Diös Fastigheter AB (publ)

Good morning and welcome to this presentation of the first quarter results for 2020. My name is Knut Rost. I'm the CEO of the company and I'm here with our CFO, Ron Florsson. The focus on this presentation will be shared between our strong Q1 results and the effects and uncertainty concerning the COVID-19 pandemic. I will start with the highlights of the report. That will guide us through the results and the key features, and we will finally discuss the effects of COVID-19 and the outlook for the coming quarters. If you have any questions, you will be able to ask questions at the end of this presentation. Turn to page two. I'll start with the highlights. The first quarter was the strongest first quarter in the Earth's history. It shows that we do many good things within the business and that our activities are profitable. The result from property management is improved by 8% to 229 million Swedish crowns. Net leasing continues to be strong. Net rental as a key figure over time is a good thermometer for our market. This quarter, among other things, we have signed and extended the lease agreement with the Swedish Transport Administration regarding the new head office in Borlänge and signed a new lease agreement with Dalarna University for the new campus in Borlänge Center. The Swedish Transport Administration's new lease or extension of existing lease is very important. This tenant is our largest individual tenant and the contract in Borlänge is our single largest contract. By extending the tenant's agreement for 10 years, this means that the agreement is currently 13 years. The Swedish Transport Administration is a great tenant to us and it gives us a good return and cash flow for many years to come. It's also good to know that this tenant is a public tenant, which means safe cash flows. Dalarna University, also a public tenant, has decided to move the campus to our centrally located property MIMED. It will increase the flow of people in the city center. It also creates relocation chains so we can fill vacant premises with tenants who need to be evacuated. Both of these leases will come into force in July 2022. Our surplus ratio was 62%, which is the strongest ever for the first quarter. We saw both increased rental income and reduced costs. I will now hand over to Rolf, who will present the result in more detail, and then I will return to discuss the prospects ahead and the effects of the pandemic. Rolf.

