Wallenstam AB (publ) (WALLB) Earnings Call Transcript & Summary

Welcome to the presentation of the first half year of 2021. [Operator Instructions] Please turn to Page 2. During this quarter, we further strengthened our balance sheet and report an equity/assets ratio and LTV of 45%. This has been done, for example, through the sale of buyback shares and also some selling of properties. Now we are even more equipped for future investments. Turn to Page 3. So what has happened in quarter 2? We continued to strengthen our project portfolio for the future, partly in the form of a land allocation in Central Nacka and also the acquisition of land in Rosendal in Uppsala. In December last year, we agreed with SBB to sell 2 commercial properties in Gothenburg, which SBB took over on April 1. We have also sold another central property on Lennart Torstenssonsgatan where we once had our office. They took over in the middle of June. By the end of April, we have sold the 7 million repurchased shares that we had in our own custody. We sold at the price of SEK 127, and after the sale, the outstanding shares amount to 330 million. During this quarter, we agreed about the first office rental in the commercial new construction, Entré Kallebäck. It's with the biotech company, Cellink, that will move in early next year and will be the anchor tenant. Yes, the stock exchanges has gone up sharply recently and our share has also reached the peak for the period of SEK 148.8, which means that it has passed SEK 140, which meant that our synthetic option scheme for all employees fell due to redemption. But I think the most important thing that happened this quarter was that our CEO, Hans Wallenstam, has been the CEO for over -- for 30 years so a big congratulations to Hans and to the company. Now turn to Page 4. We have our property portfolio still concentrated in the growth regions of Gothenburg and Stockholm and Uppsala. The share of residentials in the total rental value has increased marginally since the previous quarter and amounts to 51%. We are also self-sufficient in renewable energy. And if we look at where we have our wind turbines on the map, they are more spread out than the concentration strategy we have in terms of our properties. Turn to Page 5. Some words about how we are experiencing our markets now. If we start with the commercial holding, the most of the area are offices. We see that during this quarter we have made several lettings and have a stable demand. We have let about 15,000 square meters during this quarter, and our letting organization has worked fantastically well. We see that companies appreciate having their offices in inner city locations. There is still a lot of thoughts about what the offices will look like in the future. We also believe and notice with our tenants and that the offices are important, not least for the brand. It becomes an identification of your company as well as having a meeting place for your employees, where you build your brand and company culture, which is extremely important. When it comes to retail, we see that it is still tough and the stores that survive are the ones that understand why you choose to go to a physical store and not choose to shop online: service is important. We are continuing our work to remove 2-floor stores, and right now, Avenyn is up for it. Now from 1st of July, the restrictions have eased and the restaurants are allowed to open longer and that is absolutely fantastic for our restaurateurs. So they are going towards brighter times and you can already see that more and more people are out eating. Then as I've said several times, we see a huge demand for housing and we now have 150,000 in our own queue for new construction. All apartments are fully leased and the total occupancy rate in the property portfolio is 98%. We go to Page 6. This graph shows passages in the whole inner city. We see from this graph that the flow has increased comparing the previous year at the same time and that is good for all our tenants. It's the green bar compared to the blue bar. Please turn to next page where we can see the passages along Avenyn. So go to Page 7. Here we see what the passages along on Avenyn looks like and it has also increased since the corresponding period last year. But of course, it's not as high as before the pandemic, but it's going in the right direction. So here it's the orange bar is this year and the blue bar is previous year. Now turn to Page 8. During this quarter, we have again completed many apartments. This quarter, it's 335 apartments, and on the next pages, I will show you which ones. So please turn to Page 9. Now we are in Stockholm in Haninge, where we had the 2 projects, Parkstråket 1 and 2, where completion has taken place out of 90 apartments this quarter. We have completed this fully in this quarter. Now turn to Page 10. In the project, Allén, in Tyresö has 66 apartments being completed during the quarter and it's also fully completed now. Just like Umami Phase 2 here on the right, part of our urban development project in Sundbyberg, which I will talk more about later. So turn to Page 11. On the left, we have our project, Söra Kvarter, in Österåker