Fastighets AB Balder
STO:BALD B
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Fastighets AB Balder
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Good morning and welcome to the Interim Report January-March 2020. My name is Ann, and I will be your coordinator for today's conference. [Operator Instructions] I will now hand you over to CEO, Erik Selin, your host for this call. Thank you.
Hi, everybody. Good morning. This is Erik Selin. And I have Marcus Hansson with me also on this little call with Balder for the Q1 report. If we go right ahead, some words about COVID and our actions. Of course, we have a lot of contact with tenants. And the tenants that are having their largest challenges in this environment is, as you all know, hotels and also restaurants. And most of the retailers, some retailers doesn't, but many retailers also suffer from this, obviously. What we have been doing is, in general, not giving any discounts or rebates, but in some cases, we help good tenants with the liquidity that we changed from rental payments quarterly in advance to perhaps monthly afterwards. Or -- but there are a lot of different things we've been doing, and that is sort of looked at case by case. So everything is handled from some weeks ago, and the total sum of deferrals of rental payments is SEK 135 million. And that is not just for Q2. That is also some deals that is longer, and that is the hotel part of the portfolio where we have a -- who are the bigger tenants, longer deals than just for Q2. So we sort of fixed the situation for the whole of 2020. And in general, all the rents are paid. So the effect in Q1 is that we have lower turnover rents in our reports because we are quite clear that there will be no turnover rents for the hotels in 2020. So we already took that into account in Q1. So the effect is already in Q1. And we also had in collector some extra provisioning, IFRS 9. And that is -- we think there could be effects. So far, they haven't seen anything actually. But -- so we have a drag on Q1 from COVID on those 2 big items. Otherwise, we have taken possession -- now I'm on Page 3, of some properties in Gothenburg, Linköping and some retail properties in Finland. That rents is rented by Kesko. And we also completed 360 apartments in Finland. And then Page 4, this leads us to some numbers. We had in Q1 profit from property management, plus 7% compared to last year, a weak figure for us compared to last year's. But I've said that is -- the corona effect is already in there. NAV, SEK 348 per share; net debt to assets, 49.%; and rental growth. 3.1%. And, of course, this is Q1 so nobody knows what will happen going forward. Our guess is Q2, we will not see much. So the question is what happens later. And if there is an effect, I think we can see then Q3 or Q4 maybe. So for the time being, it's still pretty stable. Page 5, you see the development, profit from property management and NAV. Nothing dramatic there. Next page, earnings capacity. It's in March slightly lower than year end, and that is effect in -- corona-related effect and also lower from associates and a bit more financing costs. But in general, pretty stable compared to 1 year ago. It's still a good increase, but we're sort of flat compared to year-end.Next page is Page 7, the total income. We have the profit from property management, obviously, and then small value changes in this quarter. So the net profit was SEK 1.2 billion. And turning to Page 8. Investment properties value are up a bit compared to the year-end, and that is we bought some assets, we invested some money and also we have the currency. March 31, the Swedish krona was very weak compared to the euro. So I think if we look today, it's billions that will actually shrink the balance sheet. Right this day, the Swedish krona was pretty weak. And that led the property value to be SEK 151 billion. Page 9, the portfolio. I think it's identical from last quarter's, more or less. Residential, 60%; office, 18%; retail, 8%; and other, 14%. And on the other 14%, hotel is 8%; and retail, 8%, and then we have the largest part is car retailing. And they are actually doing better than you could see here. If we look at new car sales, the figures are down dramatically, but that doesn't affect the P&L as much as you could guess because they have -- they don't earn much money on selling new cars. The income stream come from service, financing and insurance. So they are, of course, doing less good than before, but not as bad as all as you might see here just looking at new car sales. So pretty stable, even in this tough situation. And regions are the same, Helsinki, Stockholm, Gothenburg, Copenhagen is 80% of the portfolio. Going into Page 10, financing. From last quarter, it's pretty stable situation. I mean the first month, we were very strong and we made some bond issues. And then when the corona crisis escalated and, of course, the credit market also turns weak and shaky. But we have a lot of facilities and cash flow and liquidity. So, so far, this have been -- we've been doing quite well. And we also actually did a bond transaction in April in the Eurobond market. But for the time being, a bit tougher financing market, obviously, as you know.And next, Page 11. There are the charts with secured debt/total assets, secured debt/total debt, and the trend hasn't changed anything in Q1. And we don't think that we'll change much in Q2 either.And finishing with share price, you have the graphs and you see the long-term trends. Obviously, share price over time correlates reasonably good with NAV and profit from property management.So this was a brief recap. And now we open up if there are any questions.
