Cibus Nordic Real Estate AB (publ)

Good morning, everyone. Thank you for dialing in. And for those of you listening at a later time, thank you for listening. Welcome to CBUS' Q3 2024 results presentation. Presenting today, as always, from our Stockholm office is our CFO, PLN Olofsson, who will be here shortly, and I, Christian Fredersen. So, what have we been up to this quarter? Quite a lot, actually. Every quarter is busy for CBUS, but this one has been especially busy. We focused on delivering shareholder value in several ways this quarter, including, talking from the left to the right here, we carried out the directed share issue in September. We used the board's 10% mandate and issued approximately 5.7 million new shares. That was done at a 20% premium to NAB and we thank our investors for their support in our growth ambitions going forward. Talking of growth ambitions, we see attractive acquisition opportunities in the market and we have a strong pipeline which we've been building since early 2024 and we continue to add on it daily. So far in 2024, we have made acquisitions for about 500 million Swedish kronor. That's about 43 million euro, where about 410 million Swedish was done now in the second half of the year. And then we, of course, are using cash resources from the directed share issue for further acquisitions going forward. That's the plan. During the quarter, we've continued to increase our earnings capacity per share. That's the fifth consecutive quarter. We have managed to increase earnings capacity, which we're very happy about. But we're calculating that, you know, on the old number of shares, i.e. before the direct share issue. And we're doing that because we haven't, at the end of the quarter, had time to deploy new funds from the direct share issue on the 10th of September. During the quarter, we have also been working actively refinancing and hedging. As you know, we aim to create stable cash flows and we've actively used the low interest rate dip we saw during Q3 to enter into new hedging. So we've hedged about 84 million euros of interest rate hedging. Among other things, we've done two new swaps at 1.86 and 1.99%. fixed rate respectively. We have also refinanced the bank loan of 83 million euros with a senior bank and that was at a lowered margin than we had previously for this loan and portfolio and that old margin was from 2020 which was pre-Covid and also was at an attractive or competitive bank market at the time so I think this proves that the banks are supporting us and find our asset class and our and our company an attractive borrower. During quarter, we've also paid out the quarterly dividends, paid out on a monthly basis, so this quarter's share of the 0.9 euros per share annual dividend. So we paid out 0.22 euros per share during the quarter. So we've kept ourselves busy. So a bit of some financial summary for the quarter. Rental income increased about 2%. Net operating income increased about 3%. That's excluding non-recurring income within the comparative quarter from Q3 2023. Property management was about 14.2 million euros, excluding non-recurring items and FX rate changes. Profit for the period was a negative minus 5.5 million euros, mainly due to unrealized changes in property values and, of course, a big movement in derivatives. As you know, we have a large share of our rate hedged. One of my favorite slides, It says exactly what we do. Convert food into yield. And that's what we continue to do. Then a bit about Cebus. We convert food into yield. We're a real estate company focused purely on daily goods properties. We aim to create stable cash flows listed in Stockholm since 2018. We have a market cap of around 1 billion euros as it stands now. We're the only listed pure daily goods real estate vehicle in the Nordics. We have several non-listed and private real estate vehicles, many of them institutionally owned, especially in Sweden, which I'll go back to later. We've grown from Finland, and they've grown to Sweden, Denmark, and Norway. On the map, you can see the new additions to our portfolio. during Q3 and the acquisitions we've done at post the end of Q3. And I'll tell you more about those later. So our expansion timeline from a Finnish supermarket portfolio company in 2018 to a Pan Nordic player where we are today. And then we are back in acquisition mode since early part of this year. So just to flick through some of our around 450 assets, we've selected a number of photos here from each country. So in Finland, these are some of our approximately 260 assets in Finland. Some examples of our approximately 40 assets in Denmark. And these are figures from year end, by the way, our