select tenants, but I don't have details on their operations, but pricing. This quarter, I think their occupancy is soon up to a level where they will be more comfortable. But you have to ask them, I think. I think they're more or less reduced their vacancy 50% from the bottom until today. And that's good. But of course, there are two big players, Sato and Koyama. So if one is very active and aggressive, you should have some effect. So I think we've been more stable for many years, not moving up and down as much as they have. What is the best case? You never know until afterwards. So in hindsight you can see that you should have done this or that. I think it's actually good for us that they have lower vacancies.

I agree with that. Do you think that they need to come up a bit further? They're at 93.5% now. Do they need to reach you around 95% and then both of you together can continue to raise rents? Are we currently at a positive enough level?

Something like that. But I don't know exactly how they calculate if vacancy is that you actually are in the apartment. Let's say that you write the contract and then you move in two, three months later. So I don't know if they have a time lag between the actual contracts and their reporting. Maybe you know.

I would expect that to be more of a kind of spot figure.

And let's say if it is a spot figure, my guess is that they will have an improvement in Q2 also. Quite good. Exactly.

Thank you for that. Last question, you touched a bit on that before, but we saw negative top line growth here, of course driven by FX, but it's not the norm in Balder. Do you see anything particular in your portfolio that can help lift top line growth already in 2025 or any foresee any decision making near term that could help growth in Balder?

No, I think we will have some growth, but you know, when currencies move a lot, it's have a short term effect. But in the long term, you don't have to bother about that. So I'm still very positive on long term growth. But this was very big movements in currency for in our case and we have a lot of exposure you know to other currencies but now overall i feel reasonably optimistic you never know the very short term but otherwise i think we have a lot of opportunities sounds good thank you that's where my question thank you very much

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

Hi, good morning. Just a couple left. Well, firstly, I guess, can you give a bit more color on the performance of the hotel segment? And have you seen any impact in terms of just the macroeconomics on your hotel performance?

No, that is too short term to see anything special. In general, you can say the market is pretty good. with the exception of Gothenburg, where we have a lot of new supply. Part of the supply is actually our own fault as well, since we've been constructing hotels. But to be super specific, I don't know. We haven't seen anything special, actually. And we have a big part that is fixed rent in Balder. So we have smaller swing factor than if you are a lot on variable rent. so you will not see the big swings in our p l as you can have in other companies we have some turnover but on a relative to other real estate companies is smaller so we are long term positive short term guttenberg is competitive and the other markets are quite okay copenhagen is good stockholm i think will continue to be good helsinki as well

Thank you. And then my second question was just on the earnings capacity as well. And I was just wondering on the financing expenses, that's been fairly stable now for many quarters in a row. I guess with short term interest rates going down and then swap rates probably have also come in at least in the last year or so. On balance, do you see this item in terms of financial expenses coming down over the next few quarters or are all the impacts you've seen just on lower interest rates already baked into this number?

The earnings capacity is an eye-shot when we released the quarterly report. I think we also mentioned last quarter that it will come down you're in 25 but it would rather be in the later part of 25.

Okay so that would be basically the variable rate whatever three month six month you know short-term fixes that are slowly rolling off.

Yeah and you also have you know some very low interest bonds and loans that is becoming more expensive for us as well. So you have two factors going against each other. We did a big Euro bond in, I think it was February or March, something like that. And that was higher coupon than the one we bought back. So you have that's why it's sort of stable even though short term is down a bit and the average now is 3.1 so if you compare that will with the swap rates or central bank rates we're more or less in line with what the market is now maybe slightly lower but

But it's important to remember as well, because we said after both Q3 and Q4 that we felt that financing cost had peaked. But we were also quite clear that it might vary from quarter to quarter. Like in Q1, we had a as Erik mentioned, a euro bond expiring and replacing that with a new one, then it jumps up a little bit and then we can get back to the trend. But also be mindful that this is obviously when we talk about these things and give any kind of outlook, it's for the current portfolio of assets. And obviously, since we said it in Q3, we've acquired both Centur and Doxa. uh etc so so it's uh just keep keep that in mind as well that if we do continue to make acquisitions obviously that will impact the financing cost as well understood thank you that's helpful

More questions at this time. So I hand the conference back to the speakers for any closing comments.

Thanks everyone for listening in. We're obviously available if you have any follow-up questions afterwards, all of us. So just let us know. Thank you.