[Operator Instructions] And we do have the first question from Simen Mortensen from DNB.
[indiscernible] But my question is, first of all, in terms of how in Q1 -- in terms of rental payments, can you please give us how this has been also? We are now in May, have the tenancies you communicated on Q1. But prepayments from May, how is that looking, both not just for hotels and residential but also for rental apartments? Can you give us some detail on that?
No, in rental apartment, nothing happened at all, actually. It's the same as before.
And for hotels and retail into -- in -- from...
No, they are already handled. So -- no, they are already dealt with. So there are nothing new in May.
Okay. Can you -- also you have some development projects, some where you also sell residential homes. Could you please give us like an update on what you have seen in terms of sales in that part of your operations during the COVID crisis?
Yes, sure. Selling apartment has been obviously much, much, much slower the last month. But you -- I mean you could guess there will be 0 selling, but it actually isn't so. But there's a slowdown dramatically. And what we've been doing right now is that we have some projects that we actually pushed the start forward from May to November, May to September, just to see what happens. So we don't just continue to invest. So we have delayed some construction starts. Not that we couldn't start, but I think it's not a big risk to wait a quarter or 2. There could potentially be better days coming up or maybe lower construction prices. So from a tactical point of view, we delayed some starts. The ongoing project is working well, all the construction works are working well, so no disturbances in construction as such. A new resi is -- they're being completed. Also worked reasonably well in moving in tenants. It has been a bit more tricky in Denmark and Finland because there are more restrictions than in Sweden, but still worked out pretty well. So to summarize it, right now, it's slower activity in selling apartment, obviously, but it's not 0. And we have pushed some construction starts until after the summer. And we can delay it more, if we want to. It's up to us. So no pressure.
So this delay in starts, are you mainly referring to residential developments or for some of your -- or are you delaying other projects?
Yes, we have residential development, more or less. We have 1 big hotel we are building. But otherwise, that is residentials we're building.
The next question is coming from Tobias Kaj from ABG.
I would like to start by asking regarding the deferrals of payments. How much of the 125 -- SEK 135 million done is to monthly payments and how much is longer deferrals, to 2021 or longer than that?
Longer than '21 is 0. I think the majority is quarter to month in Q2 and Q3. But I don't have the exact figure. This is nothing we worry about because it's the bigger tenants that is actually -- we have no -- right now, no worries that it will not work out. We can have more...
But if you say the majority is monthly, does that mean that almost half is longer than just to monthly to next year...
No. But if you have a deal for Q2 and Q3, that summarizes -- and Q4, and that summarizes up to this SEK 135 million. So it's not just only Q2. Maybe we should have been more specific there, but that is okay.
Okay. And are you worried that the situation would be materially worse when you're about to collect your Q3 rents, for example?
No, I don't think so for Q3, but you never know. I mean it's impossible for anyone to know. But if I'm guessing, as of today, I think still Q3 will not be that bad. If it continues, I think Q4 or Q1 in that case. But the largest tenants is sort of -- no, we don't see anything happen there near term.
Yes. It’s not really so dramatic either. I mean out of the SEK 135 million, it's more likely we're going from quarterly to monthly payments. And we have already received 2 months of the 3 months that we have agreed on for Q2. And the agreements we do is with the stronger tenants, as Erik said. So we're quite certain that these will follow the payments we've set to given the easement on the liquidity situation, which happened so quickly.
Okay. And you mentioned that you have adjusted the earnings capacity and deducted the turnover component base for hotels. Can you say how big that is, roughly?
I think it may be SEK 10 million per month. So now we discount the rents, so we have sort of 0 turnover rent. And for 2020, that is our guess also that there will be no turnover rent. And so that's why we already, in Q1, adjusted the figures. So yes.
And in Q1, the NOI margin improved almost or around 190 basis points year-over-year. Are there any one-off in the improvement? Or what is driving?
No, no, no. I don't know. Maybe it was a better winter or some mix effects. We haven't seen anything other...
And one final question for me, if I may. Regarding the income from property management from JVs, fell quite significantly in Q1, both compared to Q4 and also compared to Q1 last year. But the contribution from JVs in the earnings capacity had a quite small adjustment. What's the reason for the big drop in Q1?
Yes, that is related to collector and one-off effects. So that's why we don't see a big change going forward. So it's more of effect in this quarter than a long term effect. So that's why.