year end report. Some examples of our assets in Sweden. Not always that sunny in Sweden, unfortunately, not year-round. And some of our examples of our small portfolio in Norway. We have about 20 properties. And then moving on to the acquisitions we've done this year. So far this year, we've acquired properties for about 500 million Swedish kronor. That's about 43 million euros. All transactions which we do are cash earnings per share accretive transactions. And that means that the yield we receive is higher than our financing costs, including costs on dividends. We've acquired 15 assets, and the wall for this portfolio of assets that we buy on average is about nine years. total area about 32,000 square meters and an average price of about 1,350 euros per square meter, which is a low average price. Then moving into a bit more detail on each of the portfolios per country, we've acquired in Denmark. for about 14.5 million euros. It was a sale in its back from the grocery chain, which is one of our largest tenants and the largest tenant in Denmark. These assets were five ex-Aldi stores. Aldi is a German retailer which withdrew from the market after many years, withdrew from the market in Denmark after many years, and most stores were sold to Rema 1000. But a number of stores were, due to competitive reasons, sold to other grocery retailers. And for example, these were sold to Dagoruffa, which has then turned them from Aldi stores into their own concept stores, Spa and Menu. Their average size, 1,280 square meters, which is kind of a supermarket size in Denmark. Newly converted, as mentioned, with long leases, 100% daily goods, and an acquisition price of about €2,300 per square metre. And I think the two main takeaways from this acquisition are that it was a sailing back that proves that we are an appreciative partner to our grocery tenants and a light owner for their very important operational infrastructure, which is, of course, their store network. I think this transaction also proves that the stickiness in locations for our kind of real estate, our supermarket real estate, that when a chain or a grocer leaves, as Aldi did in this case, in most cases, someone else steps in. If you have a good retail and grocery location, then what the actual sign is, that doesn't really matter that much for the local customers, they will find their way to this store again. If the new tenant is a good and active grocer who can support and their offering is suited for the local market. So I think those are the two main takeaways from this deal, of course, and also that we can do nice cash earnings per share accretive transactions in Denmark. Moving on to Finland. In Finland, we have bought three modern or newly built or about to be built properties in urban locations, 5,500 square meters, average size 1,830. The average size is pulled down a bit due to the small urban location in Helsinki, which is the K-Market Nyhti. As you can see there, that's a data-generated picture, but the building is actually built now. That's an urban redevelopment in central Helsinki. It's an old harbour area now converted into a very attractive waterfront residential location with rail-bound traffic. We've been looking through this as a portfolio. The waltz is high, almost 13 years, and that's usual. When you build a new store, it's usual in our markets to get a 10- to 15-year lease, and then that, after a while, reverts to maybe a 3- to 5-year lease. kind of rolling lease. 100% daily goods, acquisition price of 2,700 euros per square meter, which is a slightly higher price, but of course, newly built asset. Looking at the three, K-Market Nifty, we've talked about. S-Market in Björnaborg in Swedish, that was built in 2022 for S-Group. And then the third asset is an asset in Kaurava in Södra Österbotten. a property which is being built right now and completed in 2025. And I think the main takeaway from these assets we bought and this acquisition is that we have the opportunity to buy modern assets for us at attractive yields and cash earning per share accretive levels. And speaking of long leases, I think it's important to stress The long leases are nice and new and everyone likes new shiny assets, but that doesn't mean that we're shying away from shorter leases. Our average world is five years and has been throughout the company's history. And we foresee that to be stable over time because what happens in a in a grocery location is that even if leases become a bit shorter after a while, then the market is in equilibrium. The local market has found its place. The local supermarket has found its place. Customers find their way to the store. Competitors know what other