Platzer Fastigheter Holding AB (publ) (PLAZB) Earnings Call Transcript & Summary

Hello, and welcome to Platzer's Q1 presentation. Today, we have Per-Gunnar Persson, CEO; and the CFO, Fredrik Sjudin. My name is Markus Henriksson, I'm an equity analyst at ABG Sundal Collier. I will come back with some Q&A. We will also have the possibility at the floor here today and also on the teleconference. We also have, you can send in questions via the webcast, and then I will try to read them up as well. So that's all for me. Over to you, guys.

Thank you. Thank you. I'm P.G Persson, I'm the CEO at Platzer.

And I'm Fredrik Sjudin, I'm the CFO.

And we will try to lead you through this presentation. And I will start, and then you will come in, Fredrik, and then I will finish. If we look at the summary on Q1, we -- it's a lot about rental income. We have increased rental income. We also -- but it's also a lot about financing costs. So we have -- we have mitigated the financing costs with the rental income, and we are -- a lot of our products are now soon to be finished. So you can see that rental income will come up, and we will try to mitigate the financial costs. We know that the financial costs will increase because of the interest rate situation. We had a strong net letting and a large number of new contracts in Q1, also our model, which we are working with. We're still working. And we have done -- have the same model for a lot of years. And Platzer has been there for a very long time, and we are going to be there for a long time going forward. And we're also reducing the energy consumption all the time, also in the Q1. And we have denominated in our -- what we are doing in an architectural way and we have been nominated now 3x with our office buildings, Vesta. The Vesta project, the Kineum project and the Merkur project. And we didn't win in Vesta, we didn't win in Kineum, but we won the largest and the best price of all if you speak to an architect. The cost of selling price for our house, the building -- the Merkur building. And also, we are now starting to move -- the tenants are starting to move in, in Sörred Logistikpark. So in Q2, all those projects will be finished. So -- now in Q1, we only had one tenant moving in, was [indiscernible]. So in the books, there is no area -- no square meter from the Sörred Logistikpark in projects in Q1, and there will be investment properties in Q2. So keep up and look out for that in Q2. We will have those transform from project properties to investment properties. If you look at the numbers, Fredrik will come back to those. I will not talk so much about them. I will leave that to you, Fredrik. But I would say something about the market situation, and I will go from this slide to that slide. So if we start with this slide, can see that we have a second quarter -- it's very double in -- been very double and it is very double in Gothenburg. We have a second quarter where it's clearly that the situation in the environment is declining. There is a declining activity in the economic activity in Gothenburg. And if we look at the indicators, you can see that it's clearly now 89 is below where we say that it's not a -- it's a downturn. It's not a recession, but it's a recession-like situation. But still, there's very low unemployment, and the weak Swedish krona, of course, keeps up the export industry. So the situation in Gothenburg is that we have -- in the numbers like recession-like situation. But if we look at the demand in our offices and demand in our logistics is still good. And I will go into that a little bit later. We also saw maybe a turning point in the CPI, where the level now in March 2023 were the lowest since August '22. So from September until now, we have had higher year-on-year increase in CPI. And we don't know if that's a turning point or -- but there is some indicators that there could be a turning point. And of course, there is still the uncertainty with the war. We have the benchmark rates that have been increased to 3.0 now in Q1, and we will probably even higher in April. We don't know that yet. And we also down -- the writing down of the economic growth is still in very much done. If we look at the 2 markets that we are operating on, the office market and the logistics market, I will start with the office market. And if we start with the rental market, we still see high vacations -- vacancies since we had a lot of projects due in 2022. But now we can see that those projects are now -- those projects are now finished. In 2023, there will be not as much office projects in Gothenburg. It will be more of a normal situation where we have maybe 40,000 -- 30,000, 40,000 square meters where 2022, we had 170,000 square meters. So of course, the vacancies level are quite high compared to maybe 6, 