Wihlborgs Fastigheter AB (publ)

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Thank you and welcome to this presentation of e-books first half report 2024. Curiosity, knowledge and grit, important factors for sustainable business. I'm very proud being a part of Vilvogs and that our strategy for long time stability and growth seems to work. We change a bit every day, trying to avoid drama, planning a long time ahead to be prepared also when changes come. And most of all, we really love our core business. To be there for our tenants, knowing our products really well, improving techniques and finding new and more efficient solution along the way. And also important working in close relation with our municipalities to contribute and improve the cities. That is why we call us a relation and region builder. Let's go to our report and we start with a summary of Q2. A new record in operating surplus for one quarter, 764 million Swedish krona. Since focusing on cash flow and cost control in operation, this has a meaning for us. Net letting positive at quite high numbers. The demand for good quality in good location continues. Higher financing costs but an ECR at 2.5 times. And our project volume gives a good potential for growth. Results for the first half, 24, rental income increased by 7% to 2 billion 72 million and rents increased more since service cost decreased. The operating surplus increased by 7% to 1 billion 482 million and income from property management amounted to 884 million affected by higher financial cost. The result for the period amounts to 688 million, corresponding to 2.27 krona per share, and EFRA NRV has increased by 2% to 88.72 krona per share, adjusted for paid dividend. A comparison of the rental income, first half, 23, and first half, 24. Indexation, plus 88 million. One-off from Q1, 20 million. Acquisition plus 6 million. Property tax has increased in Denmark and that gives extra income of 5 million. Currency effect plus 3 million. Supplementary billing and income from canteens decreased by 12 million. And completed projects, new leases and renegotiations plus 27 million. We have signed new leases for the last quarter of 94 million, 270 million in the period. The positive net letting for the quarter is 21 million and 50 million for the period. The high activity continues in all of our cities, and I'm very grateful to the whole organization that work hard, listen to our customers and find really good solutions. Also, the last quarter we have succeeded to switch tenants in the same area almost from one day to the next. But even if we always have discussion ongoing, this is not the normal procedure. We have just started July, but I feel positive also for the fall. Some are new tenants that we have signed during Q2 on this slide. And as always, a wide spread of many tenants in many sectors contributes to a growing market. Here we have schools, consultants, logistics, tech companies and the governmental sector represented. Here we have the net letting in historical perspective. Letting in light green, terminations in light blue and dark blue stacks are the net letting. Now 37 positive quarters in a row. And even if we don't hit new records in volume, the net letting of 21 million is a good level. No promises ahead, but we do everything we can every single day to continue. We love our core operation and this is the heart of the core. And the list of our 10 largest tenants in alphabetic order. Strong customers and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants. The rental income from public tenants is in total 23% and they contribute to long-term stability in our cash flow. Rental value as of 1st of July is 4 billion 490 million per year and rental income 4 billion 102 million plus 5%. A good part is, of course, indexation. And let's remember that indexation in Denmark and Sweden have been quite different during 2023. Approximately 1% in Denmark and 6.5% in Sweden. In Sweden, the indexation is made once a year with October CPI as the base. But in Denmark, the indexation is made all year round, depending on when the lease was signed. So low inflation in Denmark affect these figures. Looking at like for like figures, comparing the properties we owned a year ago with updated figures, we can see that the rental value is up 6% and rental income is up 5.3%. If we just look at offices in Sweden, rental value is up 6.7% in like for like. Let's look at changes in the market value of properties. We started the year with 55 billion, 872 million in accordance with our 100% external valuation. Acquisition adds on 201 million. Investments 1 billion 40 million. Divestment minus 4. Changes in valuation minus 31 million. And together with currency translations of 107 million. That's summarized to 57 billion 159 million Swedish krona. The value of the portfolio has developed, as you can see on this slide, since 2005 without raising any new equity with investments, new leases and a few transactions. We have also during the last years with rapidly higher yield requirements been able to increase the value somewhat. Valuation is interesting, but most of all, it's interesting to measure how we actually perform in relation to these values. These figures, the running yield, show how we actually perform. So this is not the valuation yield. For the whole portfolio, the occupancy rate is 93%, excluding project and land, and with an operating surplus of 3 billion 91 million, that gives a running yield of 5.7%. Fully let, the portfolio would give a running yield of 6.3%. Good earnings capacity in relation to the value of the portfolio. In the office portfolio, the market value now is 46.5 billion and overall the occupancy rate is 93%. 96% in Malmö, a high level, 91% in Helsingborg and Lund and 92% in Copenhagen. When we add new products to the market or buy vacancy, that can affect the figures downwards a bit, but we have kept the numbers at good levels despite that. In the best days we can improve a bit, except in Malmö, but we see positive changes over time, not at least in Lund where the improvement has been ongoing for some years. The operating surplus from offices summarized to 2.6 billion and a running yield of 5.6%, 6.1% fully left. This brings stability and resilience. The demand for logistic and production continues to be good, occupancy 94% in Malmö, 85% in Helsingborg, a bit lower, mainly according to changes between tenants, 98% in Lund and 97% in Copenhagen. 90% occupancy rate as a whole with a running yield of 6.7%, 7.6% for Lillet. A total value of 7,371,000,000. High flexibility and changes at a faster pace is especially important for logistics in this segment. Production seems to be more persistent and focus on high quality. Development of our total portfolio running yield 5.7% brings stability, not at least since the portfolio overall have a high quality and good locations, but a quick increase of the running yield since 2021. ESG performance at this slide, we continue with our certification program. Now 85% of the Swedish office portfolio is approved. Energy savings are also of highest interest and we continue to improve here as well. The carbon dioxide figures are at low levels for scope one and two, but affected by a breakdown in a cooling machine at one of our district cooling suppliers. This proves how important it is that we continue to influence their production methods as well. Other sustainability actions I would like to point out is Black Hornet 1, first in Sweden with a new manual for miljöbyggnad 4.0, which also includes parameters in line with the EU taxonomy. And we have level gold here. We start our first larger battery storage in Lund, a way to also contribute to balancing the electric supply system. We have new requirements for procurement of solar cells, which includes demands for people and production methods. Will give us some headache for some time, I guess, but the only way to go. Continue our work with climate adaption, especially heavy rain and raising water levels. Now also with a more scientific method. And our Janne-lösningar are fitted in everywhere we can, saving a lot of energy. Lately, we have also found methods together with our energy suppliers to improve the business model for this, and this will improve the economic numbers further. A catalogue of our value and properties in our four cities. 40% of the value in Malmö, 22% in Helsingborg, 16% in Lund and 22% in Copenhagen. Last time I mentioned the massive ongoing infrastructure investment in Denmark and the construction of the Fremont Belt tunnel which are ongoing and this time I would like to comment a bit on how the commuting possibilities in the Swedish part of the Arizona region contribute to making it easier for people to actually meet. Easier to get to work, easier to choose where to live and still have several of interesting job possibilities close by. The white connected areas in this picture show how far you can live from city center and commute in less than 30 minutes. All our four cities are connected in this pattern and I'm totally convinced that this increase the attractiveness of actually working at work. Together with your colleagues and on the next level, I'm totally convinced that this affects the productivity, interaction and innovation in companies and also in the region. It's fun to work together, but it must be reasonable, easy to meet. And time for financials. Over to you, Arvid.

