Castellum AB (publ) (CAST) Earnings Call Transcript & Summary

Welcome to the Castellum Q4 Report 2023. [Operator Instructions] Now I will hand the conference over to CEO, Joacim Sjoberg; and CFO, Jens Andersson. Please go ahead.

Good morning, everyone, and welcome to this Q4 and full year 2023 presentation from Castellum. I will start by saying that our core business continues to deliver stable results, for which we are both proud and happy. Our total income increases by 9.8%, mainly due to indexations and completed projects, more on that later. The income from property management decreases mainly due to higher interest costs, of course, while the NOI increases by 12.5%. Financial costs increases by approximately 42%. And in addition, the central administration and results from Entra negatively affects our results. In total, we have had changes in the property values over the year of minus 9.5%. That corresponds to the amount SEK 14.5 billion. Those changes are for the last quarter at SEK 6.3 billion. The average yield requirement is now down up to 5.62% compared to 5.01% at the beginning of the year. So it's an increase of 61 bps over the year. Our net leasing was negative minus SEK 67 million, mainly due to increased terminations during the last quarter. And for those of you, who have heard me predicted positive figure, I can only say that I did not really expect a high number of terminations towards the end of the year, more on leasing trends later on in this presentation. We see a slightly decreased occupancy rate that is negatively affected by divestments of fully let properties, and so, the statistical effect is already given. So for those of you, who are new to us, Castellum is one of the largest listed property companies in the Nordic region. We are a fully integrated company with local hands-on presence, where our assets are located. The property portfolio is located in attractive growth regions in the Nordics, and we are exposed to the robust market in Norway via our holding in Entra. On the map, you see the locations of our property portfolio and the size of the circles represent somewhat of our property size. Property values, as of last December sums up to SEK 160 billion, including our share in Entra. Of those SEK 160 billion, 73% are located in the main metropolitan areas, i.e. Stockholm, Oslo, Gothenburg, Malmo and Copenhagen and Helsinki, of course. 50% of our square meters that is about 5.5 million square meters are sustainability certified, and that has actually taken us through the goal for 2025 more on that later. And we have a yearly contract value of approximately SEK 9.2 billion. So the income is showing good growth with an 8.9% increase in like-for-like holdings. There are some currency effects on our portfolios in Denmark and Finland. And if we exclude them, that those are adding about 1%. So the net is [ some ] 7.9%. The completed projects have made a significant contribution, boosting the income by SEK 374 million compared to the same period last year. The notable projects include E.ON's new headquarters in Malmo, and the new court building next to that also in Malmo and police building in Orebro. The completed projects, together with the like-for-like portfolio are the key drivers increasing the income. However, growth is weighted down by transaction. We are, as you may know, net sellers throughout 2023. The direct property costs have risen 4.2% and [ as in ] the like-for-like portfolio. This increase -- the increase is significantly lower for the fourth quarter, mainly due to lower electricity costs in that quarter. The increase in property and central administration is mainly attributable to one-offs and more on that later as well. So there's very little changes in our top tenant list, and the list represents a cross-section of Nordic business and authorities, and our exposure to individual tenants is very low. Our 10 largest tenants represent less than 14% of our total contract value and no tenant generate more than approximately 2.3% of our rental income. We have a very strong tenant base and some of our larger tenants are publicly funded, approximately 25% of our total contract value derives from public sector tenants. The largest individual tenant is the Swedish Police Authority. We have an average lease duration, as of the year-end of 3.8 years and ABB, our second largest tenant -- now the third largest tenant has indicated that they are leaving some of the assets in our portfolio [ investors ]. We have a good dialogue, and we expect to prolong some of that. And in addition, ABB continues to be an important tenant for us in the future. I think I'll stop there and hand over to Jens.

