Eastnine AB (publ)

Hello and a very warm welcome to EAST9's first quarter presentation of 2025. My name is Kerstuti Sasnauskas and with me I have Britt-Marie Nyman joining for this presentation. So for you who are Watching our presentation first time, just a very brief reminder, East9 is a real estate company focusing on prime offices in prime locations in the fastest part of Europe today. We have 272,000 square meters of leasable area, approximately a billion in asset value. economic occupancy of 96 percent rental revenue which is in our earnings capacity around 62 million euros. Average yield six and a half percent loan to value 48 percent and average interest of four and a half. And with this, I will start going into the quarter. Before I do that, I would like to remind all of you to post questions whilst we hold the presentation so we can start with answering them straight after that. We had a wonderful first quarter, very strong results. Our net operating income is actually growing 75 percent. We also have record profits from property management up 46 percent, reaching 7.8 million euros. And per share, it grows 33% just because we had a capital increase during last year. So still very, very strong results. I'm also very happy to announce that we have positive net letting for the quarter. We are already at a very high occupancy level, but we still improve it. We also have positive value growth in our portfolio due to unrealized value changes, mainly in Poland. Very stable occupancy, as I mentioned, 96%. Surplus ratio improved by 1.7 percentage points, so it's reaching almost 94%. Again, very, very high figure. And the board has proposed a dividend of 1.2 sec per share, which is an increase compared to last year. So, if we go back a little bit to our key target markets and why we think it's so exciting, it's actually about growth. Our region, Poland, the Baltic states have been growing faster than most of other European countries over the last 25 years, and we believe they will continue growing faster. for the next coming years. And this is shown, you can see it actually in the figures, but Poland and Lithuania are actually performing extremely well, somewhat lacking in Latvia, but the performance continues very, very strong, despite the turbulence that we see globally today. These countries are also very low indebted, which opens up additional possibilities to do infrastructural investments, defense investments, et cetera, et cetera, that is now on top of the agenda. So all of this, the very positive macro environment. It's also combined with growing office usage and growing demand for office. Our biggest challenge today is not a vacancy. It's actually the lack of premises that we have. We see very, very strong demand, primarily in Poland, actually, for office space, as the trend for coming back for office is increasing. At the same time, we see that structurally there is huge potential to grow, and especially in combination with lower production numbers of new offices as well. So this all positively drives the rental levels as well. And of course, probably the main point is actually we are in the market with lowest rental levels combined with highest yields, which creates very attractive capital values for investment. Over time, we think this gap should close, should narrow down. And definitely it will have a positive impact on the value growth of the portfolio should that trend happen. But we believe that this actually we see positive signs of this actually moving upwards. We see positive trends in the rental levels and we see positive moves in the yields as well. So if you look on our properties, we have 16 wonderful properties. There's no change since last year, so I will not probably spend too much time on them. If you look on the distribution overall, 51% of our revenue comes from Poland. 30% from Warsaw and Poznań, Vilnius with 41%. So Lithuania's capital remains our core market. And then followed, of course, we have 7% of revenue coming from Riga. Property values and revenues are approximately the same. If you look, we are very sort of on our kind of segmentation in business. Office is 96%, which is basically 4% is mainly services surrounding the offices. So we are a very, very pure office play. If we go into the tenant side, our tenants are very strong multinational players in many cases. You can see the top list of the 15 tenants, all multinational names that you would recognize. And if you look on the rental value, basically the distribution is pretty similar, it's just Warsaw somewhat lower compared to to the values, but it's around one third. So 51% comes from Poland. On average, we have four years vault, 221 euros per square meter and year on average in rent. And we have approximately more than 200 tenants in our portfolio that we offer services today. In terms of sustainability, we have Very ambitious targets. Actually, also very strong results. So these are figures as per year end. So sustainability certification is 100% of our portfolio. We received 92 points in GRESP last year and five stars. 78% of our financing is green. And of course, when we do refinancing this figure, we expect to increase even further. Green leases, 45%. It's mainly dominated in the Baltics. Poland is not yet there, but we will be working on that. And as of last year, we have 82% of our portfolio AU taxonomy aligned. We also work quite hard to reduce our energy intensity. So if you look on the total energy during January, February, we reduced by 4%. And if we look on just building energy, not excluding the tenant energy, we reduced by 5%. So we continue that work on improving our operations and making our buildings much more efficient, even though the portfolio is very modern. We have a very professional, very strong board led by Lisa Lothgjort. She will be leaving us as of this AGM. And the new proposed chairman is Louise Richtnau, which we have an AGM tomorrow, so we hope that She will be elected. And we expanded our executive management team. Before it was myself and Britt-Marie only. Now we have Erik, Emil, Julius and Janis joining the team. And, well, with this improved team, we hope that we will further run the business in an efficient manner. So on this, I will leave to Britt-Marie. And, yeah.

