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Samhallsbyggnadsbolaget I Norden AB
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Ladies and gentlemen, welcome to the Samhällsbyggnadsbolaget Q1 Report 2020. Today, I'm pleased to present CEO, Ilija Batljan. [Operator Instructions] Speaker, please begin.
Thank you very much, and welcome to presentation of Q1 for SBB. And this is the first quarter where, how to say, the full effect from the new SBB, including Hemfosa could be seen. And if you look at the main messages, the first is actually, our strong financial position. At the end of the quarter, we had 50 -- more than SEK 50 billion in unencumbered asset, strong bank relationships and also access to European credit market that we could show by issuing 10-years bond at late March. So we are coming into the crisis with strong cash position, but also with very strong earnings capacity that will be delivering strong cash during the year. So we can go to the Slide 2, please. And at Slide 2, we are presenting our earnings capacity for 12 months rolling and you can see that just duly mathematically, we are expecting to deliver profit of SEK 3 billion or SEK 2.36 per share -- per ordinary class A and B shares from property management, and on top of that, income from our other income streams, which is expected to total to close to SEK 4 billion, so SEK 3.12 per ordinary A and B shares. So that is very strong profit expectations from an earnings capacity. If we look at the quarter, we delivered profit after tax of SEK 1.4 billion or SEK 1.373 billion, which adjusted for nonrecurring costs relating to transactions, refinancing and the repurchase of the bonds amount to SEK 1.5 billion, which is a strong increase compared to the corresponding quarter of the previous year. I will comment later on this onetime costs related to the Hemfosa transaction. Important thing there is that we had to take almost all transactions cost through P&L, which is, how to say, affecting profit from property management negatively and increasing unrealized value changes. And our strong net operating income is important message from this report. Net operating income increased year-on-year with 273% to SEK 895 million and also where we delivered strong margin of 67%, which is increased with 11% during its -- in relation to the last year. And finally, this is, of course, affecting cash flow. So our cash flow adjusted for nonrecurring costs amounted to SEK 591 million, also that very strong increase in relation to the last year. Next slide, please. Our income is 9 of 10 counts coming from the Board's most creditworthy counterparts from Swedish, Norwegian governments and from Swedish rent-regulated residentials. And you can see that we have income -- or the earnings capacity of SEK 5.2 billion, of which 88% is coming from government direct or indirect or from Swedish rent-regulated residentials. And the other message here is the same as always: we are long-term partner to municipalities. And we have, as I will show forward in presentation, also in those times, i.e., working together with municipalities to deliver to them special apartments for people with disabilities. We are building the new buildings for municipality sector across the aisle. And in those times, we have probably one of the most secured income in the space of our income like 1% or even below that is affected by the corona crisis. And we have been, despite that we have a low exposure, humble and trying to help those that are exposed, and that is why we are counting to have deferred payments or change the timing for the payments of SEK 12 million and are giving the support to those in need SEK 1 million in discount. So that is less than 1% of our total income. Next slide please, financial performance. As you can see, very strong increase in rental income from SEK 453 million to SEK 1.341 billion. Particularly strong increase in net operating income and this is slightly affected also downwards by, I would say, catastrophic development for the Norwegian krone and this is really a strong message from this report increased margins and net operating income that is beating even my expectations. So I'm really happy that we can integrate property management in the way that we are doing and that we can deliver the strong NOI. If you look at EPRA NAV, that is now reported -- presented according to new EPRA definitions, we are -- landed it at SEK 24.8 billion, which is slightly less at the end of the year, and the main reason for that is changes in Norwegian krone. However, we feel comfortable to continue to deliver also in increasing NAV. And our message to the market that we will be the company that is performing highest increase in NAV 2019, 2021 is firm, and if you want guiding, that is final guiding, so we feel pretty comfortable with that. Increasing equity ratio and loan-to-value slightly affected by the rest of -- paying the rest of Hemfosa. However, when you look at our assessment, where we are in 2020, we still feel comfortable on our way to BBB+ within next 12 months, which is onboard. And finally, probably the most important for our shareholders, that we delivered strong earnings