Wallenstam AB

STO:WALL B

Earnings Call Transcript 2020-Q4

[Susann Linde]

Welcome to the presentation of year-end report 2020. My name is Susann Linde, CFO and Head of Investor Relations here at Wallenstam. And if you have any questions, please click on the envelope on this side, and I will try to answer them as soon as possible. Now turn to Page 2. The title of our year-end report is Wallenstam has a successful business model. Despite the pandemic, we, as a company, can navigate our way through this in a good way. And even in such time like this, we create value. We create new homes in attractive areas and rented out offices at good levels. These markets are doing well, but you still have to be humble and say it has been a tough time. There has been a lot of complex with tenants, especially shops and restaurants having a very tough time. We try to do as much as we can to help them both discounts and by buying lunches, which we delivered to the needy in society. And turn to Page 3. I'm going to talk about the year 2020, but I just have to start to say that we won the gold in the Swedish Design Award this end of January, with our newly redesigned and logo. I think it looks really nice, don't you think, and it feels great that our [indiscernible] that has been with us since the '50s has now come in a new suit that is so stylish and also in a single brush stroke. But now I have to go from design into business. So go to next page. And what happened in quarter 4. In mid-December, Länsförsäkringar out took over the newly constructed development property in New York at Gärdet in Stockholm of 50 apartments, with a price of SEK 420 million. We have also bought a central land at Carlandersplatsen in Gothenburg, on which we will build apartments here in the close future. And we have also signed an agreement of land acquisition in Stora Sköndal in Stockholm, which we take over when the zoning plan has gained legal force. In mid-December, we signed an agreement with SBB of sale of 2 community properties in Gothenburg that mainly contain schools. And they will take over these properties this spring. In November, we acquired further shares in Convendum through a new issue of an amount of SEK 58 million, and now we own 34.6% of the capital and 31.6% of the votes. We also signed a letter of intent in late December to acquire the temporary market hall Östermalmshallen in Stockholm, where now the final acquisition agreement has been signed. The Board proposes a dividend of SEK 1.2 per share for the year 2020, an increase of SEK 0.70 compared to last year. Now turn to Page 5. And a short summary of what we have done throughout the whole year is that we have invested over SEK 4 billion in construction and started construction of 551 apartments which is slightly lower than usual. And here, we can partly see the effects of the pandemic where the permit processes, such as building permissions have been delayed. We have also acquired land for future new construction totaling SEK 500 million and also sold properties and apartments for the same amount. We have also completed 1,331 apartments this year, and the effect of this, you will see further on in my presentation. Now turn to Page 6. This slide, I always show you, just to remind you of what our property holding looks like. You probably know by now that we are concentrated on the growing regions of Stockholm and Gothenburg, and we have both -- residential in both Gothenburg and Stockholm and the commercial premises are mainly in the Gothenburg CBD area. And 50% of the rental value comes from residential and 25% from offices. And now turn to Page 7. And here is how we are experiencing the market right now. On the office market, we see a continued high demand, the restaurant and retail are having a tough time, as you all know, and especially now with new regulated opening hours, but we don't notice any bankruptcies so far in our holding. The commercials have an occupancy rate of 94%. Residential, as I said, has the high demand, and our housing queue has increased further and have 130,000 people and the residential holding is fully occupied. In total, it looks good for our business, but of course, we want all our tenants to go back to normal again. Now turn to Page 8. As I said, we feel that the office market is working well. However, the agreements take a little longer, since the company, you have much more to focus on now than [ to move ]. During the autumn, we have set a lot of new agreements, and we can welcome a number of new tenants to us, which feels very good. And here are some of our new agreements. Now turn to Page 9. So let us move on to our new construction. This quarter has been a record quarter in number of completions. We have completed 652 rental apartments that have entered our management. In total, for the year, it is 1,331 apartments that I mentioned earlier. And we had to adapt to the pandemic and [ sole digital showings, ] among other things, and it has really worked well, so we will continue to do so even in the future. I will go through quickly in which projects we have completed apartments or the entire property during this quarter. So go to next slide, Page 10. And we start in Stockholm in Haninge [indiscernible] with [ Parkstråket 1 ] where we completed 18 apartments during the quarter, and a total of 54 apartments. So here, we have 100 left to complete. To the right, it's Parkstråket 2 where we started the first occupation of 46 apartments here in this property. So here, we have 85 apartments left to complete. Now turn to Page 11. We go to Tyresö and where we completed 100 apartments, and it's a large project of a total of 221 apartments. So here, we have 121 apartments left in Tyresö, Allén. And to the right, it's Österåker Söra kvarter, where we have occupied 58 apartments this quarter. And we still have 138 apartments here left to complete of total 305 apartments. So it's a big property. Now turn to Page 12. Now we are in Sundbyberg and our urban development project here, which we call Umami. Here, we have a total of about 330 apartments that have been completed in total and 181 are those now during this fourth quarter in these 2 properties. Now turn to Page 13. And now let us move to Gothenburg and start with Måndag to the left, it's Elisedal, which we started to complete during the quarter, 82 apartments and where we have a total of 336 apartments. So it's a large project that we will gradually complete. [ We keep up ] in the Gothenburg region and goes to Majorna, Godhems Backe, and where we have started occupation of 77 apartments out of total 138 departments that we are constructing there. Now turn to Page 14. To the left, it's kvarteret Rosengången, our first project in Mölnlycke, which has been completed. We started the occupation of 61 apartments in the fourth quarter of 2020. And the rest 62 apartments, we started to occupy in February this year. So in total, it's 123 apartments here in this project. We have also occupied the first property of 3 on Sten Stures kröningar, which you can see here on the right. So we have 2 left there. And there were a lot of projects, but also a lot of apartments. So now we can start to look at the result. And so please go to next slide. So let's start with the net operating income, which amounts to SEK 1.6 billion and a surplus ratio of 75.7%, which is quite better than last year, this, despite the corona, which has affected us negatively in our rental income. I will show you more on the next page, Page 16. Here, I try to do a short summary of the COVID-19 discounts and support buyings and how that has affected us. We gave discounts and support buyings of a total of approximately SEK 30 million, and we received compensation of SEK 9 million in rent support. This means that our result is negatively affected by net SEK 21 million in total. So go on to next page, Page 17. We then look at the entire net operating income. And what the reason is why it has increased by 5%, we can start with the rental income, which has increased by SEK 105 million and where SEK 83 million comes from our new construction that came into our management. Existing property increased by SEK 41 million, and this means an increase of 3.5% in basic rent. Operating expenses increased by SEK 22 million and the majority SEK 17 million is due to a larger property portfolio, as we have completed so many new apartments during the year. And it can be said that the year began and ended with less snow and warmer climate, which means SEK 8 million in lower expenses. But now it's much snow and colder. Operating expenses are increasing mainly due to tariff increases in general. Regarding property maintenance, we have managed to keep costs well. So in total, it's a higher NOI with SEK 83 million. Now turn to Page 18. Here, you can see how the net operating income has developed over time. And in 4 years, we have increased our NOI by more than SEK 400 million and the surplus ratio has also increased at a good pace. Now turn to Page 19. The entire income from property management amounts to SEK 1,131 million. And in addition to the net operating income, it has been deducted for our administration expenses and financial expenses. The administration has increased slightly this quarter, mainly due to increased gifts that we have chosen to do due to the pandemic. Regarding the net financial items, they are approximately SEK 4 million to SEK 5 million higher expenses in the properties than last year. And if we switch to next page, I can tell you more about that. So switch to Page 20. Our average interest rate, when we close the year is 1.21%, which is 1 point lower than last year. But if you look at the average interest rate during the whole year, it's higher than previous year by 9 points, in total 1.29%. During the spring, there were higher interest rates on the capital markets. But now and after the summer, they are back at basically the same levels as before the pandemic.In addition to interest rates, we also had on average higher interest-bearing liability of just over SEK 3 billion during the year. Now turn to next page, Page 21. Our profit before changes in value amounts to SEK 1,253 million and is an increase of just over SEK 80 million compared to last year. And the main reason is that we sold a development property New York this last quarter. The result from energy is negative because of lower prices, but I can also say some glad news on next page, Page 22, and that is that we