Logistea AB (publ) (LOGIA) Earnings Call Transcript & Summary

Welcome to this webcast where we will present the transaction that we just announced this morning between Logistea and KMC properties. On this call, we have myself, Niklas Zuckerman, who's the CEO of Logistea; Patrik Tillman, Chairman of Logica; Bjornar Ulstein who's Chairman of KMC Properties; and Christian Linge who is CFO of KMC. After the presentation, take any questions, and that obviously could be in either of the languages, I'll start to leave the word to you, Bjornar.

Thank you, Niklas. Let me just start by stating that it's exciting times for all us at KMC and Logistea. From KMC perspective, we look forward to joining forces with Logistea and believe that the combined company will be able to accelerate accretive growth beyond what 2 individual companies can achieve. The capabilities of the combined organizations will most likely create added platform value that should increase market pricing beyond net asset value to the advantage to all shareholders. Bewi Invest AS has been involved from the start of KMC and will continue as the largest shareholder to support the combined company. And with that, I will leave the word to Patrik.

Yes. Thank you. Thank you. My name is Patrik Tillman. I'm the current Chairman of Logistea and also the proposed new Chairman in the combined Logistea KMC Group. And to follow up on Bjornar, we see also this announced transaction as a strategic milestone for both Logistea and KMC creating this new combined company. We will be one of the leading listed logistics warehouse and industrial real estate companies in the Nordics. And we start this foundation from a very strong financial and operational standpoint where we see that we can continue to deliver strong best-in-class shareholder value and capture future growth opportunities from an excellent platform. For everyone's benefit. I will now leave the word to Niklas, who will present the transaction a little bit more in detail before we take questions.

