Eastnine AB (publ)

Hello and very warm welcome to our nine month presentation. My name is Kestuti Sosnauskas and I'm CEO of East9. With me I have Britt Marie Niemann, Deputy CEO and CFO of the company. I'm very happy to present this quarter which is exceptionally strong for us. We continue growing. Our rental revenues are up 18%. Our profit from property management is up 21%. So very very strong quarter including net letting which is up with a positive figure. Occupancy ratio increases by 0.8 points and surplus ratio is unchanged which means that our operations are continuously running in a very efficient manner. October was also a very positive month for us. We received five stars in grasp rating with 92 points. We also signed two big leases which have an annual revenue of around 750 000 euros. So this is actually even higher than twice the size that we reached so far during the first nine months of the year. If we go to the nine month results, rental income is up 7% of course mainly driven by the last acquisition which has full effect in the third quarter in Poznan. So profit from property management remains unchanged going up 21% during these nine months. So again very strong figures overall. Total profit from property management total is 16 million euros. Net letting almost 400 000 and I would add another 750 000 basically with the new two leases that we signed. So again very very strong performance. Occupancy ratio up 1.3 points to 94.4%. If we add the other two leases we were up to almost 96%. So again very very strong. We made a share split in May and we made acquisition in Poland in June which plays out with its full results during this last quarter. So if we go back to our markets and basically where we operate we are in the fastest growing part of Europe. We are in a very exciting region and I will spend more time during this presentation today to talk about Poznan where it is. You can see it very clearly on the map. It's actually in the middle between Berlin and Warsaw. It's actually distance-wise closer to Berlin than Warsaw and it's a very very exciting place where we today are the largest office property owner in that market. So Poznan actually is the second largest or has the second largest GDP per capita in the city after Warsaw. It's a very vibrant economic hub and very important economic hub in Poland with a very diversified economy. Still 70% of the GDP is created from the service industry so it's a very modern city but also has a very strong industrial base. Population of around more than half a million people in the city itself so comparable to our Baltic capitals and actually 1.3 million in the metropolitan area. So it's with the metropolitan area it's actually bigger than Riga, it's bigger than Vilnius even and if we look on the region itself, this Wielopolski region where Poznan is the centre for, it's 3.5 million people living there. So it's actually bigger than any of the Baltic states that we operate in per se and it's in a country of almost 40 million people. So it's a really exciting place to be and we are very happy with our positions and we see very strong performance of our assets there. It's also a city with very nice top universities, but there's a number of universities as in many regional cities of Poland. It has a very vibrant cultural scene, numerous theatres, art galleries and so on and it's actually a city with very very rich history. Basically the Polish state was formed in the surroundings of Poznan and it's a place actually in the middle of Europe where a lot of historical events have taken place. So it's a very very rich historical background. If you haven't been there, I really recommend everyone to go and visit Poznan you will not be unsatisfied of actually doing a trip there. So if we look at our properties in Poznan, they are situated in the very heart of the city. You see those two properties in the centre, they are in the transportation hub with trams very close to the central station. They are actually probably the best location in town. Historically it used to be the bus station, the central bus station, so as always these stations are in the middle of the city and this is that place for the hub. We acquired property D back in 2021 and the second property, no 2022 and the second property 2024. So total investment of around 200 million euros. Those properties are top certified, both elite platinum and well gold as well. It's 100% leased out with very very strong economics. But it's not only about having the offices, it's actually very important for us to to create the venues where creative ideas can flourish and successful businesses can actually be developed. So it's a sustainable surroundings, it's a lot of features that are very very attractive. We have natural cooling facilities in the yard and a number of very very exciting things and it's actually becoming a meeting place for the city inhabitants as well. It's a very exciting place with restaurants, cafes and now we will just open a new bakery there. So it's becoming a place where you can meet and greet your friends, your colleagues and your clients. And it's also a very activity based place. So we have a kindergarten, we encourage a lot of activities which we do in our company all the time. So it's not only running a pure simple office with as a pure collecting revenues. We do work a lot with creating it as a very important and attractive environment around it. If we go back to the markets, and this is something that I repeat for a number of times now but I think it's so important to remember that we are in the fastest growing part of Europe with phenomenal growth, especially in Poland, Lithuania and so on. You see on these staple graphs the growth for the last 25 years and actually it's an amazing growth that has taken place. But if you look on the dots we also expect this growth to continue and we can see that actually today our core markets, Vilnius and Poland are performing stronger than any of the European peers today in terms of GDP. There's also a pending demand for offices. We have markets that are not saturated with office work per se. So if Warsaw is coming closer to the other developed capital cities, we see Vilnius, we see Poznań still significantly underdeveloped. If you compare Poznań, I would compare it to Munich of Germany to be honest. And in terms of Munich is at almost 30% there as well. So we will hopefully see the pending demand coming further. You can see on the graph it's actually the demand for office, the percentage of office employees have been growing over the last years quite significantly. We also, when it comes to the rental levels, we are on the opposite part of the curve. So if we have the highest growth, we actually have one of the lowest rental rates in the current market. And this is combined with highest yields that we can achieve for our investments. So this combination of course is what makes us so excited about this investment opportunity of actually investing and growing in this part of Europe. And now on operations, I give over to Britt Marie.

