Prisma Properties AB (publ)

Thank you and welcome all to our Q3 presentation where me and Martin will provide an overview of our financial performance and key developments this quarter. In Q3 we saw a strong rental growth with a 16% increase year-over-year. Our net operating income was 88 million up from 75. This growth was mainly driven by acquisitions, completed projects and CPI adjusted leases. Currently we have 124 properties with a valuation of 6.6 billion SEK. We've added one property this quarter and this is Vännersborg where we are planning to start the construction of a new Rusta store in Q4. Worth mentioning this quarter is that continuing our tenants and the whole discount segments are performing very well and all the leading discount retailers continue to show high interest in establishing new stores on new markets and also existing markets. This quarter, we achieved an adjusted profit from property management of 46 million compared to 29 million previous year. We have also signed our first of many acquisitions as a listed company and well-performing retail center in Gothenburg that has potential for future development. This deal has been signed, and we are expected to close the deal in the 22nd of November. Furthermore, we have signed several long lease agreements, strengthening our position in both in Sweden and Denmark, which have resulted in a net letting of 12 million this quarter. These lettings help us to maintain our occupancy rate of 99%, and we are pleased to sustain a vault of 9.1 years. When it comes to the organization, our property management organization is now fully operational, allowing us to manage our assets more efficiently for the future. And the current management agreement with P&E Property Partner terminates by the end of the year. So during Q3 now and Q4, we have double costs for property management.

And this has been accounted for in the central administration. Next slide.

We can see that we continue to grow with the leading discount retailers. We have done some changes when it comes to the income split. We have included now the income from fast charging into the fast food segment. And this is a normal thing due to that the fast food and charging goes hand in hand when developing these projects. One of the most important lettings that were done in this quarter is that we have signed a 10-year lease with Dollar Store in Växjö, who will now take over the previous XXL store, who vacated the end of September this year. And Dollar Store will move in in March 2025. So with this letting and some smaller renegotiations, we only have 1% of our contracts expiring now until the end of 2026. This gives us the ability now to focus only on growth and identify new projects and new acquisitions together with the tenants and municipalities around Sweden and Denmark.

Looking on the property values of 6.6 billion as per this closing, we actually saw a small uptick in the values, small but sweet. The yield contracted from 6.64 down to 6.62, resulting in an uplift of 31 million. So small numbers, but those give us comfort in the gut feeling that we also had in Q2 that the valuation should have at least bottomed out, and we are optimistic about valuations going forward. Looking at the table to the left there, where we list the rental values, you can look at the property standing assets, where we have a rental value of 394, which is basically flat from Q2. We have had the opening of Rösta Hör late in September and the opening of McDonald's in Holbeck, I think the 1st of October. These have come into the rental value but on the other hand the XXL asset has come out due to the vacation there or vacating that property and that is now into a short project until the dollar store moves in March 2025. We go into the next slide showing some ongoing projects.

Yes, currently we have five ongoing projects. We can start with the first one in Sigtuna, where we signed a 20-year lease with ShopShop. This construction is going to be finalized by the end of November. And the next one, Eksjö, we've signed a 10-year lease with Rusta. Both Rustan Eksjö and our project in Ljusstal, both of these projects is going to be finalized in March 2025. In Randers, Denmark's fourth biggest city, we will sign long lease agreements with Big Dollar, Lager 157 and T. Hansen. That project is ongoing and we plan to have a finalized project by latest in December 2024 this year.

And we can mention that Jostal actually has two tenants, one or two projects basically, but we keep them together as they are simultaneously performed. It's Rusta and Jomo Fix.

Yes.

And the last ongoing project is in Störbring where we signed an 11-year lease with Harald Nyborg.

And that project is planning to be finalized in May, June next year. Our planned construction starts during the coming quarters.