per ordinary share of classes A and B of SEK 0.94 per share, which is like almost 5x comparing to the last year when we had SEK 0.2 per share. Next slide, please. Concerning our business, 94% of the portfolio value, Social Infrastructure with 77% community service properties and 17% Swedish rent-regulated residentials. Strong and the increased presence in the largest city in the Nordics, 66% of total property value is in the largest cities in the Nordics. Next slide, please. More in detail concerning portfolio, SEK 61.5 billion elderly care homes, schools, LSS-housing and municipal and government buildings, 17% rent-regulated residentials. In the quarter, we increased our presence in Malmö region by buying from the municipality of Kävlinge, which is fast-growing part of the Malmö region. And our property development, which is within this Other segment of SEK 5.2 billion, is continuing to deliver and also delivering cash flow properties in our property management portfolio. Next slide, please. We still do things that is important, which is to repeat every time what kind of underlying megatrends are shaping our growth and are shaping outlook for our company. Demographic change is important one and also connected to urbanization and we feel pretty comfortable that those trends will continue also in post-corona world. And in corona or in pandemic world, I should say that sustainability is even more important than ever, and we are in the report showing that we continue to invest in energy efficiency. We delivered strong decrease in -- and now we can actually, in this report, present the first results from that shock that we are delivering strong decrease in CO2 emissions. But we also invest in social sustainability that is very important in those states. We founded, together with Nassos Ikonomou, Food4Heroes that up today has delivered 7,000 meals to people in need, together with Stockholm's Stadsmission and the Salvation Army, delivering food to the elderly. We are also delivering food to hospitals in Stockholm and at the same time also trying to support our municipalities through the crisis. We ordered respirators, masks to municipality of Boden and we are also in the -- through different initiatives supporting small businesses in our municipalities. But even more important, we continued to invest. During the quarter, we invested SEK 380 million, in that way saving jobs and supporting growth in our municipalities. Next slide, please. Our property development is doing a great job. And you will see report now when we have a portfolio of 1.8 billion square meters, which is like 25,000 apartments, that we also can and through the quarter -- in the quarter, we delivered from our building rights cash flow properties in our portfolio and we will see more of that going forward. And that is why we, in the report, do some scenario analysis to give you a flavor concerning value creation potentially in our portfolio. And just to mention a few ongoing projects. We are working, rebuilding of city hall of municipality of Nykvarn with 25-years new lease. We are next year, in Q2 next year, expecting to have our cultural center in Skellefteå with 50-years lease been finished. We are delivering new buildings for Social Services in city of Västerås with 15-years lease. Also in municipality, one of the top most municipalities, municipality of Haninge, we are expecting to deliver 23-years lease on a school and 10-years lease (sic) [ 20-year lease ] on an elderly care home. And at the same time in the pipeline, 6 new group housing units for people with disability and all of those will be on 15-years lease. So we are going to see strong inflow of cash from our building rights, but also strong improved for long leases coming from our property development portfolio. Next slide, please. To summarize, as I said before, the important message that we are, despite the times, delivering strong profit after tax per ordinary share of class A and B of SEK 0.94 per share, which is almost 5x last year at SEK 0.2. And our earnings capacity amounted -- for profit management amounted to SEK 2.9 billion at the end of Q1. And if we look the change in relation to the last year, adjusted for our cash position, we have -- we can see increase of 274% year-on-year. And as I said before, also earnings capacity slightly affected by development in Norwegian krone, which has affected more our net asset value and also in that way, let's say, affecting EPRA NAV per share that is landed at SEK 19.52 per ordinary A and B class -- A and B -- class A and B shares at the end of the first quarter. Profit before tax, SEK 1.7 billion, and after tax, SEK 1.4 billion. And adjusted for nonrecurring costs for repayment of expensive loans and also deductions for profit paid to preference shares, D shares and hybrid loans, we have net earnings -- adjusted net earnings for the year of down SEK 1.06 per ordinary A and B shares. Important message from the report. As I said before, that we are continuing to build strong cash flow machine with our scalable platform and that will be very clean from our NOI development where we are delivering margins of 67% and the NOI of SEK 895 million. And you