Thank you very much Ulrika and good morning everyone. We can see that rental income increased by 7% to 1 billion 32 million and operating surplus increased by 6% to 764. And as Ulrika mentioned, that is actually a record number for an individual quarter when it comes to operating surplus. Income from property management amounted to 460 million, which is minus 6%. affected by higher financing costs. And we'll get back to that in a few slides. Small positive value changes regarding our properties in the quarter, plus 28 million. Valuation yields are basically flat. And then we'll see what happens with valuation yields going forward. And it is, of course, interesting to watch what central banks will do to the rates during the second half of the year and how that may affect valuation yields. We had a profit for the period amounting to 350 million. Looking at the balance sheet, investment properties versus 12 months previously. increased in value by half a billion Swedish kronor to 57.2 billion. Equity decreased by approximately a billion. And then you shall of course remember that we paid approximately a billion in dividends during Q2. And in the same time perspective, our borrowings increased by 1.1 billion. Translating that into key ratios, you can see that the equity ratio now stands at 37.6% and the LTV at 51.8. The LTV has, of course, been affected by the dividend payment and that effect corresponds to basically one point or approximately 1.7 percentage points on the LTV number. It can be worthwhile keeping in mind. The interest cover ratio multiple is now 2.5 times. The EPRA NRV, as Ulrika mentioned, increased 2% versus 12 months previously, adjusted for dividends, and now stands at 88.74 Swedish kronor. On the next slide, you can see the historic development of EPRA NRV. And since 2009, we still have an Average annual growth rate of 15% in this number adjusted for dividends, of course. The historic development of our financial ratios is visible on this slide. Equity assets ratio at 38%, the LTV at 52, and interest cover ratio at 2.5. And we also on the next slide have a financial metric we've been talking about for several years now, which we feel is relevant for showing our financial stability. Net debt in relation to EBITDA stands at 10.2 times. which is the same as last quarter. And as you can see on the graph, actually a slight improvement over the past couple of years, which I think is positive given what the world has looked like in that period of time. Looking at our financing, we still have approximately half of our financing from bilateral bank agreements with Nordic banks. Approximately 40% of the financing from the Danish real mortgage system and now 10% from the bond market. As you are aware, the bond market has improved significantly over the past six to nine months. We issued a bond a few weeks back, a 3.25 year bond with a margin of 123 basis points. And that is, of course, a huge improvement over a nine month period and quite competitive now versus secured bank financing. Bank financing has also improved over the past 69 months. And looking at the next slide, you can see the details of our loan portfolio. The average interest rate excluding costs for credit facilities is 4.05. That is slightly up during the quarter or versus a quarter ago. We've had an effect of lower stiber, which has affected this number by approximately minus 10 basis points. At the same time, we've had interest rate swaps at the very attractive levels expiring, which has affected this number upwards by approximately 10 basis points. Then we've also had an upwards effect, partly from increased debt, but also renegotiated bank agreements, which have slightly higher margin than the previous agreements had. And to put that into perspective, you can say that the the agreements we have renegotiated, the last time we did renegotiate those contracts or bank facilities was approximately three years ago. So the world looked slightly different at that point in time. Going forward, you can bear in mind that we still have some advantageous interest rate swaps, which will expire, as you can see in the table in our report. We have, of course, expectations of further central bank rate cuts during the second half, which will improve the situation. You can also bear in mind that you have some new regulatory changes regarding capital requirements in the Danish rare mortgage system, which may affect those margins slightly upwards. Looking at interest rate sensitivity, You have a graph showing that on this slide. And the conclusion from the slide is basically that the underlying interest rates, Tiber, Kyber, can increase by one and a half percentage points. And we would still be at an interest cover ratio of two times, which is our stated targets. And the underlying rate could actually increase as much as five percentage points. and we would still meet our bank covenants of 1.5 times interest cover ratio. The fixed interest period and the loan maturity on the next slide. Fixed interest period now stands at 2.5 years and the loan maturity at 5.9 years. And last of the financial slides, we track our available funds that is, unutilized credit facilities plus liquid funds, which at the end of June stands at 2.8 billion Swedish kronor. And with that, I hand the word back to you, Ulrika.

