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

A warm welcome to the presentation of SLP's results for January to September 2026. My name is Filip Persson, and I'm the CEO of SLP. With me today is Tommy Astrand, our acting CFO and Board member. Today's presentation will begin with the highlights of the period, followed by a review of the property portfolio, and Tommy will then present the financial performance before we conclude with a summary. We are once again demonstrating that our business model works. We are sticking to our strategy and deliver strong results across all areas, acquiring attractive properties, increasing net operating income, maintaining a high surplus ratio, succeeding in leasing and securing competitive credit margins. In doing so, we continue to create value for our shareholders. Rental income increased by 24%. This increase is driven partly by property acquisitions and partly by our ongoing value-add projects through which we create more attractive properties and higher net operating income. At the same time, profit from property management rose by 27%, demonstrating that a significant portion of the rental growth flows through to the bottom line. This clearly confirms the efficiency of our property management and the strength of our dialogue with the banks. During the period, net leasing amounted to strong SEK 38.1 million, and we signed several major lease agreements totaling approximately 125,000 square meters. This confirms the strong demand for our attractive and strategically located logistic properties. It also demonstrates that our active management is yielding results. There has been significant activity regarding new construction projects during the period. We currently have projects worth SEK 700 million in progress, which will contribute to approximately SEK 50 million in increased net operating income once they become operational in the third quarter of 2027. During the period, we acquired and took possession of 6 properties with a combined value of approximately SEK 1.5 billion, a figure in line with our average acquisition volume in previous years. A loan-to-value ratio of 49.1% and an interest coverage ratio of 3.2% -- 3.2, combined with our strong cash flow, provides us with significant firepower for future acquisitions and value-add projects. In terms of our overall goals, profit from property management per share increased by 18%, exceeding our annual target of 15%. SLP is a rapidly growing real estate company focused on acquiring, developing, and managing high-yielding logistic properties in attractive locations with significant value-add potential. Through our value-add projects, we boost net operating income while transforming brown properties into green assets. Sustainability is, therefore, an integral and natural part of our day-to-day operations. Since the start of SLP about 7 years ago, we have built a portfolio comprising 135 properties with a value of approximately SEK 20.5 billion. Our portfolio is concentrated in strategically important logistic locations along major roads and railway hubs within the so-called logistics triangle, reflecting the fact that prime location is a key element of our strategy. At SLP, we have a strong, unique culture that I'm convinced has contributed to our consistently strong results. A fundamental aspect of this is employee co-ownership and the fact that everyone chose to participate in our incentive program this spring. This fosters deep commitment and a willingness to go the extra mile while also promoting a high level of risk and cost awareness, qualities reflected in our key performance indicators. We maintain a high occupancy rate of 96%, a level we have consistently sustained over a long period. We achieve this success by being incredibly selective when acquiring properties and by maintaining active, hands-on property management. As we prefer not to take on excessive risk, we also actively work to extend our lease agreements when doing value-add projects. This has resulted in an average remaining lease term of approximately 6.8 years, a level we have maintained for a long time. To ensure we continue to moving in the right direction, we operate based on 2 overarching goals, achieving annual growth of 15% in both profit from property management per share and in net asset value per share. We have successfully met these targets every year. To achieve these 2 overarching goals, acquiring logistic properties with development potential is a central part of our strategy. Our acquisitions focus primarily on location and potential for development targets as well as ensuring the properties are attractive on the rental market. In this way, we build a portfolio characterized by long-term cash flows while also creating opportunities to increase net operating income over time. During the period, we completed 4 transactions, acquiring a total of 5 properties with a combined value of approximately SEK 1.5 billion. This is in line with our acquisition volume in the previous years. The largest deal in the third quarter was a sale and leaseback transaction with DSV, involving a fully leased logistics terminal of approximately 35,000 square meters in Gothenburg. The lease has a 9-year term, and the property offers significant potential for value enhancement through both energy projects and a substantial expansion opportunity, exactly the type of property that fits well with our strategy. Since the start of the company, we have completed nearly 80 transactions, averaging almost 1 per month. The transaction market for warehouse and logistic properties has shown positive momentum so far in 2026, and we see good opportunities for further acquisitions while our strong financial position puts us in a good position to capitalize on them. Turning to the property portfolio. We have divided it into 2 segments. We have properties in property management, properties that are fully developed. These properties generate higher net operating income and have lower vacancy rates, which in turn allows for higher LTV. In essence, they help to finance the other part of the portfolio, the development properties. The development properties are those with the potential to increase net operating income through our value-add projects. This can involve reducing energy costs through various measures, carrying out extensions and conversions, and leasing out vacant space, and in some cases, renegotiating below-market rents. At the end of the period, value-add properties accounted for approximately half of the portfolio by area, and the difference in net operating income between the 2 categories is around SEK 160 per square meter. This means that all else being equal, we can drive an increase in net operating income of approximately SEK 160 per square meter across half the portfolio, representing significant remaining potential. Beyond the potential with our existing built portfolio, we also hold significant building rights on our properties that allows us to drive further value. These rights do not constitute a speculative land bank. Rather, almost all of them are located on properties that are already developed, assets we often acquire as part of the package when purchasing properties governed by older zoning plans. Looking at our major projects, which frequently involve significant extensions and new construction, we have seen an increased activity. We view these types of projects as an excellent complement to our core business, adding another dimension to our value creation. We currently have major projects underway with a total value of SEK 700 million. A large portion of these originated from close dialogue with our existing tenants, where we have identified that they are outgrowing their current premises. It's a strength of our business model that we have been able to capitalize on these opportunities through either new construction or major extensions. In total, we have new construction and major extension projects comprising approximately 80,000 square meters currently in progress. These will generate nearly SEK 50 million in net operating income once tenants move in during the third quarter of 2027. Additionally, we have agreed to construct a new logistics facility in Helsingborg, spanning approximately 25,000 square meters under a 12-year lease with an annual rental value of SEK 17 million, also for an existing tenant. New construction and extension projects are naturally important, but the many smaller ongoing projects we carry out are just as significant. During the period, we have invested approximately SEK 55 million in energy projects and around SEK 160 million in other value-enhancing projects, such as minor extensions and refurbishments. The return on these projects is significantly higher than the required rate of return used in valuations. This means that they generate a substantial value and are the reason we have consistently been able to report positive value appreciation. Our portfolio comprises approximately 400 lease agreements with tenants operating 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 societal trends. These include shifting trade patterns where e-commerce continues to grow in terms of both parcel numbers and volume. Furthermore, ongoing global instability is driving demand as companies secure their supply chains by reshoring production and warehousing. Additionally, increased investments in the defense and our NATO membership will generate a need for logistics space. Our 10 largest tenants account for 40% of our annual rental income with a long remaining lease term of 8.9 years. This means that a significant portion of our rental revenue is secured through long-term agreements with strong tenants. The many value-add projects we undertake are often identified during the property evaluation phase prior to an acquisition as well as through the close dialogue we maintain with our tenants. In many cases, we find solutions that create value for both parties. These range from improvements to lighting, heating, ventilation, the installation of solar panels, as well as remodeling and expansion projects. An added benefit is that these measures make the properties more attractive over time and secure long-term cash flows. Net leasing and the attractiveness of our logistic properties is further confirmed by the net leasing figure of approximately SEK 38 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 of 96%. We are successfully offsetting lease terminations and vacancies with new leases and expanded agreements with existing tenants. Two notable examples from the period are the lease to Meds in Eskilstuna covering just over 19,000 square meters and the lease to Essity in Falkenberg covering 30,000 square meters. Under both agreements, the new tenant takes over the day after the current tenants leave, therefore, avoiding any period without rental income. As previously mentioned, we are actively working to minimize risk in various ways. One such measure is maintaining a portfolio that is 100% indexed. Unlike many other sectors, this provides a robust protection against rising inflation. Our sustainability efforts continue to progress positively and are a natural part of how we enhance the value of our logistic properties. Since the majority of the buildings that we use in the future will have already been constructed, players like us play a vital role in the green transition by progressively making older properties more energy efficient and climate smart. We have established concrete measurable targets within our sustainability framework, and through the many value-add projects carried out across the portfolio, we are continuously making strides towards achieving them. Clear evidence that our sustainability efforts are yielding results is that less than 2% of our properties fall into energy classes F and G, and that a full 89% of our loans are now classified as sustainable. It's now time to turn to the company's financial performance, and I am happy to hand over that part of the presentation to you, Tommy.

