Cibus Nordic Real Estate AB (publ) ($CIBUS)

Hello. Welcome. My name is Stina Lindh Hok and I'm CEO at Cibus. And with me, I have Pia-Lena Olofsson, CFO. We live in a very turbulent and unpredictable world right now. And with that comes also a volatile stock market. So with that said, I'm glad to present a stable quarter for Cibus and that we can continue to distribute monthly dividend by over 6% on actual share price. Cibus mainly focuses on grocery properties and are the sole listed daily-goods real estate company in the Nordics. The aim is to create stable cash flows. And the company has been listed since 2018 and has grown from owning food properties only in Finland to now having operation in 7 countries. As you see on the picture here, this is a good start to continue growth in existing markets and also investigate new markets in Europe. The blue and red dots you see here, except for the yellow one, they are the new acquired properties announced this morning. Net operating income increased by 16% to EUR 42.6 million compared with previous year. And the underlying business here remains stable. Profit from property management increased by 13% to EUR 20.9 million and that's excluding nonrecurring items and currency effects. Worth mentioning that profit from property management this quarter is partly charged with interest expenses linked to the financing of transactions completing after the quarter and also some costs relating to the refinancing of the bonds. Market value slightly down during the quarter, depending on that market rents were adjusted downwards in a few properties in Finland, resulting in a marginal decline in property values of 0.16% in the existing portfolio. And this is not a general trend. And in other countries, the values are unchanged or slightly higher. The average yield is still 6.4%. The total portfolio has grown EPRA NRV and is increasing and amounted to EUR 13 per share. The earning capacity is unchanged at EUR 1.08 per share. Some key takeaways. As I said, stable underlying business, no surprises in the net operating income and the occupancy rate is slightly up, 95.6%. We had a continued growth during the quarter. This morning, we announced a transaction of 23 properties in Denmark, Finland, Norway, and Sweden at a value of EUR 103 million. I will give you some more flavor on that later on. Earnings capacity in line with last quarter, as I said. And -- also in this quarter, we see a strong capital market. Despite the turbulence in the global economy, the credit market has grown -- has shown continued appetite. And during the quarter, both bond loans and hybrid capital were refinanced at significantly lower levels than before. And in connection with the refinancing and linked to good terms, we took the opportunity to increase the hybrid by an additional EUR 30 million and the bond we increased by EUR 25 million, which has been a part of the financing for the acquisition announced this morning. And also just mention, it was decided at the AGM for unchanged monthly dividend of EUR 0.9 per share. During the quarter, we have sold 2 properties, one in Finland and one in Belgium and bought one property and that sums up to 671 properties. The total market value has increased slightly since last quarter up to EUR 2.7 billion. Net operating income from earning capacity totaled close to EUR 170 million, giving a yield of 6.4% at today's value. Our tenant mix is more or less intact, but worth mention is that Tokmanni, continues to convert the Tokmanni store to [ Euro ] Spar which means that they even more focus on grocery than before. And now we have 8 properties in our portfolio converting from Euro Spar. Total cash flow. Our rent that comes from daily-good tenants has increased up to 82% from 81% and still 95% of the properties are handled by grocery tenants. Still 99% of the leases are CPI linked and the average contract length is now 5.9 years. More than 90% have net or triple net leases. And the average property is 2,100, which means that the exposure to each property is relatively small. In addition, we protect the cash flow through a hedging ratio of 98%. With our 631 properties, there are always discussions with tenants. And this picture shows an example where we proactively replaced K-supermarket with Rusta with close to 3,000 square meter in Siilinjarvi in Finland. And at the same time, we increased the lease length with 10 years. Some more flavor about the transactions. We continue to grow with those 5 transactions in existing markets. And we did those with 5 separate transactions with a price for EUR 104 million. The annual rent income is EUR 7.3 million. And the properties are located in Finland, Norway, Sweden, and Denmark with an average contract length of 7.8 years. The occupancy rate altogether was 99.5% and the properties have area of approximately 60,000 square meters. And the anchor tenant is Tokmanni in Finland, REMA 1000 in Norway and Denmark and Sweden. And to give you some more flavor, one of the bigger transaction was the portfolio in Finland with 13 properties and the biggest tenants are Tokmanni in that portfolio, which we just happen to have established relationship with for many years. Other tenants in that portfolio are [indiscernible] which might be less known is a listed discount retailer specialized in do-it-yourself tools, pretty much like a doll house. More to know is that 8 of 13 properties are located in growing cities in this portfolio. And in the smaller cities, the micro location is good and the business is well suited for Tokmanni and low price retail in general. Ten of 13 of those properties are built after 2019 and the WAULT is over 7 years. So that was the biggest transactions. Another one was one in Denmark, where we bought 4 properties in growing cities with very functional REMA business stores, which have an average contract length of 8.6 years. In Norway, we also bought 4 REMA business stores with long leases over 7 years in a bit smaller cities, but with a good micro location and strong turnover. And except those 3, we also made 2 transactions, one in Sweden and one in Finland. So I see this as a good example how we believe that we can continue with transaction going forward, use our existing platform to find right opportunities. But of course, we also look at the same time in Europe. Over to you, Pia-Lena.