Good morning, everyone. Jumping straight into rental income and how it relates to net leasing in our opinion, a relatively weak correlation, stable increase in rental income despite the quarterly net leasing figures being volatile over the quarters, net leasing minus SEK 51 million for the fourth quarter stand-alone and for the full year, minus SEK 67 million. Bankruptcies higher than previous year, however, remains on low levels. Tenant quality has been very stable and outstanding receivables are insignificant. Continued stable demand from tenants contracts, however, take longer to negotiate and economic vacancy is down somewhat compared to last year. No clear trend on tenants taking smaller spaces, rather a combination with some expand and some decrease space. Coming quarters will give better guidance. Examples of good leases signed during the fourth quarter are a 6-year lease with the Swedish Police Authority in Norrkoping, 6,400 square meters and also a 14-year lease with a non-disclosed health care tenant in Stockholm, 2,100 square meters. Over to valuations. On an annual basis, Castellum has written down property values with approximately SEK 14 billion, equivalent to 9.5% since the peak in 2022, down with close to SEK 21 billion, approximately 85% of the write-down this year relates to higher yield requirements in our valuations. The rest is related to building rights, projects and a negative cash flow change, especially due to lower rent expectations on vacant premises. The valuation yield has been raised, as already mentioned by Joacim, with 62 bps during the year and 97 bps since the peak in 2022. All properties have been externally valued in Q1 and approximately 4% to 5% in Q4. The majority was done by Cushman & Wakefield and approximately 10% double assessed with the help from CBRE. In addition, we have also divested properties during the year for approximately SEK 5.4 billion, which is in line with book value and hopefully gives extra credibility to our valuation process. Nominal valuations are down to 2019 levels. However, looking at the yield shift isolated, we're back at the levels we had in 2017. The difference is explained by higher cash flow, mitigating some of the negative effects from the yield expansion. With falling inflation, end of 2023, we have also seen a sharp decline in underlying interest rates. However, something that do not present itself in lower yields yet, but rather the opposite. However, all normal considering well-known lag effects in property valuations. Inflation, however, seems to be going up and down and now up again. However, long-term interest rates are still well below the peak levels of last year. And perhaps an early indicator that valuation yields are stabilizing, however, too early to say for sure, is the fact that the yield gap between underlying interest rates and valuation yields are now at around 3.6% compared to just around 2% not too long ago, which starts to resemble the situation before the CRE interest regime, especially if also taking into account the quality transition of Castellum's property portfolio during recent years. And now into some financial key figures. Loan-to-value is probably the lowest we've seen in Castellum since we started operating our business, which is very comforting. But starting with ICR, that is still stable at 3x in line with our financial policy. Rights issue and lower interest rates will most likely strengthen the ICR already during this year. Interest-bearing liabilities amounts to SEK 62 billion, down from SEK 77 billion at the beginning of the year. Average debt maturity has also improved quite a lot to 4.2 years, thanks to repayment of short-term bonds and refinancing bank loans on longer tenure during the year. And Moody's has confirmed our Baa3 credit rating with stable outlook during the fourth quarter. Also looking at the loan-to-value again that I couldn't resist to mention already on the previous slide, has improved over the year. The rights issue has been the main contributing factor followed by funds from operation and divestments. Changes in property values of minus SEK 14 billion, have on the other hand, put upward pressure on the loan-to-value, however, only with 3.7 percentage points. Average interest 3%, up [ from ] 2.6% at the end of 2022, despite increasing underlying interest rates during the year by almost 140 bps. Excluding cross-currency swaps, average interest rate amounts to 2.6%. Backed by strong Nordic banks, we have successfully increased our secured borrowing during the year at reasonable prices well below the bond curve. In addition, we see continued good interest from the banks and even start seeing a downward shift in pricing. In addition to positive signs in secured financing, domestic bond market is also more liquid with new bond issues during the quarter. In Q1, we issued another bond of SEK 1 billion with a 5-year tenure at 230 bps spread. Bond spreads have tightened gradually during the fourth quarter and has continued to tighten in 2024. Easy to forget, but as late as in July 2023, our 2-year SEK bond was trading at a spread of 300 bps. And now we see our bonds being traded at around 120 bps in the secondary market for the equivalent terms. Our expectation is that the debt capital market continues to recover and hope to return to the Eurobond market during 2024. The spreads are still wider than in the SEK market. However, with continued repayment of Eurobonds by us and other Nordic names, resulting in decreasing supply, we expect the gap to close. Available cash and unutilized revolving credit facilities amount to amazing SEK 27.3 billion, reduced project investments and no dividend this year will free up further funds. In '24 till '26, we have bonds maturing totaling SEK 25 billion, for which we expect the majority to be refinanced with new bonds. Over to you, Joacim.

