Swedish Logistic Property AB (SLPB) Earnings Call Transcript & Summary

A warm welcome to the presentation of SLP's results for the first half of 2026. My name is Filip Persson, and I'm the CEO of SLP. Joining me is our acting CFO and Board member, Tommy Astrand. We have an agenda for today's presentation, and we'll begin with the highlights, followed by an overview of the property portfolio, and then the financial performance presented by Tommy before concluding summary. Looking at the period in brief, we can confirm that we continue to deliver strong results and once again demonstrate the effectiveness of our business model. We continue to execute our strategy and deliver results across all areas. We are acquiring attractive properties, increasing net operating income, maintaining a high surplus ratio, succeeding our leasing efforts, and securing favorable credit margins, thereby continuing to create value for our shareholders. Rental income increased by 24%, while partly driven by property acquisitions, this is growth -- this growth also reflects our day-to-day development projects through which we continuously create more attractive logistic properties and also generate higher net operating income. Profit from property management increased by 29%, meaning we successfully retained a significant portion of the rental growth, a clear evidence of our operational efficiency and strong relationships with our banks. During the period, we achieved exceptionally strong net leasing of approximately SEK 34 million, having signed several major lease agreements totaling approximately 95,000 square meters. This clearly indicates strong demand for our strategically located logistic properties and demonstrates that our active management approach is yielding clear results. During the period, we completed the acquisition of 3 properties with a combined value of approximately SEK 900 million. This is in line with the average acquisition volume of previous years. A loan-to-value ratio of 48.7% and an interest coverage ratio of 3.2x, combined with our strong cash flow provides significant scope for further acquisitions and development projects moving forward. Regarding our overarching goals, profit from property management per share increased 19% compared to the target of 15% per share. Short about SLP. SLP is a rapidly growing real estate company focused on acquiring, developing, and managing high-yielding logistic properties with significant value-add potential in prime locations. Our development projects, they generate a higher net operating income while also transforming the properties from brown to green assets. Sustainability efforts are thus fully integrated in our daily operations. Since the company was founded approximately 7 years ago, we have built a portfolio of 131 properties with a total value of around SEK 19.7 billion. Location is important. And therefore, there are -- all our properties are situated in strategic logistics hubs along major roads and railway junctions within the area known as the Logistics Triangle of Sweden. SLP have a unique corporate culture, and I'm convinced that this is a key reason for our consistent delivery of strong results. This culture is largely rooted in employee co-ownership. And it's, therefore, particularly gratifying that our -- every single employee chose to participate in the stock option program approved at AGM. These fosters a drive to go the extra mile while having awareness of risks and costs, which is reflected in our key performance indicators. Our 96% occupancy rate and 6.8-year average remaining lease period are a direct result of this approach. We are selective investing in the right properties and striving to build strong tenant relationships, which often enable us to successfully extend the lease agreements. To ensure that we are constantly moving in the right direction, we have established 2 overarching goals that we continuously work towards 15% annual growth in operating profit per share and in net asset value per share, both of which we have always been able to reach. Acquiring well-located logistics properties with development potential is a key part of our strategy to achieve our overarching goals. When evaluating properties, we focus primarily on locations and potential, followed by their appeal in the rental market to ensure that we have stable long-term returns. The potential can take various forms. It can be high operating costs, vacancies, opportunities for expansion and redevelopment, but also involve below market rent levels that can be renegotiated. During the period, we completed 2 sale and leaseback transactions and acquired a total of 3 properties with a combined value of SEK 900 million, consistent with our previous acquisition volume. These properties are an excellent fit for us. They are situated in prime strategic logistic locations. They offer significant potential and generate cash flow through long-term leases with strong tenants. Since the company's inception, we have completed nearly 80 transactions averaging almost 1 per month. And the transaction market for logistics properties have shown clear positive momentum so far in 2026. So the outlook for future opportunities is therefore positive. And our financial position, which Tommy will go through later, enable us to capitalize on these opportunities, and it allows us to continue growing our earnings and delivering on our overarching goals. To describe the remaining potential within the portfolio, we have divided it into 2 segments. First, we have the management properties. These are properties that are fully developed and generate higher net operating income and have a lower vacancy rate. This allows for a higher value, but also a higher LTV. And therefore, they help finance the second segment of the portfolio, the development properties. The development properties are those that there is potential left. These can include reducing energy costs, carrying out extensions or conversions, leasing out vacant space, and in some cases, renegotiating below market rents. Currently, development properties