Logistea AB (publ)

Thank you so much. Good morning to you all and welcome to the presentation of Logistea's Q3 report. Myself, Niklas Zuckerman, CEO of the company and sitting next to me is Philip Lövgren, who is CFO of the company. As said, we'll answer any questions after the call. The merger with KMC Properties is completed. And we are today presenting a full quarter for the new combined company. Before we dig into the numbers in detail, it's worth to highlight the main advantages with the merger and how the company looks today. With the merger, we found a company that is, or with KMC, we found a company that had very similar types of properties as the former Logistea had. focus on logistics and industrial properties, and both companies favored long and triple net leases. We see a clear economy of scales when it comes to, first of all, cheaper financing from banks and the debt capital market, broader shareholder base and much better liquidity in the share, better tenant diversification and more potential tenants to do add-on investments with, we we saw synergies both on the short and medium term and medium term is much driven by potential lower interest costs a task we're working hard with at the moment we have more markets to operate in meaning that we could take advantages of good investment opportunities in more markets the property portfolio now amounts to a bit more than 13 billion sec A split between 1.4 million square meters of lettable area and 343 000 square meters of building rights. And the NRV today stands at 15 SEK per share. As a result of the merger, we're presenting large improvements in income, NOI and income from property management. Notable is that the increase in income from property management is much higher compared to the increase in NOI. And as you can see on this slide, we are presenting 169 million SEK in profit or income from property management for the period. Still a long vault, meaning long leases at 9.7 years. The net initial yield from income producing properties is at 6.9%, and the LTV is slightly lower compared to the last quarter, and now at 48.5%. A few words on the property portfolios, and here are a couple of examples. The portfolio comprises a good mix of logistics and light industrial properties. To the far left, we have a few examples of logistics properties, fully leased, long leases, and we have bought those at yields of 7% to 8%, these two examples. In the middle, we have two examples of light industrial type of properties, also fully leased, also long leases, in most cases, triple net leases, meaning that the tenants are paying for not all all operating and maintenance costs and here we're talking yields of 7.4 to 7.7 percent. Developments is an important factor and we are hoping to do more and when we say developments it will be a mix of add-on developments as is the case for the first one in Alingsås where we bought an existing property at a yield of 7%. We are currently completing an extension for the tenant NKT. The extension is 160 million SEK, and we get a yield on cost of 10% on that investment. And at the same time, we're prolonging the lease with NKT for another 22 years, meaning that we increase the vault from previous seven, eight years to 15 years. And the last one is a greenfield development that we completed the other year. 14-year triple net lease and the yield on cost on that one is 7.4%. As you can see, 80% of the properties are located in Sweden and Norway. The properties outside of the Nordics are triple net leased properties with long leases. And all of those properties are also leased to Nordic tenants, meaning that we can manage the properties outside of the Nordics. Yields in the portfolio, as you can see, varies between 6.4 to a bit more than 10% in the various markets. Main tenants in the portfolio are BEWI, Insula and NKT. To the far right you can see the split between the different industries. There's a good diversified mix between insulation and construction, industrial and production and some others like e-commerce and the fish industry. More on the property portfolio. 91% of the leases are triple net. And as I said, meaning that the tenant is responsible for operating and maintenance costs. Also, obviously, meaning that we as a landlord have less risk when it comes to increases in operating expenses. The occupancy rate is high and now at 97.4%. If we're looking down to the left, you see the net lettings and we're reporting 3 million SEK of net positive net lettings in the quarter and 4 million SEK for the first three quarters of this year. Very strong vault as we've said and notable when you look to the right that 88% of all our leases expires in 2029 or later. Talking a bit on the market for our type of properties and starting with the transaction market, where we can see that for the third quarter, the volumes were slightly lower compared to the previous quarter. However, we're 50% higher compared to the same quarter of last year. We foresee higher activity the coming six months driven by the fact that investors seek high yielding assets with strong underlying demand from tenants. And obviously higher activity in combination with lower interest rates would probably push the yields down over time. And the higher initial yield compared to previous is much driven. Next slide, please. Here. As you can see, we're reporting much higher net initial yield of 6.9%. As I said, much driven by the merger with KMC. Just to give you some background to the 6.9%, that should be compared to an all-in financing cost today in Sweden of approximately 4%. The valuation yield is up 0.25% from year end and 0.02% from the last quarter, meaning flat.

