Logistea AB (publ)

Welcome to Logistia Q3 Earnings Call for 2025. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Nicholas Zuckerman and CFO Philip Lofgren. Please go ahead.

Good morning, everyone, and welcome to the presentation of Logistea's Q3 report. As always, myself, Niklas Zuckerman, and next to me, Philip Löfgren, we will present and we'll be happy to take any questions after the presentation. Even though we've had a fairly quiet quarter when it comes to new acquisitions, we have during the year been active and we have expanded the portfolio to 15.6 billion SEK. As always, and since we started the company a couple of years ago, full focus on logistics, warehouse and light industrial properties. We favor long leases, triple net leases, and the occupancy currently stands at 97% and the vault at 9.4 years. Growth during the year has been in the Nordics and currently 91% of the properties when it comes to value are located in the Nordics. We're once again reporting record high income, net operating income and profit from property management. The profit from property management is up by 139% in real terms. and 48% when it comes to comparing the property from property management per share compared to the same period of last year. As I said, we've continued to grow. And we have so far this year required properties worth 2 billion sec. Also worth mentioning is that the cash flow from operation is up by 65%. And we're reporting an operating margin of 92%. A few words on the market where you can see that Sweden is the only Nordic market where transaction volumes are up thus this year. The other markets have been fairly quiet, but we foresee a pickup in all of the Nordic markets for the remaining of this year. This is mainly driven by lower cost of financing, lately driven by lower margins especially, and an overall appetite for stable and long cash flow with a clear yield gap. And talking about yield gap, we have during the year acquired properties at an average yield of 1 or 8.3%. And this should be compared to our average cost of debt of 4.6. And the cost for new financing in Sweden and Finland at 4% or lower. The transactions undertaken have contributed 0.22 sec per share, which is equal to roughly 22%. We are under no pressure to buy, but we have a very good pipeline presently, and we still see good opportunities in the Nordic market. As communicated before, we look to grow the portfolio from acquisitions obviously, CapEx investments in our own portfolio and new developments. And our project for Intersport in Näsjö is progressing as planned and it's expected to be finalized in December of this year. So hopefully we can show you more or pitches of outstanding assets when reporting the full year number. The run rate also continues to improve by the quarter. The NOI is up by 17% in one year, and the profit from property management is up by 33% for the same period. And the change per share is up 23% compared to a year ago. Notable is that the net financial cost is down in one year, even though the debt portfolio is much larger compared to a year ago. More on the run rate per share. The improvement has been stable in 2024 and 2025, following a decrease in 23 when we did the rights issue. And the growth is obviously driven by acquisitions, improved financing terms and finalized property projects. No major changes in the leasing portfolio over this quarter. The BRV share has decreased to 25%. And as we've said in the past, will continue to decrease even further. if and when we do new acquisitions with properties leased to other parties. Otherwise, still long leases, and as we've said in the past, even longer leases when it comes to most of the non-Nordic markets. Very happy to present a net letting that is positive for the quarter, one million SEK, mainly driven by a new lease signed in the property that became partly vacated following a bankruptcy in Q3 of last year. We have had two smaller terminations during the quarter where tenants will leave in 2026 and 2028. But I said a positive number when it comes to net letting for the quarter. And finally, from my end, we have said that one of the benefits of being a larger company and one of the reasons why we did the merger with KMC was to improve liquidity in the share. and now a bit more than a year post the merger you can see that the liquidity has improved dramatically. So we're now seeing a turnover of per day of call it 10 to 30 million sec and that wasn't to be compared with numbers you know at maybe one or two million sec before the merger. and even higher obviously in some periods when we've seen larger block trades. And with that, I'll hand over to Philip.

