Platzer Fastigheter Holding AB (publ)

Welcome everybody to Platzer's Q2 presentation for 2023. My name is Fredrik Odin, the CFO, and I will now hand over to our CEO, PG Persson.

Yes, hello and welcome everybody. I'm PG Persson, the CEO. This is my last report, but I will come into that later in the presentation. I will go through with Fredrik our key numbers for the second quarter in 2023. I will start with some of the events in Q2. We had acquisition of three properties in Söre Logistikpark, which is our own JV. We also got a firm, BBB, minus investment credit rating with stable outlook. We made a sustainable linked bank loan. Fred will come into that a little bit later in the presentation. And we also see a really good net lending, especially in the office segment in Plattsburgh, which was one of the major ones, was one in 3,800 square meters in Lilla Bomman. And if we look at the numbers, summary in January, June, the first half, we have increased rental income, we have increased operating surplus, but decreased income from property management, of course, due to the interest levels. Unrealized change in values of property was negative, minus 620, which is of course because of the yield decompression. So the result for the period was negative instead of positive last year. We have a value change of increasing because of the investments and also the acquisitions. We will come into that also a bit later in the presentation. If we look at the economic activity in Gothenburg, it was slightly better than we expected. We still see low unemployment figures. The inflation is somewhat a little bit decreasing and also we see the GMP growth is slightly better than we reported in the Q1. So this was a little bit unexpected for us. We have also talked to some of our major tenants about it and the picture is that The market situation is slightly better than many people think it is. This is also shown in those figures. We don't know, we haven't got the Q2 figures yet. We will see after the summer, where the economic activity in Gothenburg is headed. What we should say is that although it's positive, it's still not a normal economic situation. For the normal economic situation, it's around 100. So it's still somewhat tough out there. If we look at our market situation for our property, if we start with the property markets, we can see in the office sector that the prime yields are still slowly increasing and it's driven by the sentiment and increasing policy rates rather than implemented transactions. We have no major transactions in Gothenburg in Q2 and not in Q1 as well. And of course, there is an uncertainty going forward on the magnitude of the yield compression. There's a situation on the property market where most market operators are waiting for a less uncertain environment in general, and especially where the policy rate is heading. But if we look at the rental market, even though the vacancies are on a high level, it's stable. The rents went up with the CPI. We don't see any decrease in rents, but we don't expect so many further increases in 2023. If this CPI is flat from now until October, we will have an increase of 4.5% but in the valuation we have calculated on 6%. And we also see from the record year 2022 when we had a lot of projects, 270,000 square meters, We now see a more normal or low volume of office projects in the coming three years from now and 2025, around 30,000 to 40,000 square meters, which is more normal in Gothenburg. high office projects due in 2022. So we still see a good demand, which we also can see in the net letting for office, that we still have a good demand on the rental market in Gothenburg. If we look at the industrial and logistic market, and I start with the property market, we can still see that the prime is slowly increasing. I think I said last quarter that there was an increasing prime yield, but we now see that it's slowing down. There are more transactions on the logistic market in Sweden, still few in the Gothenburg region. So there's still some uncertainty going forward on the magnitude of the yield compression in the industrial and logistics markets as well. But more implemented transactions makes the market situation more confident. So we have seen a slightly slow slowing down the yield. The yield decompression is slightly slowing down. And if we look at the renter market, we still have very low vacancies. Prime rents are stable, not increasing as much. And for us, being in Gothenburg we still have a good demand from e-commerce from tenants looking for the product development close to the Volvo plants and also close to the to the harbor but we can also see there is a little bit more hesitance in and longer process processes from tenants renting so the net The net letting in the industrial logistics is slightly weaker for us right now in the first half of 2023 than in the office segment. These are our locations and this is not new for the people that follow us. We have 75 properties in selected focus locations in Gothenburg where you can see of course that the red dots are the offices in central Gothenburg and the gray and black dots are in outside to the west. And that's our industrial and logistics. And we also have some residential building rights still that we have parts. Most of them we have sold, but they're not being converted into the... We still have them. We have signed the contracts, but we still have them in our books. So that's the green dot. If we look at our earnest capacity, we had a record high earnest capacity. it's up the operating surplus is now up to 1 billion 280 million and that's a record high earnings capacity and that's of course due to the the transaction the acquisition we made but also that we are now seeing the our projects being finished and the the result and the letting out is coming into the books And of course, if I look since 2013 and map the quarter that we did the earnest capacity chart and look 12 months later, you can see that it's almost, it's very correlate between what we say we are going to be and what we in fact are coming also in 12 months later. Hopefully this operating surplus will show up in the books in Q2 2024, hopefully in rolling 12. The investment properties is now a more major part of Platzer than we've had before. Usually the project property stands for around one to ten percent of the portfolio and now it's four percent and that's also because of the situation on the market. I think we will keep it around that for the moment. I think it's a good ratio around five four or five percent of the of the fair value is is the project and we have we also have the same ratio in in the associates now since we have finished our logistic logistic park projects two of them there are uh two uh three of them and there are two more to go so i think that's a good ratio ratio right now be looking at the situation on the market for for platzer Our value creation, we haven't changed anything in how we work. We are working with the Lettingen property management, we are working with our property transactions and we're also working with the project and development project and everything is dependent on our capital and employees of course and we are working on all the time to create sustainable value for all our interests. the shareholders, the customers, the employees and the municipality and everybody that is around us. And if we look at the numbers on the value creation, you can see there's a difference between 2023 and 2022, where we sold a lot in 2022. That's also the reason why we can do the acquisitions this year. We have very strong numbers on key figures on finance. But you can also see that there's a major change in changes in value where we have positive changes in value 2022 at the same time. And now we have negative. changes in value. But still, if you look in the long term, this is how I think all property companies with a long-term strategy should look, where you can see that the market value is continuing to grow. I mean, we can't decide how the market situation will be, but we can work in all types of market situation. I think this chart shows that Platzer is a company which can work in all types of market situation. So that's one of the things that I'm very proud of being the CEO since 2013 when we got listed. I will hand over to you Fredrik to talk them through some more numbers.

