Platzer Fastigheter Holding AB (publ)

We welcome everybody to Platt'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 Logistik Park, which is our JV, our own JV. We also got a firm, BBB, minus investment grade credit rating with stable outlook. We made a sustainable linked bank loan. Fredrik will come into that a little bit later in the presentation. We also see a really good net net net thing, especially in the office segment in Plattsö, which was one of the major ones, was one in 3,800 square meters in Lilla Bomman. If we look at the numbers, summary in January and June, the first half, we have increased rental income. We have increased operating surplus, but decreased income from 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 little 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. So this was which is also shown in those figures. We don't know, haven't got the Q2 figures yet. We will see after the summers where the economic activity in Gothenburg is heading. What we should say is that although it's positive, it's still not 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. Of course there is uncertainty going forward on the magnitude of the yield compression. There's a situation on 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. We had a rents went up with the CPI. We don't see any decrease in rents but we don't expect so much, so many further increase in 2023. If the CPI is flat from now until October, we will have an increase of .5% but in the valuation we have calculated on 6%. We also see from a record year, 2022, when we had a lot of projects due, 170,000 square meters, we now see a more normal or low office projects in the coming three years. From now to 2025, around 30,000 to 40,000 square meters, which is more normal in Gothenburg. It was a very high office project due in 2022. 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 yield is slowly increasing. I think I said last quarter that there was an increase in 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. There's still some uncertainty going forward on the magnitude of the yield compression in the industrial and logistics market as well. But more implemented transactions makes the market situation more confident. We have seen a slightly slowing down the yield, the yield decompression is slightly slowing down. If we look at the rental market, we still have very low vacancies. Prime rents are stable, not increasing as much. 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 plant and also close to the harbor. But we can also see there is a little bit more hesitance and longer processes from tenants renting. So 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 selective 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 outside to the west and that's our industrial and logistics. We also have some residential building rights still that we have. 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 earnings capacity, we had a record high capacity. Operating surplus is now up to 1 billion, 280 million and that's a record high earnings capacity. That's of course due to the transaction, the acquisition we made, but also that we are now seeing our projects being finished and the result and the letting out is coming into the books. Of course if I look since 2013 and map the quarter that we did the earnings capacity chart and look 12 months later, you can see that it's very much in the same direction. So we're not seeing any correlation between what we say we are going to be and what we in fact are coming also in 12 months later. Hopefully we will... This operating surplus will show up in the books in Q2 through 2024 hopefully in rolling 12. The investment properties is now a more major part of Plattsöder than we've had before. Usually the project property stands for around 1 to 10 percent of the portfolio and now it's 4 percent. 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 4-5 percent of the fair value is the project. We also have the same ratio in the associates now since we have finished our logistic park projects. There are three of them and there are two more to go. So I think that's a good ratio right now. Looking at the situation on the market for Plattsöder. Our value creation, we haven't changed anything in how we work. We are working with the letting and property management. We are working with our property transactions and we're also working with the project and development project. 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 and 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 they made with the logistic park in 30th of june. Rental income we have a steady pace of increase if you hold 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 a CNAEUM project in Gorda that's the main contributor and we are really happy with the occupancy rates that's kind of a receipt that we are making good progress in in a hesitant market. The 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 support in 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 15 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 P.G. commented 0.6 billion and that's in Q2 we had no net zero changes in Q1 but we had it the effect is in the second quarter for 2023. Positive net lettings we were into that as well we made some progress in in Australian logistics but if you look at that the isolated it's negative and we have good progress in our office lettings and the net the previous quarter we were at 26 million I think and now we are at 30 for the accumulated period of this year. We have not made so much lettings in project properties but that 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 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 if you look at the Swedish Riksbank there we are closing the top levels we are through the peak levels I would say so and with our strong ratios our strong balance sheet and a strong earnings capacity we will meet this and have good pace going forward I would say we have a good running yield it's about .9% now look at that in a whole. Decrease in EPRNRV it's mainly due to the property values decrease and we also I have to add had a reporting error due to our IFRS reporting so 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 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 but we have a deviation now it's not unique for Plattsdorf it's in it's it happened 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 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 contribute to the employment market and contributing to getting people into work. If you follow Plattsdorf you saw a higher number in our certified properties in a certified building last quarter but that's due to we are awaiting certification on the potential 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 percent target there. This is a by-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 it's a revolving credit facility is one of the loans there so this will tend to vary over time. Our loan maturities it's always 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 Jem P.G. and we look at the projects.

