Public Property Invest ASA (PUBLI) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our presentation of Public Property Invest results for the last quarter of 2025. My name is Andre Gaden. I'm CEO of PPI. And together with me to present the results is our CFO, Ylva Goransson. Together, we will take you through highlights from 2025 and the fourth quarter, and we will end the presentation with a Q&A session. Overall, 2025 has been a very eventful year for PPI. But the fourth quarter really marked a step change for the company, both in scale and in the strength of the platform we are building. PPI is now a large pan-Nordic company with significant portfolios in Sweden, Norway, Finland and Denmark. Since the beginning of 2025, the portfolio has grown 5x, and we have increased our run rate rental income by 4.7x. During 2025, rental income increased by 65%, net operating income by 63%, and net income from property management was up by 73%. Cash flow from operations increased to -- by 87% to NOK 874 million. On our growth journey, we have managed to maintain a disciplined capital structure and strong focus on creating shareholder value. In 2025, we have delivered a total shareholder return of approximately 35% and 70% if you look at the period from the IPO in April 2024. If you look at the key events in this quarter, it is, of course, the transformative NOK 38 billion acquisition of the social infrastructure portfolio from SBB that stands out which includes 737 properties across the Nordics. This transaction establishes PPI as a leading listed social infrastructure platform in Europe with a total gross asset value of NOK 54 billion after the deal. Following the transaction, the Board has announced its intention to propose a dividend of NOK 1 per share, a 100% increase since 2025, reflecting our growing and predictable cash flow. We have also started the preparations for our redomiciliation to Sweden and Nasdaq Stockholm listing, an important strategic milestone to broaden investor reach and improve liquidity. Now let's move on to portfolio highlights and have a look at the new PPI portfolio. PPI's portfolio now includes 850 properties, with a total BTA of 2.2 million square meters. After the transaction, the Swedish market is now the largest market in terms of gross asset value and constitutes of 53% of the portfolio. Annual rental income is NOK 3.7 billion, and our estimated run rate EBITDA is NOK 2.7 billion. We have a strong portfolio of government-backed tenants that represents 84% of our annual rental income, securing a stable and resilient cash flow. Occupancy in the portfolio is 95% and we have a portfolio WAULT of 7.3 years, including our development projects. And the net yield in the managed portfolio is 5.7%, reflecting the large share of the portfolio now located in Sweden and Finland, countries that have lower rent levels, thus also lower market yields. Balance sheet remains strong with an LTV of 48.3% and adjusted net debt to EBITDA of 9.5x. So let's have a closer look at the SocialCo transaction. With a portfolio that was acquired from Samhallsbyggnadsbolaget i Norden AB, PPI more than tripled its size and portfolio value, creating one of the largest listed infrastructure real estate companies in Europe. The transaction involved 737 properties across Sweden, Norway, Finland and Denmark, and has significantly strengthened PPIs strategic positioning and capital markets profile. The SocialCo portfolio consists mainly of properties with long duration contracts with government-backed tenants, almost 70% of the portfolio is also within health and elderly care. The SocialCo transaction was carried out at approximately 8% discount to book value and closed on the 16th of December 2025. The transaction was financed by NOK 13.8 billion in new equity, NOK 13.5 billion in an unsecured investment grade bridge loan facility and cash on balance sheet. Our 2 largest shareholders, SBB and Aker, they have shown strong commitment to PPI. And in this transaction, Aker alone has contributed with NOK 5.4 billion in new equity. The SocialCo portfolio represents a high-quality portfolio with mainly government-backed leases and is based on long-term relationships with municipalities and government tenants in Sweden, Finland Norway and Denmark. The portfolio has maintained a high occupancy over time and is mainly positioned towards the growing elderly and health care segments. The properties are also, to a large extent, specialized for their public purpose specific purpose, creating a high propensity for the tenants to prolong their leases. Approximately 86% of the annual rent income in the SocialCo is coming ultimately from government budgets and our CPI linked. Positioned in a favorable Nordic environment with long leases, the portfolio provides a stable and resilient cash flow. If we then look at the combined