Thank you very much, EG. I will just comment on the previous slide as well. As you see, the office segment in value, that's where we have the large decrease in value in Q2. And you see the share of industrial and logistics are increasing, and that's due to the acquisition being made with Soved Logistics Park in 30th of June. Rental income, we have a steady pace of increase if you look at the whole period 2023 up until now. We are up at 679 million in comparable properties and the main increase if we compare the periods it's due to Kineum project in Gorda. That's the main contributor. and we are really happy with the occupancy rates that's that's kind of a receipt that we are making good progress in in hesitant markets income statement if you look at the Isolated quarter for rental income, if you look at Q1 compared to Q2, you see a decrease and that's mainly due to the energy support for electricity. So we have a decrease of 10 million in the isolated quarter, but we have an increase in the contribution in costs with 50 million. So the net there is plus five, but that's the deviation if you compare isolated quarter to the previous quarter this year. We have a growing operating surplus, so that means we are making good progress in our operations, I would say. Changing value, as PG commented, $0.6 billion, and that's in Q2. We had no net zero changes in Q1, but we had The effect is in the second quarter for 2023. Positive net lettings, we were into that as well. We made some progress in industrial and logistics, but if you look at that isolated, it's negative, and we have good progress in our office lettings. And the previous quarter, we were at 20. Six million, I think, and now we are at 30 for the accumulated period of this year. We have not made so much left in project properties, but if you look at the decrease in possibilities there as well, if we have only 4% in projects, that will naturally go down. Key figures. One of the main focuses now for every property company or every debt dependent company is the interest coverage ratio. And if you look at the rolling 12 months, we are at 2.7. If you look at the isolated quarter, it's 2.4. But you always measure this by four quarters. So that's important to it. take note of but due to the increasing rates interest rates this will go down as long as we can't keep up the good work in operating income to give more support but we hope we have a If you look at the Swedish Riksbank, we are closing the top levels. We are up to the peak levels, I would say. With our strong ratios, our strong balance sheet, and our strong earnings capacity, we will meet this and have a good pace going forward, I would say. We have a good running yield. It's about 3.9% now. Decrease in EPRA NRV is mainly due to the property values decrease and we also had a reporting error due to our IFRS reporting. We have reported two high numbers in profit from associates, and we have updated this retroactively in the report to give the best view, to give a good view of what it should have looked like. And if you look at the isolated effect per share in the quarter is about 1.4 Swedish crowns per share negatively. Net asset value compared to share price over time, they seem to correlate that we have a large deviation now. It's not unique for Platzer. It happens to all of us right now, but over time we will see this tool will have a tightening spread, I would say. So it's a big discount. In our sustainability work, we are keeping up the progress in that sector. We are committing more of our financing to our sustainability work and linking that to our operations and we have made a sustainability linked loan agreement with Handelsbanken in this quarter and that is directly connected to both energy efficiency but also the social responsibility to to contribute to the employment market and contributing to getting people into work. If you follow PLATSERI you saw a higher number in our certified properties in our certified buildings last quarter but that's due to we are awaiting certification on the portfolio that we acquired from our joint venture. So this will go up as soon that is in place. So we are still working on our 100% target there. This is a pie chart course over how our sustainability financing are looking right now. And we have a new slice from this period going forward, and that's the sustainability-linked bank loans. It's at 850 million at the moment, and this will have some changes. Its revolving credit facility is one of the loans there, so this will tend to vary over time. Our loan maturities, it's in the scope of interest. If you look at the gray areas in this chart, it's in the short term, that's our commercial papers. So they will always be short, but we are refinancing our commercial paper program at the levels that we are at, and that's 325 Swedish crowns in millions and we will of course look forward to increase that but we are making good progress in the refinancing and are happy with that for now if you look at the 15-20 months that's our first bond maturity in our own name and it's a bit ahead but We have good possibilities to refinance this in bank funding as well as the upcoming bonds in 18 months time. There are two split into bonds. One is with SFF and the other one is in our own name as well. So we have a good plan to refinance this, and if the capital market isn't where we want it to be, we will finance ourselves with the bank market. With that, I turn over to you, GenPG, and we'll look at the projects.