During the quarter we communicated both that we signed contracts with Rusta in Vännersborg and Ola Stornas Tamman. We have received building permit of both of these projects and we're planning to start this in Q4 2024. We've also signed a contract with The Lager 157 in Göring, which we're planning to start now in Q125. We're currently doing a tendering of that project. We can see that we have several projects with Dollar Store in Denmark. In the previous quarter, we have communicated that we signed up to 14,000 square meters with this tenant. We're very happy that we can continue to grow with Dollar Store in Sweden and Big Dollar in Denmark. Worth mentioning also is Lidl Uppsala. This is our second lease agreement that was signed with Lidl. The first one was in Nälby strand where we are now currently changing the zoning. But in Uppsala, this involves a property in central Uppsala where we don't need to change the zoning. So here we have applied for our building permit and we estimate now that we can start the construction in Q1 2025. The next project, Mora, which we communicated yesterday. It's a very good project in a central location in central Mora. We've already signed a contract with Lidl and Jysk and this morning we have also signed a 10-year lease with the discount chain T. Hansen.

So the Incognito named the discount there. Yes.

So we're planning already to start this construction next in Q1 2025. In Ålborg, in Denmark, we are planning to develop a hub of fast food restaurants and that construction start has been set to Q2 2025. Vinlu's dollar store in Kiruna, which we previously have communicated, will start when the winter is over in Kiruna. We are not able to start the project now in Q4. We have to wait until Q2 2025. We mentioned the dollar store project in Denmark. We have also Gothenburg, where we're planning to do an extension of the retail center that we have acquired in Gothenburg. We're now in negotiation with several discount retailers to take over up to 3,000 square meters. The last planned project is Netto. We're not growing only with discount stores. We're also growing with food.

So for this quarter, we have signed contracts with both Netto and also Löbjerg in Silkeborg.

Looking on the shareholder list, the top list is basically the same as last June. So no major changes, just on the decimals here. As you know, we made a small comment down below that if we add the management holding that is seen as a group, the management of Prisma would actually be on the top list with 2.2% ownership. So continued skin in the game for management. Going to the finance update, Fredrik already mentioned that we have a growth of 16% on rental income. That growth comes from three places. It's the store openings that have happened during the last year and the CPI adjustments going into 2024 and also a small and declining effect from mainly the acquisition of segment 1 in Q1 and there you know that the revenue is declining. If you look sequential from Q2 2024 to Q3 2024 we are winding down that rental income The increase of 16 percent basically filters down to net operating income unchanged. And then we have an even higher change, positive in the profit from property management. And the main effects here are one positive and one negative. The positive one is that we now are receiving interest income on the IPO liquidity that we have of approximately 10 million in the quarter, but that is then offset slightly by the increase in size of the group. We have increased the central administration size since last year, but also, as Fredrik mentioned, we are accounting the double cost for the asset management awaiting the termination of the asset management contract with P&E Property Partner. For simplicity reasons, we're keeping that accounting in the central administration to keep track of the of the doubling there but that should go out once we come to 1st of January. On the balance sheet no changes there in the structure basically only calendar effect on the debt maturity and average interest we're still in the two area on the ICR and the net LTV has come up slightly and will of course continue to come up as we spend the cash we received in the IPO on the projects. Worth mentioning here is you see a small uptick in the interest rate, average interest rate, which might look a bit strange, but we are reading in the 530, we are reading the all interest in the swaps and in the paid variable interest costs as per the date of the closing and some of our rate fixings are actually happening a few days into the coming month after the quarter end. So a large portion of the paid variable interest is actually being rate set 15th of July and 15th of October. So the 530 is based on in the declining interest environment that this gives effect that we're not getting the full effect on the paid part. So if I would set all rates to the last of September, the rates at that date, the average interest rate would be 501 instead of 530. But other than that, no changes in the structure of the finance model. Other than that, we are, of course, now in negotiations with our current suppliers and new suppliers for coming investments and coming renegotiations of financing.