Thanks, Jens. Those are comforting figures for sure. We'd like to draw some attention to the other part of our business, not only the financing business, but actually leasing properties. And during 2023, we have completed 8 projects with a yearly rental value of SEK 326 million. The average occupancy rate for these completed projects is 93%. The first picture down to the left is E.ON's new headquarter in Malmo. The building is called Sjustjarnan, and it's almost 32,000 square meters and an investment of SEK 1.36 billion, has a 12-year rental agreement and is located very close to the central station in Malmo. The second picture shows the new court building in Malmo, which is one of Northern Europe's largest workplaces for legal professionals. This is one of Castellum's largest and most complex construction projects of all times. We are very proud, and the building is called Godsfinkan and has an area of 26,500 square meters, an investment volume almost equal to that in E.ON's headquarter, SEK 1.38 million -- billion, I'm sorry, with a 20-year rental agreement with the Kingdom of Sweden. Both projects are fully let with very stable customers. The remaining percentages are actually occupied by Castellum. I cannot stress the importance to us and to our tenants of these projects. The Swedish Minister of Justice and myself participated in the inauguration and all officials were extremely happy with their new workspace, including the court rooms. We are very pleased to say that we have built these projects within budget and within the set time despite the fact that the majority of the construction time was during the pandemic. Next slide. We have a very interesting potential in our portfolio. And despite the fact that we have been net sellers during 2023, we have retained the growth potential in our project portfolio. The challenging market conditions have, of course, caused us to pause some of the projects. At the same time, we have initiated new projects, as part of our ongoing business. One of them is called Erskine & friends in Swedish, that's [ Gotaland ] in Stockholm. It's 3 vacant office buildings in Kungsholmen. One of them is an award-winning Ralph Erskine design with lots of details preserved, a really cool building. Leasing is starting now and our first tenants to move in, in about 18 months. The total area is [ 3,900 ] square meters, and the investments are -- is done in 3 phases to accommodate leasing activities. Another one is Amperen in Finnslatten in Vasteras. It's a new logistics building. We are densifying on existing land for an existing client, thus reducing risk. And we're building 36,000 square meters at the price of approximately SEK 400 million. And as Jens mentioned earlier, we have a vacant office building in Norrkoping now being refurbished for the Swedish Police Authority, 6,500 square meters with an investment of SEK 125 million. All these 3 investments and projects are examples of what we prioritize. We're refining existing or vacant properties with -- that has a short time to cash flow, very limited risk since we already know the buildings, and we are turning assets that could be partly vacant from negative cash flow to positive. Turning the attention to one of the most important issues of our time sustainability. We have achieved 2 of our main sustainability targets 2 years ahead of schedule. And one is the solar power initiative that we have called 100 on solar, where we completed the -- or reach the goal 2 years ahead of time. By the end of 2023, we had 106 solar panels installed, and they're now generating 70% (sic) [ 17% ] of our annual energy consumption. The other sustainability goal that we have set up and which we have already achieved is to certify 50% of our square meters, and we reached that also during 2023, and we are very proud of that. So finally, some key takeaways. We are focusing on our core business. We are letting properties. We are reducing costs. We are being more efficient, thus improving our net operating income. This is a never-ending process, and we will sort of never be finished with that. We still apply a strict capital discipline. And through that supported by our shareholders chipping in has allowed us to amortize SEK 16 billion during 2023 and at the same time to invest. The LTV is down. Jens had mentioned that a couple of times. We are super proud of that and shows a very stable business going forward. We have a very resilient business model and measures are taken to withstand whatever negative effects there might be from the slowdown in the general economy. That gives us also power to take some of the opportunities that might arise in the market. And despite the investment volume being lower than previous years, we still have a good growth potential with approximately SEK 43 billion in existing projects in our portfolio. So that sort of summarizes this part of the presentation, and we now open up for questions.