Thank you. Acquisition and transaction, the transaction market is there and possibilities arise, but no reason for us to get wild. When the right opportunity is there, we can act. And during Q2, we have acquired land for our project Kaldik at Galoppen, and we have also acquired this property, Värdshuset 2, in Malmö. Not the largest ever seen, but a good possibility for us. Almost 4,000 square meters at best location in Hylje, actually on top of the train station. Property value 180.5 million and it includes some vacancy and a very poor energy classification. Here we know that we can add knowledge and improve value by that. And an update on our investment in progress and a quick overview of our largest projects. During the first half of the year we have invested 1 billion 14 million and it remains 3 billion 103 million to invest in improved projects. We have quite quickly been able to improve yield on cost in our projects and adjusting to higher yield requirements. And the volume that we have been able to continue with the last year gives a solid foundation for our growth. This is the kind of possibilities that stability and good cash flow gives. We got the opportunity to buy land from the municipality of Malmö at Galoppen, and here we will build a facility for Kaldik, approximately 10,000 square meters production, logistic and office. Total investment 264 million and completion in Q3 2025 and yield on cost 7%. Another new project is Kranen 4, a rising star in our portfolio showing possibilities in the most unexpected places. Almost down for the count in an area waiting for a new zoning plan and the most likely thing was that these premises would be demolished. Instead we will be able to transform the building for the police education at Malmö University We invest 106 million, 10 years lease and yield on cost of 11%. Completion in Q3 2025. Börshuset 1 in Malmö is also under transformation, but at another level. We knew this was good when we started. An iconic building right beside the train station, 6,000 square meters offices, restaurants and co-working at absolute top rents in Malmö perspective. Approximately 60% pre-let and completion in Q4 2025. Our largest ongoing project is Blekkornet 1 in Hylje, the one I mentioned with the miljöbyggnad 4 certification. It follows the schedule well. First completion of the mobility hub later this year and for the office completion starts in Q4 2025. Yield on cost 6.2%. Post-Tornet 1, Phase 2, a new build office at 10,100 square meters in the center, right beside the center station in Lund. Investment of 448 million includes value of the land, 374 million excluding land completion with start Q126 and yield on cost 6.5%. Ongoing discussion for at least 5,000 square meters. In Hörshon, Copenhagen, we invest for a new school for NTG, 25 years lease, 11,600 square meters and investment 390 million. The building process has started well and completion is expected to end 25. The facility for Niedermann with a 20-year lease at Rausgård 21 in Helsingborg will be completed in Q3 this year. investment 420 million or 370 million excluding cost for land and also that includes a new shelter and a considerable amount of environmental decontamination We also continue our project for Rolko at Storskogen 5 in Helsingborg with a yield on cost of 7.1%. At Sundanå 1254, we build the 17,000 square meters logistic, 100% pre-let at a 15 years lease with completion in Q3 2025. Yield on cost 6.4%. And Bilryftan 5, Inlandskrona, included in our Helsingborg portfolio. Here we will complete a facility for DAXer late this year at an efficient time schedule with a 15 years lease and the yield on cost including value of the land is 6.7%. Here we can add on some extra volume to increase the value further. That was some of the ongoing portfolio and let's also mention something about future investments. Anfitriet in Malmö, where we have signed an agreement with the University of Malmö after a public procurement act to create a project together. Approximately 15,000 square meters. Now the architectural competition is completed and we can continue with the zoning plan. Time schedule indicates a possible project completion in Q2 27, but it's a bit early to say. Four possible projects in Lund and Helsingborg. Here we can develop some 70,000 square meters in the future. Zoning plans are approved for the first three projects. And some office possibilities in Malmö in the area of Nyhamnen and Dokkan. Continues to have high attention from us. Not any new pictures on this side, but actually there are things going on at Hamnen and Kranen 15. Promises or action from the municipality? Time will tell. And our summary again. A new record in operating surplus for one quarter, 764 million. Net letting positive at quite high numbers. Demand for good quality in good location continues. Higher financing costs, but ECR at 2.5 times. and our product volume gives a good potential for growth. And with that, we are open for questions.