Thank you, Kirstin. This is nine has 15 properties, 14 office properties and one development property. The total lettable area is likely about 210,000 square meters. And some of you might think that that isn't much. And you are correct in some way, but the lettable area per property is as high as 15,000 square meters. And that's a lot. The property value by the end of September was 654 million euros after one acquisition during the period. And that's corresponding to 7.5 million billion C. The property value per square meter is slightly above 3000, corresponding to 35,000 C. And the average age was around 10 years. The surplus ratio is a very important figure when it comes to real estate business, because it shows how much of the rental income is left after the property expenses are paid. And a figure as in is nine above 90% is very, very high in a Swedish comparison. Normally in Sweden, if you have an office company is around 70%. So 93% by the end of September is a very high figure. The occupancy rate also high 94.4 after an increase both during the quarter and period. After these positive net letting that we have had during the year and some of the tenants moving in. The weighted yield requirement in the valuations has stabilized around 6.7%. It's a little bit higher than at year end. And you know that it has increased for a couple of years now. And as you saw in the report, we also had positive value changes during the quarter and slightly negative during the period. We have 30% of the portfolio in Poznan with a value of 200 million euros and an area of 68,000 square meters. The economic occupancy rate is 100%. In Lithuania, we have around 60% of the portfolio with a value of 380 million euros. And the lettable area is slightly above 120,000. The occupancy rate in Vilnius is also high above 94%. And in Riga, we have around 10% of the portfolio with a value of 70 million euros, 22,000 square meters and a little bit lower vacancy 78%. If you look into Vilnius to the left, we have nine office properties. Uptown Park up to the left is located close to the central station. The BOS Teresbures properties on the top line and the seven properties in the bottom line are all. All five are located in the CBD area and the three properties in the middle, Unik, Vertas 1 and Vertas 2, they are located in the Parliament District. We have one planned project which is Poznan and it's located on the same land plot as Teresbures 3. In Riga, we have three office properties, quite centrally located and we have two planned projects, one on its own property and one on the same land plot as Aloia Spiroj. And in Poznan, two properties. It's actually our two biggest properties and they are quite centrally located in what's becoming the CBD in Poznan. Net letting was positive during the quarter and the period and as you heard from Kestuti, we have seen some new big leases during October which will mean that probably we will have quite a big positive number even in Q4. The annual rent level on those were 750,000 per year. The vaults around stable around four years and tenant concentration is improving. Tenant concentration figure shows the largest tenants share of annual contracted rent in percent. It was 14% by the end of September, 16% by year end and if we look a little bit more than three years back, it was actually as high as 31% and this is perfectly normal development when we acquire new properties with new tenants. At that time, three years ago, Danske Bank was actually our largest tenant with 31% of the contracted annual rent. Now it has only 12%. Allegro is the biggest tenant with 14% and we expect this trend to continue. If you look to the left, to the circle, you can see some different sectors among the tenants. ICT, that is information, communication and technology stands for 25% which is on the same level as finance, e-commerce slightly lower and other slightly higher. East9 has a long-term and genuine sustainability commitment with ambitious goals. We have a goal to have 100% certified portfolio and we have it already. We want to increase green financing and green leases. We managed to increase green financing during the period but green leasing has decreased somewhat and both these changes are related to the acquisition in Posnan. The ambition is to be a leader in sustainability and we have a target to have climate neutral property operations by 2030 and also we have a target to have five stars in Gresp and as you heard, we have five stars since a couple of weeks ago. Some financials. We saw a large increase in profit from property management both during the period and during the quarter. Most important factors during the period was the interest income after the sale of MFG in August last year. We also saw an effect from on profitability from acquisition of Novyrynyk E in June. It affected of course the rental income in a positive way, meant some more property expenses, more interest expenses and also somewhat lower interest income since we used cash in the acquisition as partly financed by cash. We also saw some higher bonus payments and one of settlement payment in Q1. When it comes to the quarter, the most important factors was that we had for the first quarter, we had full effect from the acquisition of Novyrynyk E on rental income, property expenses, interest income and interest expenses. We also saw and I think this probably more of a one-off effect increase in legal costs and costs for sustainability consultants during the quarter. The earning capacity as you already know, this is a theoretical assessment based on current agreements, certain assumptions and also in some cases 12-month figures. It's not a prognosis. We compare the figures by the end of September to the end of previous quarter and look on this is 12-month figures. It's important to know that. We had a higher occupancy which means that the rental income and the NOI is positively affected. We had also some property expenses related to the new letting and broker fees which increased the expenses in the earning capacity because it's 12-month figures. The interest income increased after we received the repayment of temporary VAT which was related to the acquisition of Novyrynyk E and the interest expenses has gladly enough decreased due to lower interest rates and amortizations. So on the bottom line we had a positive effect on the profit from property management in the earning capacity plus 4% which is good. The interest rate level as I mentioned somewhat lower in the end of September, higher than in the beginning of the year though since we had some refinancing during the first quarter and also new financing during the second quarter. Share of fixed interest around 70%. The interest maturity is around two years but it's higher than at year end after the new financing and refinancing. The liquidity increased after the repayment of VAT but it's lower than at year end because of acquisition during the year. The ICR at 2.5 times now higher than at year end and the loan to value on a low level 35%, a little bit lower than end of June but higher than at year end after the acquisition. Loan maturity has increased during the year after the refinancing and new financing. So over to you Kirsten.

