Wihlborgs Fastigheter AB (publ) (WIHL) Earnings Call Transcript & Summary

Welcome to the Wihlborgs Fastigheter Audiocast with Teleconference Q3 2021. [Operator Instructions] Today, I am pleased to present Ulrika Hallengren, CEO; and Arvid Liepe, CFO. I'll now hand the floor to our speakers. Please begin your meeting.

Thank you. So welcome to the presentation of Wihlborgs' 9 months report 2021, and we start with a summary. Since March, the activity is good and accelerating. We have good discussions, and decisions are made. Being close to our customers pays off. We have signed leases for SEK 65 million in Q3. And also, this year, Q3 includes a summer, so that's a good level. And it continues to be the sum of needs from a diversity of companies, which together represent our largest combined business opportunities. Rent levels continued to develop in a positive direction, a bit more flat in logistic. But when the quality is right, the rents go up. We see that both in renegotiations and in new leases. Most important of all, the tenants are ready to take action. Not in all places there is much more to be done, but our customers have changing needs and they take action. It seems like the main part of what you can call moisty blankets is lifted from all of us. I wouldn't say that it has been a wet blanket because we have been able to do business also during the pandemic. But it has been a bit too moisty for our taste. We like actions. We have been able to sign several new leases with public tenants. This brings more stability. And of course, it also tightens our relationship with these tenants. Cash flow and earnings is our focus, and the strong cash flow also creates opportunities. We continue to start projects which is well on the timing and the location is right. And good access to capital continues to be the base from which we take off. We are ready for investment possibilities. Continue to Page 3 with a summary of the figures for the 9-month period '21. Rental income is affected by our divestment in Malmö last December, but also from a one-off compensation from Danske Bank of SEK 64 million. As pointed out in Q2, activity also give us terminations. And terminations create opportunities, and in some cases, some extra income. The income summarized to SEK 2.290 billion; the operating surplus to SEK 1.658 billion. And income from property management amounts to SEK 1.372 billion. The net result amounts to SEK 1.680 billion, which corresponds to SEK 10.93 per share, and EPRA NRV increased to SEK 159.68. Page 4. We have had a high level of new leases, SEK 65 million in the quarter and SEK 207 million for the period. One larger termination, I think the industry, they put one in Copenhagen of minus SEK 29 million, and that leaves us with a net letting of SEK 3 million for Q3 and SEK 48 million for the period. We have new leases of 132,000 square meters and terminations of 143,000 square meters. So measured by square meters, the termination are a bit larger. But we have plus SEK 48 million in positive net letting, so the signals of increased rent levels are definitely there. The picture up this slide is from the city center in Lund, and we have signed new leases in Raffinaderiet that's new top levels in this location. But it's at Ideon on the Brunnshög Science Village area, Lund that shows the largest activities lately. Governmental tenants, such as Försäkringskassan and the Institute for Human Rights is new at this site. And of even greater importance, the number of square meter per lease is up for this location. We have been waiting for this since we bought Nya Vattentornet 2 to 4 a few years ago, convinced that if we do the right things with the area, the demand is there. But even if we have been confident, it's still a special kind of joy when it's happening. Our strategy is working, and now it starts to pay off. We have more vacancy in the area, so I'm also convinced that we will be able to feel that joy many more times and for quite some time. The net letting in a historical perspective at Page 5. Positive figures for the last 26 quarters. Letting in light blue and termination in dark. The black line is the net letting. The number of new leases, 111 during Q3 and 383 during the period, is strong as well as volume in new letting. Still no guarantee that we will never be below 0, but I see many positive signals in our organization. Page 6 and a list of our 10 largest tenants. The rental income from public tenants continues to be high, 24%, and we signed new leases in this sector, as mentioned. But I also -- as I say every quarter, it's the wide diversity across many sectors in a region that is the strength that brings stability over time. Page 7. Rental value is SEK 3.322 billion per year; and rental income, SEK 2.991 billion after our divestment. And I expect a positive development going forward. And looking at like-for-like figures, we can see that rental value is up plus 1.4% and rental income up plus 2.1%, again, beating our ambition to exceed index by at least 1 percentage point. The vacancy will improve further when our new tenants move in. Page 8, a summary of our office portfolio. The market value is SEK 38.787 billion, and overall, the occupancy rate is 92%. In Malmö, it's 94%; 88% in Helsingborg; 89% in Lund; and 93% in Copenhagen. And as I said, this figure will continue to improve when our new tenants move in, for example, in Ursula 1 and Hermes 10 in Helsingborg. The operating surplus from offices summarized to SEK 1.895 billion and a running yield at 4.9%. Page 9. The demand for logistics and production continues. And here, the occupancy is still very high in Malmö, 97%; improved to 91% in Helsingborg; and 93% occupancy rate as a whole, with a running yield at 6.4% and a total value of SEK 6.149 billion. And demand continues to be strong throughout the sector in all our cities. For the entire property stock, also including projects and land, the total value is SEK 47.741 billion. The occupancy rate, excluding projects and land, are 92%; and operating surplus, SEK 2.290 billion, which gives us a running yield of 5.1%, excluding project and land. Page 11, changes in market value of properties. We started the year with SEK 46.072 billion in accordance with our external valuation, which once a year values 100% of the stock at the same time. We have made acquisitions for SEK 182 million; invested SEK 755 million; divested SEK 3 million, just a small piece of land at Vätet in Lund; changes in valuation of plus SEK 591 million, half from leases and half from lower yields in some properties, for example, Hermes in Helsingborg and the industrial segment. Together with currency translation of SEK 144 million, that summarized the property value of SEK 47.741 billion. Page 12. The value of the portfolio has developed, as you can see on this slide, since 2005. And even if we still can see the effects from our industrial divestment last year, the overall value is moving up. But more to come, of course. And the catalog of our value in properties in our 4 cities at Page 13. 42% of the value is in Malmö; 23% in Lund -- in Helsingborg; 17% in Lund; and 18% in Copenhagen. These cities belong to the same region, but they also have differences that contributes and interact with the whole. And especially in Sweden, we have noticed the rising number of discussions and leases the last 6 month. Perhaps a bit more hesitant in Copenhagen. Lund and Helsingborg, however, have a pace that I really cannot remember ever seeing before. The cluster of companies working with the best engineers is growing in Lund. And now we also see interest of building an industrial cluster between larger companies for development and research from a common platform in Lund. And Oatly is the company that we signed a lease with in June, so that we could start the project Space at Science Village. And what about the future? Have we any new signals about the future way of working? Page 15. Now we see people again. There is now queue outside the restaurants at lunch, and we have not liked them before, but now it's a joy to see people who meet wherever you look. People are coming back to the offices, but we also see different solutions for the way of working, of course. Flexibility is needed to meet the needs we see both from tenants, employees and when it comes to company's future growth. I'm also convinced that companies see a benefit in meeting employees. And when you want to attract people back to the workplace, that contributes to setting higher demands for the workplace. More warm, welcoming, home-like and design environments, and of course, more space for meetings. Overall, higher demands and workplace in focus, that creates opportunities for us. And over to Arvid for some more figures.

