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

Welcome to Logistea Q2 Earnings Call 2025. [Operator Instructions] Now I will hand the conference over to CEO, Niklas Zuckerman; and CFO, Philip Lofgren. Please go ahead.

Good morning, and welcome to the presentation of Logistea's first half year of 2025. Here to present is myself, Niklas Zuckerman; and our CFO, Philip Lofgren. We will answer any questions after this presentation, and you can submit questions written as they pop up. As some of you might remember, we had an old goal to reach SEK 15 billion worth of properties, and we are today at a bit more SEK 15.2 billion. Total rents for the first time exceeds SEK 1 billion, and we continue to report high occupancy and high net initial yield of 6.8%. Looking at the financials for the first half year, we are reporting income of SEK 511 million, representing an increase of 131%. The NOI amounts to SEK 456 million, and the profit from property management amounts to SEK 246 million, an increase by an impressive 267% compared to last year. And maybe most important, the profit from property management per share has increased by 74% compared to last year. The Wault remains high at 9.6 years and the LTV -- net LTV is down to 47% following the rights issue undertaken a few weeks ago. It's been a very active 2025 for us at Logistea. We have, during the last quarter, purchased 2 properties. The first one is a 36,000 square meter property fully leased to e-commerce company, Lyko on a 19-year lease, the one to the top. The second property is in Hämeenlinna in Finland, lettable area, 22,000 square meters, and the property is fully leased to a strong tenant on a 10-year lease. And we have furthermore this morning announced an acquisition of 2 properties in Ulricehamn and Tranemo in Sweden. Both properties are leased to AP&T, and they are a leading industrial company providing production lines, automatization system and servo-hydraulic presses. The 2 properties, of which the one in Ulricehamn is by far the largest, comprise 19,000 square meters and AP&T has signed 15-year new triple net leases for both sites. The properties are not taken possession of yet and are therefore not included in the run rate. As said, a very busy start of the year. We are actually reviewing almost 1 property per day. The transactions undertaken adds looking at the profit from property management, SEK 0.19 per share. And if we include the last transaction, we did this morning, we could add SEK 0.22 per share. And more expansion on this slide. As I said, we have reached a bit more than SEK 15 billion, and we are currently reporting a yield gap of 2.2% being the difference between what the properties yield of 6.8% and the cost of debt being 4.6%. We continue to see good opportunities to expand the portfolio even further and that is the main reason why the rights issue was undertaken during the spring. Looking at the run rate, we could see that the NOI, including the project for Intersport amounts to SEK 1.014 billion. The profit from property management has increased by 184% in 1 year to SEK 571 million. And as mentioned, the main drivers for the changes are acquired properties that accounts for SEK 0.19 per share. We have seen decreased cost in the debt portfolio, and that has improved the numbers by SEK 0.05 per share. And on the negative side, we have seen an effect from the rights issue, which lowered the profit from property management by share in the run rate by SEK 0.08. And also, we have seen a negative FX effect that lowers the numbers with SEK 0.02 per share. Earnings per share, obviously, a very important measure. You can see that we have seen an increase by 35% in 1 year and the growth for this year is 12%. And in order to make sure that we have dry powder to take advantage of the current transaction market, we undertook a share issue in June. The share issue was directed to professional and institutional investors. We have noticed and noticed good interest in the share, and we decided to issue roughly SEK 500 million worth of new shares. And as said, the proceeds will be used for, among others, new investments like the one we did this morning, or yielding CapEx investment into our own and existing portfolio. To the left, our updated list of largest investors post this rights issue and notable is that Brummer & Partners and Clearance Capital are new on that list. And both of them as well as Fourth AP Fund and Länsförsäkringar took large lot sizes in the direct issue. No material changes here other than that we have decreased the share of BEWI from previously or from -- that was 31% post-merger, that is now down to 26%. Otherwise, as you can see, still the vast majority of the properties located in Sweden and Norway, high net initial yields throughout and long leases and especially long leases when outside of the Nordics. We continue to report a high proportion of triple net and CPI index leases. Occupancy stands at still high, 97%. The net letting for the quarter is negative at SEK 4 million, mostly driven by 2 terminations. We do not see a trend that the leasing market is softer now compared to 6 months ago, and we are in good leasing discussions, but the processes are still fairly slow. Before passing on to Philip, I will say a few words on the market. We have seen a good pickup of transactions in Sweden the last weeks, transactions within the Logistics segment as well as the Light Industry segment. Interested that both domestic and international investors are active on both the buying and selling side. Sweden is the market with the highest turnover, and it's still fairly slow in the other Nordic markets when it comes to our type of properties. And by that, I will hand over to Philip.