Thank you, Stina. So let's start off with some key events during the quarter. We refinanced a EUR 50 million bond by issuing a new EUR 85 million bond with a long maturity of 4 years and a significantly lower margin of 210 basis points, down from 400 basis points. Then in February, we refinanced the hybrid bond with a new EUR 60 million perpetual hybrid bond at a fixed rate of 6.25%, redeeming early the old hybrid bond in March. Then we announced that I will be leaving Cibus in July and Ann-Sofie Lindroth will take over as CFO. Ann-Sofie is an experienced CFO, so Cibus will be in very good hands. After the period, we held our AGM in April, where we changed the company name by removing Nordic, reflecting our transition to a pan-European company. So the new name is Cibus Real Estate AB. We also got appointed 2 new Board members, Louise Richnau and Stefan Dahlbo. Then Cibus has announced acquisitions that Stina already has covered in his presentation. So looking at the P&L. Net operating income amounted to EUR 42.6 million. Profit from property management was impacted by nonrecurring administration costs related to management change. Net financials include a positive exchange rate change of plus EUR 0.3 million, but also of minus EUR 0.9 million related to early repayment of the old EUR 50 million bond. The repayment cost is not considered nonrecurring as Cibus is an active and recurring issuer on the bond market. Profit from property management, excluding nonrecurring items and FX effects was EUR 20.9 million. Property values was largely stable and the portfolio yield remained at 6.4%. Interest rate derivatives contributed positively due to market rate movements. Looking at the current earnings capacity, rental income increased due to acquisitions and indexation. Less financial items rose following new acquisition financing, some of which will be included in the earnings capacity from the second quarter. The new hybrid bond is excluded as it will finance acquisitions not yet reflected in the earnings capacity. Profit from property management, excluding noncash items plus expenses for the old hybrid bond increased by 4% compared to last year to EUR 1.08 per share. Now looking at the like-for-like. Net operating income now include Forum Estates since it was acquired in January 2025. The portfolio was negatively affected by higher property costs driven by the increased vacancy. Vacancy had a negative impact of EUR 3 million and a large part is previously in Q4 announced property in Finland. Also 3 terminated furniture retail leases increased the vacancy in the quarter. And this was partly offset by a positive net lease contribution in the grocery and daily goods segment. And this is exactly why we focus on the stable grocery and daily goods tenants. Tenant transition reduced income by minus EUR 0.5 million, reflecting proactive asset management to support future earnings. The case study [indiscernible] that Stina presented earlier being one of these transitions. And inflation contributed with EUR 2 million or plus 1.3%, where particularly Finland has low inflation. Overall, like-for-like declined by minus 1.2%, while acquisitions drove total net operating income growth by plus 8.2% to EUR 169.2 million. Cibus segments are defined by country. Finland remains the largest market, accounting for 46% of the net operating income, although its share of the total has declined. Belgium and Denmark are the second largest market, each representing 16% of the NOI. Moving on to the balance sheet. Property value amounted to EUR 2.7 billion. Secured debt totaled EUR 1.3 billion, corresponding to a secured loan-to-value of 49.5%. Cibus has unsecured bonds of EUR 309 million and proceeds from the newly issued bonds have not yet been utilized for acquisitions. The cash position is elevated, resulting in a net loan-to-value ratio of 57.2%. EPRA NAV remained stable at EUR 13 per share. Looking at the WAULT, the average remaining lease term continues also to be very stable and was 5.9 years at the end of the first quarter. Overall, over to funding, the average interest rate decreased to 4%, down 0.2 percentage points year-on-year, driven by lower margins on refinancing bank loans and bonds. The old EUR 50 million bond was refinanced at a significantly lower margin and extended to a 4-year maturity with the bond volume increased to EUR 85 million. In addition, a new EUR 60 million hybrid bond was issued at a fixed rate of 6.25%. And the previous hybrid bond has been fully repaid, of which the last EUR 8.5 million was done after the quarter on the 1st of April. Cibus remains 98% hedged against interest rate risk due to a combination of cap swaps and fixed rate loans. We proactively manage interest rate hedging and seek to enter hedging during favorable market windows. During the quarter, we entered into a new 4-year interest rate swap at 2.34% and extended an existing swap by 4 years at a fixed rate of 2.7%. So the portion of the hedges consist of caps, higher market interest rates have a lower negative impact than lower market interest rates on earnings, as you can see on the sensitivity analysis to the graph. Looking at our key credit metrics. All remained well within both internal targets and covenant levels, providing solid headroom. Net LTV was lower than usual as proceeds from recently issued bonds have not yet been deployed for acquisitions. And net debt to EBITDA was slightly lower to 10.4x this quarter. And this metric typically increases during acquisition intensive periods as debt rises immediately while EBITDA is built over time and declines during periods of low acquisition activity. On a forward-looking basis, net debt to EBITDA was 9.8x. The interest cover ratio remained stable at 2.4x. Cibus continue to deepen dialogue with tenants, particularly around energy efficiency, health and safety, and support for tenant sustainability initiatives. Progress in the energy transition continues with one Finnish property converting from natural gas to district heating and 2 additional properties transitioning to renewable heating solutions. Solar installation expanded further with panels now installed at 82 properties. The value of economy compliant assets increased to EUR 1.134 billion. Over to you, Stina.