The earnings capacity, as we mentioned,

Property slide the rental value is basically unchanged with With the rustic are being added and McDonald's hold back being added that also XXL Being deducted as that now is gone into project mode awaiting the store opening of dollars for later in 2025 or early 2025 No other updates to the earnings capacity other than that we have now included, and this is important to take note, but we have included the interest income in the financial net. And just simply putting the 1.113 billion times 3.3% in the financial net, assuming that that cash is stable, that's the only way to make the calculation without making some sort of forecasts here. So last quarter we had not included it. Now we have included it and it's basically the cash balance times the interest and it's included in the financial net. The reasoning behind it was if we're not including it, it becomes a bit skewed on the earnings per share, on the income from property management per share as the shares have come in.

the ipo we should also calculate the cash that's the reasoning behind but as long as we tell you how we calculate is not not a problem i think that concludes what we intended to say and we can now go into q a operator 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. The next question comes from Albin Sandberg from Kepler-Chevreau. Please go ahead.

Yes, hello, Albin from Kepler.

Hello, Albin.

I have three questions. If we start on slide 8 on your slide, potential construction starts. I know we discussed the cure in a project and impact on winter, so I understand that, but looking already in last call, but would you say, what are the, let's say, are there any uncertainties around the rest of the projects for these to eventually end up at slide seven, sort of the ongoing developments?

This is our best expectation at the moment based on the tendering and the talks that we have in municipalities, how the building permits are going, how the zoning process is going. So this is the current timeline and we believe that we can manage these timelines.

So just taking the two maybe first ones since it's consortium Q4. have you actually already put the shovel in the ground or, I mean, now we're all ready.

When it comes to Vännersborg and Östhammar, the first two projects, which is in southern parts of Sweden, we feel very confident that we're going to start the construction within a couple of weeks.

Perfect.

So the only project that we're having in Kiruna, the open window to start a project is in in by the end of q2 and and during summer time you can't start the construction of the concrete slab and and the ground works in q4 and q1 in q1 so and that's the only project that we have to wait with with a construction start yeah and i also very much appreciate that you have put your estimated investment there in terms of capex again on slide eight

I know in your slide 7 also provide the rental value, but should one assume maybe 7.5% yield on cost on these 755, is that a fair assumption?

Yeah, I think we mentioned that number in the report, 7.5 is the average for, yeah.

Yeah. But I guess eventually as these projects move into the current, you might disclose the actual rental value as well, or?

Yes. Correct. Yes.

Good. And then I just wonder any, any recent update on the project or expectations of timeline there?

Yeah, we are waiting for a decision to start the zoning process with the municipality and we are in negotiation with several tenants for the project. So our aim is to communicate our plans in the Q4 report.

Good, thank you. And my final question was just, so I understood the re-letting in Växjö. Yes. Would it mean any, do you lose any rental income?

I mean... Compared to the... Yeah.

We will maintain... almost the same base rent but we need to give the rental discounts to dollar store due to the fact that they have a couple of time left in their current store with MSUs so we need to make sure that we long term attract dollar store to this location so the the tenant has been very clear that this is a better location so we we achieve the same almost the same base rent but we are need to we are going to need to give them some rental discount as long as they have their other store in place okay um i'm sorry one more question then also to martin on the um 501 the average interest rate that's all yeah

maybe start of October 1st. Should I read it that when we started on October 1st, then that is the relevant figure to look at. I mean, the base rates have been reset to this lower rate.

Exactly. So the 530 is handicapped by the fact that the rate sets from July 15 um are not yet reset in that number but if i would use if i would use the rates for 30th in september and assume that the the rate resetting on the 15th of october will be that number it's 501 or one rather than 530. yeah great okay thank you very much thank you all for me the next question comes from david flemish from nordia

Please go ahead.

Hi, thank you for taking my questions. Hi, David. Good morning, David. Hi. I think my questions are fairly similar to Albin's, but I have a follow-up on the yield on cost on the planned projects. You referred to the 7.5%. The way I interpret it in the report is that that is for the ongoing projects. Is that correct?

Yes. That's how we interpreted the question. So sorry if we misunderstood. The 7.5 is for the ongoing. Sorry that I misunderstood.