Thank you, Niklas. I will now move over and talk about the strong earnings and the finances for the period. Logistea's revenue for the quarter increased to 288 million compared to the previous quarter of 263 million. The increase is linked to the finalized acquisitions during the period and a smaller increase of the revenues in the like for like portfolio. The net operating income came in at 269 million, an increase from last year's quarter, last quarter of 242 million, which is linked to both the acquisitions, but also one quarter, which kept the heating and electricity costs down. The operating margin increased to around 91% and adjusted operating margin where we exclude the rent supplements from the revenues came in at 97%. An increase from 93% at the beginning of the year. And triple net year leases and an active asset management are two main drivers for these strong key ratios. Over to the profit from property management. In the quarter, we have reserved a cost of 10 million as a central administration cost following an agreement that was signed in connection to the recruitment of Anders and Niklas, our CEO and deputy CEO. More about this can be found in our report. But if we exclude this one time cost from the profit from property management, the result came in at 140 million, which is aligned with the estimates. The main driver for the increase, which was the much stronger net operating income for the period. If we look at the profit from property management per share, one hour financial target, it increased by 54% on a last 12 month basis, which is an increase of 52% period on period. Over to the key metrics, the loan to value ratio decreased a bit following the increased value of our property portfolio. As I've told you before, we have a lot of headroom increasing the loan to value up to our financial limitation of 60%. So together with the current cash balance of almost half a billion, we have a lot of firepower when it comes to acquisitions and yielding investments in our own portfolio. A quick comment on the discussions we've seen in the Swedish newspaper Dagens Industri regarding CAPEX investments in the property portfolio. So year to date, we have had 201 million in investments. More than 80% of that number is linked to the ongoing project we have in Näsjö for Intersport. And almost all of the rest is linked to yielding tenant renovations. The interest cover ratio increased to 2.4 times on a rolling 12 month basis. This is an increase from 2.0 times a year ago following a greater property portfolio together with improved financing portfolio. So here you can see overview of our loan portfolio divided into currencies. Our basic funding strategy is to have loans in the same currency that we have rent in and in the currency that we can trade the assets. So this gives us a limited currency risk in the group. The hedging ratio of the group was around 73% in the end of the third quarter. The absolute majority of the SEAC loans are hedged, while the hedging ratio for our NUC loans is around 40%, which opens up for lower interest rates following the recent cut in NIBO. On new loans for all markets except Denmark, we're securing a margin of around 140 to 160 bps, depending on the region that property is located in, which is lower than the average margin in all of those markets. Over time, this will affect the average interest rate, which per the end of the period amounted to 4.6%. And just for comparison, as we see on the diagram to the right, note loans are pushing the interest rate up. And if we exclude the note loans from our portfolio, the average interest rates would be around 400 bps. Continuing on our debt portfolio, during the quarter we've renegotiated a bank loan in Norway of 328 million, where the new margin decreased by 25 bps. We've continued to improve our loan portfolio and we can see that over the year we've decreased the average loan margin or the average interest rate from 5.0% to 4.6%. We'd also have in the end of the quarter unencumbered assets in Germany, Poland and Netherlands of around 940 million Swedish. And we are in long term discussions regarding financing in one of those countries. Wrapping this up, we must look at our financial targets. Annual growth in profit from property management per share adjusted for one-time effects came in at 54%, well north of our target of 15%. One should not expect to see these kind of increases going forward, but looking at the growth rate in our earnings capacity together with the transaction capacity, we expect to deliver on this target. The NRV per share increased 10% from a year ago, and the LTV is in the conservative zone, and the interest cover ratio is continuing to increase. So the key takeaways from the finance side are that we have a good position to continue to grow the business using the cash balance, but also increasing the loan portfolio. We have a strong underlying earnings capacity and we've also improved the operating margins on annual basis. Back to you, Niklas.

Thank you. And a few words to summarize and where we see the rest of the year. So as you've seen, we're reporting improved numbers basically throughout. We have managed to grow the portfolio by approximately 2 billion SEK so far this year, adding 22% on our profit from property management per share. We still believe there are good deals to be done. We have good firepower and we should be able to act if we find value creating investments. And by that we say thank you and we open up for any questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Good morning, Niklas and Philip. You answered some of my questions already in the presentation, so good job. But I have a few of them left. uh so first off you have other income of eight million during this quarter uh what is that relating to and is that a level we can expect going forward as well yes so the eight million is partly due to uh

A previous bankruptcy where we now realize that we will end up getting more income than expected. So a higher income from that, but also some income related to finalized projects for tenants. So we've renovated some areas and invoiced the tenant directly for that.

