Samhällsbyggnadsbolaget i Norden AB (publ)

Good morning, everyone, and welcome to today's earnings call for Q2 2024 for SBB. My name is Helena Lindahl, and I'm the Treasury Director at SBB, and we will present to you our quarterly earnings for the second quarter of 2024. With me, I have our CEO, Leif Simnes, who will be presenting, and also Daniel Telberg. Leif will begin by sharing the strategic and financial highlights during the quarter and give you an overview of our performance and our business segments. After that Daniel will talk about the financial statements and I will end with discussing our state of the finance. We will, of course, host a Q&A in the last part of the presentation. And with that said, I would like to kick off and hand over to Leif.

Thank you, Helena. One key highlight for the first half of this year is the strong development of the revenues in the Life for Life with the 7% growth. That is really strong. And also if we look on the net operating income growth, like for like, it's also very strong with 9%. When we have this situation where the rental growth is high and also the net operating income is growing fast, this will on long-term create valuations for S&P. The properties is likely to at some point start to increase in value. We have focused still on improving the financials in SBB. And one way of doing that is, of course, to reduce the debt. So for this period, we have reduced the debt with close to $8 billion and with $43 billion the last two years. And we see still some value decrease in our assets, so 1.4% in the quarter. We believe that the market shifted during this year and particularly during the last three months where the interest rates have been reduced and also the credit risk in the markets have been lower. So we expect that we think that the property prices have a good chance to bounce back in the quarter ahead. We continue to deliver on our strategy in order to provide you with transparency and also proof that we get, over time, better funding for the SVB Group and also that we can show higher efficiency in our main holdings. You can shift page to page four. One part of the company is the education piece, and there we part on the company Nordicus together with Brookfield. We entered a milestone this year when we received a strong investment grade rating in Nordicus, and on the back of that strong rating, we could borrow 9 billion SEK in the capital market with the maturities varying between 10 and 15 years. And we also could add 1 billion of new credit lines from banks. So in the Nordics, now we have the situation with long leases and long funding and a very predictable cash flow in the years ahead. and that gives us a belief that we will receive dividends from Nordicus in the years to come. In Sveafastheter we also have a strong development. We have dissolved all the joint ventures in Sveafastheter and created that very efficient organization with a new management and new board, totally independent. We have received or refinanced or reorganized all the debts. So it's seven banks, Nordic banks with 10 billion of debt. And we also issued up a bond after the quarter. So we have set up the SEFA state in a very good way in order to attract new part owners of that business. And we intend to divest up to 49% of the company and keep the majority of the shares. And in the community section, we entered a new joint venture together with Castle Lake, providing a liquidity for the company. And also after the quarter end, we settled the exchange offer where we in SBB bought back senior bonds and also hybrid bonds where we traded 1.6 billion in equity for the shareholders. If you look on the group structure, we have three business areas. We have community, residential and education. And as I mentioned earlier, we have received good funding in two of the three business areas now. We have investment grade rating in the education part and we have investment grade like structure in the residential part. So we expect to get good funding in both those parts of the company going forward. And then we still have some work to do with the community properties, but we expect to take the same journey as in the other two areas and create a situation where we can attract both equity and debt on attractive levels. And I think we This process of creating good companies will be easier in the years ahead due to the strong development we foresee in the markets. If you look deeper into the communities part of the operation, we have a leading and scalable platform in the Nordics. and elder care is the largest part of the operation with 25%. We have a low downside risk in revenues. Instead, we have a possibility to beat the market when it comes to growth in revenues. We have strong demographic trends that works in our favour and we have strong tenants. And so we really like the community operation and it continues to develop in line with our expectation. And as I mentioned regarding the residential part, it's mainly constituted of the company where we have A goal to take in part owners in 2024. And for those who know the Swedish market, you know that the rents are rent controlled. So there is a limited or no risk of lower income. Instead, there is strong possibilities of increasing rents. And this time it's an even higher possibility to increase rent than it used to be, due to that inflation on short-term has outpaced the rental growth. So we expect from the residential area in Österby that we will be able to increase rent to 10% more than inflation in the upcoming years. and that will lead to a 15 to 20% growth in NOI compared to the inflation. Also, we believe that the years with increased yields is behind us and there is a good chance that the property yields are stable or even decreasing on the back of stronger capital market sentiment. So we are, you can say that we are bullish on the residential at the moment. And on the education, it had been a good journey. We started some years back with thinking about taking in co-owners and we are happy that we choose Brookfield which have a lot of equity and also a lot of know-how in the infrastructure operation in the property market. So together with them, we have created a very good company called Nordicus, and we are now taking the benefit of that in the capital market. And it's very happy to see that a lot of investors share a view of the stability of the operations. We think that Nordicus and the education part of the operation have a very bright future. We see during the last year high yields in the property market. We believe that now the property yields will not increase anymore. And hopefully it could be so that, as I mentioned earlier, the good trend in the capital market influence the property prices in a positive way. We have a slight decrease in occupancy, but it's not dramatic. We believe that we will pick up to the normal 94 to 95 percent in occupancy going forward. And we have a little bit more vacancy in Finland. But overall, we believe that we will be able to recover that and more and increase the occupancy over time. One reason behind that is that we expect to have more time to focus on operations in the years ahead than we have had in the recent two years.

Thank you Leif. Let's go more into detail on the financial statements. On a like-for-like basis, rental income for Q2 increased by 7.2% compared to the same quarter last year, and net operating income also grew by 8.9%. In general, both revenues and costs are rising, but revenues are rising more than costs, resulting in a favorable development of net operating income. This is driven by the fact that maintenance costs have been kept low while operating costs have risen in line or faster than revenues. This achievement is the result of our continued dedicated work to deliver on a strategic plan despite the still challenging market conditions which are gradually improving. In terms of segment, community and residential are relatively similar the full period in terms of both income and net operating income why community shows a stronger development in the quarter together the income basis provides stability and reduce risk by balancing income streams across different segments During the quarter, net operating income continued to grow and improve on a like-for-like basis despite reduced income due to divestments. Admin and restructuring expenses are up compared to last year, mainly related to one of advisor costs and legal fees, which we did not have last year. These are expected to half by the end of 2025. There was a decrease in property values, but we are now seeing signs that the decline is leveling off. The decrease of nearly 3.6 billion is due to both realized and unrealized changes. Of the 3.6 billion, 2.8 billion is unrealized, of which only 846 million is in Q2. Q2 is consequently a better quarter in terms of changes in value. The value of our properties decreased with 1.4% for the quarter. The realized value changes are mainly attributable to transactions with SBB infrastructure and SBB social facilities. They have resulted in accounting-related losses as property are deconsolidated into associated companies and valued at an estimated discount to the net assets. Looking ahead, rent development and lower capital costs are expected to lead to a positive property value changes in the long term. Rising interest rates on the back of increased inflation, which are now seeing a tendency to decrease. Net interest improved due to increased interest income. The average interest rate has decreased six basis points in the last year other financial items includes profits from repurchase of bonds relating to the tender offer let us look briefly into the balance sheet and at the asset side the goodwill impairment is related to the first to defer tax with a flip side in the third tax giving no equity net effect The largest changes in property portfolio are attributable to transaction with joint ventures and associated company, while only 720 million is attributable to sales to other companies. These sales should be seen as a structure measures rather than sales of assets. The acquisitions are mainly attributable to the solution of Kåpan, as a preparation for an IPO and strategic partner in Svea Fastigheter. I would now like to hand over to Helena to look more into the financing.