Can you give an aggregated estimated yield on cost for the planned projects? Because I see the projects you disclosed in Eksjö and Jostal, they look to be well above 8% yield on cost, rather 8.5%. What's your estimate for the planned project?

We have a positive. We don't have an exact number for you here now but we do see positive signs on the user costs in the project portfolio.

So we follow our profit requirements. So 20 percent profit margin for discount stores and fast food and 50 percent of

So that is a hard limit for you to start a project, is that correct? Yeah. Okay. So it's not unreasonable to assume that the yield on cost in future projects will be higher than the average for ongoing projects because in ongoing projects you have the Valsta project running at 5.8. I would say that's a correct observation. Yeah, great. And then in terms of the property management organization that has been taken in-house, can you give an update on estimated cost savings of taking the property management in-house in the earnings capacity you guide for property admin on an annualized basis of 20 million and you write in the Q3 report that central admin is burdened by four. Is it correct to annualize the four up to 16 and that the cost savings will be four million per annum as of 2025?

The 40 in central administration in the earnings capacity, that is the current status of the central administration, excluding one-time items. So the double cost for the property administration is not included in that 40. So you see the number for Q3 isolated is 14. So that is burdened by that double cost. So you should not extrapolate those 14 in the quarter into a full year number. So the 40 is sort of a clean run rate for the central administration going forward. And then the property administration of 20 per annum That is where we're aiming with a new organization. We will not save any money initially, but we will be able to take on further volume with a constant organization rather than having to pay by square meter to an external supplier. So you should not expect that number to go down.

But for the future, the current organization, if you look at the agreement that we have with P&E Property Partner, that fee was based per square meter. So when we bought the property, the property management cost went up. And now we can continue to grow, especially in Sweden, the coming year with tens of thousands of new square meters without increasing the central administration, the cost for property management in the same way as before.

The guys are working intensely now. It's a slight difference or a difference, to be polite. If you have an in-house organization or if you have an external organization, in terms of being on top of each and every crowd, and the guys that have come in, they are now looking into every little pocket everywhere to make sure that we invoice out everything that we are allowed to invoice, that the chargeout rate is So these guys will find productivity, they will find savings going forward, but you should not expect a cost cut. It's rather that we establish our organization to take care of further growth.

Okay, that's great. My final question regarding refinancing. You have almost 800 million maturing in one year. I guess you started the discussion with banks regarding that. Can you give an update on expected or indicated margins in those discussions compared with current margins for secured bank loans?

Current margins on average right now are in the 2.20 area and we will be below 2 with the margin I would say in this. So we are looking at of course lower margins in the negotiations. I don't want to be too exact but we have high expectations and we do have high interest from Banks are calling us now instead of we calling them as we did in 2022 and 2023. We are looking forward to constructive discussions with not only existing banks but also new relationships.

That's great. Final question sorry. I guess you touched upon it in the report but the project in Randers is quite large and is due for completion in 2024. Do you expect any rent contribution already in the Q4 or should we expect that to mainly be in Q1?

There will be a rent contribution. The date is 28th of November I think, the opening. So is that Black Friday maybe? I think that's synced well. So there will be a slight contribution from that but not the full quarter of course.

Okay sorry are you able to give an update also on the Sigtuna Valsta you said 28th of November for Randesh and the Valsta project also expected to be completed in 2024 when's the date for that?

It's in the ongoing and it will be opened I think the contract starts at the 1st of November.

Yeah I think they have a plan opening the 27th of November. That's great.

One month.

Yeah. That's all from me. Thank you very much.

And then I can mention also on that note, David, we had the Rösta Hör opening in the very end of Q2. So you will see a full quarter effect from that one, which you didn't see in Q3. We had it as a completed project.

quarter for us to host okay super thank you thank you thank you there are no more questions at this time so I hand the conference back to the speakers for any written questions and closing comments make thank you all for this presentation and we can end with make this country said great again thank you all thank you