Cibus Nordic Real Estate AB (publ)

Well, good morning, everybody, and welcome to the SEBIS Nordic Real Estate Quarter 1 2024 presentation. As we just heard, we have a lovely robot voice there. I am Christian Fredriksson, and I'm CEO of the company, and I'm joined here by our group CFO, Pia-Leena Olofsson. So let's get cracking on the presentation. To summarize the period, it's been a solid start to the year. We have stable cash flows in our underlying businesses. We're, of course, in the daily goods business, which in itself is a very stable underlying business. People are still buying food and groceries. The main point for the quarter is we'd be very busy on the bond markets, taking proactive measures and extending our maturity profile and lowering our margins on bonds. But I will get back to that in a separate slide shortly. Our rental income is up 3% driven by indexation through our 99% index-linked lease structure. Our net operating income is up 2%. We have a high surplus ratio of about 92%, but there's some seasonality in our property costs. Profit and property management up 4%. And when it comes to unrealized changes in value, we have a positive 4 million euro change on our derivatives as interest rates have increased during the quarter. And we have a negative 22 million unrealized property value change generated from a general change of yield requirements and one specific property in Finland where we had an unrealized value check. Next slide, thank you. We just had the AGM last week, and the AGM resolved the dividend of 0.9 euros per share in monthly payments. And then the next slide. This slide may not look much, but this is actually one of my favorites. um i think it it says exactly as i said on the last quarter it says exactly what we do converting food into yield and even adding to that even cebus even the word means food or nourishment in latin so this is what we're all about daily goods and the groceries And then looking at us, not much has changed since the last quarter. We still convert food into yield. We focus purely on daily goods properties. We aim to create stable cash flows out of these properties. We've been listed since 2018 and 2021 on the mid-cap, and we have a market cap of around 8 billion Swedish kronor. And if you're interested and if you like daily goods and want to invest in it, It's good to know that we are the only sole listed daily goods real estate vehicle in the Nordics for that kind of exposure. We've grown from Finland into a pan-Nordic grocery player and we pay monthly dividends to our shareholders. And then looking back at our expansion timeline, started in Finland 2018, moved to Sweden in 2020, 2021 into Norway and 2022 into Denmark. Our properties at the end of this quarter, a well-diversified portfolio, no change there. You'll recognize many of these figures as there's been no transactions during the quarter. 451 properties in four countries. Our current donor capacity has grown 2% year-on-year, 214.1 million euros. our property value is down 1.2 percent as mentioned earlier there and um as we still have the same property so we also just shy of a million square meters of property area and then again just touching on what do we mean by stable cash flows and we try and build stable cash flows from top to bottom in our results um we focus purely on daily goods and why daily goods It's a non-cyclical business. People buy food in all business cycles. Tenants are financially strong counterparties who operate in a market with high barriers to entry. 84% of our rental income is from daily goods tenants. And worth mentioning is that excludes pharmacies, for example, and all Nordic state-owned alcohol monopolies. 97% of our properties are anchored by daily goods tenants. And when we say anchored, we often mean the only tenant in our properties, as our average property size is about 2,200 square meter, which itself is a medium-sized supermarket. In those cases where we do have other tenants, it's maybe a flower shop or some kind of very small extra area. As mentioned before, 99% of our leases are index-linked, strong tenants. That means a full pass-through of CPI and gives us annual growth in our operations. And just talking briefly about our tenants doing very well, sales growth is higher than CPI in all our markets. So sales are growing for our underlying tenants. We have a steady world and the store location stability is in itself, in the daily goods business, very stable. Often when you have established a store in a location, the store will be there for decades. You create customer awareness and the stickiness of the site is very long-term. When it comes to our portfolio, geographical diversification, we're in four countries and we're in several regions within these countries. 451 assets, where the largest one is 1.7% of our net operating income. So it's a very, very well diversified portfolio both geographically and also in very many small assets. And I've mentioned about 2,200 letterable areas on average size. So that's the basis and that's the underlying how we create this stable stability on the income side. And then when it comes to the cost side, over 90% of our leases are either net or triple net, and that shelters us from property costs increases. So that boils down to a very stable NOI. And then we add on that stability in our interest rate costs, by hedging almost 100%, with 97% interest hedging at the moment, and we have diverse funding sources. So that kind of boils down to the stable cash flow that we aim to produce. One of our key metrics is earnings capacity per share, and it's our focus. We've historically delivered value to our shareholders through dividend yields, earnings per share growth, and total returns. We've had historic operational stability, which is now proven, and historic noticeable yield spread, even through the business cycle of high inflation. And our main growth driver 2024 is increasing our earnings capacity per share. And happy to show you that now this is the third quarter in a row since the dip in mid 2023, where we have increased our earnings capacity. And our aim is to continue to grow it. And why did the earnings capacity grow now in this quarter? Top line annexation growth, as mentioned, and we have been active doing bond refinancing, which I'll get back to on the next slide. So a pretty busy slide, but let me help you through it. This is all previously known information from the bond issues we did earlier this year. As mentioned many times before, we aim to create stable cash flows, and that goes also for our financing activities. For most commercial real estate companies, refinancing risk is one of the most important risks to manage, of course. And this quarter, we took steps to lower this risk in our bond portfolio by proactive measures. So we carried out three new bond issues during the quarter, and the purpose was to address the bond maturities we have in late 2024 and late 2025. So we're well ahead of the game now and taking active measures on this already now. So to the left, the first bond issue we did, which we talked about on the last earnest call as well, the new 50 million euro bond, which was at the time the lowest margin ever for us, considering Tenno. And it's planned to handle the bond in maturing now in December 2024. And then as things in the bond market improved even more for us during the spring here, we carried out two new bond issues, even to handle our December 2025 and our September 2025 bonds. and the outcome was great and fantastic for us we've now addressed all bonds maturing over the next two years 2024 and 2025 so the next year and a half and our next bond maturity in practice is in february 2027 um subject to the redemption of the outstanding bonds and maturing now in 24 and 2025. So from this bond operation, we have managed to lower our average bond margin from 6.0% to 3.8%. And we managed to extend the maturity two years from 1.6 years to 3.6 years. So what we managed to do is go longer and cheaper on our bond financing, which is great. When it comes to our shares, we have a very liquid share with a turnover of 53 million Swedish kronor per day. And when it comes to our shareholders, it's strong and familiar names for those of you who've been following us for a while. We're very proud of those names and very proud of our large number of shareholders in general. That's it for me for now. Over to Pia-Lena.

