Eastnine AB (publ)

Hello and very warm welcome to our quarterly update and results presentation for January-June 2024. My name is Kostutis Asnauskas, I'm CEO of Ease9 and with me I have Britt-Marie Nieman, Deputy CEO and CFO. And together we will guide you through the results of this first half. Before I start I would like to ask you to post your questions during our presentation and once we finish our presentation we will immediately start answering questions. So let's go into the results for the first half and our highlights. We are very proud to present strong growth in our profit from property management. It's up 21% despite relatively flat top line growth of our revenue. And if you look on the quarter, growth is actually up 26%. So very strong profit growth during this first half. It was supported, of course, by very strong cash position that we have in the company, but also very strong net letting results. Net letting for the first half is up €200,000, €260,000 for the first half but actually is twice as high during the second quarter and most of the activity actually taking place then because we had a negative figure for the first quarter. So if you look off, basically, the second quarter was actually very, very active in terms of leasing out, and this activity continues. Occupancy up, surplus ratio increased, of course, helped by the new opposition. We also completed the share split that was announced during the AGM, and it has actually had a very positive implication, at least for this very short period of time in terms of liquidity. And last but not least, we actually made acquisition now, our second acquisition in Poland and second acquisition in Poznań. So what is it? It's a fantastic property developed by Skanska, 28,800 square meters. We bought it almost for close to 80 million euros. It's completed in 2023, LEED Platinum certified, and a number of other very high-rated certifications as well. Key tenants are McKinsey, Thomson Technology, Wunderman Thomson, and Bank Peko. It's 100% occupied and we will encamp at a very nice attractive yield. So we are very happy to take this very strong position in Poznan. Today we are a leading player in office properties in the market. And actually those properties are the most centrally located properties today in the city, between the railway station, between the old town. So it's a very, very nice micro location, a very strong micro location. And we are very happy with this acquisition. So if we look on our markets, we are growing company in a very, very fast growing part of European Union. Our region is growing twice the speed of the more developed parts of Europe or historically more developed parts of Europe. And we actually building our position in this fast growing environment. It also, if you look on the historic growth, I mean, Poland, which is the largest of our markets today, still have been growing fastest among bigger countries in Europe for the last 25 years. And it continues to do so, and it's actually expected to continue to do that for a long time to go. And this is actually this process of convergence that has taken place. and continues so far and will continue in the future. We also are in a structurally unsaturated market when it comes to office demand. The number of employees in offices actually is growing, but it's still low compared to Western peers. at least larger cities in Germany, or if you look in Sweden, the saturation is still relatively low. And if you look, Vilnius is kind of at 19%, but Poznan is at 13% of office employees working in the offices. So this is something that is bound to grow, and we expect actually to benefit out of this growth. We also are in a very exciting market in terms of yields. Yields are significantly higher. So it's our properties. And if you look on our portfolio, it's very, very high yielding portfolio. It's combined with relatively low rental levels, but financing costs are basically the same. We are financing in European banks, we are financing at European conditions, which means that our cash ROEs is 200 to 300 bps above our peers. And this is actually what makes investment case so attractive. So if you look at our operations today, our property portfolio is around 650 million euros, 15 properties. We surpassed 200,000 square meters, now 212,000 square meters. Occupancy rate close to 94% and average age of the properties is 9.6 years. So very modern, very young portfolio. We are in three cities today and if you look on our core market Vilnius standing for approximately 60% of total portfolio followed by Poznań now around 30% and Riga around 11%. All of this will be connected with a rail Baltica line in the future which is a big infrastructure project. is being constructed and is in the process and we expect this to take place by 2030-35, but it will actually have significant implications in terms of economic activity and integration for the region. Here are just pictures of some of our properties. You probably recognize, but there is one more picture on the right hand side, which is Novi Rinek I. So key ratios in terms of rental rents, net rent in the quarter, 525,000 euros. So very, very positive. And if you look on the historic figures, it's been actually one of the strongest over the past year. And Volt increasing to 4.2%. Occupancy is around this kind of 95 strike but it's now just below and going up and rent level is at 199 euros per square meter and year. We calculate it differently in square meters per month but this is just for making our Nordic audience and easier to calculate this. So if you look on our tenants, they're exposed to most expensive exciting sectors, ICT, finance and e-comm mainly. And our top tenant list includes one new name, which is McKinsey today. So we're very happy with it came with the acquisition of Bosnian property. And as you can see that our diversification among our tenants is also increasing as we add more properties and that will bound to continue in the future. In terms of sustainability, I'm very happy to tell you that actually 100% of our property portfolio today is environmentally certified and also in the highest brackets of both LEED and BREEAM certification standards. Green financing stands for 73% of our total financing. We only use bank debt. Green leases, 59%, a slight drop from previous quarter, but it depends only because of the additional acquisition. And of course, we're bound to move these figures up to 100%. We target 100% on all three of these parameters. Our ambition is to continue our leading role in sustainability and actually making not only our properties certified and environmentally friendly but also push the whole market into that direction which we believe we managed to do quite successfully. We plan to have climate neutral operations by 2030. And we target again to go into five, get the fifth star in GRASP this year. So we'll see. We'll see it in autumn actually how it will evolve. Now over to finances. Marie.

