Wallenstam AB

STO:WALL B

Earnings Call Transcript 2021-Q1

[Susann Linde, CFO & Head of Investor Relations]

Hello, and welcome to the presentation of the first quarter of 2021. My name is Susann Linde, I'm CFO and Head of Investor Relations here at Wallenstam. And if you have any questions please click on the envelop on this side and -- or send me an email, I will answer your questions. Please turn to Page 2. It has been a quarter where the business continues to deliver. And in summary, I can say that we report a stable result. Occupancy remains at the same level as the end of the year for commercial as well as residential, which continue to be 100% occupied. Our own housing queue for our new construction continues to grow and now over 140,000 people are in the queue. Turn to Page 3. Some of the things that have happened during the quarter include that we obtained a land allocation in Barkarbystaden in Järfälla. Here, we plan for about 270 apartments with commercial elements that meet the planned square and metro entrance. We have also acquired land and properties in Gothenburg, Måndag and Sundbyberg for future new construction. In this photo, you will see the high-profile temporary Östermalmshallen that we took over during this quarter. And now we have started to take down this building, and the building will then be mounted elsewhere and reused to what is not fully determined. During the quarter, we completely sold our shares in the solar cell company, Elisedal, and instead invested in the payment service provider, Klarna. Now turn to Page 4. I think that we are good at refining our buildings to become more attractive to the society. An example of this that has been noticed is at Artilleristallarna in Gothenburg, which has been given new life through our careful renovation. We won first prize in the competition Construction of the Year in the category Renovation. Doing things like this also creates a greater flow to the site and is good for the surrounding properties as well and its businesses as well. Now turn to Page 5. Here, we focus on the growth regions and the distribution of our properties, in which we operate, is basically the same as at the end of the year. The only thing that has happened this quarter is that we have completed new rental apartments, and that affect the distribution but not significantly. So you can see that Gothenburg is 60% and Stockholm is 40%. Now turn to Page 6. Yes, there has been another quarter of regulations due to COVID and the regulations have once again been extended. But now we are all starting to see the light in the tunnel, the vaccinations are underway and summer is approaching. So even this quarter, it has been affected our segments in different ways. If we start with the office market, there is continued strong demand, and we noticed that we have an attractive product of our city-owned offices. When it comes to restaurants and retail, you all know it's tougher, especially now with the limited opening hours. As at year-end, our commercial portfolio has a 94% occupancy rate. And as I said, the residentials has a high demand, and our housing queue has increased further and the residential holding is fully let. So overall, our business is doing well, and we are seeing great demand for our premises. Now turn to Page 7. In times like these, during a pandemic, it becomes even clearer to help those who are worse off. We have, therefore, giving donations and support to aid organization in several ways. During this quarter, we further expanded our cooperation with Stockholm City Mission. Wallenstam has been a partner of the Stockholm City Mission since 2008, and is now expanding our commitment by joining as a gift giver in the redevelopment of the Church of St. Paul at Mariatorget in Stockholm. This is an important investment for society and those who are vulnerable in Stockholm. Please turn to Page 8. Another important thing we do for society, perhaps the most important, it is to create new homes for families in the form of our construction of new rental apartments. During this quarter, we completed just over 400 apartments in both Stockholm and Gothenburg. If we turn to next page, I will go through each one. So now turn to Page 9. We have continued the completion in Haninge. And in total, in these 2 projects, we have completed 95 apartments and 90 to complete during the year. Now turn to Page 10. We had 2 Tyreso and where we have completed 55 apartments. It's the project here on the left, and it's a large project in total of 221 apartments. And there we have 66 apartments left to complete during this year. To the right is Söra Kvarter in Österåker, where we have completed another 35 apartments and still have 103 apartments to complete during this year. Turn to Page 11. And we go to Gothenburg and our project Elisedal, which is also a big project of a total 336 apartments. And after these 158 apartments that we have completed this quarter, we still have another 96 apartments that will be completed by the summer. During this quarter, we have fully completed our project Rosengången in Mölnlycke. In that area, we have another 2 projects ongoing, 1 of which is ready for gradual occupation during quarter 4 this year. Now turning to Page 12. Let's move on to our income statement and how much value we have added this first quarter. If we start with our net operating income, this is an increase of SEK 29 million, which corresponds to an increase of 7% comparing the same period last year and a surplus ratio of 73.8%, which is at the same level as last year. As usual, I will go into more detail about what has affected our net operating income. So please turn to Page 13. Yes, I said that the NOI has increased by 7%. And if we start with the rental income, it has increased by SEK 39 million and SEK 37 million, thanks to our new construction. It is both the 1 which were completed last year and the 1 that we have completed during this quarter. In our existing portfolio, the base rent has increased by just over 2% and increases by net SEK 5 million. Operating expenses increased by SEK 10 million, where