Thank you, Kestut. It's a pleasure to once again present a very good result from IS9. We start by comparing the first quarter this year with the same period last year. And as you can see, we had a huge increase in profit from property management and also in the profit for the period. The increase in the profit from property management was related to the two acquisitions last year, but the profit for the period was also positively affected by unrealized value changes related to properties in Poland. The interest income decreased during the quarter and the interest expenses increased and both these changes are related to the acquisitions of properties during 2024. The rental income in a comparable portfolio increased by 4%, mainly related to indexation, higher occupancy in average and also compensation for pre-terminated leases during the quarter. If we compare the first quarter for 2025 with the last quarter 2024, we saw an increase in profit from property management with 27%. And this is, of course, related to the fact that Warsaw unit and the income from Warsaw unit was included in the full quarter this year, but in Q4 only for one month. And the figures are also positively affected by the indexation of rents and higher average occupancy and also the compensation from pre-terminated leases. The earning capacity is a theoretical assessment of East9's earnings during a 12-month period based on current agreements, could be lease agreements and loan agreements and certain assumptions. We compare the situation by the end of the last quarter with the previous quarter and normally we can see large changes if we acquire new properties, which we didn't during the first quarter. and thereby we can only see minor changes this quarter. But still the rental income increases by 1% and that's due to the indexation. The interest income decreased due to a lower interest rate level. The interest expenses decreases after amortizations and slightly lower interest rate level. And on the bottom line, profit from property management increased by 2%, mainly due to indexation and lower interest expenses. The key ratios, it's positive to see that profit from property management per share continues to increase now up to 0.33 during the quarter, an increase with around 2%. And this is related to indexation and also lower interest expenses. The surplus ratio is somewhat lower but stable and the change is mainly due to higher property expenses. The ICR increased somewhat after lower interest expenses and the net debt ratio continues to improve now down to 8.5 due to higher NOI and higher, sorry, decreased net debt. We have a healthy leverage level. The LTV is now down to 48%. It was 50 by year end. The interest bearing depth slightly below 500. Liquidity improved somewhat up a couple of millions to 34 million euros. The interest rate level seems to be the same as previously, 4.5, but on the second decimal somewhat lower. The interest coverage ratio, 2.4. That is slightly lower than if we compare with the same period last year when it was 2.7. Capital tie-up period and fixed interest period slightly lower compared to year-end, but still quite long, around two years, both of them. And the share of fixed interest is high, 84%, and that's the same level as we had by year-end. We didn't have any new financing or refinancing during the quarter. And we have a small amount to be refinanced during the autumn this year. 38 million euros in September and the interest from banks is very good actually. So we think it will go very smooth. Most refinancing will take place in 2027 and as you can see in 2029. And when it comes to debt sources, the portfolio is very diversified. We have five different banks with approximately 20% each of the loans. Berlin Hypp finances both properties in Poznan, SEB properties both in Vilnius and Riga. Helaband airs the 50% each of Warsaw units and Swedbank finances properties in Vilnius and also small amounts from Luminor, LHV and OP Bank. The property value has increased substantially during the plus five years from now, from 2020 going forward. And the increase during the last 12 months was 66%. If you look at unrealized value changes for properties, we saw 19 million plus during the last quarter, corresponding to 2%. After a decrease during 2023 and quite stable values in 2024. And this increase was related to properties in Poland. We saw a decrease in the yield requirements in Poland and also an increase in the assessed market rent for properties in Warsaw. We externally evaluated three properties during the quarter, of which one in Poland. That was one of the properties in Poznan. And the yield requirements in the total portfolio decreased from 6.6 at year end to 6.5 by the end of the quarter. We have a proven growth and strategy execution. If you look at the property value, it has increased by 157% since 2020. And if we look at the profit per share from property management, it has increased from with 128% from 2020. And if we include also the earning capacity and the figures in the earning capacity, the increase is as high as 182%. So that was the end of the presentation. So now we are ready for questions. Let's see. Do you expect your current average interest rate of 4.5 to decline when you refinance bank loans in the future? Yes and no. Of course, that will vary depending on which level they are financed on today. When it comes to the refinancing during the autumn, these interest swaps that we have today for those loans will probably be lower than the level during fall. At least they are lower than the level for swaps today. On the other hand, we can see that margins have come down also. So it will vary over time. Hi, congrats to a great quarter regarding the one-off income from tenants moving out early. How much have that affected their rental income in Q1? I don't actually have the exact figure for that. Not that much. I can come back to you, Martin. How do you view share buybacks?