Yes, and I will lead you into some of our major projects underway. We all have 340 about 340 square meters in potential development projects, which we are working on all the time, but I will not go through those. Those are on page 10 in the report. These are the ones that we have in our office area, business area. It's area in Lilla Bommen, which is an office refurbished project. And it's due in Q3, so it's soon to be due. And we are now at 66% occupancy rate. So this will be finished and then we will take the ones we rent out. we will we will finish also hopefully we will get a hundred percent occupancy rate in in in maybe 2024 or in in so this we we are working on on renting out area area and also the same with mccure where we are doing in our associates with big yatta we're doing uh refurbishment of the old part of it the new part was built And finish 2021. So this is the old part. So now we are doing that. and modernizing the whole part of it. So it will be a completely new total investment property of 10,000 square meters once it's finished. And the whole part is 64% economic occupancy rate. And the new, also from the school, the English school in Södra and Goran. Now we can see that things are happening over there. The picture to the right down is how it's going to look when it's finished and up to the right is how it looks today when we are building it. It's due to the school start in fall 2024. We're also now showing some of our major projects underway in the next step of the industrial and logistics. We have finished 97,000 square meters. So those are not in the report. It's in the transaction, but not in the report, because they are investment properties right now. But we are working on the phase one and phase two at Surola 3.1. The phase one is 100% fully lead to Entex and phase two is 59% to Volvo. And we're also working on our new project V4 in the logistic park, which is not yet rented out. And the new one also is where we have a secret tenant so we can't report anything more than we have started the project. It's 100%, it will be 100% fully left. And of course, last but not least, the acquisition we made from the JV, our own JV, where we're 50% owner, was three properties in prime logistic location, 90,000-ish square meters. occupancy rates 100% and the market value was around 1.5 billion which is around 4.5 initial yield and good tenants, good year vault and it's a really best location, prime location of logistics in Gothenburg. So we're really happy that we could go through with that agreement which we made with Bokasjö. And now we are continuing to develop two more properties which will be very interesting now and Catena has bought Bokasjö so we will do that in together with the Catena once they take over Bokasjö in the first of October. I don't think it will affect so much because it's the same people working on Bokasjö will be the ones that are working on Catena's side. So that's really good. And of course, always, I said I was proud that we can do the same things long-term in Plattsburgh that we have been doing, although the market situation will vary through the years. So I think this is how Plattsburgh has been doing, what Plattsburgh has been doing during my time. This is my 39th Q2 report and the last one and I've said to all my colleagues here on Platzer and I will say to all to you that it's of course a very large step for me as a person but a very small step for Platzer I mean this company will continue to do the work and on on the market and one ceo doesn't make that much of a difference and johanna the new ceo and platzer will will also do a great job with all the the colleagues here so thank you everybody for uh being supportive during the year uh it's been a really pleasure to have be the ceo in platzer and I mean it's not always been easy but mostly it's been a really nice journey for me as a person and for my development in my working life. So thank you everybody and I will stop here I think. Fredrik do you have anything?