I will lead you into some of our major projects underway we all have 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 in page 10 in the report. These are the ones that we are in Lilla Bomen 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 do do take the ones we rent out we will we will finish also hopefully we will get 100% occupancy rate in in maybe 2024 or in so this we are working on on renting out area area and also the same with McHugh where we are doing in our associates with Bygjötta we're doing refurbishment of the old part of it the new part was built and finished 2021 so this is the old part so now we are doing that and modernizing the old part of it so it'll 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 Sörrängården now we can see that things are happening over there the the picture to the right down is it's how it it's going to look when it's finished and up to the right is how it looks today when we are building it's due to the school start in in fall 2024. We're also now showing some of our major projects underway in in the next step of the industrial and logistics we have finished 97 000 square meters so these those are not in the in the report it's 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 Sörråla 31 the phase one is 100% fully led to Entex and phase two is is 59% to Volk and we're also working on our new project V4 in in the logistic park which is not yet rented out and the new one also is the Sörråla 43 where we have a secret tenant so we can 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 in prime logistic location 90 000 each square meters occupancy rates 100% and the market value was one point around 1.5 billion which is around 4.5 initial yield and good tenants a good year vault and it's a really 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 the Bokkasjö and now we are continuing to develop two more properties which will be very interesting now when Katena has bought Bokkasjö so we will do that in in together with Katena once they take over Bokkasjö in the first of October I don't think it will affect so much because it's the same people working on on Bokkasjö will will be the ones are working with on Katena's side so that's that's really good and of course always I said I was proud on that we can do the same things long term in Plattsö that we have been doing although the market situation will vary through the years so I think this is how Plattsö has been do what Plattsö 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 Plattsö 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 Plattsö I mean this company will continue to to do the work and on the market and one CEO doesn't make that much of a difference and Johanna the new CEO in Plattsö will will also do a great job with all the the colleagues here so thank you everybody for being supportive during the year it's been a really pleasure to have be the CEO in Plattsö 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 39th quarterly quarterly yeah Q2 but no sorry sorry just time fly I haven't done 39 Q2 no but we will do that open up for questions

if you wish to ask a question please dial star five on your telephone keypad to enter the queue if you wish to withdraw your question please dial star five 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 financial starting with the earnings capacity as you point out you showed 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 in Södertogestik Park was in the magnitude of a rental value of 68 million so can you break down the rest of the change there please the

rest of the change is of course net letting in Q1 and Q2 and also projects that are being I mean we are we 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 the 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 before now much of those projects or those those lease contracts are now in the earnings capacity I would say that that's the main part for it with that combined with net lettings

okay very good obviously operations are showing good growth strong growth but and in your earnings capacity you don't show it's 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 yes we're not down up how much roughly

we're not forecasting the I mean we are focusing because we are doing business plans three-year business plan but we're not forecasting the the financial costs in 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 the if you look at the short term interest rate and you look at our rate hedging so if you don't increase debt it's about 50 percent of of that increase that come into our books then you have give or take the refinancing if we 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 wait so that's the best prognosis for cost we give

yes okay and then just a couple questions about capex and interest sparing that ltv I mean you have rising ltv rising net debt 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 night at 24 what are you expecting in terms of capex I think