So before I sum up the quarter and the first nine results I would like to remind you to post questions online so we can start with them immediately after I finish. So why we believe East9 is an attractive case? We're actually growing a unique portfolio in the fastest part of Europe. It's the fastest growing part of Europe and in the very exciting markets of Poland and the Baltic states. We are investing properties yielding significantly higher in combination with lower rental levels which creates a very attractive investment in the capital in form of capital values. So there's a very very huge potential especially with looking into the amazing growth that region has experienced and will be experiencing. We also work on creating sustainably attract returns in terms of growth and profitability and especially looking into profit from property management per share performance. We also are exposed to the most exciting clients in the region and the most exciting sectors both ICT, ECOM, finance are actually the sectors that we believe are very sustainable and will sustain over the time and will experience significant growth going forward. So if you look on our business and if you look on profit from property management over the years actually over the past five years our profit from property management increased by four times. So you can see that actually our growth has been phenomenal during this period and this transformation we're actually making these recovering profitability growth. And of course we have grown our portfolio and we see that there is still quite a nice potential for adding on more attractive investments and Warsaw will probably be our next target for our acquisitions. So on this I'm leaving out for questions.

Yeah and we have received some questions but please continue to post questions and we will answer them. The first question is the vacancy rate has decreased a bit in Riga but still about 20 percent. What actions are taken to decrease the vacancy rate? You can start with that and can you continue?

I mean we're constantly working and I think in leasing out we are actually we're done almost done with one of the properties called Lojas. Actually you will see more people moving in over the period of time now going forward but in in Waldemar where we have bigger vacancy right now we'll do a number of investments we've done a number of environmental improvements in the building but we also now working on making it much more attractive especially when we have a possibility now to renovate the premises that are older. Just to remind you the biggest vacancy today is in the property that is our oldest property it's very well located but it also needs a certain investment as well and this is what we are working on at the moment and I believe that we will see positive news from there.

Another question on the same theme could you elaborate a bit on the high vacancy rate what's driving it and so on and it's also the market? Yes of

course and I mean if you look Latvia and Liga stands for approximately 11% of our portfolio so it's not a big market even the vacancy figures might look big it's about one house it's one property so really it's I wouldn't be so you know I don't think we need to spend so much time on it explaining it but it's a market dynamics of course we have in general there has been a number of newcomers in the markets after a very very long period of stagnation in that area so people tend to move to newer premises and that's a very natural move. At the same time we see that you know there's always a movement in a multi-tenant building so I wouldn't you know.

Yeah and another question you mentioned 750 000 euro of positive net letting in October when will these tenants enter their premises it's March and April expected next year and which city is this related to Vilnius? Vilnius

yes it's 100% leased in Poznan it's yeah it will be very high in total I think we will reach 96% with those leases so unless of course there will be some more moves or not.

Another question long-term interest rates are currently lower than short-term rates how do you think about interest maturity do you intend to extend the maturities or are you happy with the current split? I would say that's something we consider every time we refinance or new finance so it's on our mind and it depends a little bit on how the situation is on each market but I it has certainly become more interesting to fix more. So do you have any more questions please post them. Perhaps Kirstin you can elaborate a little bit about any change in people coming back to the office.

Yeah in general I think we see a very very big wish by most of our tenants to actually bring people back and we see actually a steadily growing trend in people coming back to the offices we are not worried about that and in general our strong leasing during both in the first month but also especially after the end of the quarter it's just an indication actually that the market is still very very strong and the demand is there of course it takes longer time it takes maybe it's a little bit fewer players than it used to be but at the same time what we see is a very very clear trend of flight equality from which we are benefiting we have been benefiting it from day one after pandemic and actually the same trend continues and it only strengthens and we see that it's quite common that tenants decide to maybe reduce the premises by 30 percent but they are actually paying up to 50 percent more in per square meter rent when they move so it's in general this trend actually has benefited us and we still we can basically show in our figures that actually this trend is there

so if you don't have any more questions

thank you very much in that case and look forward to speak to you at q4 yeah sometime next year

thank you