No it's your 30-month quarterly. Quarterly yes. I thought you too. No sorry. Time flies.

39 q2 no but we will with that open up for questions if you wish to ask a question please dial star 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial star 5 again on your telephone keypad The next question comes from Lars Norby from SEB. Please go ahead.

Thank you and hello. I have a couple of questions on the earnings capacity and then a question or two about financials. Starting with the earnings capacity, as you point out, you showed a A pretty big change in terms of rental income and NOI in the earnings capacity compared to the previous quarter. Now, partly of that is, of course, acquired growth. Now, if I remember correctly, the acquisition of the three logistics properties inside the logistic park was in the magnitude of a rental value of $68 million. So can you break down the rest of the change there?

The rest of the change is of course net letting in Q1 and Q2, and also projects that are being... I mean, once we sign a contract, it's not going to be in the earnings capacity until it's six months before the project is finished. So a lot of projects are now in that time space. So if you look at page seven, Lars, in the report, you can see down to the left, we have leases for occupancy of January 24. That one, that number was greater than before. Now much of those projects or those lease contracts are now in the earnings capacity. I would say that that's the main part, Fredrik, that combined with the net lettings.

Okay, very good. Obviously, operations are showing good growth, strong growth. And in your earnings capacity, you don't show it further down in the P&L, I mean, after financial costs. If you would, looking at profit and property management, how would that have looked like at the end of June compared to the end of March? on that level, profit from property management? Up or down? How much roughly?

We're not forecasting. I mean, we are focusing because we are doing business plans, three-year business plan, but we're not forecasting the financial costs in the report. So I think you could have an answer on that, Fredrik, but I'm not sure.

No, we will just keep it at that. If you look at the short-term interest rate and you look at our rate hedging, so if we don't increase debt, it's about 50% of of that increase that will come into our books then you have give or take the refinance again if you get the different different deals there but on the net it's mainly due to the volatility in the short-term interest rate three months rate so that's the best prognosis cost we give yes

Okay, and then just a couple of questions about CapEx and interest bearing debt, LTV. I mean, you have rising LTV, rising net debt, I guess for a good reason, because your big acquisition. CapEx, pretty much unchanged in the first half. If you look at the full year, 23 over that matter, 24, what are you expecting in terms of CapEx?

I think we will... I mean, now we have around 350 in Q1 and 350 around in Q2. I think that we'll see a little bit decrease. It's easy for me to say, not being... I don't have to be responsible. But we can see now that we are not starting that... We don't have the pace. we don't have the same pace in starting new projects that we have in the last two or three years. So I think that you will see, I think you can expect a decrease from today's numbers.

Yeah, and if you, with our forecast there as well, if you look at the share of project properties in our fair value, so that is decreasing and we are

not letting out so much for projects so the pace will go down yes okay final question regarding icr you were at 2.7 hour only 12 months i believe down from 3.2 at the end of q1 if you have a target of it that should be at least two do you feel confident of that you will be

above two and if so how close in the coming three years i said i said in in the my ceo last i said we will we will not be under 2.2 but i don't know

No, that's perfect to put in the CEO word, but I will probably underwrite on that. So we have a financial target of 2.0 and we will definitely do our best to keep well above that. So you can read it in the CEO and we will see what Johanna will be writing going forward.

Okay, thank you.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Marcus Henriksen from ABG Sundal Collier. Please go ahead.

Thank you very much. Good morning Fredrik and PG. A few questions from you. You mentioned that you see a positive one-off on NOI of around 5 million. If I adjust the top line and NOI, it looks like the NOI margin is around 76.1%, down from 77.2% last year in Q2. So I just want to know a little bit more what drove the decrease in margin. Why do we see higher property costs adjusted for the one-off? And should we expect similar development going forward?

Can you give us, where is it in the report, Marcus, so we can look at it?

As Fredrik mentioned before, that you had a negative one-off of 10 million on top line plus 15. and plus five on NOI in total from some electricity support. So I just adjusted and then it looks like underlying margin is down.

Yeah, the main drivers in the cost is if you compare year on year, it's Gorda, it's Kineum that will be occupants and then it's where we don't have in our agreements when we don't have coverage for electricity costs that will affect our margin of course. So we have a few of those properties that will be directly affecting the NOI.

If you look at the Q1 development, we saw a positive increase and I would expect the CPI to positively affect the NOI margin. But then the way I interpret it is that this development is likely to continue going forward if we see the similar electricity prices.

