Samhällsbyggnadsbolaget i Norden AB (publ)

Good morning everyone and a warm welcome to our Q3 presentation. Here with me this morning I have our CEO Leif Synnes who will present the Q3 result and also give you a strategy update. And Daniel Tellberg our finance director will answer questions on the reports and run through the numbers. After the session, we will host a live Q&A session and please prepare your questions and we will be ready to take them after the presentation. With that said, I will hand over to Leif.

Thank you, Helena. SPV is four segments, community, residential, education and development. In total, the property exposure is 94%. billion and the assets have low downside risk. Instead, there is a potential for higher revenues and also for more investments. We are creating efficient and focused platform and we have a very good market position. If you look on the highlights for the period, The property exposure increases to 94 billion, which is good. And that is mainly through the subsidiary CFA Steter and the associate companies Nordicus and PPI. We see a good development in rental income plus 1.6% and also a growth in net operating income plus 2.9%. And we're happy to see that we are reducing the costs. So the central admin cost is down 22%. And we think that the central admin costs have potential to further decrease in the upcoming quarters. We have an increased activity in leasing. and we start to sign new leases. And one lease that we have signed is with the city of Stockholm for a 15 years lease. And I think we will be able to announce more of these new leases to the market within short. We continue to develop our brand names in the SVB group and we are benefiting from the stronger and stronger ability to raise capital in those entities and it's good that Nordicus, Public Property Invest and Svea Fastigheter all have investment grade ratings. If you take a closer look on the community sector, it's 40 billion of assets and 50 percent of that it is consolidated and the rest is through joint ventures and associated companies where one big associated company is public property invest in the segment elder care is the largest sub-sector If we move on over to residentials and the proper exposure is close to 30 billion and Sveafastheten is the core assets in the sector and our part of that company is they have a property value of close to 19 billion and Sveafastheten was listed on Nasdaq First North and also upgraded to the Stockholm main list in June this year and have also received an investment grade rating from Fitch. We believe that CFA Städte will be able to show high growth in revenues and also lower costs. It's a large vehicle And I think it will be more effective than the market as a whole. And in the upcoming years, we will be able to show it. That is my expectation. Education. The core assets for us in education is Nordicus. And our part of that is we have a proper exposure of 20 billion. In total, the company has assets for 40 billion, so we hold close to 50% of the shares in Nordicus, a company that we co-own with Brookfield. We see a strong development in Nordicus, rental growth, net operating income growth, and also an ability to act on the transaction market for properties and grow. So we believe that Nordicus will be a growing companies with higher and higher dividend stream to SBB. We have moved some properties with great potential into a subsegment called development, where we have put increased focus on leasing activities and also investment activities. we are in the final time to sign new leases in development for the properties here and I also think that we were able to announce to the market positive development of the assets in sign of lower vacancy and higher net operating income and a positive revaluation through higher rental income and lower vacancy. And now very positive to the development in this sector at the moment. We limit the segment to 10% of the company balance sheet and we have a minimum return of equity of 15% for all the investments we have in development. I believe that we are in a good shape when it comes to the strategy. We have a done a lot and the rest of the plan we have in strategy, we will be able to work in tailwind. The market is strong enough and it's easier for us to execute on the strategy that we have in the company. We see strong growth and positive development in the platforms that we're creating. We are starting to see cost reduction in the group and we believe that we will be able to continue with this positive trend. And we have a very strong confidence in the core business. Residential is a very strong segment and also public properties is safe and have ability to create higher rental income in the future. We have some areas that we will put more focus on going forward. We are addressing the joint ventures and the financing cost of those. And we think that we will be able to cut the financing cost in the joint ventures that we have in the upcoming year. And we also think that we will be able to make SBB easier to understand and reducing the number of joint ventures. We will see higher and higher cost control in the SBB group through that we are more and more of the assets are in effective vehicles. and that will lead to higher cash flow from the property management. Thank you.

Thank you Leif. Deep diving into the P&L, we've had a solid like-for-like development for the year. We see a strong continuous growth in the residential revenues, giving a total revenue increase of 1.6% on a like-for-like basis. At the same time, we are closely monitoring our property costs with lower maintenance and operating costs compared to 2024. In the last years, we made some wise energy investments, clearly showing signs of paying off. All in all, we had a 2.9% net operating income increase on a like-for-like basis. Looking at administration costs, we have several strategic initiatives aiming for strengthening internal functions, reducing consultant dependency and improving operational efficiency. In total, administration costs are down by 22% from last year. Continuing on this road is a key priority for both SBB and Svea Fastigheter. Changes in property values amounts to minus 0.5 billion for the year. This has been impacted by some individual projects and sales during the year. Looking at the quarter, value changes are clearly leveling off and flatting out for both consolidated properties as well as joint venture properties. In total, we're happy to see a net profit for the period of 1.6 billion. With that said, Helena will take it from a liquidity standpoint.