portfolio, over the last year, PPI has built a unique, large and scalable social infrastructure platform across the Nordics. The current PPI portfolio and the new SocialCo portfolio are highly complementary, and the combined portfolio now comprise NOK 54 billion in asset value and is concentrated in or around major cities in the Nordic countries. Our geographic exposure is now more diversified with 53% of the portfolio value located in Sweden, almost 30% in Norway, 16% in Finland and a smaller portfolio of assets in Denmark. With reference to the table on the right, the Nordic region is expected to outpace the rest of Europe when it comes to population growth in the coming years. It is also a region characterized by strong economies in all the Nordic countries, the triple AAA and AA ratings. We believe PPI is well positioned within a region that provides stability in a global macro environment, which currently is difficult to navigate. The SocialCo portfolio consisted of a high share of tenants operating within the health care and elderly care segment. And in the combined portfolio, the exposure towards elderly and health care now represents 50% of our gross asset value. In the Nordic region, similar to other European countries, we expect a significant increase in the elderly population. And as you can see on the figure to the right, the share of the population over 65 years is expected to grow by 40% towards 2060. I we expect that the aging population will drive a lasting demand for social care and properties housing this type of functions. And with our current exposure to this segment, we are well positioned towards this demographic trend. PPI's core focus that remains the same and that is to be a preferred partner to the public and government sector by only managing and developing the important social infrastructure properties in a professional and sustainable manner. After the SocialCo transaction, PPI increased our exposure to publicly financed tenants from 80% to 84%, providing stable and resilient cash flows, ultimately financed by strong high-rated Nordic states. Some of our largest tenants are represented on this slide, including large municipalities like Stockholm Stad and state agencies like the Norwegian police. Our WAULT and maturity profile is also presented on this slide. And as you can see, we have a diversified maturity profile for the coming years and the current WAULT of 6.9 years and 7.3 years, if you include the project portfolio. This page highlights important moments in our journey that have laid the foundation for the company that we are today. For those of you who are new to PPI, the company was listed in April 2024. And since then, we have worked hard to build PPI into a leading European platform for social infrastructure. In Q4, 2024, we achieved several important milestones. And among those, we secured our first investment-grade rating from Fitch and we successfully issued our inaugural public Eurobond. 2025 marked another year of significant progress. We expanded into Finland and Sweden. We strengthened our position through a strategic partnership with Aker Property Group, and concluded the year with rating upgrade to BBB+ following the transformational SocialCo transaction. Strong access to equity and debt markets enable these steps. And we have raised NOK 17.9 billion in new equity and NOK 1.85 million in the Eurobond market since IPO. The 70% share price increase over this period underscores the strength of investor confidence. PPI has a strong long-term and supportive shareholder base anchored by SBB and Aker. Aker alone has committed NOK 7.7 billion in equity, which reflects strong confidence in our strategy. As a result of the company now having over 50% of its portfolio in the Swedish market, and we see much larger and much more liquid real estate sector on Nasdaq Stockholm, the company is in a process for redomiciliation to Sweden with a secondary listing on Oslo Bors, in line with what was communicated in connection with the SocialCo transaction. The estimated timing is May or June 2026. On this slide, we present our largest ongoing projects with net product cost above NOK 100 million. Maurinkatu and Metallimiehenkuja are 2 refurbishment projects located in the city center of Helsinki and Espoo. Both are fully leased and with ambitious ESG targets. Then we have 3 care properties under construction for the lease to well-established operators on 15 years agreements. All projects are without project risk for and we received a net rent paid on invested capital in the construction period, booked as interest income in the P&L. At construction end these ongoing projects also including an additional project in Finland and one in Sweden, will add a net operating income of approximately NOK 132 million. Then I will leave the word to Ylva who will take you through our financials.

