Platzer Fastigheter Holding AB (publ)

Hello and welcome to Platzev's Q1 presentation. Today we have PG Persson, CEO, and the CFO, Fredrik Schodin. My name is Marcus Henriksson. I'm an equity analyst at ABG Sundal Collier. I will come back with some Q&A. We will also have the possibility at the floor here today and also on the teleconference. We also have so you can send in questions via the webcast and then I will try to read them up as well. So that's all from me. Over to you guys. Thank you. Thank you.

I'm Fiji Persson. I'm the CEO at Platze. And I'm Fredrik Schorin, the CFO. Yeah, and we will try to lead you through this presentation. And I will start and then you will come in, Fredrik, and then I will finish. If we look at the summary on Q1, it's a lot about rental income. We have increased rental income, but it's also a lot about financing costs. We have mitigated the financing costs with the rental income and a lot of our projects are now soon to be finished. So you can see that the rental income will come up and we will try to mitigate the financial costs. We know that the financial costs will increase. because of the interest rate situation. We had a strong net letting and a large number of new contracts in Q1. Also, our model, which we are working with, we're still working, and we have the same model for a lot of years. And Platzer has been there for a very long time, and we are going to be there for a long time going forward. And we're also reducing the energy consumption all the time, also in the Q1. And we have been nominated in our, what we are doing in our architectural way, we have been nominated now three times with our office buildings, Vesta, the Vesta project, the Kinneum project and the Mercure project. And we didn't win in Vesta, we didn't win in Kineum, but we won the largest and the best prize of all, if you speak to an architect, the Kasper Salin Prize for our house, the building, the Mercure building. And also we are now starting to move, the tenants are starting to move in in Söder Logistikpark. So in Q2, all those projects will be finished. So now in Q1, we only had one tenant moving in, it was Schenker. So in the books, there is no area, no square meter from the Surrey logistic by still projects in Q1. And they will be investment properties in Q2. So keep up and look out for that in Q2. We will have those transformed from project properties to investment properties. If you look at the numbers, Fredrik will come back to those. I will not talk so much about them. I will leave that to you, Fredrik. But I will say something about the market situation. And I will go from this slide to that slide. So if we start with this slide, you can see that we have a second quarter. It's been very double and it is very double in Gothenburg. We have a second quarter where it's clearly that the situation in the environment is declining. There is a declining activity in the economic activity in Gothenburg. And if you look at the indicators, you can see that it's clearly now 89 is below where we say that it's a downturn. It's not a recession, but it's a recession-like situation. But still, there's very low unemployment. And the weak Swedish krona, of course, keeps up the export industry. So the situation in Gothenburg is that we have in the numbers... like a recession-like situation. But if we look at the demand in our offices and demand in our logistics, it's still good. And I will go into that a little bit later. We also saw maybe a turning point in the CPI. where the level now in March 2023 were the lowest since August, August 22. So from September until now, we have had higher year-on-year increase in CPI. And we don't know if that's a turning point, but there's some indicators that there could be a turning point. And of course, there's still the uncertainty with the war. We have the benchmark rates that have been increased to 3.0 now in Q1. And we will probably be even higher in April. We don't know that yet. And we also, the writing downs of the economic growth is still very much done. If we look at the two markets that we are operating on, the office market and the logistic market, I will start with the office market. And if we start with the rental market, we still see high vacations and vacancies. since we had a lot of projects due in 2022. But now we can see that those projects are now finished. And 2023, there will be not as much office projects in Gothenburg. It will be more of a normal situation where we have maybe 30,000-40,000 square meters, where in 2022 we had 170,000 square meters. So, of course, the vacancies level are quite high compared to maybe six, seven years ago, but they are stable now. So we will see what happens. The prime rents have increased, mainly, I would say, because of the new CPI level. And we estimate that we will see no further increase above the CPI level 2023. We don't have any problems with the tenants. The tenants have all accepted the new rental levels, but we don't see that it's going to be quite as easy to raise those levels even further, to increase them even further. But we still have a good demand, and Fredrik will go in on our net letting, so you can see that we have a good demand situation on the office market. If we look at the property markets, we can see that the yields are slowly increasing. And why I've written down slowly here is because I will say more rapidly in the logistics. But slowly increasing yields. There's no transactions. It's more a sentiment question that if the interest rates are increasing, the yields should be increasing as well. But we don't see any proof yet of any transactions. But still, we are looking, keeping up very much in the market situation to see if there will be any transactions. And this uncertainty is still going forward. It's still very high. We don't know yet. I think nobody knows what will happen, if the inflation will keep up as high as it is or if it will start to descend. And we don't know where the Riksbank will do. So we will have to keep close Watch on that. If we look at the logistic market, we still don't have any vacancies on that market. The prime rents are still increasing. And what we... What we can see, though, is that the demand for e-commerce is not as high as it's been, but the demand from other tenants that want to be close to the Volvo plants and close to the harbour still have a demand for the logistic locations in our area. and if you look at the property market we had a high increase in the yields from q2 to q4 this month this quarter we have haven't seen any more increase in in the yields but we had a rapidly growing yield situation between q2 where we have prime meals on three and a half until q4 where we The increase, the prime is to 4.5, so 1.0% from Q2 to Q4, but no further increase in Q1. And also, of course, uncertainty situation, no transactions in the logistic market as well. So very few transactions generally in Sweden and extreme few in Gothenburg. This is our area of where we work. It's 20 times 20 kilometers. And the red dots are our offices. The red dots with a little white in is our project opportunities. And the gray dot is our investment properties in industrial releases. And the green one is what we're going to sell in the future. I will have a slide on what is going to happen in Södra Engården. In the earnings capacity, if you look at the chart on the slide I just showed you, we have the central Gothenburg property, where it's 60% of our fair value. And you can see that we have 95% is investment properties today, 5% projects. We're trying, and these are the fully owned properties, and we're trying to have that around 5% project property, between 5 and 10%, no more than 10%. So 5% is quite good. We'll probably maybe have a little bit lower percentage as long as the interest rates are so high that they are right now. It's more difficult to start new projects. And the associates, 4 billion. Most of them are 50% owned by us. So it's 4 billions today. A lot of them are project properties in Surrey Logistics Park. And those will now be investment properties, most of them in Q2. And we'll come back to that in Q2. Our value creation, the model is still the same, but I think we are focusing a lot more on the keys today, the ownership, a little less on the transaction and still a lot on our development. And the goal is always to create sustainable values. If you look at the resource side where we have the competence and the capital is always, of course, important with the competence. But I think we are focusing more right now on the capital side than we have done in many years. Fredrik will also come in to that a little bit later. I think I will do this slide as well. If you look at Q1 on our value, you can see that we have not done any large acquisitions, only a small acquisition, which was already... We had already done that with Göteborgs stad, the municipality. So the investment in existing properties is almost as high as last year. And we are doing our projects. I will go into our projects a little bit later in the presentation. No change in value. Yields are the same. and the goal also is always to increase the value in the portfolio and we've done that since 2013 and we will keep up doing that also in the future I will leave this to you.