Thank you. Just the last slide about how to move forward. We will continue to invest in food and grocery properties with stable cash flows. And we will have focus on profitable growth, which should in the longer perspective, increase profit from property management per share. We will continue to work with the refinancing and hedging to keep stable cash flow. And overall, I think it's been a stable quarter for Cibus operations and it's great value that we have completed acquisitions after the quarter that developed the standard of Cibus portfolio and also the earnings per share. We want to continue to develop Cibus in this direction. Thank you.

So we open up for Q&A.

[Operator Instructions] The next question comes from Svante Krokfors from Nordea.

Svante from Nordea. First question on the admin expenses, up from EUR 3.4 million to EUR 4.5 million and that includes the EUR 400,000 one-off. So EUR 4.1 million is kind of the run rate for Q1. Is that correct?

Yes, that is correct.

And regarding the property value changes, which were down in Finland. So this is now more tenant specific and not market specific, the development there?

Yes, that's correct.

And regarding the...

Definitely new properties.

And the acquisition that you announced today, you will not obtain any bank loans. So it's funded by the cash from the hybrid and bond issuance. Is that correct?

No, we will also finance it with bank loans as we always do with acquisitions, yes.

So is it 50-50 as previously or...

Yes, yes, exactly. Exactly. That's a good guesstimate.

And do you have any comments on the bank's willingness to lend to the sector? Has it remained good or any changes there?

Yes, it remains very good. They also like the asset class and like the stability of the cash flow. So we have really good dialogue with all our corporation banks. So they continue to support Cibus going forward.

And you continue to increase your exposure towards Tokmanni. You are not worried about their financial position?

Well, no. I mean we have had a relationship with Tokmanni for many, many years and we know the business in there very well. So we also have information about how it works in every store so to say, and we work close to them. So we feel secure with this transaction that was made.