account for approximately half of the portfolio by area. And the difference in net operating income between the 2 categories is around SEK 180 per square meter. This means that all else being equal, we can increase the net operating income of approximately SEK 180 per square meter across half the portfolio, a significant remaining potential. Beyond the potential within existing space, our properties also hold substantial building rights that allows us to generate further value. These are not merely a land bank. Almost all of these rights are attached to properties that have already been developed, which means that we get this potential for free when purchasing properties in older zoning plants. Looking at our larger projects, we are seeing an increased demand for new construction from both new and existing tenants in regards to 2025. We are happy to take on these types of projects as they complement our business model well and add another dimension of value creation. We are currently -- we have currently 1 new construction underway at Aringen 4 in Jonkoping, which also serves as a prime example of how we work with existing tenants as their needs evolve. Spobik, the tenant has outgrown its current premises. And thanks to our strong partnership, we are able to offer a solution, allowing them to scale up from their current 9,000 square meters to just under 22,000 square meters of new space under a 10-year lease. In addition to this, a couple of other major projects are set to launch as soon as the necessary regulatory permits are secured. During the second quarter, we signed an 8-year lease with Essity covering 30,000 square meters, including an extension of just over 7,000 square meters. We will also carry out a substantial expansion of approximately 23,000 square meters at Ronnedal 1 property in Ulricehamn, with a simultaneous 10-year lease extension for the entire property, which will total around 47,000 square meters. Regarding the 27,000 square meter new construction project in Malmo, announced in the fall of 2025, a building permit has now been obtained during the period, and we are now awaiting a necessary decision from the County Administrative Board. Finally, there is the project announced after the end of the period, a land acquisition of approximately 32,000 square meters in Kjula area of Eskilstuna. Here, we will construct a logistics facility of around 5,000 square meters, while retaining the potential for further new construction of approximately 11,000 square meters for 1 or more tenants on the property. While new construction and expansion projects are important, the smaller day-to-day projects are just as significant. During the period, we invested approximately SEK 40 million in energy projects and SEK 110 million in other investments such as smaller extensions and refurbishments. These -- the return on these projects are substantially higher than the yield requirement in our valuations, making them highly value-creating. Our portfolio comprises of approximately 400 lease agreements with tenants across a wide range of sectors with food, beverage, and transport being the primary categories. We continue to see strong demand from our tenants driven by several major trends in society. These include shifting consumption patterns with e-commerce continuing to grow in terms of both parcel numbers and volume. Furthermore, ongoing global instability is fueling demand as companies source their supply chains by moving production and warehousing closer to their markets. And least, but not last -- last but not least, we have increased investments in defense and our NATO membership, which will generate a need for additional logistics space. Our 10 larger tenants account for 38% of our annual rental income with a long remaining lease term of 9.1 years. This means a significant portion of our rental revenue is secured through long-term agreements with strong tenants. The many development projects I mentioned earlier are often identified during the property evaluation phase prior to an acquisition, but also through our close dialogue with the tenants. We frequently find win-to-win opportunities ranging from upgrades such as lighting, improved heating, ventilation systems and solar panels to structural modification and extensions. A further benefit is that these improvements make the properties more attractive over time. And the fact that we hold attractive logistics property is confirmed by our net leasing of close to SEK 34 million for the period. To date, we have not experienced a single quarter with negative net leasing, a strong result given our high occupancy rate. We are successfully offsetting lease terminations and vacancies by securing new leases and expanding agreements with existing tenants. Notable examples from the period include the lease to Meds in Eskilstuna, covering just over 19,000 square meters, and a 30,000 square meters lease to Essity in Falkenberg. Both deals were concluded before the premises have become vacant. For us, keeping portfolio risk low is a priority, and we are pleased that 100% of our lease agreements are indexed. This provides built-in protection against potential increase in inflation and also interest rates. Our sustainability efforts continue to progress as an integral part of how we upgrade our logistic properties. Since most buildings are already exist, it's crucial for the green transition that players like us upgrade older properties to make them more energy efficient and climate smart over time. We have established concrete, measurable sustainability goals, and are continuously making progress towards achieving them through the many upgrade projects being carried out across our portfolio. During this period, for instance, we reached our solar power target of 25 megawatts installed capacity ahead of schedule. We have also had our climate targets evaluated by the Science Based Targets initiative, meaning that they are now scientifically verified by a third party. And with that, it's time to review our financial performance, and I'm happy to hand over to you, Tommy.