competitors are doing. And things settle down to a very stable turnover development. That's my picture of most locations in the Nordics for supermarkets and groceries. Then we carried out one acquisition in Sweden for about 6.5 million euros. It's a modernized Citigrass, which is a privately held chain, which was recently acquired by the listed retail and grocery group Axfood. Citigrass market share in Sweden was about 3.7%, but now taken over by Axfood. And Axfood have said that they are looking to keep the Citigrass brand, and they've been looking for a hypermarket format in their portfolio. Actually, it's been very successful lately with especially the Billy's concept, which is a discount food location and concept. And they've been looking for a hypermarket concept for quite some time, which they've now managed to get their hands on. It's a large asset, almost above 11,000 square meters. Citigrass is the largest tenant, but there are other tenants in there as well. There's a vault of almost six years, but Citigrass is in a much longer lease than that. And the acquisition price was very low, as seen here, €480 per square meter. And that's a combination of low rents and high yields. um it's our first hyper market in sweden which increases our diversification in our swedish portfolio and the main takeaway here is a very interesting level of accretiveness for us and there's more potential in the building and on the site as it has a large land plot so this slide many of you will recognize this is our properties at the end of q3 452 properties property value of approximately 1.8 billion euros. Our earning capacity has increased as we mentioned to 115.1 million euros and just shy of a million square meters of lessable area. Our tenant share of NOI hasn't changed much but so in each country we still have the largest grocery tenants in each market as our tenants. We talked about we create stable cash flows. And what do we mean by that? Well, it means that we, on every single line, if this were an income statement, we try and create stability. So we focus purely on daily goods properties, which are a non-cycle business type, a business area. We focus on daily goods tenants. 84% of our rental income is from daily goods tenants. 97% of our properties are anchored by daily goods tenants. And when we say anchored, it's most often the only tenant. As you see, our average size of our assets are 2,200 square metres, which is a supermarket size, and most of the other rental income is from something adjacent to a supermarket, i.e. maybe a hairdresser's, a dry cleaner's, or a flower shop, or something similar, which you'll find adjacent to a supermarket, alcohol monopolies, which you have in the Nordics, or a pharmacy, etc. 99% of our rents are linked to CPI. And we have a steady world, as mentioned, and we have a very stable store location stability. And then we also create stable cash flow through diversification, geographical diversification within each country, in four countries. We have a very diversified portfolio when our asset is larger than 1.7% of our net operating income. And then we have a small average property size. On the cost side of things, we have 90% of our leases are either net or triple net, which shelters us from property cost increases. And then on the financing side of things, 97% of our interest rate hedging is interest rate hedged and we use diverse funding sources. Earnings capacity, we are proud and happy to show that our earnings capacity per share has continued to grow now for the fifth consecutive quarter and it is now 0.99 euros per share when counting the previous number of shares before the share issue on the 10th of September. And why is earnings capacity growing? Top line indexation growth, which we'll get back to a bit later. The outcome of the bond refinancing we did earlier this year, where we have started to call and repay the old, more expensive bonds. And then now we're also carrying out cash earnings per share accretive acquisitions. In these results, we had our Swedish acquisitions, which we did in May. in the figures. Looking at our share price performance, I'm happy to see the share price performing so well, up 55% since our Q4 report in the early this year. Very liquid share, 51 million of SEC traded daily and about 2,500 transactions per day. Looking at our shareholder list, it is more or less unchanged. You recognize these names, both well-known institutions, equity funds, index funds, and real estate equity specialists, along with a few generalists we see starting to pop up in our shareholder list. And we're proud to have almost 54,000 shareholders. So over to Pia-Lena and the financial overview.