[Operator Instructions] The next question comes from Lars Norrby from SEB.

Good morning, Joacim. Good morning, Jens. First, a few questions about the rental market, then a couple of questions about one-offs. Obviously, the rental market, you're talking about preparing for a tougher rental market. So my first question is, if you look at the market situation today compared to in October when you released our Q3 numbers, is it pretty much the same? Or is it a bit more negative?

I'd say it's pretty much the same. But as Jens mentioned, we have had some kind of a catch-up effect on terminations in the last quarter. Those things happen, and we try to illustrate that by the volatile quarterly net leasing figures that summarizes in the stable upward going trend on our total rental income. But I'd say there's very little changes from last quarter to this one. But we do sense that the general downturn in the economy is slowly, as I mentioned, transforming into the real economy, thus affecting tenant's appetite going forward.

And as you mentioned earlier on the call there, you expect that or you indicated or you guided for, if anything, slightly positive full year net leasing figures, obviously, that did not materialize. You mentioned the terminations. If you look into 2024, and just looking at the full year, what can you say, what are your expectations? Are you expecting around [ 0 ]?

We're not guiding on that. But the fact that we have a significantly slower project development going on, and those projects have significantly contributed to the net leasing historically and that we are still trimming our portfolio, there might be negative changes in the total leasing portfolio. But it's way too early to say now early February, what the year will look like.

Okay. And then turning to non-recurring items, or some people call them one-offs. I think you mentioned in the CEO statement that you had a SEK 180 million in total, I guess, that's for the full year. Just isolating, if I remember correctly from the 9 months report, you had SEK 63 million on the CA line. So my question is, for the fourth quarter, is it an additional [ SEK 170 million ]? And if so, how is that broken down on the 3 lines, maintenance expenses, lease and property expenses and CA?

I think central administration, Lars, amounts to roughly SEK 50 million in the fourth quarter and the remainder is split up between different categories that I don't think we want to dive into, but property management and other categories spring to mind.

And then it's correct that it is [ SEK 170 million ] in the fourth quarter, which means, if you say it's around [ SEK 60 million ] on the CA line, it's what -- it's close to [ SEK 60 million ] on those 2 other lines. Is that correct?

That's correct.

The next question comes from Jonathan Kownator from Goldman Sachs.

Coming back to the leasing to follow up. What was the reversion captured on releasing over 4Q, i.e., do you have reversionary potential at this stage? Or is it fair to assume that it's perhaps a bit flatter. That's question number one. Question number 2, you mentioned ABB. Was that including in the net leasing already for Q4 or not? And how much of the space, given it's your #3 tenant has been included in this termination? Yes. I mean, let's start by that.

I'm not sure I got the first question. The line was breaking up slightly. So could you repeat the first question, please?

Yes, of course. It's the releasing spreads when you do re-leasing, what was the premium captured or not perhaps just the existing in rent -- in-place rent?

Okay. We do not really disclose sort of the catch-up there. We -- I mean, there's been a total of 17% increase due to indexation over the last 1.5 years. And that means that the new contracts are entered into on significantly higher levels. Are we always able to catch that? Well, that depends very much on the demand in the individual location. So it's very hard to give an exact figures, and we don't do that broken down on the individual areas. In terms of ABB, some of their, I mean, ABB is a huge tenant of ours, and we have a constant dialogue, more or less a partnership in Vasteras. Some of the figures are included. Some are not. Some will be probably prolonged of these 40,000 square meters that we have announced already in Q3. And some are included, some are not. So that's just a very small portion of what's happening.

Okay. Perhaps ask in another way, are you able to give us the impact of inflation or indexation on the like-for-like rent growth for 2023?