Thanks. Yes. We have put yet another strong quarter behind us. We delivered an 18% 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 8% growth during the first 9 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 49% against the stated ceiling of 55%. SLP has grown rapidly throughout its years of operation. We, therefore, believe that our earning 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, reaching rental income of close to SEK 1.3 billion with a high surplus ratio of 90%, which, of course, is reflected in our P&L as well. We often highlight our efficient systems and processes, but this is an area where we clearly stand out compared to other companies. We are convinced that the cost consciousness evident there that there is reflected in other parts of the income statement. We have increased our administrative cost by SEK 11 million over the past 6 years, whereas NOI have risen by SEK 1.1 billion. Overall, we see a sharp rise in earning capacity and are generating a pretax cash flow of SEK 780 million. Turning to the 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 818 million compared to SEK 656 million in the same period last year, an increase of 25%. This is driven by, of course, a larger 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 277 million, positively impacted by leasing, Day 1 effects 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 5.8%. Looking at our balance sheet, we continue to drive value in our investment properties. We are approaching a property value of SEK 21 billion. All properties have been externally valued by Newsec this quarter, as every other quarter. During the period, we acquired properties for nearly SEK 1.5 billion. We invested SEK 353 million, and as I mentioned earlier, generated a value of SEK 277 million. With a loan-to-value rate of 49%, we have significant headroom relative to our financial risk limit of maximum 55%. We have granted undrawn credit facilities amounting to SEK 1.1 billion. In summary, we have a strong financial position to continue growing the company through new acquisitions and projects. The situation regarding our banks remained the same as last quarter. We see continued strong interest in expanding on very favorable terms. Our margin continues to decline, standing at 1.28% at the end of the period, down 4 bps since the turn of the year. As I mentioned earlier, the loan-to-value ratio stood at 49% at the end of the period. We are, therefore, comfortable increasing the leverage within our existing portfolio to continue financing our growth journey. Here you can see the shareholder list. We have a shareholder list that we are very proud of, featuring strong Swedish and international institutional owners, with foreign holdings in particular, having steadily increased. And with that said, I will hand back things to you, Filip, for a few final words.

Thank you very much, Tommy. In summary, SLP has delivered strong results for the period. We have maintained a high pace of activity, achieving solid growth in income from property management and strong net leasing, while launching numerous major projects and executing several strategic acquisitions. The value-add potential within the portfolio remains significant, and we see good opportunities for further acquisitions in the transaction market ahead. Our financial position remains very strong, with ample headroom relative to our financial risk limits. And at the same time, banks are showing keen interest in financing our growth on favorable terms, providing us with significant capacity for further acquisitions. Overall, we, therefore, see excellent opportunities to continue our profitable growth journey and to keep creating value just as successfully as been done in previous years. That concludes today's presentation. Thank you very much for listening. If you have any questions, you are welcome to send them to us at info@slproperty.se. Thank you.