Neobo Fastigheter AB (publ)

Welcome to Neobo Q1 Report 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer 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 Ilvasabi Westman. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to the presentation of Neobo's Interim Report, January to March 2024. My name is Ylva Sorby-Vestman, and with me here today, I have our CFO, Maria Strandberg. Operations are continuing to develop positively, and rental income has increased by 6.9% in the Like for Like portfolio as a result of rent increases and reduced vacancies. Net operating income decreased with 7 million as a consequence of high costs for heating and snow removal. And the decrease is also explained by the fact that comparison between the first quarter of 2023 and the first quarter of 2024 is somewhat misleading as costs attributable to the first quarter of 2023 were not received until the second quarter of 2023. Profit from property management decreased to 11 million and unrealized value changes amounted 130 million. And I will elaborate on this later on. Our vision is to create attractive and sustainable living environments where people can thrive and feel secure. Sweden needs more residential that people can afford to live in. And by managing and refining our properties and adapting them to people's needs, we want to contribute to a more sustainable residential property market in Sweden. We have a residential focused property portfolio with a value of 13.8 billion and 8,300 apartments. Residential properties account for 95% of the value and the remaining value mainly consists of community service properties. The rental value constitutes of 76% from residential apartments and 21% from commercial premises. At the end of the first quarter, 74% of the year's rent negotiations in the residential portfolio had been completed, with an average uplift of 5.1%. The remaining negotiations are expected to be completed during the second quarter and will take full effect in the third quarter. Increasing the occupancy rate has been top priority since we started near Bo, and we are happy to note that our efforts are paying off. Total occupancy rate has improved by 1.3 percentage points in the last 12 months. And the residential vacancy has decreased from 6.6% to 5% since we started Nivo. We have targeted specific efforts towards areas with high vacancy, such as refining outdoor environments and renovating apartments. And we are also continuing to work with insights from the customer survey that we conducted last autumn to increase customer satisfaction and reducing the vacancy rate further. Our property in Tidaholm is a good example of how vacancies are declining sharply. Since July last year, the number of vacant apartments in Tidaholm has decreased from 42 to 9, thanks to successful lessing. And in this picture, you can see a digital style apartment from Tidaholm. We operate in a market with a long-term positive trend. There is strong demand for rental apartments in Sweden with a growing population, a very low market vacancy and a majority of the municipalities reporting housing shortage. This, combined with a historically low level of new construction, gives us an opportunity to further increase the occupancy rate. And here you can see a picture from one of our districts in Tranås. Liquidity in the transaction market has increased sharply by 43% compared to Q1 last year, which is positive both for us and for the property market as a whole. In February, we divested six low yielding residential properties in Eskilstuna at a property value of 130 million, which was in line with the most recent external valuation conducted. The six properties have high vacancy and low surplus ratio and are facing significant investments, which means the divestment will strengthen our cash flow as we move forward. And closing took place in March. For us, sustainability means taking long-term responsibility for the development and management of the company, as well as our property portfolio, so that our impact will not be negative for future generations. We assume a holistic approach to our work and our definition of sustainability is based on environmental, social and governance perspective. An important part of understanding our current situation and setting priorities for the future has been to calculate the company's climate impact for 2023. For the first time, Neobu's total greenhouse gas emissions were compiled in a climate report. Our sustainability strategy, which will ensure a sustainable nearby is based on the two perspectives, sustainable living environments and corporate social responsibility. In this picture, you can see the 12 sustainability aspects that are most material for us and the overall and the overall targets in each area. We have also established short and long term sustainability targets during the quarter. Here are some selected sustainability targets that we aim to achieve by 2030. Reduce greenhouse gas emissions by 50% in scope 1 and 2. Reduce energy use by 20%. Tenant turnover per year less than 20%. Employee engagement measured as employee net promoter score shall be about 20%. All significant suppliers shall be evaluated against our supplier policy. And the organization shall reflect society in terms of gender and ethnicity. The work to achieve the sustainability target is monitored internally on a quarterly basis. And I'm very proud of the drive I see in the organization to create a sustainable renewable. Some comments on our Q1 results. Rental income increased to 227 million, and with 6.9% in the like-for-like portfolio. The increase is attributable to last year's rent increases in the residential portfolio, increased occupancy rate, and rent