Thank you. Please continue to post questions. In the income statement, we compare the income and profit for the first six months and the last quarter with the same period last year. Profit from property management increased by more than 20%, mainly due to interest income as a result of the sale of MFG in August. Besides that, we also saw an increase in the property expenses, and this is due to a higher average vacancy during the first six months. Central administration also increased, and this was due to one-off items during the first quarter. Interest expenses increased after the refinancing during the first quarter and also after the acquisition during the second quarter. The redemption of the bond during the autumn last year limited the increase. We saw negative unrealized value changes during the second quarter, and this is related to our own acquisition in Poznan. It was done on a very high yield and also then affected our existing property in Poznan. The earning capacity is a theoretical assessment based on current agreements, certain assumptions and in some cases also 12-month figures. It's 12-month figures, we're talking about a full year. We compare the situation at the last quarter end with the previous quarter end. And of course, during the second quarter this year, the acquisition of Novrinike has affected these figures in a very positive way. We can see that rental income increases, property expenses increases, and so does the NOI. The interest income has decreased after the acquisition, and that's of course since we used cash for the acquisition, and also due to a short-term effect from the VAT related to Novirinic E. This amount will be repaid during the autumn and will then affect the interest income in a positive way. It's around 500,000 in interest income. The interest expenses has increased due to the acquisition and profit from property management increased by 7%. And it's really, really fantastic to see that it's possible to make new acquirers in Poland and on other markets still despite high interest rates. Since August last year, IS9 is a pure real estate company. Total assets, investment properties and interest-bearing liabilities increased after Noverinic-E. But cash decreased, as I mentioned before. The VAT was around 18 million euros. Cash? Decreased during the last quarter, will increase by 18 during the autumn. ICR slightly lower. LTV and net debt in relation to EBITDA increased, but also a little bit affected by this VAT. Should have been a little bit lower if you exclude that. And it's important to remember that net debt in relation to EBITDA is also affected by the fact that we already have the debt related to Novy Rynek I, but we haven't seen that much of the income since we took possession of the property in the beginning of June. Loan maturities on the same level as previous quarter. Interest maturity slightly higher after the new loans. We swapped the total amount, so it's 100% swapped. Interest rate level on the same level as previous quarter. Kestutis, please continue.

Okay, so this summarizes a little bit of our results. And of course, we think that EAST9 is an exciting opportunity. We are ahead of a very exciting journey, continue growing into fast-growing economies. We also focus very much on creating sustainable returns, both taking relatively weighted risks as we believe and at the same time focusing very much on transforming the properties or improving the property ESG of performance overall. We also have, we're building very stable long-term relationships with our tenants, with our counterparties and act as a very long player in the market which is a unique feature today in our markets. And this is also something that comes to our advantage over a longer time. And actually, if you look on our build up of the portfolio as such. Sorry, what happens? Cannot. Just a slide. So if you look on our growth, if we move ahead. So, yes, if we move our growth potential, actually, you see the buildup of our portfolio over time. Of course, this little drop in 23 was a result of certain write-downs and adjustment of the yield curve. But overall, we continue growing, and we have some additional possibility to grow whilst deploying our capital. But I will not want to finish with this. I would like to finish with profits from property management and actually development of it, which with the unchanged number of shares, basically you see a very, very strong growth in our profitability and our cash flow generation of our business. So this is what is so exciting about these nine and coming into the future. And now we are ready for questions.