Thank you, Knut. We can move to page four. Our first quarter was strong. Income from property management increased by 8% compared to the same period last year. Like for like, the increase was 7%. Rental income and payment of the first quarter's rents were not affected by COVID-19, as the due date was last December last year for most of the rents. Like for like, rental income increased by 2.8%. 1.2% is due to indexation, 0.6% to cost transfer to our tenants, and 1% was due to renegotiations and new lettings. Our net letting in the first quarter was strong and amounted to 31 million. Most of the revenue streams will come within 12 to 24 months. Winter-related operating costs have been normalized compared to last year. Our operating surplus increased by 8%, resulting in a surplus ratio of 62. And as Knut said, the highest in the company's history. Net financial items is slightly higher due to rising stiver and higher average debt. Unrealized changes in value for properties amounted to 10 million. Profit after tax is lower compared to last year. which is mainly explained by lower unrealized changes in value. Continue to page five. If you go on then and look at the development of our cash flow in the form of earnings per share and our management efficiency measured at surplus ratio, we can see that there's a clear trend for both measures. 10% is the average growth in income from property management per share over the past 13 years. We have achieved this by raising rents and reducing vacancies, by reducing our financial costs, and by making the right transactions. If we look at the surplus ratio, which is the line chart, it has increased by 6% over the last five years. This is a result of our strategy, urban development. We have made the right transactions. We have acquired properties in CBD and sold non-priority cities and properties in peripheral locations in our cities. As a result, we have reduced industry in favor of primarily offices. We have increased the quality of our portfolio through investments. which has led to higher rents, lower vacancies. Rental income per square meter has increased by 39% during the same period. Go to page six. What this slide shows is that we have a well-diversified portfolio when it comes to type of properties, industry, and geographical location. Our exposure to industries that currently belong to the most exposed is relatively limited. Cafes and restaurants stand for 5% of total rental income. Hotels stand for 1.8%. Retail in city modes for 9%, and high street retail stand for 10%. This category includes, for instance, grocery stores, pharmacies, and sustainable lagers. a state-owned chain of shops that have exclusive rights to sell alcoholic beverages. The majority of our revenues come from type of premises that are currently regarded as secure payers. Offices account for 54% of rental income and housing for 8%. We can turn to page 7. As you can see, we have low tenant concentration risk Our 10 largest tenants account for 16% of total rent. 78% of the rental income from our 10 largest tenants comes from public-related tenants. 26% of our total rental income comes from public-related tenants. The average lease term for all leases was 3.9 years. We are, as I said before, well diversified with relatively low exposure to exposed sectors. But there's great uncertainty in how long the spread of infection will continue and what the long-term economic effects will be. Continue to page eight. The market value of our properties amounted to 23.2 billion. an increase of 300 million since the turn of the year. The change is mainly due to investments. Unrealized changes in value amounted to 10 million. 77% is cash flow driven. The rest is an effect of yield change. Our lettings and investment in primarily offices and higher rental levels than expected for housing have had a positive impact on the value. While the auto for above all certain retail has had a negative impact on the value. The average valuation yield was 5.9%. Go to page 9. There is a clear trend that the investment volume has increased in recent years. We've become a more complete real estate company as we also add new production to future earnings and cash flow. On the right side, you can see some of our larger projects. We currently have about 100,000 square meters under production, with an investment volume of about 2.3 billion. The positive cash flow effect will mainly come during 2022 and 2023, which will also have a positive impact on other key operating figures. In addition, they have an additional 100,000 square meters in existing or possible building rights in central locations with an estimated investment volume of just over 2 billion. We will complete our ongoing investment. Then we must be humble in the current situation and let the future show at what pace new projects are started. Move to page 10. As you can see, our net debt to EBITDA is stable over time and amounts to about 11 times. This is clearly below the average for listed Swedish real estate companies and again shows our strong cash flow. Our loan-to-value ratio at the end of the period was 54.9%, which is slightly higher than in Q4. If we take into account utilized overdraft facilities in Q4, the loan-to-value ratio was 54%. The difference is due to increased lending to finance planned shared dividends in early April. During the first quarter, we have refinanced $5.1 billion of bank loans on deficit terms than before. In connection with this, we have extended our average loan maturity to 3.2 years. In addition, we have increased existing credit limits by 600 million to, among other things, finance ongoing projects. After the end of the reporting period, we have refinanced a bond maturity of 574 million through bank loans. What remains to be refinanced this year thus amounts to 255 million. The average annual interest rate was 1.3%, which is 0.1 percentage point higher than at the turn of the year, due to the fact that DIBOR has increased in Q1. Thanks to our strong cash flow and an interest coverage ratio exceeding six times, we continue to choose a shorter interest rate fixing. We, like many others, continue to see low interest rates in the foreseeable future. Overall, we have a strong financial position. In addition to existing loans, we have liquid funds, unutilized overdraft facilities, and unutilized credit facilities available, corresponding to 1.2 billion. Continue to page 11. We report the EPRA key figures according to the new standards. NRV increased by 8% to 75.1 per share. The interest coverage rate remains strong and amounts to 6.1 times. Income from property management per share increased by 5.4%, rolling 12 months. And then I will hand it over to Knut again.

Thank you, Rolf. We'll turn to page 13. We can conclude that Q1 was a very strong quarter in many ways, but we are just now facing a new reality. The effects of COVID-19 are very difficult to assess today. And taking this into consideration, some of our tenants experience a major impact of their operations. Hotels, cafes, and some parts of retail have seen the number of visitors decrease. which has direct effect on the sales. We handle our tenants on individual basis. This means that we must make an assessment for each specific tenant based on their specific needs. By doing so, we will get even closer to our tenants and be able to make better decisions about what actions we should take. There is a lot of activity going on, both within the administration centrally but above all in the field. Our local business managers and their team handle all issues and issues that arise from the current situation. The example of actions taken is, for example, flexible opening hours. We have accepted monthly payments instead of quarterly and so forth. The uncertainty is reduced concerning the governmental rescue package And even though we don't have the final details, we are very proactive with our tenants. We make an individual assessment, take into account the tenant ownership and whether they have taken their own measures to lower their costs. When we look at the tenant's exposure in more detail, we state that we have a well-diversified portfolio in terms of industries, geography, tenants, private and public tenants. The effect varies greatly, with the hospitality industry being the most vulnerable at this stage. We have about 6% of the exposure to rental income from restaurants, hotels and cafes. We also have a good diversification within our tenants, with everything from grocery stores, pharmacies and public tenants, like Systembolaget, to the large retail chains. Many tenants are also small, local, entrepreneurial companies. About 9% of rental income comes from the city malls. It is difficult to give a forward-looking picture when there is such a high degree of uncertainty about the effects of COVID-19. What we can say is that we take the situation very seriously. We follow the instructions from the Public Health Authority with different types of measures. We see that about 91% of the expected rental payments for April have been paid. We do not see any delays in our project and we intend to continue ongoing projects and commitments as planned. Our financial situation is good and our financial position is strong, as Rolf already mentioned. We believe that many of the ongoing trends in both office, retail and residential will continue. but perhaps now at an even faster pace. Urbanization in our cities is most likely to increase. The office market has an ongoing trend of polarization. The right location is becoming increasingly important. Owning offices in the right neighborhood with the right surrounding companies and urban services, as well as good infrastructure becomes more important. Here we have a unique position that is very positive. Retail is changing. Stores is combined with e-commerce. That trend is being accelerated by the pandemic. I think we are at the forefront of these issues, and I really look forward to helping our tenants in the new landscape. On the residential side, we see an increased demand for centrally located apartments, where as a tenant, you want to take advantage of the urban service offering. Our long-term goal remains. Although the effects of the pandemic are impossible to assess, at this stage we see no reason to reconsider our long-term target for growth and profit of 10% on average over a three-year period. I end by turning to our employees and thank Thank them for good efforts for a fantastic result we present for the first quarter. I'm also very grateful for all the efforts that they have been put in lately regarding the current situation. Together with our tenants and shareholders, we will handle these challenging times. That takes us to the end of this presentation. Thank you for listening. We are now ready for questions.

