Samhällsbyggnadsbolaget i Norden AB (publ)

Good morning everyone and welcome to our year-end presentation for 2025 and thank you all for taking time to listening in. Today's presenter is our CEO Leif Synnes. Leif will provide a thorough update and explain the SBB corporate structure, core holdings, finance and capital structure. I, Helena Lindahl, Treasury Director in IR, and our Finance Director, Daniel Tellberg, will join Leif in the Q&A session afterwards and answer any questions you might have during that session that will follow the presentation. Now I'll turn it over to you, Leif. Go ahead.

Thank you, Helena. I'm very proud to have completed the company's strategic transformation. SBB has significantly reduced its leverage, simplified its corporate structure and increased its transparency. SBB is now the leading social infrastructure investor in real estate in the Nordics. We have market leading companies in Public Property Invest, Svea Fastigheter and Nordicus, which fund themselves with investment grade ratings. Public Property Invest is now Europe's leading publicly traded operator in social infrastructure with assets of nearly 50 billion SEK. Sveafastigheter is Sweden's largest listed pure play residential company focused on high demand growth regions in Sweden. Nordicus is a dedicated specialist in educational infrastructure and spanning the entire learning chain from preschool to universities. We have achieved transparent, well-defined core holdings and we will provide future growth. Currently my understanding is that we have a strong financial market and the transaction market has picked up the momentum. And my belief is that this will lead to higher property prices in the times to come. It's time to capture the tailwind that we see in the market for residential and community properties. And remember, leverage works with you in times of tailwind. Now if we look on the highlights for the period. I think it's very good for a real estate company to have growth in net operating income like for like and the figure 7.4% is according to me a very good figure. And also it's very good that SPB have managed to lower the leverage and the loan to value is now 50%. Maybe the biggest event for the quarter was the sale of properties to Public Property Invest where we received back shares in PPI plus cash. We have then fulfilled the transformation to a real estate investment company and we have simplified the corporate structure in SBB and we will take advantage of this going forward. A large part of the advantages come with lower cost in public property invest. The rating in public property invest has increased to triple V plus which is a very strong rating and they have the ability now to raise funds with attractive terms. And also there will be synergies with improved administration. At the time of the transaction, we estimated the benefit of future cost savings due to the better financial terms and lower admin cost to 3.8 billion. That is a very strong and good figure. And also lower cost in PPI will lead to improved cash flow in PPI and a part of that cash flow will come to SBB as dividends. We estimate that 360 million per year will come to SBB as dividends going forward. If you look on the core holdings in SPB, the assets under management is 124 billion. And we have, as I said earlier, market leading companies. And we are very proud of that. And the companies have a good chance to outperform the peers in the years to come. If you take a look at a closer peek on the public property invest, a company that SPV now owns 40% of, we can see that the asset base is 50 billion. And half of that, around 25 billion, is elderly care and healthcare exposure. Segments that will have good opportunities to grow in the future and is very stable and reliable. My opinion is that Public Property Invest has a very solid asset core and with a low risk. And if you couple that with prudent financing, you get a very safe company. And if we move on to Svea Fasteter, they are performing well at the moment. with a high like-for-like growth in revenues, but also in net operating income. And as I said earlier, the 7.4% growth in net operating income in the like-for-like portfolio is very good. And CFS Theater has established themselves now in the second euro market with issuing bonds with investment rate. My belief is that the revenues in Sveafas theater will outperform inflation in the years to come. Nordicus, the leading company in educational infrastructure in Europe, has a very bright future. It was the first of the three companies that were established back in December 2022. We have a very strong and knowledgeable co-owner in Brookfield, which we are very proud of. and it uses their investment credit rating to issue very long-term bonds in the US market. In 2025, the net investments in Nordicus amounted to 1.6 billion. And they illustrate an ability to, as a market leader, to seize opportunities that arise in the market. I'm confident that Nordicus will continue to pick up good deals in the market and grow and have a higher return on equity than similar peers. And the final part of the core holdings is SBB Development. It's a company that focus on develop and thereafter divest properties that needs special resources. And to succeed with that, we have some resources that are skilled in strategic work to convert potential into long-term value. The plan is to develop all the properties in this company and sell them with a time period of five years. And already in 2026, we expect that some properties will be ready to invest. One example is elder care properties in the Stockholm region. Besides the core holdings, we have also non-core holdings in SBB. And the biggest part of that is a loan to Nordicus, which were given to Nordicus when the company was created. And the second largest part of the non-core assets is the holdings in a company which we co-own with Morgan