And then the last one regarding the transaction market, which seems to be quite active. Could you give some color on the -- how the seller -- potential sellers look at the situation? And how is the competition for assets currently in the different countries?

Well, it's hard to give as many details there to describe. But overall, it's -- I mean, there are both sellers and buyers. And I mean for us, it's to be able to find good opportunities, it's the most important thing is to be active in the market and all the time and we have a pipeline, which we always investigate. And I mean, that's the way that we find opportunities in the end.

The next question comes from Fredrik Stensved from ABG Sundal Collier.

I have a couple of questions on the earnings capacity and the sort of link to the announced M&A today, which I'm trying to get my head around. But maybe if we start with the deal, how large -- can you say how large portion of the deal is in each country?

We guided on that exactly. I don't have the digits exactly in my head now.

Yes. But I can get back to you because we guided on that in the press release. So as we said, around 20% of the deal price was down in March or early April, but there's capacity for the 1st of April. So we can say that there's [indiscernible].

I am so sorry. I have some issues hearing you. But just to confirm, 20% of the deal closed in March and April. How much closed in March and how much is part of the earnings capacity?

As we said, the earnings capacity from the 1st of April. So the 20% is in the earnings capacity and 80% is not.

So 20% is included. And in relation to that, I guess, the net financial expenses line item, how is that taken into consideration the 20% that sort of contributes to NOI? And how do you treat the large cash position as of quarter end?

Yes. As you know, we've done the bond. So the bond -- the new bond, EUR 85 million bond in the earnings capacity. But then the hybrid bond, as we said, we have not calculated that in the earnings capacity. And, sorry, what was your other question?

So 20% of the deal contributes to NOI. And then, I guess, also 20% of the deal is reflected in the net financials line item. Is that correct?

The bond as I said is completely in the earnings capacity. So it's, finally, it's in the earnings capacity, are having higher net financing calculations that are happening in the whole the full EUR 85 million bond in the earnings capacity. But that was disclosed the new hybrid is not included in the earnings capacity.

Yes, that's clear. One final on this, a follow-up. So the hybrid is not included, as you say. I guess you have a cash position, which is larger, thanks to the hybrid. Does that contribute positively then to net financials?

I mean if we have -- I mean we don't calculate interest on that even if we do get some interest on those bonds, but that's on the short term, of course. No, we don't have any of that capacity.

[Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments. The next question comes from Emil Ekholm from Pareto Securities.

Yes. Just a follow-up on the earnings capacity question there. So you have not included any raised bank debt for the acquisition in the net financials.

Sorry, I'm hearing you very badly. Can you try to speak up, please?

Yes. Just a follow-up on the earnings capacity question. You have not included any raised bank debt for the acquisition, just the newly raised bond. Is that correct?

Are you talking about bank loans or what do you -- I'm not.

Yes.

I mean if we have -- yes, we do have some financing also with the ones that we have taken possession of, then they're included.

Okay. And you also said that you...

Actually the only thing which is not included is actually the hybrid.

Yes. So it's nothing different. It's just because we haven't -- I mean, the acquisition hasn't been made yet. So that's the reason. Otherwise, it's exactly always.

Yes. But acquisition that we have not taken possession of yet, they are not of course in the -- yes.

Yes, yes, of course, of course. Okay. And you also said you did 50-50 leverage on the acquisition. Is that including the proceeds from the hybrid? Or is that just bank LTV?

No, it's just banks that we have. And then, of course, I mean, we have usually around 58% in LTV. So we usually top up the bank loans with the bonds that we've done previous year to finance these acquisitions.

And also on the hedging portfolio, it doesn't seem to change much quarter-over-quarter. But can you give an indication on what types of hedging you will do for the new acquisition and maybe an indication on levels given the current interest rate environment?

I mean you can expect that we will have a high degree of hedging as we have that philosophy that we want to secure our stable cash flows. But we have not guided on what kind of levels that we will do the hedges on.

And it also depends a lot. I mean the market changes every day and we try to do the best to secure the best we can.

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

I would just say thank you.

Thank you.