I'm sorry, Marcus, but I really get the question. I really get the answer from Fredrik. Can we come back on this one to you?

Yes, we can do that.

We can move forward.

Yes. Then if we adjust for the electricity support, we have a rental income of 351 in Q2. Then your earning capacity state 398 per quarter. If I... and divide 1593, the rental income in the earnings capacity. That's a historically large gap, 398 versus 351. So first question is, how much do you expect the logistics acquisition from Bokasjöt to contribute in Q3? And could you help us in any other way, how close we will come to the 390 already in Q3? Any other large drivers?

Tell you one more time, Marcus.

Yeah, so in the earnings capacity, you state the rental income of 1593 million in Q2. And if I divide that, we have 398 per quarter. And you reported rental income of 341. And if I adjust for electricity, it was 351. You mentioned 10 million. So that gap, 398 versus 351, I expect one driver to be the logistic acquisition of Bokassjö. Any other large driver? And how much do we expect from the logistics in Bokassjö? Do we have full impact in Q3? Are they already fully moving?

No, you don't have full impact on any of these contracts today. It's always a little bit in the beginning, so you can't expect full impact.

Okay, so any other help we can get there? I expect it to be rental discounts then. How long? Is it three months or six months?

It depends on, it's different between the different lease contracts. Okay. Yeah, so it's, we have one lease, and the Schenke, one is with Schenke, that one is a longer discount, and one other one, but that's not, we haven't communicated that to the markets, but we can try to serve you with those numbers. But I don't have it in my head.

No, okay. Moving on on the JV line, you reported 6 million in Q2 in income from property management and 7 million in Q1. And the way I look at it, you should have had some more contribution from logistic tenants moving in in the Bokasjö properties. And any explanation for the decline here?

And do you expect... Major part from that is Gorda Vesta, the office building. And the reason is that we have higher finance costs. So the net will be lower.

Thank you. And you had some contribution from the logistics here in Q2. So all else equal, run rate is below 6 million.

if we don't see more net moving in in the properties yes I mean it's the the once we have now when we have bought the the JV that you're gonna have we would only have I would say contribution for Gorda Vesta it's not much contribution from the from JV anymore so I would say rather six than seven in Q3.

Thank you. And you mentioned that you restated the results from JV. Could you explain a bit to us what the restatement is about?

It's a mistake made when we do the IFRS reporting between the cash flow and the value changes and this is a balance sheet that is not in the legal reporting for the relevant parties and it's not in the consolidated balance sheet or profit and loss for us so it's in between and in that in between we haven't had a good measurement to keep if you do the offstemming if you measure this that where it should be so This has been some kind of a leakage in the system, but we have now closed the circuit, closed the loop, so this will not be able to happen again. And it's been an unfortunate mistake that started really some five years ago in the model that was set up then in the reporting. But it became clear now and we have down to the single decimal where we should do the adjustments to make it right retroactively. So it's an unfortunate mistake in the model for IFRS reporting.

Thank you. And the difference is the NAV decline. You mentioned 133 versus 131.7. That's the total restatement.

Yeah, for this period. So we will do this retroactively. Now we did it in the Q2 report back to Q3 2021. But in the full year, then we will have make the right adjustments back to 2018, where it started. If there is a significant number, then it has been an success. It's been increasing slowly over the years with the same pace as the investments, you could say.

Perfect. Very clear. Last question. We note that Newsec have a prime yield of 475.

in Q2 in Gothenburg and how do you think we should view the acquired properties from Bokasjö and the way I calculate it it's an initial yield of 4.4 percent so any comment there yes bill is 4.5 my comment is that you have to look at the rent and what the price per square meter is so if you compare the price per square meter and the rent to other types that looks the same, then you will see that this is a good price on the total acquisition. uh and also uh if you read the news report a little bit more closely you can see that they have stated that there are some prime yield allocations that can could go under 4.75 so we have had external valuations on on that one as well so that's my uh that's the

Very clear. Thank you, Fredrik and Peggy. And good luck in the future, Peggy. Thank you for taking all the questions over the year. Good luck.

Thank you, Marcus. Thank you. Thank you, Marcus.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Yes, we do not have any written questions that have come in. So we will sum this up with thanking all of the participants. And we look forward to a Q3 report. Then we will have a new team to answer the questions and present Platscher. And I will now hand over to PG for last words.

Yes, thank you very much, everybody.