Perfect. Thank you. And we will start with -- and as said by Patrik and Bjornar, we were extremely satisfied to announce this transaction. We will, after this combination will be a Nordic leader within logistics and industrial properties in the Nordics. On this slide, lots of information, but to highlight, the transaction is executed by Logistea acquiring the shares in the property owning subsidiaries within KMC and those subsidiaries are the property holding companies. So we're buying effectively all of the properties in KMC. The payment will be newly issued Logistea shares, and that will represent the same proportion of AMB shares as we have today. We'll come back to a lot of numbers. Financial numbers and property information data on the following slides. But to highlight briefly, and it should be stated that completion is expected on July 11, and that's the date when the Logistea shares are delivered to KMC properties. The transaction is subject to customer conditions being approval from both companies' extra general meetings where 2/3 majority is needed, and we'll come back to how to support for the transaction looks as of today, will need approval by the bondholders of KMCP. And finally, that the prospectus regarding the admission to trade in new shares will be approved by the Swedish Financial Supervisory Board. We have already presented the transaction to many of the largest shareholders on both side, as you can see on this slide. Over 2/3 of the respective companies have shown support for the transaction. And as we see, that's another proof that we're creating something more than just adding one plus one. On this list, you see the main shareholders on both sides and in addition, we have many of the Swedish and Nordic pension funds and institutional investors such as Länsförsäkringar Fonder, [indiscernible], Carnergie Fonder . A few words on the indicative timetable. So 14th of June today, we announced the transaction written bond hold resolution from the KMC properties bond on the 28th of June. There will be an Extra General Meeting in KMC on July 5 in Logistea on July 9. We will get the prospectus approved and published on July 11. And on the same date, as I said, we will deliver the shares to KMC properties. And on the final on this slide is that 80% of the shares will be delivered directly. And then the remaining 20% of the shares will be delivered to the shareholders in KMC late Q3 or beginning of Q4, and that's basically because you need an audited interim balance sheet to deliver all of the shares. Very briefly on the 2 respective companies because we will spend more time on how the combined company will look. And it strikes you that when presenting Logistea and KMC as individual companies, the story is very much the same. In the former Logistea, we have reached a bit more than SEK 6 billion in property values. We have plus 8 years involved we have roughly SEK 400 million of rental income, and we have a net initial yield, as you can see, of 6.3%. Almost everything is indexed. So we'll leave it to -- we can move on to KMC. KMC have reached almost SEK 7 billion worth of properties, even longer wall, 11.5 years. Higher rental income of SEK 521 million per annum and a high initial yield of 7.5%. And also here, you have , as you can see, you have 99% of the leases or CPI or linked to CPI. As I said, we're better to spend more time on the combined company because that's where we are today or at least will be in a couple of weeks' time. We'll own 145 properties at a value of more than SEK 13 billion. We'll have 97% occupancy rate and over 10 years remaining lease term. And that's by far best-in-class when it comes to listed real estate companies in Sweden. So that's extremely positive and attractive. We'll have an NOI at almost SEK 900 million per year and the net initial yield will be 6.9%, which is also high compared to, I would say, all of the other listed real estate companies in Sweden. We'll have the majority located in Sweden and Norway, a fairly large portfolio in Denmark. But as I said, Norway and Sweden by far the largest locations. We'll continue to have offices where we're located today, being in Stockholm, Trondheim, Boras and Oslo. And looking at the type of properties and type of tenants, there will be a good mix of industrial type of properties and tenants within the logistics segment. As described or said, we'll more than double the size of the company. And we'll have the plus SEK 13 billion worth of properties. The market cap will increase to SEK 6.5 billion putting us in a situation where the possibility to enter the EPRA index is much more likely to happen. And obviously, a larger market cap would also improved. The turnover in the share and the possibility to attract more international capital is greatly improved. We have said on our end, and I know that KMC have said the same on there, and it is a great benefit to create a company these are good size of the portfolio. And with that said, if you're larger than we are now. You will everything equal, you will get cheaper financing from the capital market. You will get, hopefully, cheaper financing from the banks. You will have more tenants, meaning that you could find more CapEx investment. We could, as we'll show on the next slide, there are synergies. So the cost for central administration per square meter will decrease. So overall, it's a perfect match, and it will create benefit for the company going forward being larger. Financial benefits, there will be many, I would say, both in terms of looking at structuring the bank financing being a larger company. And maybe more importantly, to look at the secured bond of NOK 900 million that the KMC has outstanding. And hopefully, we can do something good with that and obviously increase the cost of financing overall. Looking at the short-term day one operational benefits, we foresee a decrease of roughly SEK 14 million. And that's, as you can see, based on -- we only need one -- obviously, one Board of Directors and smaller management or not a smaller management team, but not a double management team combining the company's listing fees, audits, et cetera. So at least SEK 40 million per year. The management and Board of Directors, we can start with the Board of Directors, as Patrik and Bjornar said, they will stay along and take a big part of the new Board of Directors, where Patrik will be Chairman and Bjornar Deputy Chairman. Will the representatives from M2, Mia Arnhult, we will have Karl-Erik Bekken is from Bewi. Erik Dansbo representing Slatto, Jonas Gander from Nordika and then we'll have Anneli Lindblom, who is representing herself, so to say, being not connecting to any of the major shareholders. And the same goes for Patrik. On the management side, we'll have an executive management group consisting of myself, Anders Nordvall who will be CIO and Deputy CEO; and Stig Wærnes who is today the CEO of KMC. He will take the COO role in the new company and will also be an integration of the manager. But there are obviously, more colleagues on board, and everyone will stay on board. We will not need to do any layouts or layoffs as a result of this combination, which is good and good for the future. Looking at the capitalization, and it's not maybe worth for me to present it to you. It's a lot of numbers, but we'll have a new top 4 shareholder list being [indiscernible] Invest, Nordika, Rutger Arnhult, being, as I said on the previous slide, M2 but we have many others, a fair amount of good institutional long-term investors, such as Länsförsäkringar Fonder [indiscernible] and Carnegie Fonder. And as I said before, we will look to increase the ownership or the investor base, and that is you have more likely to do so, especially when talking to international investors, if you have a larger market cap and if there is better liquidity in the share, which we'll have now. Some rationales for the merger or the combination, and we have mentioned many of them. But a larger company, I've told you a Nordic presence that we can operate in more locations. For instance, we could decide that 1 or 2 of the markets look more interesting one year and take benefit of that and vice versa the next year. Extremely long haul as I said, increased share of triple net lease agreement. The KMC portfolio is, I would say, extremely triple net with very, very high or very, very low leakage when it comes to operational costs, by far, best-in-class when it comes to Nordic real estate. We'll have a high-yield gap and obviously, that's something that investors are very fond of today provided the turbulence on the financing market. We'll have a strong base of shareholders that could -- or could support continuous growth for the combined company. Some key metrics, and I just need to take a slide in front of me because there is text on the screen is too small for my eyes nowadays. So I would say worth to highlight the SEK 13-plus billion worth of properties, high occupancy rate, long wall, the total NRV of almost SEK 6.6 billion will have a net LTV following the combination of 46.6%. And an average interest cost of 6%, but with the intention, obviously, to take that down over time. On the next slide, we're presenting the earnings capacity for the 2 companies and the combination a lot of numbers, but maybe worth to highlight this going to the bottom where you can see that per share we have a property or income from property management of [ 76, ] and that will increase to [ 87 ] after the transaction representing a 14% increase. And that's before financial synergies that we foresee will come in the coming years. So this is as is, so to say. That was a lot of information on a large transaction, we would be happy to answer any questions now or later.