7 years ago, but they are stable now. So we will see what happen. The prime rents have increased mainly, I will say, because of the CPI -- new CPI level. And we estimate that we will see no further increase above the CPI level in 2023. We don't have any problems with the tenants. The tenants have all accepted the new rental levels, but we don't see that it's going to be quite as easy to raise those levels even further to increase them even further. But we still have a good demand, and Fredrik will go in on our net letting. So you can see that we have a good demand situation on office market. If we look at the property markets -- property markets, we can see that the yields are slowly increasing and why I've written down slowly here is because I will say more rapidly in the logistics. So -- but slowly increasing yields. There is no transactions. It's more a sentiment question that if the interest rates are increasing, the yields should be increasing as well. So -- but we don't see any proof yet of any transactions. But still, we are looking -- keeping up very much in the market situation to see if there will be any transactions. So we will -- and this uncertainty is still going forward is still very high. We don't know yet. I think nobody knows what will happen. If the inflation will keep up as high as it is or if it will start to descent. And the -- we don't know where the [ risk bank ] will do. So we will have to keep close watch on that. If we look at the logistic market, we don't -- we still don't have any vacancies in -- on that market. The prime rents are still increasing. And what we can see, though, is that the demand for e-commerce is not as high as it's been, but the demand for -- from other tenants that are -- that want to be close to the plants, the Volvo plants and close to the harbor is still have a demand for the logistic areas, logistic locations in our area. And if you look at the property market, we had a high increase in the yields from Q2 to Q4. This month -- this quarter, we haven't seen any more increase in the yields, but we had a rapidly growing yield situation between Q2, where we have prime yields on 3.5 until Q4, where we increased the prime yields 4.5 so 100 -- 1.0 percentage in -- from Q2 to Q4, but no further increase in Q1. And also, of course, uncertain situation, no transactions in the logistics market as well. So very few transactions generally in Sweden and extreme few in Gothenburg. This is our area of where we work is 20x 20 kilometers. And the red dots are our offices. The red dots with a little white is our project opportunities, and gray dot is our investment properties in industrial leases. And the green one is where we -- what we're going to sell in the future. I will have a slide on what is going to happen in [indiscernible]. In the earnings capacity, if you look at the chart on the slide I just was -- showed you. We have the Central Gothenburg property, where it's 60% of our fair value. And you can see that we have 95% is investment properties today, 5% projects. We're trying -- and these are the fully-owned properties. We're trying to have that around 5% project -- between 5% and 10%, no more than 10%. So 5% is quite good. We will probably maybe have a little bit lower percentage in -- as long as the interest rates are so high that they are right now. It's more difficult to start new projects. And the associates, SEK 4 billion, most of them are 50% owned by us. So it's SEK 4 billion today. A lot of them are project properties in Sörred Logistikpark, and those will now be investment properties, most of them in Q2, and we'll come back to that in Q2. Our value creation, the model is still the same. But I think we are focusing a lot more on the keys today, the ownership, a little less on the transaction. And still a lot on our development. And the goal is always to create sustainable values. If you look at the resource side, where we have the competence and the capital is always, of course, important with the competence. But I think we are focusing more right now on the capital side than we have done in many years. Fredrik will also come in to that a little bit later. I think I will do this slide as well. If you look at Q1 on our value, you can see that we have not done any large acquisitions, only a small acquisition, which was already -- we had already done that with [indiscernible], the municipality [indiscernible]. So the investment in existing properties is almost as high as last year, and we are doing our projects. I will go into our projects a little bit later in the presentation. No change in value. Yields start same. And the goal also is always to increase the value in the portfolio, and we've done that since 2013, and we will keep up doing that also in the future. I will leave this to you.