where we have completed 48 apartments and where there are about 6 apartments left to complete during the year. Let us then go Gothenburg. To the right, we have Elisedal, a large project of 336 apartments, which with these 96 apartments, has been fully completed. So this was the completions this quarter. So now turn to Page 12 and then some words completions about the result. All these completions obviously have a positive impact on our net operating income. In total, NOI amounts to SEK 860 million and this is an improvement of 10% compared to the previous year. In the current quarter, it has increased by SEK 50 million, which corresponds to an increase of 13%. Go to Page 13. So the net operating income increased by 10%. And if we look in more detail at what the changes consist of, we are beginning to recognize that it is new construction that has come into management that is the main reason of the larger increase. In total, for the first half of the year, almost so thousand 750 apartments have been completed. Of the total increase in rental income of SEK 95 million, SEK 81 million comes from new construction. In our existing portfolio, we haven't been affected by corona discounts to the same extent as last year, which has a positive impact on rents by SEK 19 million. Operating expenses increased by SEK 17 million, and even there, the majority of the increase is due to the fact that we have a larger portfolio to manage as new construction has come into management. Otherwise, it hasn't been as hot as last year plus more snow, which has affected our operating expenses by SEK 9 million. So in total, it's up SEK 79 million. Now turn to Page 14. Here, you can see how the NOI has developed over time, and in 10 years, we have increased our NOI by more than 60%. And the surplus ratio has also increased at a good pace from around 65% up to 76%. Now turn to Page 15. If we look at the entire income from property management, this is an improvement of SEK 60 million, 10%. We have an increase in our administrative expenses of SEK 80 million, and this is mainly due to the increased number of employees and also some share of gifts. Our net financial items remained at the same level as last year. The average interest rate has gone down, but the average debt for the period is about SEK 2.3 billion higher. So in total, it remained at the same level. Now turn to Page 16. We have secured the interest rate this half year with more 10-year interest rate derivatives of a volume of SEK 600 million. Here, we see that the average fixed interest term amounts to 40 months and the average interest rate during the period to 1.21%, which is 10 basis points lower than the previous year. Now turn to Page 17. As I mentioned, our synthetic option scheme for all employees due for redemption, the cost this period totaling SEK 90 million. If you add realized change in value of SEK 103 million and a revenue of SEK 30 million as unrealized changes, it's totaling SEK 90 million During the second quarter, we only sold a few co-ops in older converted properties. Regarding the result for energy, including financial expenses, its total of SEK 14 million minus. It has been 6 months when it has not been as windy as last year, which means 26% lower production. Now turn to Page 18. If we then go to changes in value and start with changes in value of properties, we see a strong property market with a great demand for residential properties. These are properties with a low risk. As a result, the direct yield requirements have been adjusted down for a number of residential properties by 10 basis points. Otherwise, the yield requirements haven't been adjusted. In terms of new construction, SEK 389 million is reported for the half year and SEK 244 million for the quarter, and that is the successive profit of the ongoing projects where we recognized the estimated surplus on the completion date in relation to the degree of completion of the construction. It also includes value changes in new constructions that have been in management less than 1 calendar year. Now turn to Page 19. In total, the properties amount to SEK 60 billion and this represents an increase of SEK 2.5 billion since the beginning of the year. In addition to changes in value of SEK 1 billion, we made investments during the quarter of SEK 2 billion in total and sold properties at a value of SEK 0.5 billion. Now turn to Page 20. The property value is distributed to 36% commercial properties and 64% residential. Our average yield requirement in commercial remains unchanged at 4.5% and residential at 3.1%. 