Rental income. We had a good increase during the quarter. If you look at Q1 2022 compared to this quarter, we have an increase from 311 million to 350 million. And mainly due to the Canadian project you see in the background here, the tenants are moving in there this year. Our economic occupancy rates, which is of the essence for us, it's stable. In the decimal, it's increasing, but it's stable at 92%, which is important for us for every cash flow is will come into use if you look at the whole income statement the rental income increase as i said we have a good increase in the operating surplus the noi But still we have a decrease in our income from property management when you compare quarter on quarter. And that's due to the increase in the financing costs, which are up at 97 million for the isolated quarter this year. And we are managing that going forward, I would say. so we a little profit for the for the period it's a positive number so that's the positive with that it's not on the negative side very little value changes it's it's driven by the derivatives portfolio where the long interest rates has moved in the quarter which has decreased the value in the derivatives portfolio and as pg said no changes in value when you look at the income statement our positive net lettings which are really good for us in the day-to-day business because this is a proof of our good quality in our investment properties and the the locations that build an interest that we still can do good net lettings. We have some terminations but we have 21 million in net lettings for the quarter. No lettings in the project properties and as they decrease the number of projects it's fewer possibilities to let out. But we have still possibilities going forward with new projects in our industrial and logistics and ongoing projects in offices. Our key figures for this quarter, the most focus we have right now, or the market, it's about the interest coverage ratio. We are now standing at 3.2 if you look at rolling 12 months. It's a significant decrease since last year of course and if you look at the isolated quarter it's at 2.6 and that for those who don't know that's how much cash flow we have to pay the interest and as they are increasing of course the and the cash flow doesn't increase in the same ratio then this will deteriorate but we are looking closer closely into that and working with our financing structure and our interest rate derivatives portfolio our interest rate swaps and and of course the day-to-day business with our management property management are contributing to keeping this at bay our surplus ratio is up a notch if you compare it to last year it's up at 76 percent which of course is good in all essence Our net reinstatement value, our EPRA NRV, is increasing still. If you look at the rolling 12 months, it's a 15% increase if you adjust for dividend. But we know as the result goes down, this will be a lower pace going forward. at least at what we know now, but the market can still change if you have a positive outlook. Net asset value, when you compare that to the share price over time, you see it's mainly going the same direction, but now we are in a period where the stock market prices the substance in the company at another level but over time this tends to go to correlate really well so we will see when we will meet again so hopefully soon We are still making good way in our sustainability perspective. We are, as we said before in our earlier conference calls, working with the climate goals and we are in the SPTI initiative where we have committed ourselves to to be in line with the 1.5 degree target the 1.35 degree goal under the paris agreement the the the biggest challenge there for us and other in the business is the scope three of course because it's hard to measure it's not within our grasp but it's we have to rely on contractors, entrepreneurs, our tenants and so on. So we are committed to measure and lower, decrease our scope 3 emissions going forward. we are still at a good rate coming to our environmentally certified properties we are at 92 percent but with the EU taxonomy that's less of an external interest but it's good for us in our property management to have this to work with. It keeps good order in how we manage our properties and we still have a lot of financing that is depending on the certifications. And energy usage, of course, as Peter mentioned, we have a really good decrease in the quarter. We have decreased it with 5.4%, which means that we are on a good track. Coming to financing, 67%. We have been at a higher level, but that depends a little on our transactions and what business we are going into at the moment. We have increased our commercial paper somewhat during the quarter. which is a positive sign. We have even issued an MTN green bond with SFF in the quarter, which is also a positive sign because both of those are in the capital market. But we haven't yet have any unsecured bonds because that market the margins there are about almost twice as high as we would like so we are really looking forward that to that coming down so we have all the instruments in our toolbox when we want to finance our growth journey going forward Our maturity profile, if you look at this slide, the red ones is bank and secured lending from the banks to us and the gray is then the capital market and if you look at the within three months that's our commercial paper only and the the next instance of the capital market is it's a bond that's due in November 2024 an unsecured bond and further on there's some secure bonds that are up for refinancing so hopefully we have a due time to get this in order and hopefully the bond market will get in order and we can come back and meet the investors at good levels so we can increase our exposure to the capital market at a good way. Back to the project.