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 John Vong from Van Lanshot Kempen. Please go ahead.

Hi, good morning. Good morning. Thank you for the presentation. I'm just looking at the net letting chart. Both new leases and terminations screen much more normalized compared to the outliers we saw the past two quarters. Are we back to a more normal operating environment or is it still possible that we could still see large numbers going either way?

I think it's hard to say what normal is, of course, as usual. I think that we will continue to see new demands, and we think that is a good thing. We don't see any drama in this, and I think that we have, most of all, it's important for us that we know that we have the organization that can handle both high numbers and more of what we saw back in the days, a normal level. I know that we have started Q3 very well, so it's hard to say what a new normal level is, but I don't see any drama going on today.

Okay, that's fair. And just on the battery storage investment, is this a test pilot that you're doing in Lund, or do you see Scopes who roll this out in more projects? And could you perhaps talk about the economics of this battery storage?

We have two projects ongoing on the battery storage. We think it's, I mean, the business model is working well. Of course, hard to predict how many years will you get this economical upside. So we kind of calculate that in quite shorter time perspective. I think it's both a good, I mean, depending on the situation after 10 years or so, but I think it's a good business opportunity. but most of all it's also a contribution to balance the electric system so it's a bit of both especially on premises where we have solar cells I think it's a good combination in that so okay thank you and then just by the sounds of it you could do this more projects that you're also placing solar cells on in the future exactly that's the best combination when we have larger solar cells panels and so we both have the production side and the storage side at the same property okay that's clear thank you

The next question comes from Lars Norby from SEB. Please go ahead.

Thank you and good morning, Ulrika. Good morning, Arvid.

Morning.

My question is, you showed an interesting chart, the one about commuting time. So just let me ask you, link to that one, thinking about office properties. We've seen several cases of companies and entities downsizing office space for employees, at least in Stockholm. So let me ask you, in the areas that you operate, what's your picture on that? Do you see examples of that? And if so, is that related to remote working, or what's the reason?

We see examples of both, I would say. So we have mentioned examples before, especially for larger international companies making the decision elsewhere that they have decided to decrease number of square meters per employee. But we also see examples of growth, of course. And I think I mentioned this before, but the latest trend is but we don't focus on downsizing the areas. It's more of a quality you need and adding on actually areas for more focused work. More single rooms, more, I mean, you need some space for people to feel really comfortable. So it's more about how can we perform the best workplace uh for our employees uh since it's still a struggle about finding the the best competence and and the best employees that's the main driver i would say so high quality good location of course you you try to be efficient but you had to add on also areas for more focused where you need some space, actually. So we see a bit of both.