Ladies and gentlemen, we will now begin our question and answer session. If you have a question for the speakers, please press 01 on your telephone keypad. So one moment, please, for the first. One moment, please. There's no name given. I need to ask the name first. So we have a question from Stefan Billum. The line is now open. Thank you.

Stefan Billum of ABG. First off, I would like to ask a question about your net lease. You report a strong net lease of 31 million. So I'm wondering if there are any bigger new leases in these figures, or is it spread out over many new leases?

Thank you for the question. Of course, since we have so many tenants and so many properties, there are a spread of many ins and outs, so to speak, but there are two big ones there. The one is the National Transportation Authority in Bålänge, and the other one is the University of Borlänge, so both in the same city that contribute to that figure. Yeah, that's correct.

All right. And concerning your interest rate, the average interest rate increased by 10 points from 1.2 to 1.3%. Could you give us any estimate of what we should expect for the full year 2020? Rolf, we don't give a prognosis over our thoughts that the effect from Q4 was related to increasing cyborgs. So it depends on cyborgs. All right.

should you give us an update on your two uh hotel projects uh has the time frame changed or is it uh business as usual yeah it's i i don't think anything is business as usual right now but but concerning our two hotel projects they are ongoing there's no change in that uh of course we we are living close to the the peter strudalen companies and we are looking at them a lot to see the strength what we have but we have haven't heard anything from them concerning any problems with those hotels one hotel is going to open in q3 2021 The other one is 2023-2022. So it's rather far away in time, so to speak. But of course, we follow the company, our tenants very closely. But just for now, it's ongoing business and the construction cost and the construction are going forward and it's going very good.

Yes, and you mentioned the government's rent relief program. Do you think it will be applicable for your tenants and do you think you will use it?

We are in the forefront there, so you can speak. We have many deals with our tenants as we see it now. And in our Q1 report, we say that until now, it's our part of the contribution, 25%. It's worth about 8 million Swedish crowns for the Q2 right now. But I think it will go up to about 10 to 12 million for this quarter. It's only... it's only about the second quarter this year. So we are in the forefront and we can see that and we think that this sort of rescue package from the government is very good. But everyone has to realize that when the state, the government says that they contribute with 25 percent, they want us

um also to contribute with 25 so it's a contribution to the to the tenant not to us right and value revisions came in at roughly 10 million and you mentioned it was a negative effect from retail and positive from office should you give us any split between office and retail yeah we have made some good investments and left things in in office that contribute to to the change and we have high rent levels and expect for housing and then we have for certain retail the yield is up And we have lowered the long-term market rent for certain retail also that affects the market value negatively. Okay, thank you and one final question. What is your view on transactions at the current moment? Will you be Will you wait and see how the situation will evolve in Q2? Or do you think you will be active on the transaction market in the coming months?

Thank you for the good question. We are always hungry for transactions. And just now, I think, this is a thought, not a fact, the transaction market just now is rather low. We don't get too many prospects from the brokers. We are looking at some things in both ways. I think the transaction market for the coming months will be very low. Maybe we'll do some transactions, but I don't think there will be any big issues concerning this.

OK, thank you for taking my questions.

Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad. If you do have a question for the speakers, please press 01 on your telephone keypad. So there are no further questions at this time.

please go ahead now we don't we don't have any further questions okay okay thank you very much thank you for participating in in this q1 report and take care out there and have a good day thank you very much from the earth