Rental income. We had a good increase during the quarter. If you look at Q1 2022, compared to this quarter, we have an increase from SEK 311 million to SEK 350 million, and mainly due to the Kineum project you see in the background here, the tenants are moving in there this year. Our economic occupancy rates, which is of the essence for us, it's keep -- it's stable. It's in the decimal, it's increasing, but it's stable at 92%, which is Important for us for every cash flow is -- will come into use. If you look at the whole income statement, the rental income increase. As I said, we have a good increase in the operating surplus, the NOI, but still we have a decrease in our income from property management when you compare quarter-on-quarter. And that's due to the increase in financing costs, which are up at SEK 97 million for the isolated quarter this year. And we are managing that going forward, I would say. So we -- a little profit for the period, it's a positive number. So that's the positive, but that it's not on the negative side. Very little value changes. It's driven by the derivatives portfolio, where the long interest rates has moved in the quarter, which has decreased the value in the derivatives portfolio. And as PJ said, no changes in value when you look at income statement. Our positive net lettings, which are really good for us in the day-to-day business because this is a proof of our good quality in our investment properties and the locations that build an interest that we still can do good net lettings. We have some terminations, but more than 21 -- we had SEK 21 million in net lettings for the quarter. No lettings in the project properties. And as they decrease the number of projects, it's fewer possibilities to let out. But -- we are -- we have still possibilities going forward with new projects in our industrial and logistics and the ongoing projects in offices. Our key figures for this quarter, the most focus we have right now or the market, it's about the interest coverage ratio. We are now standing at 3.2 if you look at rolling 12 months, it's a significant decrease since last year, of course. And if you look at the isolated quarter, it's at 2.6. And that for those who don't know, that's how much cash flow we have to pay the interest, and as they are increasing, of course, the -- and the cash flow doesn't increase in the same ratio, then this will deteriorate. But we are looking closely into that and working with our financing structure and our interest rate derivatives portfolio, our interest rate swaps and -- and of course, the day-to-day business with our management -- property management are contributing to keeping this at bay. Our surplus ratio is up a notch. If you compare it to last year, it's up at 76%, which, of course, is good in all essence. Our net reinstatement value, our EPRA NRV is increasing. Still, if you look at the rolling 12 months, it's a 15% increase if you adjust for dividend. But we know as the result goes down, this will be a lower pace going forward at least that's what we know now, but the market can still change, if you have a positive outlook. Net asset value, we -- when you compare that to the share price over time, you see it's mainly going the same direction. But now we are in a period where the stock market prices, the substance in the company at another level. But over time, this tends to correlate really well. So we will see when we will meet again. So hopefully soon. We are still making good way in our sustainability perspective, we are, as we said before in our earlier conference calls, working with the climate goals, and we are in the SBTi initiative where we have committed ourselves to be in line with the 1.5-degree target, the 1.35 degree goal under the Paris Agreement. The biggest challenge there for us and other in the business is the Scope 3, of course, because it's hard to measure. It's not within our grasp, but it's -- we have to rely on contractors, entrepreneurs or tenants and so on. So we are committed to measure and lower decrease our Scope 3 emissions going forward. We are still at a good rate coming to our environmentally-certified properties. We are at 92%. But with the EU taxonomy that's less of an external interest, but it's good for us in our property management to have this to work with. It's good -- it keeps good order in how we manage our properties. And we still have a lot of financing that is depending on the certifications. And the energy usage, of course, as PJ mentioned, we have a really good decrease in the quarter. We have decreased 5.4% which means that we are on a good track. Coming to financing, 67%. We have been at a higher level, but that depends a little on our transactions and what business we are going into at the moment. The most -- we have increased our commercial paper somewhat during the quarter, which is a positive sign. We have even issued MTN, a green bond with SFF in the quarter, which is also a positive sign because both of those are in the capital market. But we haven't yet have any unsecured bonds because that market -- the margins there are about almost twice as high as we would like. So we are really looking forward to that coming down. So we have all the instruments in our toolbox when we want to finance our growth journey going forward. Our maturity profile, if you look at this slide, the red one is bank and secured lending from the banks to us. And the gray is then the capital market and if you look at the -- within 3 months, that's our commercial paper only. And the next instance of capital market is a bond that's due in November 2024, an unsecured bond. And further on, there's some secured bonds that are up for refinancing. So hopefully, we have a due time to get this in order. Hopefully, the bond market will get in order and we can come back and meet the investors at good levels, so we can increase our exposure to the capital market at a good way. Back to the project.