SEK 7 million is due to a larger property portfolio as we have completed so many new properties. In our existing holding, expenses due to the climate increased by $7 million. It has been both colder and more snowy compared to last year. In terms of maintenance, it has been SEK 4 million cheaper than the previous year. So in total, a growth of SEK 29 million in NOI. So please turn to Page 14. Our net operating income continues to increase. And of course, our strategy to add new construction is really evident in the figures. The newly constructed efficient rental apartments at a good net operating income that also improves our surplus ratio, as you can see here on the graph. Now turn to Page 15. The total income from property management amounts to SEK 291 million, and this is 6% better than the previous year -- last year at the same time. Administration expenses has increased slightly this quarter, mainly due to more employees compared to last year. The net financial items are basically at the same level as the same period last year, but we will go over to the next page and talk more about it. So please turn to Page 16. Our average interest rate, when we leave this period, stands at 1.21%, which is 10 basis points lower than the corresponding period last year. But if you look at the average rate during the quarter, it is also 1.21%, which is 2 basis points lower than the previous year. It was only towards the end of the first quarter last year that the interest rates began to rise in the commercial paper market among other things. We have had an average debt of just over SEK 3 billion compared to last year. Please turn to Page 17. Our profit before changes in value amounts to SEK 321 million and is basically at the same level as last year. We have sold 2 apartments further at Vasagatan 33, our core project there. And then we have just 1 apartment left, and it is sold but will be taken over in the close future. Otherwise, I can say that it was less windy than last year, so we have produced less energy by around 35% but the price of electricity has increased. So in total, the result in energy is 0. Now turn to Page 18. Our changes in value of properties amounted to SEK 311 million and about half come from our new construction and the other half from the existing properties. The value of existing properties are increasing due to increased net operating income, and we haven't adjusted any direct yield requirements this quarter. Profit after tax ends at SEK 723 million and is doubling compared to the previous year. And in addition to what I have mentioned, changes in the value of our derivatives have had a positive impact on the quarter by SEK 253 million as long-term interest rates have risen during the quarter. Now turn to Page 19 and go on with the balance sheet. In total, the properties amount to SEK 59 billion, and this represents an increase of SEK 1.3 billion since the beginning of the year. In addition to changes in value of SEK 0.3 billion, we made investments during the quarter of SEK 1 billion in total. Now turn to Page 20. If we look at the total value of the properties, 62% of the value is residential and 38% commercial. This means that the share of value of residential has increased by 2 points since the beginning of the year. As I said, the yield requirements haven't been adjusted during the quarter and are at the same level as last quarter and amounts to 4.5% for commercial and 3.1% on average for the residentials. Now turn to Page 21. In the first quarter, we have invested SEK 800 million in our new construction, and our plan in the current business plan is to invest SEK 3 billion to SEK 4 billion annually in our new construction. Now turn to Page 22. We have started 1 project this quarter. It is in Kallebäcks Kvarter 7 of 189 apartments. In Kallebäcks Terrasser, we have almost 1,000 apartments under construction right now. So there are a lot of constructions there right now. And we can see on the next page what we are ongoing right now. So please turn to Page 23. You can see that here in Kallebäcks, we have a lot, just around 1,000, as I said. And the first project there, which will be completed is Kallebäcks Terrasser Kvarter 11, which will be completed during quarter 4 this year. So in total, we have now 2,100 apartments that are ongoing, and this has decreased a bit due to the fact that we have completed so many apartments and the starts have been delayed due to the permit processes that have been negatively affected by the pandemic. But to remember, they are only delayed in time and will be started but later than expected. Now turn to Page 24. Our interest-bearing liabilities amount to SEK 27.7 billion. And as I said, this is an average increase of SEK 3 billion compared to the previous year, and an increase since the beginning of the year of approximately SEK 350 million. Now turn to Page 25. During the quarter, we issued additional green bonds of SEK 250 million and additional SEK 200 million in commercial papers. So you can see here on the graph, how the distribution is in our financing. So the share of green finance is a little more than 1/4 of our total funding right now. Now turn to Page 26. To sum up what I said, we can review our key ratios. We reported NOI of SEK 440 million, which is an increase of 7%, a surplus ratio at the same level as the corresponding period last year. The LTV ratio and equity ratio are basically at the same level as the previous year and from the beginning of the year. Equity per share amounts to SEK 81 and net asset value is now just over SEK 100. Net asset value is also our goal. So let's turn to next page, Page 27. During the first quarter, we created SEK 2.6 in net asset value, which means that we have added SEK 21.7 to our net asset value within this business plan. Our goal is to have created SEK 40 by the end of 2023, and we keep on filling this out. So that was all for today. And as I said at the start, if you have any questions, you can just e-mail or click here on the envelope. So will I try to answer all your questions. Thank you all for listening, and goodbye.