Eastnine AB (publ)

Hello and very warm welcome to our nine-month presentation. My name is Kerstin Stasnowskas and I'm CEO of EAST9. With me I have Britt-Marie Nieman, 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 profits 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 for property management remains unchanged, going up 21% during these nine months. So again, very strong figures overall. Total profit for property management total is 16 million euros. Net letting almost 400,000 euros. 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%. And if we add the other two leases, we were up to almost 96%. So again, very, very strong performance. 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 Poznań actually 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 Wielopolska region where Poznan is the center 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 acquisitions and we see very strong performance of our assets there. It's also a city with very nice, basically one of the top universities is there as well. 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 Poznań. And it's a place actually in the middle of Europe where a lot of historic 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 on our properties in this, in Poznan, they are situated in the very heart of the city. We are actually, you see those two properties in the center. They are in the transportation hub with trams, very close to the central station. They are probably the best location in town. Historically, it used to be the the bus station the central bus station so as always these stations are in the middle of the city and 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 in 2024. So a total investment of around 200 million euros. Those properties are top certified, both lead platinum and gold as well. And 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 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, a cafe, and now we will just opened 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 very activity-based place. So we have a kindergarten. We also have, we encourage a lot of activities, which we do in our company all the time. So it's not only, you know, running pure, simple office with, as a pure, you know, 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 Poznan, still significantly underdeveloped. If you compare Poznan I would compare it to Munich of Germany, to be honest. And in terms of, you know, Munich is at almost 30% there as well. So we will hopefully see the pending demand coming further. And 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 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, Kirsten. East 9 has 15 properties, 14 office properties and one development property. The total lethable area is likely about 210,000 square metres, and some of you might think that 15 properties, that isn't much. 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 billion SEK. The property value per square meter is slightly above 3,000 SEK, corresponding to 35,000 SEK, 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 IS9 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 the period. after this 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 we look into Vilnius to the left, we have nine office properties. Uptown Park, up to the left, is located close to the central station. Both Tres Buras properties on the top line and the S7 properties in the bottom line, all five are located in the CBD area. 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 paused and it's located on the same land plot as Tredsbyrhus 3. In Riga we have three office properties. centrally located and we have two planned projects, one on its own property and one on the same land plot as Alojasbyråji. 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 Kastutis, 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 tenant's 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 tenants. 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 Poznan. 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 on profitability from acquisition of Novirynik 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, partly financed by cash. And we also saw some higher bonus payments and one-off settlement payments 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 Novy Rynik i on rental income, property expenses, interest income and interest expenses. We also saw, and I think this is 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 these 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 property expenses in the earning capacity. Of course, it's 12-month figures. The interest income increased after we received the repayment of temporary VAT, which was related to the acquisition of Novy Rynek 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 the 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 that year ends 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. This is 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 sustainable 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 profits 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.

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 above 20%. What actions are taken to decrease the vacancy rate? You can start with that and I can continue on.

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 Aloyas. Actually, you will see more people moving in over the period of time now going forward. But in Valdemara, 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're 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 soon.

And 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 Riga 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... 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 market after a very, very long period of stagnation in Latvia, so people tend to move to newer premises, and that's a very natural move. At the same time, we see that there's always a movement in a multi-tenant building, so I wouldn't

Another question. You mentioned €750,000 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 it has certainly become more interesting to fix more. So, do you have any more questions? Please post them. Perhaps, Kerstutis, 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 nine months 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 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 to quality from which we are benefiting. We have been benefiting 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%, but they are actually paying up to 50% more per square meter rent when they move. So in general, this trend actually has benefited us, and 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 sometime next year.

Thank you.