can see that our cash flow is increasing with 300 -- cash flow from operation increasing with 358% to SEK 444 million or adjusted for nonrecurring costs to SEK 591 million and we see still continuing strong increase in cash flows going forward. Our portfolio with building rights of 1.82 million square meters, as I mentioned before, is going to continue to deliver both in terms of cash flow, in terms of the building rights that have been sold before, but also in terms of delivering new cash flow properties with long leases to our property management. And you can see from the report from the scenario analysis that show that we have strong value potential that is much, much higher than the valuation of the books in our property development portfolio. Sustainability. We focus to be 100% climate-neutral by 2030. And in the report, you show that investments within our green bond framework already have proven significant reductions in energy consumption and carbon dioxide emissions. In those times, social sustainability probably very important. And as I mentioned before, we initiated collaboration with Stockholm's Stadsmission during the first quarter to help mitigate the consequences of the spread of COVID-19. We also found Food4Heroes together with Nassos Ikonomou and Food4Heroes has been now delivered almost or probably by today more than 7,000 meals together with Stockholm's Stadsmission and Salvation Army. And we are also supporting our municipalities, both by making sure that our Social Infrastructure properties are working well. We have a contingency plan at place and have the support for the municipalities. But we also are helping in other ways, among others, by ordering respirator masks for healthcare workers in order to make them safe. And probably even more important, in long-term times that we are continuing with all investments, and we are holding our promises, including also our promise to our shareholders to pay the dividend. And through different initiatives, we are helping to mitigate negative consequences for the groups that are most affected of COVID-19, which are elderly, small businesses and health care workers. And the point number five. As I mentioned in the introduction, we have strong financial position, more than SEK 50 billion in unencumbered assets, strong bank relationships and we see strong access to European credit markets. And our focus is not changed. We are continuing to work to achieve BBB+ rating within 12 months, and that we see as a prerequisite for strong growth. And in the long term, the goal is to achieve an A rating. And this is important if you compare us with our peers [ HEBA and Nyfosa ] that both are rating in public rating category, we have much, much, much stronger key ratios without -- I mean, without comparison. Please just put those in the table, so you will see. And we think that we have even today, stronger property portfolio, higher quality and still there is unjust difference in rating. And we will work hard to show this to investors. We will work hard with trading agency. We will ask to get independent study of this because this is not fair, and we have to do work here to inform the market. We have one of the strongest balance sheets. If you look at the unencumbered assets, if you look at our credit policy, at our sales income in the Nordics and in Northern Europe -- I'm just looking at, for example, Deutsche Wohnen and the companies that have problems in Germany with future rents and so on. So we have to do the work to inform the market to get the right peers and to get the right comparison and to not be compared with the commercial real estate, which we are not part of. And finally, we have had very clear message that for the period 2019-2021, our assessment is that we will be able to deliver the highest annual increase in net asset value among all Swedish-listed property companies, and we feel pretty firm on that. This will be underpinned by strong potential from organic growth and the high NOI markets. And as I mentioned in introductions, the Q1 NOI margin was 67%, which is 11 percentage units higher than the NOI margin for Q1 2019. And this is also higher than our earnings capacity. And I'm writing finally in -- because in those times, many companies are afraid to give the guidance. But we have strong financial position. We are humble, but we are not that great. We continue to work and as I'm writing in the outlook session, given the profits for Q1 and given our earnings capacity, just mathematically, we see that we will be able to have total earnings capacity for the 2020 like SEK 3.28 per ordinary A and B shares. I will stop there, and please come with questions. Thank you. Next slide, final slide.
[Operator Instructions] Our first question comes from the line of Simen Mortensen from DNB Markets.
This is Simen from DNB. I have a few questions, actually. First of all, saw the report, just in terms of the rental income, I see in the quarter it's roughly SEK 50 million higher than what you all can read off your earnings capacity. The reported rent in the quarter is actually higher than the rental capacity figures. Is there anything behind that roughly SEK 50 million?