Thank you. So let's start with some of the significant events during the quarter. The 22nd of July we updated our MTM program which we do every year. The 13th of August we announced that we redeemed our September 2025 Green SEAC bond as of the 6th of September. The 10th of September, we completed our directed share issue, raising 927 million SEK. The subscription price was 162 SEK per share, and was to a 20% premium to net asset value of EF9RV. The 23rd of September, we acquired five grocery stores in Denmark. And after the period, we have acquired additional properties, three in Finland, which we announced the 23rd of October, and one grocery store in Sweden, which we announced the 29th of October. We have some key figures for the quarter. Rental income grew with 2%, to 30.4 million euros. Net operating income grew with 3%, to 29.2 million euros. if you exclude the non-recurring income from the Q3 2023 figures. We have called two out of our three bonds that mature at 2024 and 2025. Until the last bond is called, we have double interest costs since the bonds were refinanced in advance. The interest costs for the old bonds amounted to minus €759,000 during the third quarter. and this is not classified as a non-recurring item. So when all the bonds are called, we will not have this cost. Profit from property management in Q3 2024 excluding non-recurring costs and exchange rate effects amount to 14.2 million euros. If we go into details, as said before, The Q3 2023 figures include a non-recurring income of 2.7 million euros, which was attributed to compensation from product developers in Denmark, as well as compensation in connection with a cancelled acquisition in Finland. Net financials include a non-recurring expense of minus 527,000 euros for early redemption of a bond maturing in September 2025 as well as an exchange rate change of minus 475,000 euros. Unrealized changes in property value was minus 6.3 million euros, and it's attributed to Finland and Denmark. And the main reason, however, why we have a negative earning for the quarter is due to the unrealized changes in value of the derivatives. And this was due to sharply falling market interest rates at the end of the quarter. Our current earnings capacity shows a net operating income of 115.1 million euros, which is an increase of 2% since 1st of October last year. Profit from property management minus the expense for the hybrid bond and adding back the non-cash ISIMs amounts to 66.5 million euros or 0.99 euros per share, which is an increase of 6% since 1st of October 2023. Earnings capacity has increased with 2 euro cents per share since last quarter. Looking at the net operating income in a comparable portfolio, indexation and other increases amount to 3.7%. Indexation, though probably in a lower pace, will increase net operating income in a comparable portfolio going forward. The other segment is countries. Finland is still the largest market with 68% of NOI. Sweden and Denmark both contribute with 14% each, and Norway is the smallest market with 4% of NOI. Looking at the balance sheet, property value was slightly below 1.8 billion euros. Secured debt was 886 million euros, giving a loan-to-value on secured debt of 50.2%. Unsecured bonds were 212 million euros, giving a net loan to value of 54.6%, which is below our finance policy target of between 55 to 65% LTV. LTV is expected to rise as we grow through acquisitions. Other net assets include our large cash position of 134 million euros at the end of the third quarter. Net asset value EFRA NRV was 749 million euros or 11.9 euros per share. The vault continues to be stable around five years and was 4.8 years at the end of the third quarter. As you've seen, as Christian said, the acquisition we've done after the quarter If you look at funding, bank financing continues to be the largest part of Cebu's external funding, which is close to 80% of funding. The average credit margin was 1.6% at the end of the third quarter. During the quarter we have refinanced a bank loan of 83 million euros at a lower margin. The new margin is in line with the average credit margin. Other bank loans that mature within 12 months is expected to be refinanced in the fourth quarter this year. Regarding bonds, we're able to call the third and last bond that matures in December 2025 which has a margin of 7% of the Eurobord. After it has been called, the next maturity for a senior unsecured bond will be in February, 2027. For Siebel, stable cash flows are very important. There was a high degree of hedging, and during the third quarter, we made use of the inverted interest rate curve and did additional hedging of 84 million euros at attractive levels. Even if it looks like the market interest rates are falling, we do like stability. And considering if there would be an increase of the market interest rates, With one percentage point, this would affect Cebu's profits with minus €660,000 on an annual basis. Looking at our key credit metrics, net LTV was 54.6% and net debt to EBITDA of 9.3 times. And these metrics are lower due to the direct-to-share issue that was made the 10th of September. And these ratios, as we have said before, are expected to rise as we go through acquisitions. Interest-covered ratio is still stable at 2.2 times, and this is due to the high degree of hedging. Stables generates stable cash flow so we can pay out dividends on a monthly basis to our shareholders. CBUS receives its rents on a monthly or quarterly basis in advance, and part of this cash flow is distributed to our shareholders. Dividend yield was 5.8% with the share price at the end of the quarter, which was 176.10 SEK per share. Over to you, Christian.