had a record in electricity production from our wind turbines during the year, as much as 417 gigawatt hours. And how much is that then? It corresponds to an annual consumption for 167,000 apartments or 20,500 villas. So there are a lot of energy that we have produced. So we are very proud of that figure. Now turn to Page 23. Our changes in value in properties amounted to SEK 1,339 million, and 2/3 come from our new construction. And the remaining part, SEK 486 million, from our existing properties and that was mainly due to operating net increases in the existing properties. Now turn to next page, Page 24. In the properties that we completed during the year, we created a total of 30% in surplus value. This doesn't correspond to what we recognize in the income statement because this is just summary of the completed properties. In the income statement, we recognized all projects, even the one under construction because we gradually value the properties during the construction period. So now turn to Page 25. So in total, the properties amounted to SEK 58 billion, which means an increase of SEK 5.5 billion compared to last year, where in addition to changes in value of SEK 1.3 billion, the investments we made during the year of SEK 4.5 billion are also added. And more about the property value on next page, Page 26. If we look at the total market value of the properties and the distribution, 60% of the value is residential and 40% commercial. The average yield requirement wasn't adjusted during the quarter and amounts to 4.5% for commercial and 3.1% for residential. Now turn to Page 27. As you can see, the investment rate has been high during the year and amounts to SEK 4 billion for construction. So this is just the construction, not acquisitions. And the plan is to invest around SEK 3 billion to SEK 4 billion annually during this business plan 2023 in construction. Now turn to Page 28. We just had one start during this quarter and it is Bandhagen in Stockholm, where we built 84 apartments. We started a total of 551 apartments during the year, like I started the presentation with. Now turn to Page 29. With occupations and starts, we had during the year, the total ongoing projects amount to 2,321 apartments, of which 857 in Stockholm and 1,464 in Gothenburg. And here, you can see when the occupation starts and the occupation can be over many quarters, depending on how big the property is. Now turn to Page 30. As I said in the beginning of this presentation, we have bought some land during the year and quarter and filled up our future product portfolio, which now amounts to just over 17,000 apartments. And this is, of course, in different phases and not ready for construction right now, but it is for the future. And it feels very good to fill up for the future because we all know that it takes a lot of time until it can be built. So in the future, they will come into our management. Now turn to Page 31. At the end of the year, we had just over SEK 500 million in cash and interest-bearing liabilities of just over SEK 27.3 billion, which, as I mentioned before, is just over SEK 3 billion more in average compared with the previous year. And more about the financing on next page, Page 32. During the year, we further increased the proportion of bank loans and reduced our outstanding volume of commercial papers. And also reduced the backup facility for commercial papers from SEK 4 billion down to SEK 3 billion, which you can also see there down to the right on the available liquidity, which has gone down because of that. And also that we used all the credit from EIB during the year. When we released our climate goals, we also released that from now on, we will only issue green bonds. And we've done this during the year. So now the share of green bonds in the total volume of bonds amounts to about 60%. In total, our green financing amounts to approximately 25%. During the year, we also added new interest rate derivatives and have a volume of derivatives of just over SEK 12 billion and a debt volume of SEK 27 billion. And now turn to next page, Page 33. Here is a summary of some of our key figures. I have mentioned most of them before. If we look at the equity ratio and LTV, they amount to 42% and 46%, and the equity ratio has decreased slightly and the LTV has risen since the previous year. Equity per share amounts to SEK 79 and net asset value to SEK 98.3 per share. And net asset value is also our goal in our business plan, and I will show you more on next page, Page 34. Yes. Our goal is to increase the net asset value of SEK 40 per share. And during the year, we created SEK 7, and we have created 19.1 so far so -- during this business plan, which means that we have created half of what our goal is by 2023. So this SEK 7, next page, I will show you a summary of what created this. Let's turn to Page 35. So here is a graph of the SEK 7, where SEK 2.8 comes from property management and SEK 1.5 comes from changes in value in existing properties and SEK 2.6 in value growth in our new construction as well as divestments of SEK 0.4. So this was all from me. And please, if you have any questions don't hesitate to contact me. And thank you all very much for listening. Thank you. Goodbye.