Yes, and the liquidity is improving. The total liquidity for the SBB Group on a consolidated basis is a tad over 4 billion and with unutilized credit facilities of 2.1 billion. And on a standalone basis for only SBB, we have a liquidity position of 1.5 and unutilized credit facility of 500 million. We also have the availability of liquidity in the form of the listed shares that we own, such as the Public Property Invest and Svea Fastigheter, and that is in total 7.5 billion. As you all know, we have worked tremendously hard to strengthen the company's financial stability, and we are improving it quarter by quarter. We have an ICR ratio of 2.4 for this period and a loan-to-value of 59%. We still enjoy a very attractive long-term funding position. We have an average maturity of 2.5 years and also we enjoy the low cost of funding of the average interest rate of 2.4%. And also, I would like to highlight that 78% of the debt stack matures later than 2026, which gives us plenty of room to further improve the financial stability of the firm. And with that said, I leave the word to Leif to summarize the quarter.

Yes, in SBB we are creating subsidiaries and associated companies that are able to grow and benefit from the strong market position that they have. Nordicus is the largest company in educational properties. Sveafastheter is the largest listed pure residential company in Sweden and PPI is a growing company in Norway. All of these companies, I think, will be able to benefit from the market position and the access to capital and will grow in the future. These companies will also have effective cost control and also SBB as a whole will reduce costs. And in the upcoming years, we will show the market that we will be a low cost company. I'm very confident of the core business in SPB. We have very resilient assets. Instead, we have potential in revenue growth in both public infrastructure properties and the residential properties. So I'm very confident. And quarter by quarter, we increased access to capital. in SBB but also through the strong subsidiaries and all the associated companies that we create. So overall I'm very proud of the development in SBB and confident about the future.

Thank you Leif and with that said we are happy to take your question in the live Q&A session.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. The next question comes from Mary Pollack from Credit Sites. Please go ahead.

um good morning thank you for taking the question i was wondering if you could provide an update on your 10 billion kroner of disposals um how many have you completed and what is your plan for the remaining um and then i also wanted to ask on how you're thinking about refinancing the 2026 euro bond thanks

Good questions. We have sold 1 billion of residential assets. I think it was end of Q2. And the rest of the residential properties outside Sveafas Theatre is on the investment portfolio. So we think that we will be able to sell residential assets outside Sveafas Theatre if needed. And I also believe that the market will pick up quarter by quarter and the first half of next year will be stronger than this year. So I'm very confident that we'll be able to divest those assets to a good price if we choose to go that path. We also know that we can either get back the money we have lent to associated companies or pledge that assets and receive funds. So at the moment, we are very confident of being able to repay the bonds that matures in 2026. We are not overly worried about the refinancing risk.

Are you still considering tapping the market to extend the maturity?

Yes, that's an option we have and I think we have met the investors during the last quarters and we see that some of the larger bond investors in SBB are happy with the development and could add to the exposure if we come to the market. So it's clearly an option for us.

Thank you.

The next question comes from Othman El Araki from Fidelity International. Please go ahead.

Yes, hi. Actually, my question was covered by Mary just before, but maybe just a follow-up on this in terms of, you know, the different levels you have for, you know, for your disposal. So I understand, you know, the residential outside of . but I'd like to better understand how you can improve your liquidity, especially through your joint ventures. In that, are you looking to reduce, for example, your stake in KPI or Nordicus? Is that an option for you at the moment or not really?

Good question. We of course have the options, but at the moment we don't have the intention to do so. So we have created companies that are attractive for other investors. I think if we speak about the Nordicus and we discuss it with Brookfield, I think we can come to an agreement if we go that path. And also clearly Sverre Fastigheter and public property investor listed companies. So we can also lower our stake there. So what we have done the last years is to create companies that are attractive for other investors. And we think that we are able to capitalize on that if needed. However, it is not our intention to reduce our holdings in Nordicus, Svea Fastigheter or PPI at the moment.

Okay. And just one follow up on this, you know, is kind of, you know, unwinding and if you're, you know, deals with, you know, Castellet, is it something that is achievable sometime next year or not really longer term?

In the transactions we have with CallSelect, we have the ability to prolong them if needed. We have also the ability to find other solutions if other solution is cheaper or better for SBB. We have also the opportunity to renegotiate the terms with CallSelect and I think the market as a whole. has both lower market interest at the moment, but also lower risk premium. And on top of that, SPB is much stronger company now compared to the situation where we took the initial discussions with Casa Lake. So I think at the moment it's very, very likely that we will cut the costs for funding the properties that lies in those joint ventures.

Okay, thank you very much, Jason. Thanks. That's it for me.

The next question comes from Emil Ekholm from Pareto Securities. Please go ahead.

Hi, good morning. Thank you for taking my question. You've touched upon briefly But you have on page 37 in the report a non-pledged property value of almost 17.7 billion. How much of that is in CFA Peter?

I think that we will come back to you in writing on that one, so we can give you a precise number.

Okay, thank you. Also in the same table you have pledged net assets in subsidiaries of around 14.9 billion. Could you explain what that is referring to?

Yeah we can come back at that as well so you can get a precise explanation.