Yes. We will go through some of the projects where we have in the report. I will start with the area Aria project, which is in Lilla Bommen and we now -- yesterday, we announced a new rent now to [indiscernible] to their new head office in this building, and it's good for the numbers, of course, that we are renting out in that building. That project is due in -- maybe in Q3 2023, but we will do a lot of -- we haven't -- it's not fully let in Q3, 2023.

Depends on tenants.

Yes, it depends on the tenants. But it's really nice that we now are starting to see that the tenants are coming into this building. Then the Merkur project, we talked about -- I talked about before. This one is the old building. We have an old building and then we have the new building that has won the Kasper Salin Prize. And we are now doing the old building. And it's also coming out really good on the rental side. So we have been 70-plus percent now in the old building and around 90% in the new building. So this one will be one building in the future as soon as we have done this project -- this project, and those 2 buildings will be one property. It is one property today in -- it is one...

Merged, it can be one building so...

So -- yes, yes, yes. And then, of course, we are doing the Skola. The Skola in Södra Änggården and that one is in progress -- work in projects and a 100% let to the English school. If you look at the logistics projects, those the ones that will now be finished in Q2 is the Syrhåla 3:1-T in Torslanda [indiscernible]. And you can see that it's -- there will be another building. This is the Phase 1 building up to the left and you will have the Phase II building is also under way up, which is rented to Volvo. And to the right, we have Arendals Kulle, also rented out to [indiscernible] 100%. We will also be finished now in Q2. And then we have 2 buildings in Sörred 8:12 Torslanda. It's rented out to [indiscernible] and Volvo. This one, you can see it's called a V1 building. And then on we can also see a little bit of the V2 building, which rented out to [indiscernible]. And all those will also be finished in Q2. And also the 721 project, which is 100% rented out to VCC Volvo cars. So all those 4 projects or 5 projects because [indiscernible] are being finished in Q2. And of course, the future of Södra Änggården. We are doing the school and the school is the orange building up to the -- I have to go and point. This is -- this is the building that is – Södra Änggården School -- sorry. This is the building that's the school. And we also -- we're also going to do the parking house, but all other buildings around here will be sold to -- the building rights are sold, and that will be residential buildings. Finally, but not least, why should you invest in Platzer because you are investing in and believing in Gothenburg as a region. And we are very much -- the rental market is very much a mirror of how Gothenburg is doing. And if we can have nice locations, and we have a good situation in the region and will also be good for Platzer. Gothenburg is still growing. I mean, today, you can always think if it's not or if it's growing, but Gothenburg is growing. We have talked about our model. Our model is we can always -- we can focus on the investment properties. We can focus on ownership. We can also focus on the transaction when that will be a better situation. And we have a good financial situation. And we also have our projects that we can keep on developing. And there will be new projects around the corner. But new projects, demand rental out, so we will have to be -- have to have tenants before we start our new projects. And of course, we are doing the sustainable work -- and I think we are quite good at the sustainable side. So hopefully, all that will trigger you to invest in our company. Markus?

I start with a few questions, and then we'll introduce to the floor. So you mentioned [indiscernible] that you list out in the project Aria. So now it is leased out around 65%, quite big lease, 18% of rental value.

Yes.

If I calculate it correctly. What's the outlook for that property? You mentioned it's completed in Q3. Move in the summer next year. But do you have any more potential lease agreements near term?

It's already an investment property. So it's -- I mean, if it's 65% or if it's 85%, I would rather have 85%. But it's very common. The project -- even though it's a project when we are leaving Q3 2023, it will be like any investment property, which is empty some of the...

It will be moving ready...

To rephrase the question, do you have any short discussions for that property?

Yes. We have more short discussions.

I also saw the value changes were zero in this quarter. We had a bit positive from cash flow.

Yes.

Under SEK 126 million, and then we have negative from projects, SEK 126 million. First question, projects, where did we have write-downs?

In -- we have in the models -- when we do the models, we -- the investment -- the return on investment are calculated with models. And when the yields are moving, now they're moving up, then sometimes the models don't take fully into account, the return on investment. So we take too much return on investment. That's what happened, I would say, in the -- Q4. We had a little bit much -- too much return on investment from the projects in Q4, and we have to mitigate that in Q1. And that's due to the model, maybe the model is too positive when you have 100% fully let. And that's no problem when the yields are flat or the yields are going down but could be a problem when the yields are coming up like they did in Q3 and Q4. And also some of the projects will have a little bit more costs or the costs are in a periodic way that we don't -- we should have put them in Q4. So that's why -- so it's now this is the same project.

Do you feel that there is any risk going forward, say that yields would continue to go up? If we would see further project right in that respect?

I mean -- not -- I mean, the model -- I mean, I think we've taken all those measures that we can do. And then the projects are almost due most of them. So the cost for the...

Yes, they will be included later in the investment properties valuation. So there is soon to be due, you mentioned Q2 and Q3 now 2023. So the risk will decrease by time.

And valuations is not -- I mean it's not fixed, so you have to choose sometimes in the valuation. I mean we are doing -- we are evaluating every property every quarter. So we are looking into every rental income, everything. And of course, it could be something that we are a little bit changed between quarters.

Last question for me before I introduce the floor. I saw that [indiscernible] in the report where you show us rental market and valuation yields. They have put up the valuation versus Q4. But in your discussions with, I guess, at least one of them, values are flat based on transactions. Could you elaborate a bit on that discrepancy?