Thank you, Andre, and good morning, everyone. We start with the financial highlights for the quarter. Rental income came in at NOK 389 million, an increase of 120% compared to the same quarter last year and by 49% since Q3. The SocialCo acquisition was completed mid-December and contributed by NOK 126 million in the quarter, indicating a significantly higher run rate going forward. Rental income also had an uplift of NOK 1 million from Kleivbakken in Lillehammer acquired in October. Rental income for the like-for-like management portfolio increased by 3.4% from Q4 last year to this quarter. Net income from property management was NOK 147 million in the quarter, up from NOK 113 million last quarter and from NOK 61 million in Q4 last year. Year-on-year, the increase was 142%, reflecting the portfolio growth. EPRA NRV per share is up to NOK 27.3 compared to NOK 24.9 in Q3, illustrating the attractiveness of the SocialCo transaction, which was acquired at an 8% discount. EPRA NRV per share is at the same level as in Q4 last year. But the company and its property portfolio is transformed in terms of size, quality and risk profile. Despite the substantial increase in the number of shares outstanding, EPRA NRV per share is up to 27.3%, demonstrating disciplined capital allocation. Rental income was up by 120% to NOK 389 million in Q4 and by 64% to NOK 1.089 billion for the full year. Net operating income was NOK 332 million in Q4 and SEK 979 million in 2025. The NOI margin of 85% in the fourth quarter reflects the current portfolio mix and lease structure of Nordic social infrastructure leases, which is different in Norway versus Sweden and Finland. Net administration expenses was NOK 35 million in fourth quarter and NOK 100 million in 2025. The increase mainly reflects the continued expansion of the property portfolio. As a result, net income from property management was up by 142% to NOK 147 million in the fourth quarter, and by 73% to NOK 468 million in 2025. The net financials of NOK 149 million in the quarter was affected by a large cash balance, not put to work until the end of the quarter. We had one-off transaction cost of NOK 24 million in the quarter. The negative value changes of interest rate derivatives stems mainly to SEK Euro cross-currency interest rate swaps as the Swedish krona strengthened against the Euro during the quarter. We saw positive portfolio value changes of NOK 43 million in the quarter, mainly associated with the development projects in Finland. For the full year, the changes in fair value of investment properties were NOK 335 million. Turning to the balance sheet. This quarter marks a quantum leap in the scale of the company following the completion of the SocialCo transaction in December. Total assets increased from NOK 11.9 billion to NOK 56.6 billion in 1 year. Goodwill on the balance sheet arises as the acquisition of SocialCo is classified as business combination under IFRS. And primarily, reflects accounting differences related to deferred tax and the differences between consideration paid and the fair value of net asset purchased. The portfolio is, as every quarter, 100% externally evaluated by independent appraisers and the market value of the investment properties was NOK 54.2 billion end of Q4. Value change in the like-for-like portfolio from Q4 last year to this quarter is 2.7%, mainly driven by prolonged leases and CPI. The net yield of our management portfolio was 5.7% by the end of the quarter. Total investments in the quarter were NOK 314 million, of which NOK 92 million was invested in Norwegian properties, especially the refurbishment project for [indiscernible] and Skatt [indiscernible]. NOK 221 million was invested in the Finnish project this quarter. Total equity increased to NOK 21.4 billion, up from NOK 5.7 billion last year. This increase is primarily driven by the significant equity issuance, especially in second and fourth quarter. Net interest-bearing debt increased during the quarter to NOK 28.3 billion, following the bond issue in October and the establishment of the bridge financing in connection with the SocialCo transaction, which was SEK 12.7 billion. Our key credit metrics remain within our target ranges with net debt-to-EBITDA adjusted for Finnish projects at 9.5x, interest coverage ratio at 2.1x and long-term value of 48.3%. This confirms that growth has been executed while maintaining a conservative and robust balance sheet. During the fourth quarter, we continued to strengthen and diversify our funding platform. We issued a new EUR 300 million, 7-year bond in October, established bridge financing in connection with the social co transaction. And following this transaction, we almost immediately received a rating upgrade to BBB+ reflecting the increased size and quality of our portfolio. We also established a sustainable financing framework, reflecting the sustainability qualities of our portfolio. And subsequent to the quarter end, we have taken further actions. We issued 2 new social bonds totaling EUR 900 million at increasingly attractive margins, and we repaid SEK 9.2 billion of the bridge financing. We have also received a commitment for new revolving credit facilities totaling NOK 5.2 billion. Looking at the key debt metrics, the weighted average debt maturity was 4.9 years, end of 2025, excluding the bridge facility. The average cost of debt is down from 4.99% to 4.27% during the quarter and we expect to obtain further financial synergies going forward as a result of the improved portfolio quality and credit rating. The share of fixed rate debt is high and after the issuance of the 2 new bonds in January, the share of fixed rate is up to 72%, supporting earnings stability. Unencumbered asset ratio remains strong, providing additional financial flexibility. The next page shows our debt maturity profile end of the year but adjusted for refinancing activities already executed in the first quarter this year. The maturity structure is now very well diversified with no single year representing any refinancing concentration. Of the bridge facility loan following the SocialCo transaction, the remaining part is approximately NOK 3.7 billion and is currently in process of being refinanced. From a liquidity perspective, we are well positioned. We have NOK 5.2 billion inside or committed revolving credit facilities, providing substantial liquidity headroom and flexibility ahead. And the next slide shows our annualized annual run rate, illustrating the group's annualized earnings capacity based on the portfolio at period end. It provides a 12-month forward view, reflecting the current portfolio and financing structure. Annual rental income amounts to approximately NOK 3.7 billion based on current lease contracts and CPI regulation in January. Net operating income lands just low NOK 3 billion. Normalized net administration exposures are expected at approximately NOK 260 million. These costs are expected to normalize over time as the organization is fully integrated. Run rate EBITDA is estimated at approximately NOK 2.7 billion. Net finance is estimated at approximately NOK 1.1 billion calculated using interest rates on existing debt and derivatives at period end. We will continue to work with our debt portfolio and expect gradual improvement in margins. Based on this, net income from property management is estimated at approximately NOK 1.6 billion. This corresponds to a net debt-to-EBITDA ratio at 10.3x. If we include expected NOI contribution from ongoing construction projects of NOK 130 million, the adjusted net debt to run rate EBITDA is reduced to approximately 9.5x. And net income from property management per share is NOK 1.83. Now Andre will present concluding remarks.