Thank you, Pia-Lena. And then looking a bit into the future, but let's start by looking at the market for our tenants, where they are right now and the competitive landscape they have every day. So just looking at the grocery markets in the Nordics, one can see here that there are, in each market in the Nordics, there's three main types of retail. or grocery tenants. They are the independent retailers like ICA, Kesko, Dagropa and Rema 1000. Then you have the cooperatives, Coop, who are present in all markets. In Finland, they're called S Group, the cooperative. And then there's the integrated chains like Axfood in Sweden and Lidl in several countries. So that's the kind of tenants that we have and who we let our buildings to. And characteristics in these markets are that the markets are dominated by a handful of large daily goods chains operators who have bargaining power towards their suppliers, strong store networks and efficient logistics chains. Because if you boil down grocery retail in a very easy way and i'm sure the retailers wouldn't agree on me that it's this easy but what it's about is buying things and procuring items cheaply transporting them through logistics chain in an efficient manner and price effective manner and then selling the goods at a good margin in an extensive store network that's really what grocery retail is about And that's a store networks are, of course, very important for all grocery players. And what's important to say that even if there's a few players with high bargaining power on the procurement side and on the store network side of things, there's very high competition on a local store level in all of our markets, a very mature market towards the customer. Customers can choose from in very, very many locations for almost a handful of grocery stores in the local market. Another trend we also see is that the grocery retailers seem to be winning the race for online shopping for grocery. It seems to be very difficult to make money and good profits and sustainable profits if you are a pure online player, as we've seen a number of the restructurings going on, for example, in Mottem right now in Sweden. But the grocery players themselves seem to be managing to make at least profits or maybe if they're not making money, then they're still supplying the omni-channel experience to their customers because they have a store network, they have the logistics, etc., which seems to be the way that works. Click and collect seems to be a good way forward and also home delivery from stores seems to be a chosen route for e-commerce in all but the very, very most urban locations. and densely populated capital regions. So that was a bit about the market. For us, the future outlook on ESG, still very important, of course, for us. Within daily goods, sustainability is high on the agenda for consumers, retailers, and for us. We're working towards our carbon dioxide neutral target in 2030. Where we feel we can do the most good is energy consumption. We have very many net leases, as you know, so we're working side by side with our tenants for energy efficiency and solar production and installing more and more solar panels. To the right, top right, you can see a picture of our property in the box home where we have our tenant, Coop, who is buying the electricity created from the new solar panel production plant on the roof. That's about 71,000 kilowatts hours per year in production from that site. With ESG, we're also working on the reporting and financing side of things. We've completed a double materiality analysis and we aim to include CSRD reporting in our 2024 sustainability report. We have our green framework and sustainability link framework in place. and the new bonds we've issued during 2023 have been under the green framework. I've mentioned before, grocery, real estate and grocery is an important social infrastructure. Daily goods are an important part of a sustainable and resilient society. Getting people food on the table in all times is very, very important. But it's also a physical meeting place in the modern world. It's a place where mental health is upheld and where you can meet people and have a chat An interesting phenomenon we see now and amongst a couple of chains is the slow cashier. So it's a cashier where there's a sign which says basically, here you can take it slow. No need to rush. Have a chat with the cashier before you leave. That kind of shows the importance of the store network and grocery retail. And we aim to create accessible and safe marketplaces together with our tenants. Part of the social infrastructure. And then moving forward, the last slide for today. Overall, we want to and we continue to grow earnings capacity per share, not only by acquisitions, but acquisitions is a big part of that course going forward, but we work in all parts of the business in order to create more earnings capacity per share. We're carrying out cash and share created transactions. We have a strong pipeline. We see interesting opportunities in existing markets. And we're actively evaluating new markets in continental Europe. And we are looking at the markets which remind us of our Nordic markets, i.e. markets where there is a handful of strong tenants and retail players and grocery players who are fighting it out over the customer's market share. We continue to work with balance sheet optimization, refinancing, and hedging. As D. Elena mentioned, looking to refinance bank loans. We're working on that right now. I feel there's a strong interest from senior banks for our assets and to finance us. We have competent, experienced employees who are taking action daily, and we're committed to share all the value by converting food into yield. So that was the final slide for us. Time for some Q&A if there are any questions. Thank you.