We got this [indiscernible] report on Friday. So we put it in the report because we thought that was the right way to do, but we don't agree, and we haven't had the time to talk to them, but we don't agree on there. I mean, it's a very much sentiment-driven and that's what they're writing all the time. But it's driven by logic. It Is their way of putting it. The logic should be that the yields are coming up, but we don't see it in the transactions.

Connected to the finance...

Yes. Based on that, like the skeptical mind, would see that if we have few transactions or here, we always have very limited evidence in Gothenburg since it's a bit of a special market, but isn't that partly an evidence, and that's what they are basing their assumptions.

Yes. I mean, we have had a couple of external valuations where we can -- we have seen that the yields are not -- have not been coming up in Q1. So we are more -- we trusting them more, I think, than [indiscernible] report. But we are we don't want to hide anything from the market. So if [indiscernible] thinks that the yields are what they are, and that's the only report that is on the market right now, we put it in now.

Perfect. Moving over to the floor, raise hand, and then there will be a microphone coming over to you. Let's start with the one that was closest.

Starting with the logistic projects that you mentioned that will be completed in the second quarter. Will they still be owned in the JV? Or do you plan to -- can require the remaining 50% of those?

We are planning to be the long-term owner. That's what we have said all the time, and we are discussing that right now. And we will -- as soon as -- as soon as we know what we will -- what we are doing in the future, we will do communicate that to the market.

But there aren't any like forward agreements that you will just can use and with already decided yields or something like that...

There are agreements -- yes, there are agreements, but they're all optional. So we don't have -- nobody has any -- there's no one -- there's not any...

Plus, it has the first option to buy at market conditions. So we have no prerequisite regarding yields and so we have to agree to the terms.

Yes.

And when do you expect to be able to give more information about what the price will be and when the transaction will take place?

Hopefully, what I would say, in a couple of weeks.

Yes. during the quarter.

We're discussing that right now.

And as a very big part of the development portfolio, especially in the industrial and logistics segment is about to be completed. Are you planning for new starts?

We have started the V4 but we are not going to start the V3 because we have started V4 on 0% letting out, but we will not start the V3 until we have a tenant.

And do you need it -- do you have like a pre-letting ratio that's required? Is it like 50%? Or do you want it 100% leased or?

In the Board -- in Platzer's Board, where we go to the Board in Platzer, they usually say 50% on office buildings. But if in the JV, we are -- we have a separate Board, and that Board is -- has said that we are not going to do -- we were not going to start the V3 until we have tenants in V4 and we get tenants in V3. And if not -- we haven't set any percentage.

Regarding the rental market, maybe more on the office side, you mentioned that you signed a relatively large contract with [indiscernible]. Are they an existing tenant since before? And are they leaving some premises as well? And how big are those premises compared to the news?

They're leaving another premisses in Lilla Bommen. And I think that one is smaller. So they are increasing their area, but they are also living in the same area, in the same Lilla Bommen area.

When we look at large leases in Stockholm, more or less all companies that have signed large leases this year have reduced the spaces, but with maybe 30% to 50%. Do you see the same trend in Gothenburg that you see...

Not the same trend seen in Stockholm, but I mean, that has been in 5, 10 years' time, they have reduced the space per employee, but not -- the total space is more increasing for many companies. I mean it's still a situation, I would say that unemployment rates are very low, and many of the companies that are renting from us, they need more space. They don't need more space per employee, but they need more space as a total.

And you've had a relatively strong net letting in the recent quarters. Should we expect that the occupancy rate will increase during the rest of this year?

I mean if you look at the earnings capacity, it's up, I think, 1 or 2 from [ '92. ] So hopefully, we think that this will have that effect, but you never know how many terminations you get. The terminations are more difficult to predict than the -- of course, it's difficult to predict renting out as well. But when both are sometimes hard to predict if -- you have a lot of terminations then you have negative net letting, but I can't see that situation right now.

And one final question regarding CO2 emissions, you're one of few listed companies that doesn't report the scope 3 emissions. How come you are not reporting that?

We are reporting it, but only yearly. So no, we're not reporting it every quarter, but we are reporting it on...

And where we can validate the numbers because most of it is speculation even in the reported numbers. So we are increasing the number of segments where we measure the CO2, but we are not there yet. But on a yearly basis, we have reported a CO2 in Scope 3.

Yes.