[Operator Instructions] The next question comes from Jan Ihrfelt from Kepler.

Okay. And a couple of questions from my side. First one is a more technical thing. I see that your reporting date for the second quarterly report is on the 11th of July, will that be kept? Or will it be delayed?

It will be delayed one day. So the former Logistea will report on July 12.

Okay. And I saw that there were some dots outside the Nordic countries on the map where you show your properties. Is that going to be sold? Or are you -- will you keep it? Or what's happened to these properties?

No, we'll keep them for -- what will happen is that we will together the new management together with the new Board will obviously look at the strategy going forward. But these are properties typically on very long leases often 15 years with stable tenants and high yield. So before settling anything one should find even better investments and that's not necessarily the case right now. So for now, it would absolutely be kept and that goes for all properties. And as I said, the new board together with the new management, we set the strategy in more details in the coming months.

Can I just add some information, Niklas?

Yes.

These properties are properties of Bewi's also, which is, of course, the largest tenant of KMC today. And the reason why also KMC have moved outside the Nordic is to follow Bewi because we have had a strategy of being an industrial partner for our tenants. So that's the reason it's not a strategy as such in KMC either to move to far outside the Nordics.

Okay. And if I got it right, your market cap is to combine these 2 companies [indiscernible] sorry, the property value will be about SEK 13 billion and of course, I could realize that you get better financing terms from the banks becoming larger and to what level is that applicable, could you become -- have even better financial conditions up to SEK 20 billion or is this a large step done by becoming -- or to have SEK 13 million coming from [ light SEK 6 billion. ]

No, I would say, easiest probably to answer when it comes to the bond market. And there, you can see a large distinction between the companies that have properties worth say, SEK 13 billion or SEK 15 billion versus the companies that have SEK 5 billion or SEK 7 billion. As you know, we have seen bond issues in the Swedish market this week at plus 300 basis points for companies that are smaller than we will become. And you also know that we paid 515 basis points. 2.5 years ago when we were a smaller company. So I would say when it comes to the bond market, it will absolutely have an effect when it comes to the banks it will have an effect. But to what extent is obviously hard to say. The good thing now is that we have more banks. So more contact and more potential lenders, which is good.

Okay. And I think you mentioned a bond of SEK 800 million. Was that correct?