Thank you so much. We had some significant events during the quarter. As Kirikou said, we have focused on finance activities during the period. In January, we issued a 50 million euro green senior unsecured bond at a margin of 4%, which was the lowest margin ever, taking tenor into consideration. On the 18th of March, we announced that we considered issuing new green bonds and launched a repurchase offer for all bonds maturing 2024 and 2025. On the 20th of March, we announced that Sibus had issued two green bonds. One 80 million euro bond with a duration of four years with a margin of 4%. and one 700 million CF bond with a maturity of 3.5 years at the margin of 3.5%. And now these bonds are the lowest margins to date. The 21st of March we announced the result of the repurchase offer and we have repurchased bonds corresponding to 32.8 million euros plus 541.3 million CF. After the period at the AGM, all board members were re-elected. The AGM also divided on unchanged dividend of 0.90 euros per share divided into 12 payment occasions. Looking at some key figures for the first quarter, rental income was 30.5 million euros. Net operating income grew with 2% to 28.1 million euros. Net financial items was minus 13.4 million euros and profit from property management grew with 4% to 12.2 million euros. If we go into details, there are some items affecting comparability in the first quarter. In administration costs, we have partially double CEO costs during the quarter. In net financial items, we have a negative exchange rate change of minus 0.3 million euros. Unrealized changes in property value was minus 22 million euros. The negative change in value was partly due to higher yield requirements in the property portfolio, but also due to a negative unrealized change in the value of a property in Finland. The total effect was dampened somewhat by the increased rent levels as a consequence of indexation. At the end of the first quarter, 2024, the average initial yield in the portfolio was 6.5%. And then we have unrealized changes in the value of our derivatives that was plus 4 million euros in the quarter. Our current earnings capacity shows a net operating income of 114.1 million euros, which is an increase of 2%. Indexation has increased the rent, but currency effects and a slightly change in occupancy has dampened the increase. Profit from property management plus expenses for the hybrid bond was 51.7 million euros. And adding back the non-cash items, profit from property management was 0.96 euros per share, which is an increase of 0.01 euro per share since the last quarter. Looking at the net operating income in a comparable portfolio, we see that the effect of indexation and other rent increases amount to 4.8%. Indexation increases going forward will increase NOI and cash flow, while the financial expenses are 97% capped. The biggest segment is countries. Finland is the largest market with 68% of the NOI during the first quarter. Denmark and Sweden both contribute with 14%. Norway is the smallest with 4% of NOI. Property value is fairly in line with the NOI distribution. Sibyl's strategy is to give his shareholders a strong dividend on a monthly basis. The AGM, as mentioned earlier, decided on an unchanged dividend of €0.90 per share divided into 12 payment applications. The dividend yield on the closing share price of 140.36 at the end of the quarter was 7.4%. Looking at the balance sheet, property value was 1,764,000,000 euros. Secured debt was 886,000,000 euros, giving a loan to value on secured debt of 50.3%. Unsecured bonds amount to 189 million euros, but this includes 21.5 million euros of the December 24 bond that is callable in June. And next LTV was 58.7% at the end of the quarter. Our next asset value EFA NRV was 680 million euros or 11.9 euros per share. Our remaining lease time was 4.8 years at the end of the first quarter and continues to be stable around five years. Regarding funding, more than 80% is bank loans. 100% of the bank loans are interest rates hedged. 17% of funding sources is unsecured bonds. Of these, 83.5% are hedged as well. Our hybrid bond amounted to 2.7% of total funding and had the first call in September 2026. Based on the earnings capacity and taking all interest rate hedges into consideration, an increase of the market interest rate with one percent point would affect profit with less than minus 0.5 million euros annually. An increase of 2% would affect profits with minus 0.9 million euros annually. As you can see, the largest part of CBUS hedging is interest rate caps, which means that lower interest rates can affect CBUS paid interest going forward. CBUS Covenants is on the new bonds, an ICR of 1.5 times. and net LTV of 70%. At the end of the first quarter, 2024, we had an ICR of 2.2 times and a net LTV of 58.7%. Over to you, Christian. Thank you, Helena. So back to the future now.