Okay, so a little bit higher this quarter then. So it's not a new run rate, so to speak?

No, correct.

Okay. And also very high NOI margin this quarter. Anything particular boosting this quarter? Or would you say that this is a run rate for Q3, even your current portfolio?

Yeah, the third quarter operating margins have historically been very high due to the warm weather in the warmer months. So lower electricity costs and lower heating costs will end up with a higher operating margin.

Yeah, that's what I understand. So you would say that this is sort of a run rate for Q3 given your current portfolio then, considering if you weren't to have any unusual weather, so to speak.

Yes, so if you exclude the other income from the operating margin, I would say that this is the number going forward, yes.

Very clear, thanks. And you also had some yield compression during this quarter. Is that across the portfolio or is it any specific types of assets or geographies that are targeted specifically?

I would say it's across the portfolio but very or limited changes but there is no particular country or type of property. So it's basically small adjustments in most of the markets.

Yeah, that's perfect. Yeah, I think that was all for me. Thank you.

Thank you.

Thank you. Good morning. Can you hear me, Niklas and Philip?

Yes.

Good. This is Eric Randstrom with D&B Carnegie. I also have a few questions on perhaps your outlook for transactions going forward. You mentioned in the report that you see yield compression in your segment. How is this going to play out for you when you're looking at acquisitions?

As I think I've said before, we have a very strong belief in the colleagues doing transactions at Logistea. We still believe that we can do good deals going forward. We've been very active basically throughout the year, and there are signs that quality, especially the most core stuff, has become more expensive. But with that said, we still believe that we can do good and value-created deals for the remainder, call it, three to six months. So it has become a bit tighter, but with that said, we still believe that we can find good deals, so to say. Then we can't promise if it would be as good as during the spring, but definitely deals that will improve our ETS.

Okay, so basically we shouldn't expect sort of the north of 8%, but perhaps you can at least get your yield requirement in terms of deals. Is that sort of a good way to look at it?

Let us come back when we have done a couple of deals. Without promising too much, we still believe there are good deals to be done. It will definitely be higher than the reported yield of 6.7%. But I don't want to give them more guidance if it's seven and a half or eight or somewhere in between that. We'll obviously let you know once the deals are done.

That's fair enough. Looking at the project portfolio, you mentioned you had investments of about 200 million for the first nine months. You also have a large project running now. Could you give us some guidance of what you are looking for towards next year? So for 26, do you think that you would be able to reach sort of the figure for a full year 25, or do you think that this would, Is 2025 going to be a bit of an extraordinary situation?

I would say we're hoping for any year to run sort of one or two projects in the size of Intersport or NKT that we did the other year. That's our ambition. And as you know, with projects, it could be that you do two projects one year and nothing the year thereafter. But the ambition is definitely to do one or two fairly large, in our view, fairly large developments every year. in this lot size. Obviously nothing signed for next year because then it would be communicated. But there are a couple of fairly good discussion when it comes to new developments. Then we also realize that those processes are typically longer and obviously there is competition. But the aim is to run one or two projects a year.

Okay, good. And then perhaps coming back a bit on transactions but in this case looking at potential divestments, with yields coming down especially for core assets as you mentioned, do you see the opportunity to perhaps divest assets that are fairly low yielding and reallocate that capital elsewhere?

You know, potentially, but it would be driven by sort of, I'll call it extraordinary situations. We have done a couple of sales where basically we've sold it to the tenant. It could be that we over time start to sell and invest it in other locations. So... No clear answer. But But obviously, we we have, as I said, we have a good transaction team, and we need to make sure that they are, you know, BCN that they create value. And then one way of creating value is always obviously to realize profits and invest it somewhere else. But but slightly boring answer is that we will come back if that happens.