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 being not being I don't have to be responsible but we can we can see now that we are not starting that as we don't have we don't have the pace we don't have the same pace in starting new projects that we have in the last two two or three years so I think that you will see I think you can expect a decrease from from today's numbers

yeah yeah and if you without 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 now rolling 12 months uh I believe down from 3.2 at the end of q1 if you have a target of it should be at least two do you feel confident of that you will be above two and so how close in the coming three years

yeah 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

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 well above that so you can read it in the CEO and we will see what the johanna will be writing going forward

okay thank you

we need to report as a reminder if you wish to ask a question please dial star five on your telephone keypad

the

next question comes from Marcus Henriksen from abg sundial collier please go ahead

thank you very much good morning fredrik and pg a few questions from me you mentioned that you see a positive one off on noi of around five million if I adjust the top line and noi it looks like the noi margin is around 76.1 percent down from 77.2 last year in I just want to know a little bit more what drove the decreasing margin why do we see higher property cost adjusted for the one off and and should we expect similar development going forward

can you give us can you where is it in the report to Marcus so we can look at fredrik mentioned

before that you had a negative one of of 10 million on top line plus 15 and and plus five on on noi in total from some electricity support so I just adjusted and then it looks like underlying margin is down

yeah the the main drivers in the cost is if you compare year on year it's a gorda it's a kinium that will be occupant and then it's where we don't have in our agreements when we don't have coverage for electricity costs that will will affect our margin of course so we have a few of those properties that will be directly affecting the noi

okay because it's going if you look at the q1 development we we saw a positive increase and and I would expect the cpi to to positively affect the the noi margin but but then the way I would if we see the similar electricity prices

I'm I'm I'm sorry Marcus but I really get the question I really get the the answer from fredrik we have to can we come back on this one to you

yes we can do that we can move forward

yeah

yes then if we adjust for the electricity support we have a rental income of 351 in q2 then your earnings capacity state 398 per quarter if I 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 position from 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

take one more one more one more time marcus

yeah so in the earnings capacity you you state the 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 just 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 bokkasjö any other large driver and how much do we expect from the logistics in bokkasjö do we have full impact in q3 are they already no no

no you don't have full impact on on on any this contract today it's always a some it's always a little bit in the beginning so you can't expect full full impact

okay so any any other help we can get there I expect it to be rental discount then how long is it three months or six months or how long it

depends on it's different it difference between the different lease contracts

okay

yeah so it's it's we have one lease on the end of shank one one is with shank that's one is a longer discount and a one other one but that's not what we haven't communicated that to markets but we can we can try to to 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 six million in q2 in income from property management and seven million in q1 and and the way I look at it you should have had some more contribution from logistic tenants moving in in the bokkasjö properties and any explanation for the decline here and and do you expect yeah

major part from that is goda vesta the office building and the reason is that we have higher finance costs so the the net will be lower

thank you and you had some contribution from the logistics here in q2 so so all else equal run rate is below six 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 going to have we would only have i would say contribution for goda vesta it's not much contribution from the from jv anymore so the goda vesta and some from the cube but so that i would say rather six than seven in in the in the in q3 thank

you and you mentioned that you restated the result from jv could you explain a bit to us what the restatement is about

so yeah it's it's it's a mistake made in the when we do the ifrs reporting between the cash flow and the value changes and this is a balance sheet that is it's not in the legal reporting for for the relevant party and it's not in the consolidated balance sheet or profit and loss for us so it's it's in between and in that in between we haven't had a good measurement to to keep uh if you do the off-stemming if you if you measure this that where it should be so this has been some kind of leakage in them and but we have now closed the circuit to close 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 in the 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 to make it uh retroactively so it's an unfortunate mistake in in the 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 we will do this retroactively now we did it in the q2 report back to q3 2021 but in the full 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 with the same pace as the investments you could say

perfect last question we note that new sec have a prime yield of 475 in q2 in gastenberg and and how do you think we should view the acquired properties from bocassia the way i calculated it's an initial yield of 4.4 percent so any comment there

yes a 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 it looks that looks the same then you will see that this is a good price on the on the total acquisition and also if you read the new sec report a little bit more closely you can see that they have stated that there are some the locations that could could go under 4.75 so we have had external valuations on on that one as well so that's my that's the

very clear thank you freddick and piggy and good luck in the future piggy thank you for taking all 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 i look at we do not have any written questions that has 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 and i will now hand over to pg for last words

yes thank you very much everybody