Thank you, Ylva. Let's move on to summary and concluding remarks. This slide sums up the development in annual run rate numbers as presented quarterly. As you can see, our run rate rental income has significantly increased from NOK 774 million to NOK 3,686 billion in 1 year and run rate EBITDA has increased from NOK 633 million to SEK 2,742 billion in Q4 2025. As mentioned, completion of ongoing development projects in Finland will add another NOK 132 million of net operating income when they are complete. Looking at the period from IPO until the year-end, we have managed to create strong shareholder returns, resulting in a total shareholder return in this period of around 70%. PPI's capital allocation strategy focuses on maximizing shareholder values while maintaining a conservative balance sheet. From the IPO, PPI has maintained a disciplined capital structure with LTV below 50%, while growing the company significantly. We are a dividend company and introduced a quarterly dividend structure in 2025. The Board has now communicated that it intends to propose a dividend of NOK 1 per share split in quarterly payments, starting from July 2026. The proposal will result in total dividends of NOK 0.9 per share paid in 2026 representing an increase of 157% since the 0.35 per share paid in 2025. So to summarize our presentation. We have delivered a strong 2025. and taking PPI from being a local Norwegian player to a large pan-Nordic social infrastructure provider. In one year, we have grown our portfolio value and run rate rental income 5xand delivered total shareholder return of 35% and 70% if you look at the period since the IPO. In Q4, we completed a transformative transaction with SBB of NOK 38 billion, creating a large, stable and scalable social infrastructure platform across attractive Nordic markets, and have become the largest listed real estate social infrastructure company in Europe. We now have a diversified and derisked portfolio structure with 50% exposure to a growing elderly and health care segment. With 84% government-backed tenants, a WAULT of 7.3 years, PPI provides a stable and long-term cash flow with dividend capacity, and our Board intends to propose a dividend of NOK 1 per share to be paid in quarterly payments. We are currently in the process of applying for a primary listing at Nasdaq Stockholm with a secondary listing at Oslo Bors, and we expect to complete the process in May or June 2026. Going into 2026. Our main focus will be to establish a new Nordic PPI team and chasing operational excellence and financial synergies from the transaction. We will also maintain our disciplined approach to capital allocation and preserve our conservative balance sheet. That concludes our presentation, and we can move on to the Q&A session. So Ylva, please join me on stage.