Okay. [indiscernible] from SEB. Just a follow-up on the previous question and more specifically working from home. Is that -- in Stockholm, it's a factor now. It's -- to me, it's starting to have some kind of effect where one can argue that the location of an office is getting even more important to attract people back to the office. How is that playing out in Gothenburg?

We don't see any -- I mean, they've talked about now that offices is the new retail in New York. But we can't see any signs of that in Gothenburg yet.

It's not the same commute, dense. So it's not the same problem.

I mean it's also -- of course, I mean, you can always argue, do we have very attractive office buildings. And Fredrik and I will always say, of course, we have the most attractive office buildings. So we are -- the tenants are moving from other property owners to us. But I think as a general, if I talk to other property owners in Gothenburg, I think they're all pretty happy with the renting situation -- rental situation.

And one more question on a different topic. I mean, you have a strong rental growth, very much due to CPI indexation. But then property management is being hurt by rising interest costs. I mean, looking forward, without -- I know you don't give forecast, but can you give some kind of indication how you expect that to looking into the full year and looking into next year, will you able to balance the rise in interest costs or not?

We are -- if you look at the earnings capacity, and if I go back until 2013, and I map the earnings capacity with what actually is the -- what we then get, it's pretty correlating. So look at the earnings capacity and what -- if you talk to the interest rates, nobody knows, but...

But the ECR, we have a target at 2.0, and we will -- we would absolutely want to be so far away from that as possible. So of course, we want to increase the pace, we will increase the cash flow so we can meet the financing costs. And hopefully, yes, it's going to be worse before it gets better, but hopefully, it gets better soon. But we are increasing our cash flow letting out. So -- but we don't set any prognosis on that. But we are really...

The only forecast we can give is the earnings capacity. And what we can say is that it's not -- it's usually pretty close to where we also then deliver.

Albin Sandberg, Kepler Cheuvreux. You mentioned that you expected the rental growth to equal the indexation as far as I understood it, but also that that's some kind of a maximum...

2023.

So assuming next year, you think is there a risk that the market rents will drop or will you be able to compensate for indexation also going forward?

I don't think there is a risk that the market trends 2024 will drop. They will probably I mean, today, if you take the index, the CPI index for March and compare that to October '22 then you get 3.7%. And that's what -- I mean in our valuation, we have 4% uplift in next year. I think the market will -- there won't be any problem for the market. I think the market trends will cope with 4 percentage.

And Fredrik, I think you said you were looking into all the toolbox within the financing package. Given where interest rates are now and what you see going forward, do you think it's worthwhile to raise your hedging ratio? Or are you rather inclining to go for a higher share of floating rates?

I would say we are working with that on a daily basis, we are evaluating different options. So -- but I would -- without doing any prognosis, the trend is the hedging is going up.

If I can do a follow-up on the ICR, you said that you want to be clearly about 2x. If you would drop towards 2x what would be -- or how would you handle the situation, what would be most likely to do? Would you kind of raise equity or sell assets or any other suggestions. Assets is probably more of a CEO and CFO question than equity. So I would say that we will do whatever is necessary. And of course, discuss with the Board if necessary is to do a raise equity. But I would say we're not even close to that situation, but we don't know about the interest rates. That's...

No. But the first tool in the toolbox that's to sell some assets.

I do want to bounce back, I think I have 2 questions. One, regarding the paid average interest rate. I mean it made a pretty big leap from Q4 up to Q1 below 3% in Q -- so below 3% in Q4, now it's [ 36.6% ] by the end of the quarter. It's -- and I think it's 30% or something that's actually maturing regarding rates and within the next 12 months, how much is STIBOR and how much is longer matures or longer borrowings is actually maturing? And what's your -- can you give us any guidance on your expectations on paid interest rate over the next 3 quarters?

In the next quarters, it depends on the upcoming rates, of course, but the market has...

Spot prices that's [indiscernible]. If we assume that we were at least [indiscernible] with the spot prices as it looks right now?

Yes. But the short-term rate, we get about 50% effect in our finance net -- due to the hedging. And -- we had STIBOR increasing with 66 basis points during the quarter. And our effect in our portfolio was 35 basis points, if I am not mistaken. And that's 97% of that is STIBOR alone in that increase. But going forward, that's in the same way because the only thing that could change that, that's the margin in refinancing going forward. And then you have to look into the books and look what's the current financing situation and what we are expecting to do the new deal at. But we haven't had any signals lately in increasing margins from the bank, and we are -- yes. As I said earlier, hoping for the capital market to gain some ground. But I would say the pace is mainly due to the short-term rate, the STIBOR rate.