I think, as before, I think our key target is actually to grow the business and for that we need basically all the money we can we can have we see that can actually deliver over time significantly higher returns and of course but of course should the discount widen etc so that will be on the table of the board anyway so yeah okay any more questions please post them

I think we'll have to wait a little while because it's a delay.

Maybe during this time of wait I can elaborate a little bit about the strong demand. I think this is really worth mentioning that demand is extremely strong in Poland today. We see basically recovery in all of our markets, even Latvia that has been lagging a little bit. actually positive tendencies in Latvia as well. The rental levels are somewhat lower there, but the market is picking up. Vilnius has been stable, somewhat softening in the last quarter of last year, but now actually recovering. And Poznan, primarily Poznan, we see very, very strong demand. And we wish we'd have more space. But in general, Warsaw as well, the rental levels are actually picking up.

That was actually a question. What rent increase potential do you see for Warsaw units?

Well, today the average rent is 24 in the building. And we see in the market leases signed closer to 30 today. So it's difficult to say exactly because we still have quite significant vault coming out. But the tendency is very positive. And in general, I think the market trends have moved, which also resulted in a positive revaluation of the property as well.

And do you expect to keep your high economic occupancy rate?

Yes, we believe that the premises will be well occupied going forward. Of course there will be moves and I think having this high level of occupancy uh will probably you know have a uh there will be some changes in the tenants in the future so of course this could decrease somewhat but in general we are not concerned we see that actually today there's a bigger risk of lose losing tenants just because we don't have anything to offer if the companies grow so that could create some volatility but in general probably that will also lead to to somewhat higher rental levels. So overall, we work hard to make sure that our tenants are happy, that we find space for them. And generally, we see that it looks quite positive, actually.

What are the main components for East9 behind the difference in NAV and long-term equity value? I hope I understand that question right. Is it the difference between the NAV in SEK and Euro?

No, it's the book value and I think it's the deferred tax.

No, I don't think so. If you're talking about the NAV and the long term, I guess there is a difference. The long-term NAV increases in Euro, but not in SEC, since we can see that the SEC has improved versus the Euro during the quarter. The person posed the question might send another one if we didn't understand it right. Okay, any more questions?

Okay, it seems that no more questions are coming in. So thank you very much for listening to us today. And we look forward to meet you at the next quarterly presentation, which will be in July.

Yes, in the beginning of July. Thank you very much.

Thank you and goodbye.