Yes. I think I mentioned that. I think we have a -- let me just go back to my initial slide. So we have an increase by 9.8% mainly due to these indexations and then the completed projects. And I think that if we take out the new projects, we have like a 7.9% -- sorry, 8.9% increase in the like-for-like.

Okay. And inflation out of that was [ above ] that? Or was it a bit higher...

Inflation was slightly higher. So we have some contracts mainly with public tenants. Nearly all our contracts have some kind of indexation, but not all of them follow the official CPI. They might -- there's a big variety of indexation clauses, and some of them are entered into -- were entered into 10 years or 15 years ago and there might be variances in the individual indexes.

And I mean, a ballpark figure is 80% of the CPI. That is what we are able to catch usually.

Okay. Very clear. Perhaps one last question, if I may. Obviously, you've been very successful in selling assets this year. Is it your intention to continue selling assets. So at this stage, you think you've reached a level, obviously, you've reduced LTV level at which you feel a bit more comfortable and could slow down on disposals from here?

We were very clear on 2023 that we will be net sellers. We did that for a number of reasons. Some of those reasons do not prevail anymore. That means that we are not comfortable in stating either that we are net sellers or net buyers. But what we are doing is that we are constantly trimming our portfolio and selling assets that either have reached their full potential, where we see limited upside under our management or assets that are located in sort of non-strategic areas. Those transactions will continue more or less forever. The aggregated amount for that, frankly, we don't know yet.

Okay. Cool. Perhaps -- sorry, one last question. On the bonds, you said that you wanted to access again your bond market. You have a number of bonds to refinance. I mean, how do you see that versus your discussions with the rating agencies? Do you see that the market open? Do you see any changes perhaps in their assessments upcoming positive or negative, by the way?

I mean, a difficult question. We really don't know how the [ interim ] market will develop for Nordic names, but we feel a very strong interest in Castellum from the bond market. It opened up in the Swedish market first, and we see reasonably good spreads being presented to us. The liquidity is healthy. However, in the euro market, very few transactions have been done over the last 12 months. And I think that maybe we will be one of the first names coming out, but we hope to see the spreads tightening, especially we have been repaying bonds for quite some time. Other [ Swedish ] names are also repaying the bonds. And at some stage, [ Euro ] investors will be underweighted in the Nordic names. And therefore, we believe that the spreads will tighten up and resemble what we are able to issue bonds at in local currency.

It's important, [ Joacim ], I'm sorry for my breaking in here, but it's important to note that we are not reliant upon the bond market reopening. We have SEK 27 billion of liquidity. So we will be able to cover bond maturities, but that is not always what we want to do because we'd like to keep investing in our portfolio. And of course, bond market is more attractive because it retains our liquidity. But if the bond terms are less favorable, then we, of course, have the opportunity to simply repay. So we are not in the hands of the bond market anymore. That has been sort of the aim for our entire process during 2023.

[Technical difficulty] Yes. And also coming back on what I understood [ asked a ] question relating to Moody's. And I think that we have a very sound discussion with them. And of course, we want to safeguard as much of our untainted volume of underlying assets, so we can issue unsecured bonds giving a strong comfort for those investors. And I think that we have good headroom in the covenant package delivered to us from Moody's.

The next question comes from John Vuong from Kempen.

Another follow-up on the letting market. Are there any specific submarkets, where you're seeing the toughest conditions?

We see basically these slightly sort of stochastic developments happening throughout the country. So no, we don't see a clear trend. Of course, the volatility is higher in the larger cities, that is always the case. And I think that, that affects us as well. So the volatility in Stockholm and in Gothenburg and Malmo, Copenhagen is higher than it is in Orebro or Norrkoping. But there's no segment and no geography that stands out.

Okay. That's clear. It's also not outside Sweden?

No. Well, Finland is struggling as everybody knows. And our participation is relatively low in the Helsinki market, we'd like to be larger in the future. But for now, you can say that we are happy that we aren't. But the demand is slightly weaker in Helsinki. You had to -- you study the Entra report on Entra's demand, it's better that Entra comments that themselves. And the Copenhagen market in general is quite strong. They have not had the downturn nearly at all that we've seen in the Swedish market in Copenhagen. So Copenhagen is a strong market.