increases for this year in commercial premises. This year's rent increase in the residential portfolio has hardly affected the result in the first quarter at all, but will have effect in the second quarter and full effect in the third quarter. Property costs increased by 21 million compared with previous year and the increase is partly explained by the fact that the comparison between the years is misleading as costs for the first quarter of 2023 were not received until the second quarter last year and partly by increased costs for heating and snow removal due to a colder and more snowy winter. Costs for property administration also increased, which is partly explained by a redistribution between property administration and central administration. And the quarter was charged with items affecting comparability on this road of one million. Net operating income decreased with seven million as a consequence of the higher cost that I just mentioned. The increase in central administration costs is partly attributable to accounting effects between the years and partly to the fact that new booths, organizations and operations are now fully in place. And the quarter was charged with items affecting comparability in central administration costs of 1 million. Profit from property management for the first quarter decreased to 11 million as a result of the cost increases I just mentioned and due to higher financial costs. The earnings capacity, it's not a forecast and does not include any assessment for future trends. And since the last quarter, fixed low yielding properties have been divested and excluded from the earnings capacity, which has had a positive effect on profit from property management. Rental income is up 6.1% compared to earnings capacity one year ago, attributable to rent increases and higher occupancy rates. Property management costs remain remains on 390 million despite the divestment related to higher costs for heating and snow removal. Net operating income has increased by 26 million since the beginning of the year due to higher rental income. The annual cost for central administration has increased with 5 million as a result of some redistribution between property administration and central administration and assessed higher costs for accounting and internal control when Eobo will be listed on Nasdaq, Stockholm's main market. Net financial items decreased by 7 million in the quarter due to the divestment of six properties. Profit from property management sums up to 205 million and net initial yield has increased from 3% when we started new bulls to 3.7% in the end of the first quarter. The yields have continued to rise, and the average yield requirement used in the valuation has increased from 4.7% to 4.9% during the quarter. However, the decrease in value as a result of higher yield requirements was offset by the assumptions of higher rent increases in coming years. The unrealized value change Changes represented a decrease of 0.9% during the quarter. We have a strong financial position based exclusively on bank financing. The average debt duration amounts to three years. And as you can see to the right, we have almost no maturities during this year. Our average interest rate amounts to 3.4%. since we have a high hedge ratio of 75% that effectively has offset the upswing in interest rates that took place over the past year. And therefore, we also have a good predictability in profit from property management going forward. In order to secure future cash flows and further reduce the financial risk, we use interest rate derivatives. At the end of the year, the aggregated nominal value of the swaps was 5.4 billion. Riksbanken's key interest rate of 4% remained unchanged during the quarter, and the market now expects a number of reductions going forward. To hedge forthcoming reductions and thereby mitigate the financial risk further, Nubu entered into forward-started swap agreements and restructured an existing swap during the quarter. and thereby prolong the average fixed rate period from 2.2 to 2.8 years. Here you can see the largest shareholders in the end of March. According to Euroclear, the total number of shareholders amounted to 123,000. In January, we became members of EFRA, the European Public Real Estate Association, to improve transparency in our reporting and increase visibility towards investors. And in this picture, you can see one of our properties in Oskarshamn. Finally, some key takeaways. Residential vacancy has decreased from 6.6% to 5% since the start of new boom. We see continued positive development of rental income, plus 6.9% in like-for-like portfolio and positive outlook. Divestment of a property portfolio at a price level that confirms the property value in the balance sheet. And finally, we have taken important steps on our sustainability journey. New goals, total emissions of greenhouse gases have been compiled in the climate report and long and short term sustainability targets have been established.

And with this, I would like to open up for questions. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.

Can we then take a question from the webcast? Can the moderator please confirm that we can go to a question that we have on the webcast? Yes, of course. Go ahead. Thank you very much. Okay, we have one question from the web. When will you be listed at Stockholm main markets?

The ambition is that the change to Stockholm main market will take place during this year. So we are working intensively right now with all the preparations and really looking forward to take the step and hopefully during this year.

Yes, no further questions. No further questions. Thank you everyone for listening in and have a nice day.