Yes. And the main reason that is imminently said that we see that we are negotiating new leases and we are also being able to move some of the properties from building rights to property portfolio. So that is main merits with organic growth.
Yes. But why is it SEK 50 million higher in Q1 than the earnings capacity guidance we just [indiscernible].
Our earnings capacity, Simen, is just pure mathematics. We do not have any rent increases and we do not have any properties that we know that we have new leases for. And we are very conservative in our earnings capacity. So that is only this.
Okay. Can you also comment on the quarterly increase in the vacancy? We can see roughly it's up 90 basis points Q-on-Q. Can you tell us a bit what's behind that?
That is -- the reason for that is that we have been going to continue to invest and so that is the main reason. And 0.1% is Norwegian krone because in Norway, we have, I would say, much higher margins.
Okay. Higher occupancy in Norway [indiscernible].
Yes. Because in Sweden, we have the Swedish rent-regulated residentials that we use for refurbishing. And in Sweden we have also the property development portfolio that -- where we get -- when we see opportunity to do refurbishment, then we see, of course, the -- we use that by letting tenants leave in order to have income from -- increased income when the property is refurbished.
Okay. To follow up in terms of vacancies and stuff. I've read several times in media here and Norway about OsloMet, which clearly did not, despite the rise in negotiation, extend the lease with you. And it seems to be that there will be a legal dispute between you and that tenant. Can you please give us an update on the status there?
We feel that we have a right and our property management in Norway feel that OsloMet has to fulfill their obligations. So we feel pretty confident about it.
Yes. But what's behind? The company seems to not be a tenant and you're claiming -- we just have to understand what the legal case is about.
That is -- we don't want to discuss our tenants outside of the direct discussion. But we feel that will done in -- that is long story from Hemfosa time. But we feel that we will find a great solution and we feel confident with our case.
But it seems NOK 640 million is in dispute, so quite significant amount. So you don't care to give us any more details?
That is not significant amount for us. That is dealt by the local team in Norway, and we still own the property, and we will not comment our tenants outside of the direct discussion.
Okay. In terms of the payable tax in the quarter, also message that's in the report, it's SEK 48 million. Based on earnings, profit from rental operations, its amount is roughly 15% payable tax ratio. Could you give us a detail on the payable tax and what to expect in terms of payable tax ratios?
In the long term, we are expecting to have payable tax around 10% and that is still our expectation. However, after Hemfosa transaction, we will, during the year, do even more analysis on that. But we have not changed our view where it should be.
Okay. Just also to follow up a bit more. Sorry, it takes so much time. But in terms of your earnings guidance, you guided in terms of financing SEK 736 million. However, when we look into the Q1, we see, despite both extra charges, you're at SEK 292 million, which is quite significantly different in terms of financing costs. Could you give us a clarification of what's behind? And what's the difference between the figures we saw in Q1 as a financing cost and those costs you guide in the earnings capacity?
Our guidance is pretty, how to say, pretty mathematic and it's our average interest rate is 1.54 -- 1.52% at the end of the quarter and then the rest is not. However, we came in Q1 with relatively high interest rates from Hemfosa transaction and also some additional costs from that transaction. So -- and then we did large bond issuances in order to repay bank debt and then we have some overlapping there. So we have also probably some nonrecurring costs also in that number. But we think that we have strong efforts, so we didn't invest any more time to explain that. So the message there is that we feel pretty confident with our earnings capacity.
And just to sort of sum up for now, just to note there's solid value uplift in the quarter. Could you tell us where and what kind of assets we found this one? And also how that value uplift can be seen in relation to Nyfosa not wanting to step up in the NOI. Just to help us understand where has the value increased then and how we can see this in association with Nyfosa not stepping into that circumstance.