Thank you, Niklas. My name is, as most of you already know, Philip Lofgren, I'm the CFO of Logistea. As you heard Niklas saying, Logistea has grown a lot during the quarter, both in the balance sheet, but also in the earnings, which I will now present further into the financials. Logistea's revenue for the quarter increased to SEK 263 million compared to the previous quarter of SEK 248 million. The increase is linked to the finalized acquisitions during the quarter and a smaller increase of the revenues in the like-for-like portfolio. The net operating income came out at SEK 242 million, an increase from last quarter's SEK 216 million, which is linked to both the acquisitions and a warmer quarter, which kept heating and electricity costs down. The previous period was affected by FX effect of around SEK 2.5 million. The operating margin increased to around 90% and the adjusted operating margin where we exclude the rent supplements from the revenues came in at around 95%, an increase from 90% a year ago. And the figure we tend to put the most focus on is the profit from property management, which increased to SEK 131 million. Apart from a higher NOI, we have managed to -- through negotiations and completed refinancing in the current loan portfolio to decrease the average interest rate from 4.8% to 4.6% in the quarter. That is a drop of around 40 bps this year. And I will explain more in the upcoming slides. Profit from property management per share, one of our financial targets, increased by 58% on a last 12 months basis and increased by 74% comparing the first half of this year with the first half of 2024. As we heard earlier in the presentation, we issued 36 million new shares in June with the purpose of financing our future growth. The issue brought in SEK 500 million, which balances the capital structure in a good way. Even though the issue price was slightly below the net asset value per share at the time being, we've proved that we invest our capital in good yielding property transactions and projects that create more shareholder value. In order to maximize the return on equity, we aim to secure a loan-to-value in new transaction of 50% to 60%, which we have managed during the period. At the end of the period, our LTV was stable at 48.4%. As I mentioned both on the last page, but also in previous earnings calls, we have had good a negotiations with banks during the quarter, which has resulted in, apart from the lower margin, longer credit maturities. Loans that matures within the upcoming 12 months are a manageable SEK 187 million, and the average capital maturity came out at 2.9 years, compared with last quarter when we had SEK 1.3 billion in debt maturing in 1 year. And the hedging ratio is stable at 73%, and the interest cover ratio has increased to 2.3x compared to 2.1x at the beginning of the year. And our hard work with our finance portfolio, especially looking at the terms with the banks is paying off as we have decreased the average banking margin from around 200 to 180 bps in the period. During the quarter, we have refinanced around SEK 1.9 billion with better terms. SEK 600 million of those had a margin decrease of 85 bps. Apart from the decreased margins, the market interest rates have helped the average interest rate to decrease to 4.6%. So looking back at the earnings capacity we saw before, even though we have increased the loan amount by 17% this year, the net financial income has only decreased by less than 8%. And we have still unencumbered assets in Germany, Poland and the Netherlands amounting to around SEK 940 million, which we are working on getting into the banking system. To sum it up, the transactions made in the quarter, together with the work with the loan portfolio has given us a good position to deliver on our financial goals and limitations. The profit from property management per share on a last 12-month basis adjusted for onetime effects are up 58% in 1 year, while growth in the NRV per share is up 14% from a year ago. The loan-to-value ratio remains low at 48%, while the interest cover ratio continues to increase. If we deduct the income from the not yet finalized project property we have in the earnings capacity, our ICR is projected to increase from 2.3 to 2.5x. So the key takeaways from this finance side are the decreased average interest rate from 5.0% to 4.6%, the improved credit maturities, strong profit -- strong growth in profit from property management per share and a position to fund more transactions with a cash balance of around SEK 500 million. And back to Niklas.

Good. And to summarize, we -- as I said, we have managed to grow the portfolio by approximately SEK 2 billion only this year, including the property announced this morning. Those together will add 22% on our profit from property management per share. We do believe there are still good deals to be done, and that's one of the main reasons why we decided to undertake the rights issue in June, meaning that we now have dry powder to act if we find value-creating investments. So opening up for questions, please.