Okay, perfect. And then also, I think we should be around halfway through the maturity of the intercompany loan to Nordicush as of now. What is the current outstanding amount and can we expect any repayment before the maturity in about three years?

Yes, Nordicus is a company that we co-own with Brookfield and Brookfield is a very strong institution. So I think it's just a matter of price if you would like to discuss the loan to Nordicus with them. and also Nordicus itself have an investment grade rating at the moment and are potentially able to raise similar debt themselves and repay the money to us. So if we open up that discussions with Nordicus and Brookfield I'm sure that we will come to a good conclusion or agreement.

Okay and how much is outstanding as of now approximately?

Yeah, I think the outstanding amount is a little bit more than 5 billion SEK.

And if there were to be any repayment before the maturity, would that entail any earlier redemption costs for you?

It will not have any cost but since the interest on the lending to Nordicus the interest rate is low then we will have to take a haircut of the face value and we have done an assumption of that so we have a lower book value in SBB than the nominal value of the loan. I think it is 4.3 billion, the book value, and the face value is a little bit more than 5 billion, as I mentioned.

And also, talking about Nodicus, you can see that the average interest rate increased from 3.71 to 4.79 quarter of a quarter. What happened there? I can see that the loan amount has been lowered as well.

I think in Nordicust they calculate with I think they have to obtain long-term funding in Nordicus. That's one reason. And the funding mainly consists of US price. And the funding costs, depending on the market situation, tend to be around 170 to 2%, depending on the timing in the market and then you have a base rate. So at the moment that base rate is around two percent or two and a half. So then you should expect Nordicus to have a funding cost around four to four point five percent. And if there are any changes in the interest cost or in interest rate level for Nordicus to gain it since they have refinance short-term debt, which they have with RCF, with banks, and added more USPP private funding. So, yes.

Okay. Yeah, because I can see that interest-bearing liabilities were down by around 5 billion quarter over quarter. I guess maybe they repaid some very, very favorable debt. Is that a fair assumption?

You mean Nordicus?

Yeah. I think in Q2 they had around 23 billion in debt and now they have around 18 billion.

Okay, I need to come back to you. I don't have the report in front of me but mainly they are a growing company and they have bought more properties in Nordicus so they have added more debt both in 2024 and also in 2025 and then they have what they also have done is they have refinanced the RCF that they have with four banks and tapped the private placement market. And then they have taken a duration of on average 13 years of the new funding. So due to the longer duration, they have been a little bit pick up in funding costs. But instead, we have received a very low risk on the financing in Nordicus. So it might be so that the interest costs have gone up a little bit due to taking the safety route when it comes to funding.

Okay, perfect. Thank you. Yeah, I think that was all for me. Thank you very much.

The next question comes from Filippo Tomasi from BNPP. Please go ahead.

Hi, everyone. I just wanted to ask you about the community segment, as it seems like occupancy and kind of operational performance is very strong at the residential part of the portfolio, but a bit less so in community. I just wanted to understand if it's like some short-term

kind of glitch or just some something more structural going on yeah it's a good question then i can explain how how the market is when they come to residentials we it's like a rental negotiations with the tenant association each year and when you have a high inflation uh Usually there is a timeline between the inflation picking up and when you get the rental increase. So that is one reason why we have good rental growth in the residential, because we are compensating from the previous year's high inflation. So therefore, we have a strong growth at the moment when it comes to revenues in residential and also expected to have a strong rental growth in the next year. And when it comes to community properties, most of the leases we have is very long term. And they are linked to inflation. So meaning if the inflation is low, we get low income growth. So that is what's happening at the moment. We enter an environment with lower inflation. which is very good and helpful from a funding perspective. But when it comes to rental growth, it means that we have lower rental growth in 2025 and also in what we can see for 2026. So I think also in the upcoming year, when it comes to rental growth, residential will outperform public properties.

Can you comment on the occupancy?

It's been rather stable if you look on one year back. I think it's less than 1% change. So if we have included the development properties is around 90 to 91%. And if you exclude the development properties, it's around 94% occupancy rate. And it's a rather stable business. I don't think you should expect any a large movement towards higher vacancy, it's likely that you will see a lower vacancy going forward. And we see a good trend in Sveafastheter and they are facing a lower vacancy at the moment and that is a big part of the consolidated assets. And also, since the beginning of the year, we have put more emphasis on the development properties, both in doing investments in order to attract new tenants, but also in hiring people that are actually leasing out the vacant premises. So I think if you look one or two quarters ahead, you should expect a positive trend when it comes to vacancy in the public property segment.

So you expect an improvement on the community segment as well?

Yes.

Okay. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Yes, we see no further questions, so Leif will give some concluding remarks.

Thank you all for listening to this update from SBB. We are very proud of the development in the SBB at the moment. And also I think we are very fortunate at the moment to have tailwind. I think the property market, the heat is picking up with higher pace in the transaction market and also boosted by good funding possibilities for the market as a whole. And also we are very confident about the rental growth in SBB. So overall we are very positive at the moment and see strong development going forward. And with that, I would like to thank you for listening.