There is no association at all. Concerning value increase, it's very easy. You could conclude that our income is like SEK 50 million higher than earnings capacity. And that is, of course, explaining the value increase. And then we also have some -- I mean, some of the costs, let's say, that we had in the quarter, P&L should be in value changes because they may have the Hemfosa transaction was classified so -- but the main reason is that we have much higher income that we had in Q4 earnings capacity and that is, of course, expressed in value chain. Concerning Nyfosa transaction, the -- we stopped the Nyfosa transaction on 31st of January when Nyfosa didn't succeed to fund the equity for transactions. And there is -- we have been likely that we will continue to sell some properties and -- but we are not going to sell in big pieces because we see that we will make more money by selling asset by asset.
And just to clarify, you said Nyfosa didn't succeed and have enough equity to step in. So did you stop the deal, just to clarify that was what you said?
That is very clear, Simen.
Okay. Just one question on the side here. In terms of your currency exposure and financing. First of all, like the net debt increase of SEK 5.6 billion, if you include the hybrids and everything, you're almost at SEK 9.7 billion. We noticed market debt is in euros. Perhaps, how is your euro debt exposure in total? And how has that been accounted in terms of raising the net debt versus the asset values? What is your debt exposure in euros and your asset value exposure in euro? Also in hybrids, please.
Our -- first, we do not include the hybrids because the hybrids -- you see the hybrid as our equity. And the second here is that we feel pretty confident to have exposure in liquid markets with euro East -- to compare with Swedish krone or Norwegian krone. So that is our strategic choice. And right now, our exposure to euro that is not matched with assets is around EUR 700 million. And we are following that closely and using hedging in order to safeguard us from that. And that is why we are reporting some unrealized losses through P&L.
So I assume, but how is that hedging being done, just to clarify? So you will have realized financial costs when there's currency movements and financial gains exactly the other way in terms of 0 exposure? And just help us understand the financing costs versus the -- of the hedging in [indiscernible].
Concerning the Norwegian krone, we do not hedge anything because that is not liquid market. And we see the Swedish krone as our exposure to our shareholders. And we hedge euros by FX forward because that is, from our perspective, because we are a growing company. We are going to grow our property portfolio in both Finland and Denmark, and that is why we use the instruments that we use.
Okay. But how long is your fixing and hedging, just to clarify?
We are rolling FX forward on 3-month basis or -- so that is how we are with our hedging. And we are -- we feel pretty confident in that.
Okay. But just what is the unrealized loss in FX like in Q1?
It is reported affecting the profit SEK 130 million in Q1.
[Operator Instructions] And the next question comes from the line of Philip Hallberg from Danske Bank.
I only have 2 questions here. So maybe I missed this during your presentation, but in your earnings capacity, the financial income is up 75% quarter-on-quarter. Could you just elaborate a bit on what is included in the financial income? And what is behind the large increase quarter-on-quarter?
Yes. We have the Other income because we have strong cash position. And we are, among others, lending money to our joint ventures [indiscernible] Norway. So that is the main reason.
Okay. And could you just give any figures like how much have you lended out to joint venture in this quarter? And is it long-term loans or...
No. It is -- I mean, we have been in strong cash position during long time and that is one of the reasons why we are placing the cash because at the end of the quarter, we had the SEK 3.8 billion in cash position. And as we said in -- I see here that the cash is king not only under the pandemic. So -- and particularly when the times are shaky, it is for us an efficient way to place the cash in different -- in this case, in our joint ventures that have strong cash flow, both in Sweden and Norway. So we had like SEK 1.3 billion in total shareholder loans, I think.
Okay. Well, so it's only like interest expenses from the JVs that come in that's financial income for you guys. You don't include like your shares in, for instance, in SSM or anything like that?
No, there is no cash commitment. It's just real cash that we include.
Okay. And another question regarding earnings capacity. If we look quarter-to-quarter, you have managed to realize roughly SEK 170 million out of the communicated SEK 300 million synergies from the Hemfosa acquisition. Could you just give us some flavor regarding the remaining SEK 130 million? Is it still on the financing side you expect those synergies to realize? Or is it mixed between several lines in the P&L? Just to know what we should calculate with here.
Yes. That is from financing. We do have -- we have done SEK 170 million and we still have SEK 70 million from financing and -- or for SEK 90 million from financing and SEK 40 million from operations. So that is what it is in this SEK 130 million because we announced that we did SEK 170 million already in February.