We have quite a few questions, and I will start with one for you, Andre. How do you see the risk on leases maturing in 2026?

Well, I think we have a very good progress on the reletting for 2026 and what is also very important to notice is that within the 8% maturities for 2026. There is a very large portion that is already being relet or are running contracts that will continue to roll on into 2027. So I think we are good on track for the reletting next year -- this year.

What is your dividend policy and dividend capacity with the new portfolio?

Now our dividend policy remains the same at 60% of cash earnings and also mentioned in the presentation that the Board has communicated an intention to pay NOK 1 per share splitting quarterly payments which reflects the underlying cash flow in this company after the transaction.

Ylva, what is the status on refinancing of the remaining part of the bridge facility?

Yes. We are in progress with the bank financing for the rest of the bridge facility and plan on concluding this as soon as possible.

Andre, can you comment on the status of the Nasdaq listing process?

Well, the process is ongoing, and we plan to complete it in May and June this year. And of course, you will also, as mentioned in the presentation, continue to have a secondary listing at Oslo Bors.

Ylva, can you comment on the run rate and what you consider to be a normalized run rate?

Yes. We will work hard to capture financial synergies from having becoming the largest listed social infrastructure company in Europe. Our rating is now BBB+, and we see significant potential for further margin concentration. We also still have some legacy bonds and bank financing outstanding. And even today with the financing, if we include the projects that are under construction, we expect to deliver income from property management per share of NOK 1.83.

Andre, can you comment on the valuation of your portfolio? Do you believe it's valid conservatively?

Our portfolio has been [ written ] out significantly over the past years, in line with the market development. So yes, we believe it's quite conservative value. We also noticed with interest Castellum transaction was announced a short time ago of social infrastructure assets. That was done around 9% over book value.

Are you planning on getting another rating?

Yes. In the long term, that is something we will consider, yes.

The 8% discount for the SBB portfolio, where do you show this? Where does this show in the quarterly report?

Yes, that is just accounting. The consequences is that this discount is not shown in the P&L, but the real values of NOK 38 billion is shown in the balance sheet.

How should we compare the run rate model from the acquisition pointing towards net income from property management per share of NOK 1.85 versus the run rate model, the basic in the run rate model pointing at NOK 1.69?

Yes. The difference is fully explained by the lag of normalized financing costs.

Andre, how is the integration with Sweden and Finland going?

And the process is ongoing, and we expect to have the full pan-Nordic organization in place first of April this year. And at the same time, the asset management agreements that we have with SBB will be ended. However, we will continue to manage SBB portfolios and the Nordics portfolio going forward.

Ylva, can you say something about run rate figures on average maintenance CapEx on PPI and SBB combined?

Yes. Maintenance is accounted for in the P&L and is estimated in the run rate. Other CapEx is basically associated with the return on investment targets and will increase rental income going further.

On the -- of the net realized financial, what is your assumption on average interest rate? And how much is financial versus expenses?

Yes. The calculation in the run rate is based on interest rates for existing debt and interest rate derivatives by the end of the quarter, and of the net finance in the run rate of NOK 1.1 billion, approximately NOK 30 million is coming from bank deposits and estimated income from the Finnish project is approximately NOK 60 million.

How fast do you expect to roll over the rest of the debt portfolio at improved funding cost? And what is your midterm target?

Yes, we still see potential in lowering our funding costs and the average interest rate on our debt is lowered each time we enter the market.

On the admin expenses, do you expect your run rate figures to be a representative level going forward? Or is there any risk on the upside here?

Yes. Net administration expenses shall reflect the group's expected steady state cost level. And PPI is now having an ongoing transition phase, both organizational and structural. The cost does not include any transaction costs nor cost in connection with this transition phase, and we expect the administration expenses to normalize over time.

And then the final question to you, Andre. You have grown significantly since the IPO and you've been very active in the transaction market. Will this continue going forward?

Well, the main focus now in going into 2026 will be to focus on consolidation and operational excellence to integrate and set up the new pan-Nordic organization. We will also continue to change financial synergies after the transaction. And of course, important for us also going forward is to maintain our balance sheet, conservative balance sheet, and that will be the guidance for considering the new opportunities going forward.

Thank you very much. That concluded the Q&A session.