Stanley. It's called SBB Residential Property AB. And on top of that, we have investment in various other companies, which we could divest if we need proceeds to repay that. We have tried to help you and illustrate how the assets in SPB are built up. I think this picture illustrates the core holdings and also the non-core holdings. And if you start with the core holdings, you see Sveafastheter, PPI, Nordicus and SBB Development. And the sum of those holdings is 33.5 billion. And then you have the, after that you have the non-core holdings of 12.6 billion. And as I said earlier, that is the loan to Nordicus. It's the joint venture we have with Morgan Stanley and it's the other shares we hold. And one also good thing to know is the low cost of debt that we have in SPB. The annual coupon on the bonds in the parent is 1.9%. And the non-core holdings will be used to lower debt. One thing that have happened during the last years in SBB is an improved financial position and a much higher financial flexibility. This cash position now is 5.2 billion, and that is a figure excluding the liquidity that is in the consolidated Sveafastheter. CFS data has on its own a very strong financial situation with cash reserves. And on top of that, if we look on the non-consolidated companies, we can see that both PPI and Nordicus have available cash and liquidity resources. So you can say if you take a look on the big SPB group, you see a group with multiple sources of cash and liquidity sources and an ability to raise further liquidity if needed. And if you zoom back to SBB and look on other financial assets, you can see that we have interesting bearing assets of 5.8 billion. And the largest part of that is the loan to Nordicus. And that is the loan that matures in 2029, but can be, if needed, be monetized earlier. And then we have liquid assets. If you take the end price in the previous quarter, the value of those liquid shares is 14.1 billion. The listed shares we don't intend to sell, but it adds to financial flexibility. And to give you some aid on how we can proceed and what we intend to do going forward, we have created a picture. And if you look on the middle part of the picture, you see that we have a liquidity position of 5.2 billion, and then we have undrawn credit facilities of 2.5 billion. And this is only SBB excluding Svea Fastigheten. And you can see that the sum of those two capital sources exceed the maturities in 2026. So we are not under financial stress anymore. We have time to act and we can act in a proper manner. And also, if we look on the bonds, you see them on the left side and you can see that the cheapest bonds are actually the bonds with long tenor, meaning that the coupon that we have on an average coupon of 1.9% is unlikely to increase as we repay bonds. This is an additional page to help you to understand how we can manage the maturities in the upcoming years, that bond maturities in the upcoming years, but also give you an understanding that the core holdings will perform well and create NAV growth for SBB in the years to come. If we start on the left side of the picture, if we add the cash position of 5.2 billion with the Norcold Holdings, you can see that we cover that material almost to the end of 2028, giving us three years of runway. And during these three years, the core holdings are estimated to perform well based on the solid asset base and the good funding situation these companies have. So if you look on PPI as an example, we expect that the growth in NAV for that company will be 3.2 billion during the next three years. And that is SBB's part of the growth. Meaning that if the companies perform well and the value of the company increases, the loan-to-value in the SBB group will decrease. and on the right you see an estimation of what the loan-to-value can be going forward. SPV corporate structure leads to lower risk due to diversification between assets within the social infrastructure markets in the Nordic. It also gave multiple funding options. Only SBB could raise equity and debt in the past. Now, SBB, PPI, Svea Fastigheter and Nordicus all have access to equity, which is a good and strong ability, both to be able to raise equity when needed in financial stress, but also to grasp new opportunities in the market. And also PPIs, Via Fastet and Nordicus all can issue bonds with investment grade rating. And on top of that, we have old bonds in SBB with very low interest rates. And together you see a picture with attractive funding and low cost of capital for the SBB group. And if you combine that with a very strong asset base, Nordic infrastructure properties that will perform well in the upcoming year, coupled with low cost of debt, then you have a good chance to present a high return on equity in the years to come. And to summary, SBB is creating and developing market leaders in the Nordic infrastructure segments. And these companies have the potential to outperform peers in profitability due to market position, access to capital and streamlined organizations. and the higher degree of specialization further contribute to tenant long-term needs, which will give us more tenants and higher rental growth. We have demographic needs and trends in the sectors that benefit SPB. And we believe that simplified corporate structure in core entities, focused platforms will radically reduce the cost going forward and create value for the shareholders. The business cycle is going to be strong, I believe, in the years to come. We are past the bottom and my expectation is that we will see a solid growth in property values in the upcoming years. And also it's good to remember that the leverage works with you in the current environment when the property prices can be expected to grow in value. And altogether, I think SPB has a high potential for growth in core holdings and that leads to a current strong possibility to have high earnings per share.