Yes, exactly. Those were the paydown debt, right? Yes. Okay. Those were my questions.
And the next question comes from the line of Jan Ihrfelt from Kepler Cheuvreux.
Okay. Jan Ihrfelt. Yes. I have actually 3 questions. And the first one is actually going back to the first question. And I didn't get the answer there to why the financial costs were approximately SEK 50 million higher than what was indicated in the earnings capacity for Q4. Was it some nonrecurring items in this SEK 50 million? Or could you just explain a little bit more into detail?
Yes. There is still nonrecurring items left in those SEK 250 million, some fees from -- within Hemfosa portfolio and that is part of that. And then we have this overlapping by -- we first issued the debt and then we repaid the debt. And that is also part of explanation because, as you remember, we announced that we want to decrease because Hemfosa was fully bank financed and had a relatively low level of funding coverage assets and we do not like that. So we have been working hard to repay a large part of bank debt. I mean in order to do that, we first have to, how to say, we first issued the debt in order to be on the safe side of the aisle and then we repaid the debt. And then there is also a small effect from euro because euro stopped at the end of the quarter. So that is also affecting slightly, but it's -- the main reason is overlapping of that because we did large repayment. If you look at -- you will see that we have repaid like SEK 13 billion, SEK 14 billion of debt in Q1, which is very large amount.
Okay. So a very large portion of this SEK 50 million is more or less treated as nonrecurring?
That is my view that the largest portion of that is nonrecurring.
Okay. And second question also regarding your financial net debt. You stated in the report that your average interest rate was 1.52%. And looking forward and looking at your maturities, what you can get on the market, et cetera, et cetera. How do you think your average interest rate will develop going forward?
We are going to decrease -- continue to decrease our average interest rate despite the crisis.
So you think you will see a lower average interest rate at the end of December than you have now?
Absolutely.
Okay. And my third question really relates to your property revaluations and could you give us a split of how much was cash flow driven and how much yield driven is the portion split?
I should say that it is -- more than 70% of that is cash flow driven, and then you have 8% or 5%, which is coming from the building rights. And the building rights are actually also affecting the cash flow because some building rights are leaving building rights and we are coming in, in property portfolios. So it's a relatively small part of this SEK 1.6 billion that is coming from the yields. It's mainly cash flow driven. And that is also why we are presenting strong rental income, much stronger than earnings capacity.
And also final question, if I may. And also regarding your property value assets. How -- if you split that revaluation into your old portfolio, the SBB portfolio and the new Hemfosa portfolio, where the main property revaluations made in the [indiscernible].
The main part is coming from Hemfosa portfolio and coming from higher income than having in the valuation by Q4.
And the next question comes from the line of Bertil Nilsson from Carlsquare.
My question has partly been taken already, but I can take a follow-up on the market -- property market and valuation scenario. I interpret your answer that you say that property portfolios will be discounted for a while and you'll sell more or less at the same. As you look at...
That's not right. Not discounting, we are selling properties at higher levels than the book. And we are selling properties at higher levels when we sell property by property. That's the level that has been agreed with Nyfosa.
Okay. Okay. Sure. Will you -- do you see any effect on -- do you see like several other parties in the market being affected by this new situation on the financing side? But there will be a bit disclosed to buy more?
It's very important. As I said in my introduction, we need to do the voice to inform the market and -- concerning differences and the category where we should be both rated and see in the commercial real estate. And there is still very strong demand for our assets and those are easily the most looked after assets. So we do not see any, how to say -- it is very difficult to buy these kinds of assets, and we see that the transactions that are presenting are often targeting this kind of lower discussions.
And the building rates portfolio will not be much affected by this?
No. Because we value our building rights relatively low before and we actually still -- we sold -- we have been the only company that have been selling building rights also when the condo crisis started and we still sell the building rights. However, the crisis created opportunities for us to get good prices and to get entrepreneurs that can guarantee the construction cost. So we will probably get properties from our building rights in our portfolios with value upside. So there is an opportunity for us that we are -- that we saw already before the COVID-19 crisis and hired a guy that has been carrying [indiscernible] -- one of [indiscernible] construction teams that has worked together with us before at [indiscernible]. So we are strengthening team there in order to continue to deliver strong organic growth.