And over to the financials. Looking at the increase of all these figures on this page, they are huge. Though the property portfolio is up almost 150%, almost entirely linked to completed term transactions to 13.1 billion, where KMC stood for around 6.8 billion. The revenues are up 67% for the period with a 3.4% increase in the life-for-life portfolio. The net operating income is up 83% with a better operating margin of 82% on the last 12-month term compared to 78% a year ago. The profit from property management which increased to 91 million in the quarter is up 106% for the period. This result is excluding the transaction costs of 12 million, which is related to the business combination with KMC. And the increase is almost entirely linked to a greater property portfolio. Profit from property management per share increased 44% on the rolling 12 month period. And the increase for the quarter was 11%. During the quarter, we have focused a lot on the loan portfolio for optimization and to take advantage of both the current financing market, but also Logistea's new market position. We've seen some changes of bank margins and have completed some new interest rate swap agreements, seeing a five year Swedish swap rate down to below 2%. The average interest rate is now down to 5.6% from 5.9% in the beginning of the quarter. We have a current hedge ratio of around 74%, which leaves some room for coming expected interest rate decreases. Our loan portfolio consists of 85% senior secured bank loans and a 40% mix of secured and unsecured bonds. The Swedish bond of which 75 million were outstanding in the period and was sold on the 7th of October. Having around a minor share of the loan portfolio consisting of bond loans is not an issue for us. We see interesting pricing on the capital markets with peers issuing or tapping on appealing levels. The remaining secured bond of 900 million Norwegian can be called in January 2025 or even earlier. The best case is to refinance that loan with either 100% new bank loans or a mix with new bond and bank loans, resulting in a 40 to 50% drop in the credit margin on that loan amount. Logisteas EPA NRV, the net reinstatement value increased from 14 to 15 kronor per share during the quarter and it's now up 13% this year. Looking at the earnings capacity, new for this quarter is the currency exchange, which have some effects on the numbers. The net operating income in the earnings capacity is down slightly due to the FX effects. The net finance costs are down with 32 million, which is correlated with the decreased average interest rate going down from, as I said before, 5.9 to 5.6% in the quarter. Altogether we see a stronger profit from property management per share of 4% for the quarter.

Good. Looking a bit on the outlook and we'll start with the new financial targets that we presented a few weeks ago. The first two ones increase in NAV per share and the income from property management per share, the target is 15 percent. That's higher than the former logistic I have. On this slide we're presenting, as you can see, the NAV for the first or the previous two quarters to the far left. The second one is from the run rate for the same period. We kept the LTV target or hurdle of 60% where today somewhat below 50% and we feel comfortable that at or around 50% is where we'll probably be at for the coming quarters. ICR is moving upwards quarter over quarter. We're today at two and a good headroom towards the 1.8 which is the target. Good. And to summarize, we have done the merger. It was very good for the both companies. We have now a good, stable financial platform to continue to build on from. We got long leases, stable tenants. I would say good support from all our banks, now being more banks than we had in the past. We have a good and proven track record that we can do deals both in good and bad times, both buying single assets portfolios and look at M&A deals. And as Philip said, we'll continue to do a lot of work on the debt portfolio the coming quarters where we see large cost reductions. and obviously continue to work on our ESG commitment.

Good, so any questions from... There are no telephone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Good. We have a few there in Swedish, but we'll do a quick translation. The first one, how do you see upon the KMC shares that will be distributed on November 12? And is there a risk that there will be a lot of sales? What we saw is that it's correct that the remaining shares held by KMC Properties will be distributed to the shareholders of the company on November 12, following a general meeting on November 11. It's a smaller part compared to the last distribution we took place following the merger. At that time, we actually saw High liquidity in the share, but it didn't affect the share price negative at that time. But for everyone's sake, it's good that this is taking place now, obviously. But we don't have any views on how much will be sold or not following that distribution.

Also a question why the result before tax is down. That result is affected negatively by changes in value of derivatives. As I said before, this is the first quarter that we have FX rate affecting the P&L and derivatives were interest rate derivatives we've seen dropped in market interest rates which affects the values of the derivatives holdings.

Next one is will you buy more properties in and is to reach the goal, the old growth goal of 15 billion SEK. So starting with the growth goal, the 15 billion SEK was for the former Logistea. Now we have said that we will continue to grow. We have not set the number. But just to be clear, a shareholder of Logistea should expect us to grow this business. It will be a combination of buying standing assets. It will be add-on investments in our own portfolio. We will hopefully do more greenfield developments and we'll continue to look at M&A. So there is no set growth target, but one should expect us to grow the business, that's for sure. I don't think we have any more written questions.

So there are no more questions at this time. I hand over to Niklas and Philip for any closing comments.

No, good. But if there are following questions, just let Philip or myself know. We thank you for today and thanks for the interest and we'll continue to deliver growth. Thank you.