Eastnine AB (publ)

Hello and very warm welcome to IS9's second quarter result presentation. My name is Kestutis Sasnauskas and with me, Adela Colakovic, our new CFO. We will together guide you through this quarterly result and the latest news in the company. Before I start, I kindly ask you to post questions during our presentation and when the presentation is over, we will respond to your questions. So if we move to our second quarter, we deliver stable results. Our rental income is up slightly. We're coming from very high occupancy levels. So it's very difficult to increase our earnings significantly from 96.5% occupancy, which also increased during the quarter. Our net operating income, again, stable, somewhat lower over the first half year. But it's also the same for the profit and property management. It's a result of us actually building up organization to take our next step. And this is probably the main explanatory reason why the net results are somewhat lower. Our surplus ratio back again at 92.5. We have achieved now 8 times debt-to-BDA ratio and 45% loan-to-value, which actually enables us to do the acquisitions that we just announced this morning. And of course during the quarter we divested two properties in Latvia and today we announced acquisition of the bridge. And I will go into that acquisition in more detail further on in our presentation. So just briefly, we have approximately 258,000 square meters of leasable area, around a billion euros in total assets. The new transaction will add additional 300 million approximately in asset value and another 55,000 square meters. So we will be around 300,000 square meters of prime, prime office in our markets. You can see the gradual build-up of our portfolio. We actually went from first acquisition back in 2014 and now in this quarter we have, of course, first effect of first divestment that we had in Riga, but actually if you look on the profit from property management per share, It actually continues performing very strongly. Of course, there's a slight leap during this quarter. Again, build-up of the organization, sell of Regia assets. But when we look into the new acquisition, you will see the enormous positive effect coming from it in the future. What are the long-term trends? It's all about the very strong economic development in our markets. Baltic states, Lithuania and of course Poland were the leaders in economic growth over the last 25 years. Thank you very much. And if you look on the index actually you can compare over the last 10 years you see how much faster and how much more wealth is being created in that region. And that's what we believe is extremely compelling when you look into the future and when you invest in real estate. We also see that the regions where we are are among the fastest growing regions and expected to be the fastest growing regions. So even the sub-markets where we are in, in Warsaw, in Poznań, in Poland, in Vilnius and in Riga, those are actually developing quite nicely and expected to develop quite nicely. Even if you measure on the top 20 European cities over the last 10 years, 15 years, or even 5 years, actually among the top 20 European cities, half of them are Polish, and we are very happy that all of the cities where we are in, they are among those top-growing cities. So again, the very strong underlying macro picture in our universe. And this is of course our favorite graph. It's the average rent in each market and average yield that you get when you buy properties. And this enormous divergence of being in the market with lower rents and highest yields in our view is somewhat mispriced. And of course, over time, this gap should close. We don't know when, how long it will take, but actually this movement should definitely be there. Looking at the economic development, again, GDP per capita, etc., etc., etc., how fast this region is actually catching up. And what does it mean if you look on practical terms? You can see that this very low yielding combined with very high rent results in a very high capital values of property. So Stockholm peaks at 22 euros approximately, whilst Warsaw is at 5.9. Our latest acquisition announced today came at 5.4, so slightly below the top level, even though this is a top, top prime asset and brand new one. What is also important to note that in our now main market, which Warsaw actually just will become after the completion of this transaction, we see a record low offering of new supply of office. This decreased post pandemic. Thank you very much. Thank you. Subtitles by the Amara.org community and we see that drop in supply for office. And this is a very important factor actually driving the rental growth in Warsaw. We are seeing record low vacancies, especially in the region where we are, and we see very strong demand for premises. So if you look on our portfolio, I will run through those pictures very fast, but I would like you to show where we are in each of the cities, but also the quality of the buildings that we own. This is top, top, prime, very modern offices with very modern technology in them, all of them highly environmentally certified. Here we see headquarters of Vinted, a Lithuanian startup for secondary clothes. It's a platform for trading secondary clothes in Europe and globally. Here we see our properties in Poznan, top properties in the very heart of Poznan, actually