And the next question comes from the line of Tobias Kaj from ABG.
My first question is regarding your income for Q2. You're right that you have discounts of SEK 1 million and changed or postponed payments for SEK 12 million. Does that mean that you have already received 99% of income contracted for Q2? Or do you have other late payments where you don't see any risk in?
We don't have any other exposure. And this exposure is actually we are making space. I think up today, we have SEK 400,000 in discounts or SEK 446,000 in discounts. But we reserved to have SEK 1 million and of those deferrals are right now 6.6 active and the others are those that we are expecting that we may help. So that is -- how to say, that is our maximum exposure as we see it.
Okay. And regarding your gearing, you're right that you have 50% net debt to total assets. But if we include the hybrid, you are at 55.5% or if we include 50% of the hybrid. What level do you need to keep your current rating? And what level would you need to reach to get to the BBB+ rating? And also, how do rating companies view the goodwill position? Do they deduct for that or not?
We have -- in our rating focus, focusing on S&P's view and according to S&P, we need to be below debt-to-equity below 55% in order to achieve BBB, BBB+ and below 50% in order to achieve BBB+ given our high quality of assets. And we feel confident on our way as we focus to achieve BBB+. So there has not been any changes.
Do we have to stand and pause? Do they not deduct for the goodwill in the calculation?
They calculate on -- the calculation is based on -- so they calculate on equity -- adjust equity for the hybrid and then adjust debt for the hybrid and then the quote is that was debt-to-equity and in that way indirectly good release account.
And the last question is a follow-up question from the line of Simen Mortensen from DNB.
Just my question, again. I read in your report you had realized negative property changes of SEK 60 million, which means that you have sold property below book values, if I'm correct. Can you just tell us what's behind that?
That is value of the [indiscernible]
And as there are no further questions, I'll hand it back to the speaker.
We have received 2 questions by e-mail as well.
Yes. The first one comes from [ Michael Kardashian ]. He's got 2 questions. Can you talk about your liquidity situation. Cash on hand is small.
Cash on hand is SEK 3.8 billion.
Also, how do you plan to stabilize your BBB- rating? Are disposals impacted by the environment?
Could you please repeat?
Also how do you plan to stabilize your BBB- rating? Are disposals impacted by the environment?
We are not trying to stabilize our BBB- rating. We are going to get BBB+ rating. And we are continuing to dispose as we announced before.
Third question. Why is adjusted LTV so high at 67%? Adjusted LTV defined as net debt plus 50% hybrid over the investment portfolio.
And that is because -- that is you can always count in the way you want to count. Our net LTV is 50% that we present in the report and on top of the ownership -- or direct ownership of the properties, we have also indirect ownership that is not a guarantee in that measure.
The next question comes from Thakur, Lakshay from Merian Global Investors. Congratulations on the quarter and apologies my webcast isn't clear. Just to better understand how you're planning on paying back your commercial paper program, could you give a bit more color on the backup facilities themselves? And if you would consider issuing further unsecured debt in order to bust your liquidity position?
We have strong liquidity position of SEK 3.8 billion and on top of that SEK 7 billion in backup facilities, which is almost 2x our commercial papers. We actually issued commercial papers last week. So we feel pretty confident with our liquidity position.
We turn over to Ilija for some closing words.
Great. Thank you very much. And I can just close with actually the latest question that in those times are very important. Just emphasizing that we have strong liquidity position of SEK 3.8 billion in cash, we have SEK 7 billion in credit lines, we have more than SEK 50 billion in unencumbered assets and very strong bank relationship in the Nordics and strong inflow of cash during the year, both from earnings capacity if you look like SEK 2.5 billion but also from the building rights that have been sold before. So we feel both humble given the situation for the -- for our society, but also pretty confident to continue to deliver shareholder value and value to our bond investors. Thank you very much.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.