Okay, and just hanging on to, I can say, demand in the market. Obviously, you're reporting, once again, good, I would say, net leading numbers. At the same time, I think you point out that economic conditions have remained weak. And let me ask, is it still the case that negotiations, if anything, take time. Are we still in that mode or is there any kind of change in either direction?

I think things takes longer time today than it did a number of years back. But it's also something good with that because you work more with the product and it's really high focus on our product, actually. So our tenants want to be sure that they make the right decisions. And I think that also affects the quality of the product. And the best thing for us is that they are very satisfied when they move to us. And yes, patience is always a tricky one, of course. But yeah, maybe things take a bit of a longer time today. You are more into processes also. You need all kinds of decisions and many international companies have a long list of processes that have to go through before they can make the final decision. So that's part of it. it's worth mentioning that we have a wide sector of many different businesses in our region and I think that is the main reason why we can work well with our letting final question from my side regarding growth future growth obviously cpi indexation in sweden has propelled your revenues

quite a lot over the past three years or so and now it seems like CPI is slowing down obviously so you will not get that effect to the same extent going forward probably but then there is project development and then there's acquisitions two potential avenues of growth we've seen I think you made some acquisitions during the year a couple of acquisitions will that only be A small part of your future growth, will it very much be down to product development?

Depending on what comes up. Our own projects, we can choose where and when and the quality and how flexible we make it. So that is the best product for us. But when we find the right opportunities also for acquisition, that could be a good part for growth. But it has to be the right product and the right location. And the example now from Q2 when we bought Värdshuset in Malmö, that's a good example. No one can doubt that the location is right. It was a good product with another kind of other kind of product than the other one we have in the area. But most of all, we can contribute and improve the building. So today it's a lot of vacancy and the energy consumption is in the sky. And we know that we can fix that. So that kind of acquisition is perfect for us. But I like to think that we also ahead of us will have a combination. But our own portfolio is, of course, very important. We can run that on our own. The acquisition is more from time to time. We are not the only ones that make decisions on that side.

Okay, thank you. Those were my questions.

Thank you.

The next question comes from Eleanor Frew from Barclays. Please go ahead.

Good morning, and thank you for the presentation. Just one question from me. So thinking about your average cost of debt, given the various impacts that you described in the presentation, Arvid, do you have a sense of where and when your average interest rate will peak?

It basically depends on your cyber-cyber forecast. um we're if we're not at the peak we're very we're very close to the peak but but it basically depends on cyber kyber thanks

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Frederick Cyon from Carnegie. Please go ahead.

Good morning, Ulrika and Arvid. I have only two questions for you. Starting off with property value changes, they were obviously quite minor in the quarter, but in the CEO letter you mentioned, Ulrika, that the positive effects have been balanced by future potential vacancies. Are there any meaningful changes to vacancy expectations or is that just a general comment?

No, it's not any news in that, but of course the valuation are always affected of what comes ahead. And we know that Saab is moving from Malmö. At least we don't know when, but we know that that is coming and it's possible for them to move with 2026. So that is a part of it, taking that into consideration. That doesn't mean that we actually will have a vacancy period, but in the valuation that is there.

Okay, thank you. And then on the vacancy rate, it's very limited in Malmö, only 4%. Do you have too limited supply in Malmö right now in your own portfolio?

I think that we have a good balance. I'm happy that we are ongoing with Bleckhornet. so that we have something for the market. I think that we, I'm grateful if we can start with something new in Nyhamnen in not too far away, but no, I'm happy at the moment. We have things to work with and we all, you know, it's always change is coming. So we have things to work with, That's a good thing.

Do you see an opportunity to start in Nyhamnen during the second half of this year? Is that too early?

That's too early. So now we're going into, we're in a quite early zoning plan process actually for Nyhamnen. But at least it has started well. So now things are happening there. That's good. And we also have other

not sitting still that's clear thank you thank you there are no more questions at this time so i hand the conference back to the speakers for any closing comments thank you and maybe you should check if we have any written questions sorry just to make sure just before we

close this up and otherwise you are always welcome with a question outside of this meeting, of course.

We actually do have a question. Hang on a sec. It basically was a question regarding termination risks and the valuation. So it was basically covered by the question from Fredrik.

Okay.

Yes.

So by that.

So nothing outstanding.

Thank you for your attention. And please don't hesitate to get in contact with us if you have any further questions. And by that, we wish you a good work week.

And a good summer.

A good summer, yes, of course.

Thanks.

Bye. Thank you. Bye-bye.