It's good enough. Boring doesn't necessarily have to be bad either. And then finally, this is perhaps a little bit of a detailed question on net financials. I appreciate the slide 15 where you show the currencies. Could you just mention the negative sort of headwind you had in terms of FX in Q3? Was that mainly related to NOC or is it the Euro? Could you just give us some understanding of which FX was actually the main culprit in terms of translation effects?

Both NOC and Euros. So year to date, 9 million in the NOI and the income and 6 million in the profit from property management. And for the quarter, it was actually positive 1 million in the net operating income.

Yes, but you mentioned in your net financials that you had a negative effect of 6 million.

Yeah, and that is driven by the SEA-KNOK-currency.

Okay, so that's a translation effect that you report as unrealized, or how should we look at that?

Well, if you look at the previous reports, we've had about 3 million positive from FXFX in the net operating income. That should have been in the OCI, so to say, as a translation effect. So we've taken that out. That's why it's a negative effect of six now in the third quarter.

Okay. Okay. Thank you very much. Those were my questions.

Thanks.

Good morning. I hope that you can hear me.

Yes.

Perfect. So Stefan from Nordea here. I have a couple of questions, starting off with the net LTV. It currently stands at 48%. You have a risk limitation of 60%. And I'm just wondering the limitation of 60%, is that sort of theoretical and if that's the case where we are comfortable to be in terms of LTV I'm just trying to understand the potential acquisition firepower that you could have.

Yeah so typically when we do new acquisitions we tend to on a property or portfolio level we tend to end up at a 55 to 60 percent LTV on that individual transaction. But one should also remember that we are facing amortization every quarter. So the LTV is by nature coming down and now we'll see what happens with property values. But then obviously we could use the bond market as well in order to... sort of increase firepower and get the LTV up. And in terms of your questions, you know, 50 plus percent is fine. 60 is a bit high at the moment, but we're not afraid of being north of 50. And then if it's 52 or 54 or 55, you know, depending on what type of investments we find. but north of 50s is absolutely doable in the sort of mid to long term.

Okay that's clear and just coming back to transactions the quarter has been somewhat quieter in terms of transaction activity and it's not only you where we have seen that looking at similar listed pierced activity has been quite low in Q3 and also in the beginning of Q4. Is there anything that has happened in the market? Are there fewer objects? Are there more competitors? Or why are we seeing less transaction activity?

i think it has mainly to do with sort of seasonal effects uh everyone is off during the summer break and then the processes are are started in sort of august september and then you tend to be in uh october november before you you can sign the deal so i think it has mostly to do with seasonal effects uh we we are looking uh we got a very long pipeline. We are in, you know, we're placing bids and we are in good discussions. But with that said, we don't feel any pressure that we need to buy or need to spend the money, you know, each and every quarter. The most important is that we find good deals. And once we find a good deal, we'll obviously sign and then communicate it. But To answer the question, I don't think there's anything special that has happened during the third quarter, at least not for us. It's more seasonal effects.

Okay, I understand. And then a question on like-for-like rental income growth. It was relatively low and I'm just trying to understand how that come. Are there any rent discounts or how should we view that it's a relatively low like-for-like number in the quarter?

Yeah, that's mainly due to the old bankruptcies we've had from Q3, Q4 of 2024 and still vacant areas that we're trying to lease. So that's the main driver for the slow, lack for lack increase there.

Okay, I see. And then one final question from me. The Q3 average interest rate of 4.6%, does that fully reflect the lower NIBOR in Q3?

No, it does not. We're rolling the NIBOR here in October.

All right, okay. I understand. Okay, those were my questions. Thank you. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comment.

uh and there are no written questions either so i think we uh call it a day a busy day for most especially the equity analysts so uh if there are any follow-up questions just reach out to philip and myself and thanks for your time thank you