Okay. That's clear. And talking about the Eurobond market when you are talking about stepping back, are you looking at plain vanilla bonds? Or could you also be looking at more exotic options?

I think that plain vanilla is where we want to be. Of course, we might look at other products, but I think that looking at our balance sheet, we want to keep things as clean as possible.

Okay. That's clear. And on the dividend, it has already been 2 years now of no dividend. What has to change for you to be more comfortable about making statements about perhaps even reinstating again, given that assuming at least that it is the intention to reinstate at some point?

I mean that's really a question for the shareholders and for the Board. I think that we are preparing the company for all eventualities. So that means that we need a solid balance sheet, and we need a stable business. And what the shareholders want us in management to do with a surplus, it's a question for them rather than for us actually. So... we sort of... just repeat the fact that we are not proposing any dividend for the fiscal year 2023. And what lies in the future, we have to come back to.

The next question comes from Markus Henriksson from ABG Sundal Collier.

First, a question on electricity costs. Do you expect them to be lower all else equal and continue to impact the property costs positively in first half of '24 and even into Q3 next year, [ early ] this year?

I mean, we had a very positive development during the fourth quarter, and we expected -- or we are sure that it will continue the following quarters this year.

Thank you. And then, you report interest income of SEK 39 million in Q4. What is that? And how should we think about this line item into 2024?

I think you should see it as a one-off effect.

All right. Then if we look a bit to you, you gave a very, very nice table on split up of all type of financial costs, and then just looking purely at interest expense, we exclude ground cost, capitalized interest, et cetera, you end up at [ 567 ] here in the quarter in interest expense, and you stated an interest rate of around 3% year-end '23. I'm perfectly clear here that EURO/SEK has been in favor. So your net debt is down, but it's still a very large deviation if I would take the 3% interest rate and just looking at your interest expense in Q4, it doesn't add up. It implies an interest rate well above 3.5%. Any one-offs or should we take this interest income, as part of -- that you are not netting this? Or what do we have behind this deviation?

I can assure you it's correct. However, I mean, the last quarter every year is somewhat more turbulent when you want to prolong loans, you work a lot with derivatives. And also, during the fourth quarter, we had a relatively large Eurobond expiring at the coupon of 2% being refinanced with bank loans and SEK bonds at much higher levels. There's always a lag effect also on the fact that in the beginning of the quarter and the year, the total loan amount is much higher. But I truly understand that there is a difference here that could be somewhat difficult to understand. But also know that we are trying to prolong the duration of our loans, which will come at the cost. We also have a situation, where we want to safeguard quite a significant portion of undrawn revolving credit facilities that continue to cost us money, while we are actually issuing bonds and drawing down on secured financing in the increase -- when we increased the amount of secured financing from the banks. I mean, so it's really a tricky question that we could most likely discuss for hours. I think we are on the right track. And I truly understand that the numbers look a bit high, but over time and during this quarter when spreads hopefully continue to come down, underlying interest rates and the derivatives that we buy will be on much lower levels than the floating rate that we took in the fourth quarter. I think I stop there.

As you say, we could go on for hours. Thank you for the reasoning. Then one thought on the Euro bond. You have the EUR 1 billion, size is huge relative to your annual cash flow. At the same time, [ they are ] kind of longer-term interest rates if we get the step-up of 4.5% total is not too bad. So any reasoning on how you might handle this bond?

I mean, I think we are working very proactively in the SEK market and most likely in the Euro market during the coming quarters. I cannot give you an exact answer. But as Joacim said previously, we are not any longer dependent upon issuing in the bond market. However, of course, we will be issuing in the bond market, trying to keep a sound balance between secured bank financing and unsecured bond financing. And I think we are moving very much in the right direction, issuing significant amounts at least in the SEK market over the last few quarters and into this year.

The next question comes from [ Fredric Cyon ] from Carnegie.