Thank you. Thank you very much, Lei, for those concluding remarks. And I think we can move forward to the Q&A session, please.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Othman El Araki from Fidelity International. Please go ahead.

Yes, hi, guys, and thanks for taking my question and congratulations on the strong result. I just had a question on the Donkor asset. You know, Liv, when you say that, for example, the Nordicus loan could be monetized ahead, of 2029. Can you just explain how this can happen in practice? And the second question is really on the JV, on the residential AV. What is the timing, you think, with Morgan Stanley there to unwind the structure?

Thank you. Good question, Ottmar. If we start with Nordicus, Brookfield is of course a very strong country party to have. And also Nordicus is a very strong company. So that opened up possibility to speak with them to find a solution if we, for whatever reason, should need capital. And if you remember, we have done this earlier, I think it was 2023. The loan was bigger then, but then actually Brookville helped us and we reduced the outstanding loan to Nordicus. If I remember correctly, it was 8 billion. So if needed, we can reach out to the Brookfield and discuss it. And if we are not successful in those discussions, we can always go to third party and try to pledge the loan to Nordicus. And Nordicus is a very strong investment grade company. And then the loan should have one notch lower in rating than the company. So it's assets that creditors like. So it is a possibility to pledge it if needed. And then the second part of the question or the second question was the joint venture. I think it's usual in the market that if you take in a part owner, you have a shareholder agreement and then you have a certain investment period and then you have a breakup fee if you want to to go out of that agreement in advance and for us it's no cost to repay the preference shares after mid-2027. So that is the latest date, I think, when we will try to optimize the capital structure in the joint venture and which leads to us for a more like low cost solution. And one solution is to repay the preference shares to Morgan Stanley and raise secure debt from the Nordic banks. And that cost at the moment is below 4%. Another solution is that we we say that we focus on residential only through Sveafastheter and then we choose to divest the Morgan Stanley platform in order to get even more proceeds out of it and to be able to repay more bonds.

Okay, that's super helpful. That's it for me. Thank you very much.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Michael Johansen from Arctic Securities. Please go ahead.

Thank you very much and good morning. Two quick questions on my end. The first one, by the looks of it, the amount of credit facilities has increased in the quarter. Can you comment any on these facilities, please?

Yes, I think I'm correct. If you look only on SBB, the amount of credit facilities is similar, but we have used the proceeds from the sale to Public Property Invest to repay some of the drawn amount under their facilities leading to the conclusion that we now have more unused credit facilities but the total volume is the same. And then if you add the ability in Sveafastheter, I think Sveafastheter have improved their ability to raise or to get facilities from the local banks. So it could be so that the total figure, if you include Sveafas data, has increased.

Perfect. Thank you. Very clear. And then on the operating cash flow in the quarter before changes in working capital, it was negative 1.6 billion approximately. What mainly drove this negative figure? What made it 1.6 billion negative was the main cause?

That's mainly related to the restructuring of the company due to the sale.

So restructuring cost then?

Not restructuring cost itself, but effects from the restructuring of the company.

Okay, thank you. That was my question.

I think if you look on the future instead of the history, I think the ability for us to have a higher or better cash flow in the core holdings has improved. Most of the assets are now moved into effective companies, PPI, Nordicus and Svea Fastete. And they also fund themselves with cheaper debt than we could raise on our own. So of course, the cash flow in SPB is of course dependent on the dividend streams from the large entities. But if you look on how the cash flow comes from the properties itself, I think the cash flow creation in SPB has increased. the possibility to create cash flow has increased.

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

Thank you very much and we'll give the floor to Leif to give concluding remarks.

Thank you. I think it's very good to be located in the Nordics with all the investments and Nordics have a population growth and also good economic development. So the asset side in SBB I think will perform well due to the trends we see in the market and also we see the business cycle at the moment works in our favor. And then we benefit from both low-cost debt in core holdings but also low-cost debt in the parent. So we can combine very strong business side or property side with attractive funnel levels and that gives us a strong opportunity to present growing results in SPB as the years come. Thank you.