[Operator Instructions]

Do you hear me?

Yes.

Perfect. I don't think I was introduced, but this is Fredrik from ABG. A couple of questions. Maybe starting where you sort of ended, Philip, on margins, talk a lot about sort of the delta and the margins coming down. Can you specify or do you want to specify the new margins you get in different countries today?

Yes, for sure. The new margins we've received on new loans on the transactions being done are around 150 to 170 bps, and it's evenly shared in between all the countries.

Perfect. And I think we've had this discussion before, and you've been on the topic of sort of moving some of the -- maybe bond debt to bank debt for some of the countries outside of the Nordics. How -- is there an update on that?

Yes, it's actually not a move from bond to bank debt. So the properties located outside of the Nordics, they are unleveraged apart from Belgium [indiscernible] bank financing. So still where we're trying to get bank financing are the properties located in Poland, Germany and the Netherlands. And it's nothing signed even though we have -- we are in progress in one of the countries where we've come pretty far, I would say, but nothing signed yet.

All right. And if let's, in theory, assume that you don't get bank financing in those markets, would you sell those properties or continue to finance it or keep it unlevered, as you point out?

What we said is that now we're in the process trying to get as much and as good bank financing as possible, and we'll probably give ourselves at least the coming quarter to see how far we get and on what terms, and then we'll need to decide based on the financing received, should we keep or not. But the process is on the 3 countries is progressing pretty well. So we will -- as I said, we give ourselves at least another quarter to see where we get.

Yes. Fair enough. Good. And then on -- maybe on letting, I do appreciate that the quarterly figure and the year-to-date figure is very small in relation to the total property portfolio. But is there anything to call out on the terminations, either in sort of when are these tenants leaving? And maybe if there's anything specific in here, one region or one country doing -- accounting for the majority.

Yes. So the 2 terminations that we have had during this quarter, one has left and one will leave at the end of the year. There is no trend as such that the leasing market is worse compared to the previous 6 months, probably rather the opposite. So we are in a couple of good leasing situation. It takes longer, but it's not like that we have lost potential new tenants during the quarter. But obviously, we are facing a small negative net letting, but it's nothing -- there's no trend as such when it comes to our type of properties and our type of tenants, I would say.

Understood. And then finally, last question, maybe partly on the same theme of longer discussions. And I guess we heard it this from several companies in the space as of right now. You have previously sort of concluded that you do want to start significant projects. Now the transaction market to you at least seems to be very liquid and open, and you're very active. Is the project leg of the business of lower priority now? Or do we -- should we expect something in terms of project starts for the next, say, 6 to 12 months?

We're hoping to do 1 or maybe 2 projects in the coming 12 months. Nothing is signed, obviously, because then we would have let you know. But going back to the discussion where you started, obviously, if we are to do projects, the yield on those needs to be sort of in line or hopefully a bit -- yield should be hopefully a bit higher compared to buying a similar type of property standing with the lease. But then one should also remember that projects, they -- obviously, brand-new buildings, et cetera. So it's -- you could live with slightly not lower yields, but yields that are in line with what we're buying existing properties. It's not intentional that we have slowed down the process of trying to find new development tenants. It's just the case that we haven't -- we haven't signed any leases yet, but we're still trying to do so.

Understood. That's fair.

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

Good. We actually just got a written question. You reported a fairly sizable positive property value change in Q2, which was mainly explained by yield contraction of 1 bps. Can you please elaborate how the small yield shift can explain such value change? Yes, sure. So -- and this is from David Flemmich at Nordea. So you're correct in the sense that the yield compression is fairly low, and that is part of the positive property value change. The other part is that basically we have -- as explained, we bought properties of SEK 2 billion over the past 5 or 6 months. And basically, those properties have been bought at higher yields compared to the average yield in the portfolio. So that would also make a value impact on the total portfolio. Even though overall, the change on the yield requirements is just slightly down. Then it seems that we don't have anything in writing, and no one is in the queue for asking questions. So I guess that has to do with the time of the year or that the report was self-explaining or maybe both. But obviously, if there are any questions popping up during the day or during the summer, just let Philip or myself know and we'll do our best to answer those. And otherwise, we'll wish you all a great summer holiday.

Yes.

Perfect. Thank you.