95%. And our total occupancy rate is 98% and for residential it's 100% and commercial is 95%. Now turn to Page 21. During this first half of the year, we have invested SEK 1.7 billion in our new construction and also SEK 300 million in acquisitions of mainly land. So here in the graph, you can see for just this first half year, but the other years is for a full year. Now turn to Page 22. We have started construction of 421 apartments in this second quarter and just over 600 apart managements in total throughout the year. What we started during the quarter would be on the next pages. So please turn to Page 23. Another start in our urban development project, Kallebäcks Terrasser in Gothenburg, which I will talk more about later. In this project, 182 apartments are started. On the right, we have started a project further in Mölnlycke, kvarteret Skogsvaktaren, about 130 apartments. So now turn to Page 24. On the left, in the picture, we have started almost 100 apartments in Uppsala, Bersån, and to the right, 11 homes in Österåker, Söra radhus. Now turn to Page 25. With these completions and starts, we now have about 2,200 apartments under construction where our urban development projects account for the majority. And now turn to next page. I thought that take the opportunity to sum up the status of our 3 ongoing urban development projects. So let's start with Kallebäcks Terrasser and Page 27. The one that are not white are those that are started in addition to those marked as a school and nursery started, they are not yet started. So we have 1,200 apartments here now under construction. At the top left of the picture, we have kvarteret 11 that will soon be completed. In October, the tenants will move in gradually in these 270 apartments. And in December, the kvarteret #9, which is located with 1 block in between. Then comes kvarteret 10 where we have also signed an agreement with Colive from 12 sharing apartments. On the right, in the picture, we have Entré Kallebäck, which is our commercial property in this area. It was on this roof we recorded our video comment for this quarter. So if you're interested, you can please watch it. This is also where we have let 4,600 square meter to our anchor tenant, biotech company, Cellink, and also 1,000 square meter to the gym, Nordic Wellness. Imagine that this area where Arla's old milk factory was located has been a place of homes for 800 families and other commercial activities. This is -- we are very proud of this. Now going to Page 28. We continue to our second urban development project in the Gothenburg region, Mölnlycke Fabriker. Here, we currently have 430 apartments under construction. We have also completed the project in the middle, kvarteret Rosengången of 123 apartments. Next to be completed is kvarteret Kvarnen, which we have on the right in the picture where the tenants will occupy in November. In the upper left, you will see the project that we started this quarter, kvarteret Skogsvaktaren. There are also many other things happening here besides residential construction. For example, we are building a garage with a solar facade and it also becomes a center for sports in the form of different sports halls and arenas. And this is a beautiful area, nicely located between 2 lakes. You can see one of them to the left. Now turn to Page 29 and go to Stockholm and stop at our urban development project, Umami in Sundbyberg. Here, we have construction around the 2 commercial properties in the middle. There between these, we have built a large staircase that links the buildings together as well as the top of the area with the downside. Here, we currently have 133 apartments under construction. Phase 3, at the bottom right of the picture, this is the next phase to complete in November this year. We have also completed Phase 1 on the left and Phase 2 on the right, our total of 360 apartments. Walking around here in this area now gives a nice feeling from a boring parking place to filling the area with life and playing children and nursery, that feels great. This is the most sustainable thing we can do as a company: create these areas for the future of the inhabitants. Now turning to Page 30. And the balance sheet, our interest-bearing liabilities amount to SEK 27.5 billion, and as I said, this is an average increase of SEK 2.3 billion compared the previous year and an increase since the beginning of the year of approximately SEK 200 million. Now turn to Page 31. We are still mainly financed by bank loans. During the quarter, we sold our repurchased shares and this gave us a nice addition to the cash, which is why we didn't raise new financing during the quarter despite having invested at a higher rate in our new construction. In the table, you will see that during the quarter, we have net reduced our interest-bearing liabilities. We have reduced our bank loans by SEK 232 million and reduced bonds by SEK 50 million and increased our commercial papers by SEK 111 million. Now turn to Page 32. When these 6 months are summed up, we recognize these key ratios, all of which have been improved. We have an increased net operating income and surplus ratio, a stronger balance sheet with an equity/assets ratio and an LTV of 45%. This gives us even more opportunities for the future. Finally, we have the net asset value, which amounts to SEK 104.5 per share. And on the next page, I show more. So please go to Page 33. In our current business plan for 2023, we have 1 goal and that is to create SEK 40 in net asset value increase per share. Through this second quarter, we have created SEK 25.3 per share when we have 2.5 years left. So that was all for today, and don't hesitate to send me some questions if you have any. And I would also wish you a very nice summer, and thank you for listening. Goodbye.