Good morning, gentlemen. A few questions from my side. Let's start off with net listing. Negative in the quarter. You indicated that there were a couple of large terminations end of the quarter. Can you specify the amounts? Are we talking about significant volumes? Or is it not all...

They were not that large. There were quite a few of them, actually. I think it was -- it's the -- how much was it. In the last quarter, it was something like SEK 50 million compared to SEK 67 million.

Yes. That's net leasing.

Yes. That's net leasing, sorry. Yes.

I was more referring to the terminations. I got the impression there, there was a couple of larger ones at the end of the quarter considering that...

No, no, they were just accumulating. Quite few of them spread out throughout the portfolio.

Okay. Moving over to occupancy rate and it's been trending downwards for a while now, do you see an improvement moving into 2024? Or should we expect a continued deterioration during the year?

I think it's not unlikely to see a further deterioration on that, to be quite honest. I think that we -- it's important for us to tell you guys what we are actually seeing. We are selling assets and have been selling assets with a higher occupancy rate than our average. And that, of course, mathematically takes down the occupancy rate for the remaining assets. We are also reducing the project, as you know. And typically, projects contribute with a very high degree of occupancy rate. So just looking at those 2, it's not unlikely that we see a falling trend, which I believe is going to be sort of a general trend for the entire real estate market. But we're quite open with it.

And then moving over to unutilized credit facilities, it was more than SEK 25 billion. Given your fairly strong balance sheet, do you think it's appropriate for Castellum to have such a large undrawn facilities in place? Do you need it?

I mean, I think -- I mean, when you start to refinance certain properties, you have discussions with the banks over a longer period of time and sometimes, they accumulate and perhaps grow beyond the target level you set out. And these things are slow moving. And I think that over time, if we can issue longer bonds, take up longer financing, then it's reasonable to believe that we do not need the same amount of undrawn revolving credit facilities, thus being able to actually lower interest costs over time. And actually, one thing that I forgot to mention regarding the somewhat high interest cost for the fourth quarter is and also for the year is, when you actually consider that we are lowering the amount of project investment from SEK 5.2 billion to roughly SEK 3.5 billion, we cannot activate interest costs relating to those projects in the same amount. Maybe [ SEK 15 million, SEK 20 million ] in the fourth quarter relates to a lower amount of activation of interest.

Okay. I appreciate the laughter and take that as a hint to the SEK 25 billion. Moving over to investments having falling year-over-year now for quite a while. It was SEK 3.4 billion. What do you believe will be the number for when we summarize year-end 2024 approximately?

I mean, it's difficult to say. I mean, a part of the project investment is relating to CapEx in existing buildings, and that is pretty much always around SEK 1.5 billion. And it really is very well connected to the fact if we are able to sell some assets at reasonable levels, maybe we want to transfer that into new very profitable projects, but it's still way too early to give any guidance.

Okay. And my final question relates to property value changes. You have been fairly transparent and proactive in adjusting down your values. And I would assume you use the same external [ evaluators ], as some of your peers. Despite this, you concluded the fourth quarter with more than 4% downward revisions to property value. What has worsened significantly more for you versus peers in the fourth quarter, do you think?

I think that looking at Vasakronan and Fabege, I think we are playing pretty much on similar terms, and we use the same appraisers. But I think maybe it relates to which appraiser that you're using, but we don't want to comment on this.

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

So I see here in this chart that we've had quite a few questions that we already covered relating to repaying bonds, et cetera. One question that has arisen is please comment on the hybrid bond? And we'd just like to repeat what we said on that topic earlier and that is that we were one of the last ones out to issue a hybrid bond. And that means that we're -- we will be one of the last to actually have to take actions on it. So to us, the question is way too early to try to answer. We will look at the development and the alternatives, and then we'll come back on that. But for now, it remains a very attractive source of financing to us. Yes. I think we've covered most of the questions in the chat. So -- but if there's any additional questions, please send us an e-mail, and we'll try to cover them. So I think that completes our presentation for the fourth quarter and the full year 2023. We're looking forward to seeing you all again on May 3rd for the first quarter of 2024. Thank you.