located in the best place with amazing tenants like Allegro, McKinsey, Rockwool, etc. etc. We have top, top locations even in Poznań. And of course our Warsaw unit which is the largest property, single property in our portfolio. It's our jewel and it's also still 100% occupied in very high demand. We see actually a lot of people willing to come to our office even though today we don't have anything to offer. So if we look on our portfolio overview today, around a billion in assets, 62 million in rental revenue, which is rolling 12 months. If we look on the rental value, which is a contracted rent looking forward, it's around 63 million. The average value of the portfolio is 3.6 thousand euros per square meter. Current yield requirements around 6.7 and average property age of 8.5, which is actually one of the youngest portfolios, I would say, if you look in general. Warsaw stands for 33%, Poland today at 51% in total, no, 55% in total. Vilnius at 42, and we actually post-sell in Riga. We only have one smaller property in the heart of Riga and one development land plot, so it stands only for 3% of our portfolio. What is also very important to look back is actually how consistent and strong the underlying business is. This is our occupancy on the, now I would say, I see it on my left hand side, it's probably on your right hand side, is the occupancy rate, which is at 94%. www.sommensjö.com At the same time in Vilnius we only have around 2,500 square meters of free office in a portfolio of close to 130,000 square meters. So it's basically almost nothing to offer and of course occupancy remains very high and demand is very strong. On the other hand, if you look on the surplus ratio, we are higher than our average over the last, again, now almost six years, at over 92%. It's 92.5% at this quarter. And of course, we see quite strong, again, strong development. And after some other movements will come during, expected to come during Q3, we will even expect somewhat higher occupancy. So, in our portfolio. If we look on the environmental part, we have 100% sustainable and certified portfolio. We only own BREEAM outstanding and LEED platinum buildings. So even Valdemara that was gold is now actually recertified to platinum. 97% of our turnover is considered to be EU taxonomy aligned. We have five stars in GRESP and green financing stands for 88% of our total financing. and of course this figure will grow as we refinance our debt. We also aim for net zero target by 2040 which is now SBT aligned and we follow this science-based target initiative. So over to you, Adela.

Thank you. So let's go over the first half year financials. And as Kestutis mentioned earlier, the results are stable and rental income are in line with the period both for the quarter and first half year. But there are some underlying changes and those relate to a couple of things. One is the divestment of the two properties in Riga, which led to an income loss in Q2 of approximately 300,000 euros. Lower average occupancy rate in the beginning of the period had a negative effect on the year-to-date income. But both of these effects were mitigated by rent indexations, both in the beginning of the year and some in Q2. Looking at net operating income, it's basically flat in Q2. Compared to last year and for the period, it's a small negative effect mainly related to the cold weather in the beginning of the year. Overall there are small movements in the operating income. But as we mentioned before, and as Kestutis highlighted before, we're growing our company and especially the team in Poland, where we will have some extra and double cost during a limited period of time, building our own organization and moving from external administration to internal, which we do believe will be both More cost efficient and also add more value to our tenants in the future. And also the organization that we have built and are still building in Poland will also be able to take on the new property, the bridge. Net financials have decreased by 2% and both for the quarter and the period. And it's related to lower average interest rates. The average interest rate is, however, the same as a year ago, approximately 4.4%. But last year, we came from a higher interest rate level in the beginning of the year, which we don't have this year. Profit from property management decreased by 9 and 5% respectively for the quarter and period. The main reason for that is higher cost due to additional employees. Let's go ahead and look a bit at our earnings capacity, where we can see that rental income has decreased due to the earlier mentioned divestments in Riga, while lower occupancy ratio and indexation had an opposite effect. Property expenses have decreased due to the divestments. However, the unusual cold winter in the beginning of the year and higher personnel costs related to new employees in Poland has offset that effect. However, the property cost will be lower going forward since we have closed our office in Riga and we'll replace the internal management there with external which will be a bit more cost efficient since we don't have the same property stock in Riga. Central administration increases due to higher personnel cost. Interest income has increased as a result of increased cash Interest expenses have decreased due to the divestment of the properties in Riga So overall, the profit from property