Thanks, Filip. We have yet another strong quarter behind us. We delivered a 19% increase in profit from property management per share, significantly exceeding our 15% target. Regarding our second goal growth in net asset value per share, we achieved 5% growth during the first 6 months. We remain well within our financial risk limits with an interest coverage ratio of 3.2x, exceeding our stated target of at least 2.5x, and significant potential for further growth backed by secured bank financing given our loan-to-value ratio of 48.7% against a stated ceiling of 55%. SLP has grown rapidly throughout its years of operation. We, therefore, believe that our earnings capacity provides a more accurate picture of our development compared to our income statement. Here, we can see the immediate impact of acquisitions, lettings and projects, whereas in the income statement, it takes a long time for these effects to become visible. We continue to grow our earning capacity despite holding the same property portfolio as last quarter, our earnings have increased by SEK 6 million, driven primarily by our value enhancement projects. Our surplus ratios remain strong, which, of course, is reflected in the figures in the income statement as well, as I will come back to a little bit later. We frequently highlight our efficient systems and processes, a factor that clearly set us apart from other companies, and we are convinced that this cost consciousness evidence here is also reflected in other parts of the income statement and balance sheet. Overall, we have seen a sharp rise in the earning capacity and are generating a pretax cash flow of SEK 750 million. Turning to income statement. We naturally see the impact of our acquisitions and leasing efforts. However, as I mentioned earlier, this impact does not show up in the income statement as quickly as it does in our earning capacity. We continue to grow our net operating income. For the period, NOI amounted to SEK 535 million compared to SEK 427 million in the same period last year, an increase of 25%. This is driven by a larger property portfolio as well as positive NOI effects from leasing activities and cost savings. It is particularly gratifying to see a 2% increase in NOI within the comparable portfolio. It is also pleasing to note that we continue to generate value in our properties. Value changes amounted to SEK 127 million, positively impacted by leasing, day 1 effect linked to acquisitions, and high-yield energy investments. A negative factor during the period was the adjustment of the CPI-based rent escalation rate from 1.5% to 1%. Naturally, it remains to be seen how this will play out given the current turbulent global environment. The average yield requirement stands at 5.9%, unchanged since the beginning of the year. Looking at our balance sheet. We continue to drive value in our investment properties. We are approaching a property value of SEK 20 billion. All properties have been externally valued by Newsec. And during the period, we acquired properties for nearly SEK 900 million. We invested SEK 240 million. And as I mentioned earlier, generated value of just over SEK 125 million in the properties. With the loan-to-value ratio of just under 49%, we have significant headroom relative to our financial risk limit of a maximum of 55%. We have granted undrawn credit facilities amounting to just over SEK 1.2 billion. In summary, we have a strong financial position to continue growing the company through the new acquisitions and projects. The situation regarding our banks remain the same. We see continued strong interest in expanding on very favorable terms. Our margin continues to decline, standing at 1.29% at the end of the period, down 3 basis points since the turn of the year. There is potential for further improvement as older loans are renegotiated. As I mentioned earlier, the loan-to-value ratio stood at just under 49% at the end of the period. We are, therefore, comfortable increasing the leverage with our existing portfolio to continue financing our growth journey. We have a shareholder list that we are very proud of, featuring strong Swedish and international institutional owners and with foreign holdings, in particular, having steadily increased. With that said, I will hand back to Filip for a few final words.

Thank you, Tommy. In summary, we can conclude that the first half of the year has generated strong results for SLP. We have maintained a rapid pace with solid growth in both rental income and profit from property management, while also completing a couple of strategic acquisitions. The value enhancement potential within the portfolio remains high and the active transaction market offers further acquisitions. Our financial position remains very strong with ample headroom regarding our financial risk limits and continuing keen interest from our banks in financing our growth on favorable terms. We have significant capacity for acquisitions going forward. We, therefore, see excellent prospects continuing our profitable growth journey just as we have successfully done in the previous years. Thank you very much for listening. If you have any questions, please feel free to email us at info@slproperty.se. Have a wonderful summer. Bye.