[Operator Instructions] The next question comes from Jan Ihrfelt from Kepler Cheuvreux.
I actually have one question here, and it's regarding your property uplifts. If you could split that into different segments. Were you making any write-downs in part of your portfolio and uplifts in others? Or is it more neutral on the total?
It's not dramatic in any industry, really. I mean it's more likely we do a 10-year cash flow analysis on all the segments. Of course, you have an effect in the short run on -- in some segments. But when you look at it over a 10-year model, it's not going to have that effect. We are expecting it to bounce back next year.
And hotels and retail, no major write-downs there?
Yes, we have some negative effect on retail and hotel properties. And then you have some uplifts on the residential side, which is working against that.
And on the retail and hotels, so could you give us a figure, in percentage-wise, how much has it been written down? Just to get a feeling for your values here.
No, I don't know exactly what it is. It's not a huge number.
[Operator Instructions] So the next person coming through is Erik Granström from Carnegie.
I just have one question basically, and that's regarding the transactions market. I realize that you have probably been busy with a lot of other things now. But could you say something about what you're seeing in the transactions market? Is there -- have there been any opportunities come up lately? Or are you looking into any opportunities at all at this point?
I actually got some suggestions that we wouldn't tell what it is if it wasn't this corona situation. There could potentially be interesting things happening, but otherwise, we think the transaction market is sort of very, very, very calm right now. Because, as you said, the one like us, we have busy days handling tenants in this situation. And sellers are not that stressed as we see it because low interest rates. And -- I mean it's just gone a couple of months in this situation. But we think the stress can come up in, of course, projects and development that is harder to financing and cash flow-weak companies and situations. And so I think it will be interesting to see what will happen. But so far, very calm, Erik. But some things that is offered that wouldn't have been otherwise, we're looking at.
Okay. And then my final question is regarding the rating institutes. What are they -- what are your discussions with them focusing on at this point? And do you feel that there is a risk of a rating downgrade at any point this year?
We are rated from S&P, and they released their upgrade on -- update on us last -- yesterday, actually. And it's still on the same rating and it's stable. And they are not focusing on us. I think they think that this -- we have a very stable income, and it's very diversified, which is in line. And there -- also the financial metrics make sense. So there's no indication for that we should have a change rating going forward.
I have a feeling they follow liquidity, Marcus, isn't it like that?
Yes.
They're most curious about liquidity.
Yes, that's the most important part of that. I mean just on liquidity, we are very strong, of course.
[Operator Instructions] The next question comes from Philip Hallberg from Danske Bank.
I think that actually most of my questions have already been asked. Maybe just a follow-up on Erik's question here, that you mentioned in the report that you have received a number of proposals on deals that you would have had if the situation would have not have been as it is right now. You have done roughly 13 acquisitions in Q1, if I read it correctly, and it's primarily in Finland. Is any one of these acquisitions within the scope for what you mentioned in the report? And also I think you already asked -- or answered regarding if you see it coming along more deals in 2020. But is any one of these 13 deals within the scope of sort of proposals that you have received through the corona situation, so to speak?
Yes. The proposal wouldn't have happened if corona wouldn't have happened.
Yes. And these deals...
There are some situations where companies or seller gets more stressed than others. And so in some cases, I have that on the table, but I really haven't decided what to do yet.
But the acquisitions made in Q1 is not really corona-related.
No. Q1 is not corona-related at all, no.
And are these proposals sort of in the more stressed areas right now? So for instance, in hotel and retail, perhaps? Or is it in all -- across all segments?
Perhaps.
That's fair enough. Okay. Just a question in regard -- you mentioned that you did a bond deal in April. We have not seen the terms for that. But could you just elaborate a bit of how your spread development has increased? So what were the terms that you were able to get in April? And how -- what was the sense that you were able to get, pre-corona, so to speak, so the delta in spreads between before and after, so to speak?
It was not bundled. What the issue is -- was that SATO, which is a subsidiary of Balder, which actually made the transaction. I would guess that the margin was close to 100 basis -- close to 100% higher than it was actually pre-corona.
[Operator Instructions] At the moment, there is nobody in the queue. [Operator Instructions] There is no questions coming through. So I will hand the call back to you again.
Okay. But -- then we thank everybody for listening to us and sharing our views and having good questions, and we wish you a nice day. Bye-bye.
Thank you. Bye-bye.
Thank you for joining today's conference. To end the call, you may now replace your handset. Thank you.