You don't get any predictions?

No. but I say -- what to say, in April, it's 3.5. But then I will say, before the year is over, it has been up their price in the market at 3.75. And that's, I would say, it's a good belief, not in a positive way, but I would say it would decrease before the year is over. That's what I'm hoping for. And if we can see some significant signals in the KPI development then hopefully, the Central Bank will turn it down and not and we see where we are ending 2023.

What we could say on is that we are not worried about the refinancing situation.

I think and just more of the kind of development in the term because it's very difficult to predict what kind of STIBOR effect you have on a 3-month basis and so forth. But -- okay. The next question, can you please provide us some kind of breakdown on the like-for-like rental growth year-over-year in Q1. I mean it's a plus 20% in like-for-like. What's building up the number, I think it was...

The problem with like-for-like is that if you have investment project -- investment properties that are projects like Kineum, Aria then some year when you -- when they're emptied, do you have a very low like-for-like. And the next year, when you fill them with the tenants, do you have a very high, and that's what's happening for us. So like-for-like is not always a good measure.

So a big chunk of that number is actually products -- previous products that's filling.

Yes. It's an investment properties.

Isolate indexation from Q4 to Q1 now, the indexation if...

You can -- you have to take the CapEx into account, and that's the weak thing about like-for-like. That is always something -- that if you were to pull all those properties away that is not like-for-like, it's not very many properties left. So -- so we can put some of them away. And then the like-for-like will probably be more like the CPI index, I would say, without having done that.

Perfect. Moving back. And let's see if we have any questions from the telephone conference.

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

Perfect. I can end with a few questions as well. You were discussing a bit before about potential divestments. Going back a few quarters, you were hoping to be a net buyer. You were very much looking forward to buying properties. Would you say that you are more inclined to divest now? It was not certainly clear? Or is it more that the market is very uncertain. So it's more likely that you will do nothing?

I think the second, more the second and the first.

We have already agreed divestments in Södra Änggården, that will come into place during next year. So it would be if you should increase the development. But that's not in the discussion right now.

All right. And then a bit on investments. You've been investing around SEK 1 billion last few years, and now we're at 1.4, continue to be a high pace. I think we should expect it to come down, but how much you mentioned that you want to have a project portfolio of 5% to 10%. Did you mean that it will likely go below 5%?

I think we could go below 5%. It depends a lot on the renting out. For instance, in [indiscernible], we have 65,000 to 70,000 square meters in building rights. If we get a good tenant or we -- then we can start the project. And then maybe there's a project on like SEK 0.5 billion or something, and that will start. Otherwise, if it's not starting, then maybe you have a little bit other situations. Of course, it's depending on the renting out situation.

And at 10%, that's an all-time high ratio.

I think we had -- we were below -- we haven't been above 10 anytime. It was 9.7 or something. That was the highest. So I think we could go under -- we have been down to 1.5% or 1% in some years, but...

You think it's likely that we will have towards below SEK 1 billion in investments, going into '24, '25 [indiscernible], of course but with the information you have current?

Hopefully not, because the projects are still very profitable. So I think we should do projects, plus you should do projects because those are profitable.

And we see that construction have begun for housing in [indiscernible]. Do you feel that, that is something that would be a positive for a potential tenant that they see that the projects are starting or is it all else equal?

No, no, absolutely. It's very positive.

So anything you can share potentially any starts in '23 or like '24?

We hope we have discussions, also. We have a lot of discussions right now. And I mean, we had one large renting out in Q1 to the Gothenburg municipality, which we had discussed for one year. and took one year. And then when it came, it was really good. It was really good for net letting. But if you would have asked me Q1 '22, I would say, maybe it's -- we will finish that in Q2, but it took another 4 or 3 quarters. And I think that could be the case for [indiscernible].

Thank you. I will end with the last detailed questions on the [indiscernible]. They're moving from another property within Lilla Bommen or [indiscernible]? Is it your property or another?

No, no, it's one of our competitors. Start with a large C.

Too bad. Thank you that you have listened in. Thank you to the floor for all the questions and going back with some concluding remarks to PJ and Fredrik.

We will summarize with saying thank you, everyone, for being here and those of you who are listening in through the webcast.

Yes. Thank you, everybody.