An outlook for 2024, just touching upon that now. For the year, our focus will be on continuing to grow our own capacity per share. And it is a very important metric for us, and we'll be keeping a close eye on that. Just underlying in our business, CPI 2024 in all our markets look like they support rental income growth through indexation in their own right. We see stable development in the underlying daily goods business with sales growth larger than CPI in all of our markets. Of course, ongoing situation here with central bank communications and an inverted swap curve indicate falling interest rates in our markets. And all in all, of course, falling interest rates are good for the real estate sector in general, but also for many tenants and also consumers, of course. So interesting to follow how that develops during this year. A point here called increased investor interest. I think it's fair to say that in volatile times, there's more and more focus on stable companies and stable cash flows in operational sectors. And that's something I feel when we meet the market, there's more and more interest in the stable cash flow in our business and our underlying daily goods businesses in general. And one way to look at that is in the MSCI property index of 2023, they had a presentation where they showed every single sector, and this is just Sweden, by the way, Sweden MSCI 2023 property index, where they showed all of the sectors and how the total returns were for 2023. And there was only one sector or one sub-sector, one sub-market, which had shown positive total returns for 2023, and that was supermarkets. And I think in general that says a lot about the stability the underlying real estate business of grocery and daily goods. And also just looking out abroad and in Europe, we see in Europe and the UK, there are very many specialists. The only thing they do is buy their own supermarkets. And the number of REITs in the UK and in Germany and also in other places in continental Europe, which only focus on supermarkets. And I think that's a trend that will be highlighted and emphasized going forward due to the nice stable cash flows of this business. When it comes to the property transaction market, I think there'll be more activity as we go into 2024. Grocery assets and daily goods. They trade at positive yield spreads, which means they can be financed, which means that they can actually throw off cash flow from day one. And I think that's an important thing that many investors are looking for in this market. And also, importantly, the average lot size is small. It's a liquid product in its own right because there's many buyers who can buy it. And I hope that I think that during this year, we'll see that they are creating business opportunities for us. And we have a motivated, competent organization and ready to react on these when and if opportunities arise. The outlook for 2024 ESG. As put in the title here, there's both an E and an S in ESG, and I think that's very important to bring that out for daily goods and grocery real estate. When it comes to the E side of things, we have a green framework and a sustainability-linked framework in place under 2023, working under those now. We are working towards our climate-neutral and our carbon-neutral target of 2030. One of our main things we're working on there is energy efficiency. These buildings, they're small, but they consume quite a lot of energy in a building or store. Think about when you go to your own supermarket, it may be cold outside, but it's warm inside, but then you need to cool cool the grocery and in the summer it's the other way around. So energy efficiency is in focus both for us and for our tenants and as you know we have 90% of our leases are net leases so we need to work side by side with our tenants in order to implement and work with energy efficiency. The good thing is that our tenants are, of course, consumer companies, and they have millions of consumer visits every week. So we work closely with them in order to achieve these environmental goals. When it comes to the S in ESG, of course, it is the daily goods and the real estate that within the daily goods segment is an important part to play in everyday life. I mean, it's very important to the population to get food and food supplies and food logistics. And this is of course the last, the grocery chains and the real estate is the latest and the last part of the logistics chain to get food to a population. And also when it comes to mental health and society, grocery store or daily goods store is often the only physical meeting place in the modern world in many locations. So it's very important that these places keep to be accessible and safe marketplaces. And that's something we work with our tenants in order to make them accessible and safe. And so what are our focus areas going forward? Starting to the left, stability and earnings per share. We want to grow our earnings capacity per share, as said before. We continue to deliver stable cash flows and dividend-paying capacity. We're looking at cash earnings per share accretive potential transactions, continue to optimize the balance sheet as required. And then, as I briefly touched on before as well, the ESG side of things. Social infrastructure as part of a resilient society, that's what our properties are. Daily Goods is a very important meeting place, working with energy efficiency and targeting our climate neutral goal by 2030. And then the last slide for us, the primary reasons to invest in the CBUS share. High and stable yield, firstly. Favorable value growth potential through indexation and our aggregation strategy where we buy assets and put them into our portfolio. Monthly dividends and then number four here, stable and long-term underlying sector with resilience and stability. And really to wrap up, so it's been a good start to the year, a stable start. The bond operations made us go lower and longer, lower margins and longer maturities. We've grown our earnings capacity for the third quarter in a row, and we have a goal to increase our earnings capacity per share going forward. Thank you.