management is a bit lower now in Q2 compared to Q1 based on the explanations that were given. But going forward from expected from Q3, we see it will be a bit higher again. Looking at the property value development, From beginning of the year it has changed minus 4%. During the period we have invested 4.3 million euro in tenant improvements in several buildings. There has also been a small positive effect in the unrealized changes in the value due to increased market rent, but that was mitigated by a slight yield decrease during the period. The biggest change in the portfolio is of course the two divestments that decreased the value by 39 million euro, leading us to a property value of 926 million euro by the end of Q2. And like for like, the development is flat. The yield in the valuations is 6.7% up from 6.6% in Q1 and the average growth for the past years in the property portfolio has been 19% and the bridge will grow the portfolio by approximately 30%. Let's look a bit closer at the East Nines financing situation and we can start at the top left corner that shows loan to value, average interest rate and interest coverage ratio. The loan to value decreased this quarter to 45 due to the divestments in Riga which both increased the liquidity and decreased the debt since we amortized the debt related to those properties. Leading us to the average interest rate, which has increased slightly this quarter because we realized some interest rate swaps that were connected to those loans to the divested properties and were at some good levels. We do, however, see potential for the interest rate going down since we do have a few refinancings to do and we can see that they're coming in at a competitive level. Looking at the debt maturity, the next refinancings of approximately 80 million is due in February and May next year and we have already began the discussions with our banks. The interest maturity is visible in the same chart and 80% of the interest is fixed with interest rate swaps. Overall, the financing is very stable and solid. LTV and average interest has been trending down over the past four years. And as said, overall, all prepared for future growth. East9 as a long-term investment, looking at the East9 stock. The total return in the East9 share for the past 12 months was a bit negative, 7%. But during the same period, the Omex Stockholm real estate index declined by minus 16%. and over the past recent five-year period, IS9's total return averaged 11% per year, compared with a decline of 7% for the real estate index. And let's go over to the acquisition of the day.

Wonderful, thank you. I hope this is more sharing to discuss than the stock prices over the last half a year on the market. So, the bridge. We actually were working on this transaction for quite a while. It's an amazing asset. It adds to our portfolio in Warsaw both in terms of market share but also in volume and in quality. This is a top top asset with all the certifications you can mention. Very high tech again as all of our properties in Poland. The property was completed 2025. It's a 40-story building with a lettable area of 55,300 square meters. Today, the property is let to 92%, but we expect that occupancy level to actually increase before we complete the transaction. Today the building is anchored by Erste Bank Polska, which used to be Santander Polska, and Erste acquired the Santander Bank, which was the Polish largest private bank. And Visa, which is a Visa Technology Center, the Visa Card Technology Center. Rental value is expected to be at around 18.2 million euros, an average lease term in excess of 10 years. We acquired this property for 300 million euro valuation. Preliminary purchase price will be lower, and you might ask why it's like that. The reason for that is actually that the building is not fully moved in and commenced. The lease leases are signed and we have a price reduction related to certain periods of vacancy during this time as well as some rent freeze and some fit-out contributions that will be necessary to complete the building. But when it's completed And it's fully operational. We expect the profit from property management to reach 37 euro cents, which is 20% up from today's level. And this build-up will happen gradually, depending on the schedules for tenants moving in and, of course, starting to occupy the building and operating. And now I just wanted to share with you some nice pictures just to get you a little bit of a feeling of the high quality of this building. You can see there some elements from the lobby, which is truly amazing and very inspiring. It's a true wow feeling when you enter the building, and also architecturally it's a very, very attractive building. Again, something that we always work with, that we want to create feeling buildings, and this acquisition fits our values very, very well. And last but not the least, I would like to show you where it's situated on the map. and actually in the background with a light text on the top you see Varta, it's actually Warsaw unit and this building is just around approximately 500 meters from our current building and in between we have Warsaw Spire which is one of the landmarks of Warsaw and headquarters of PCU. So we are extremely well located, extremely high quality and it will be another jewel in our portfolio. So with this, I open up for questions. Thank you.