Thank you very much, Ulrika, and good morning, everyone. Moving to Slide 17, looking at the income statement for Q3 isolated. You can see that the rental income amounted to SEK 813 million, up 5%, but that, as Ulrika mentioned, has, of course, been affected by the termination fee of SEK 64 million accounted for in the quarter. And operating surplus amounted to SEK 612 million; and income from property management, SEK 513 million. In the quarter, we had positive value changes of just over SEK 300 million, with a positive change in value of derivatives of SEK 34 million. And all in all, this amounted to a profit for the period of SEK 673 million. Moving to Slide 18, you can see a bridge of the rental income for the first 9 months in 2020 and how that has evolved to the rental income 9-month 2021. The comparison has then been affected by minus SEK 67 million in divestments, had a minor effect of SEK 7 million from COVID discounts. We've had a negative currency effect of SEK 17 million, and we have SEK 20 million in lower service income. We also have SEK 58 million more in vacancies in 2021. Then we've had the lease termination payment of SEK 64 million affecting the comparison positively. And we have had other increases in rental income from index and renegotiations, et cetera, amounting to SEK 58 million, arriving then at the rental income for the 9 months period of SEK 2.290 billion. Moving to Slide 19, looking at the balance sheet. This is the balance sheet end Q3 compared to the same point in time 1 year previously. During this 12-month period, the property value has increased by SEK 700 million approximately. And at the same time, loans have decreased by SEK 1.6 billion, and equity has increased by SEK 1.6 billion. So I think that in rather rough terms still shows that we've done something positive for our shareholders. Translating the balance sheet into key figures on Slide 20, you can see that the equity/assets ratio now stands at 41.5% and the LTV at 48.2%. The interest cover ratio remains on a very strong level at 6.7x. The EPRA NRV, as I believe Ulrika also related to, stands at SEK 159.68 versus 12 months previously. That is actually up 12% adjusted for the dividend paid during Q2. Moving to Slide 21, you can see the historic development since 2009 of EPRA NRV. And notable, I think, that the average annual growth in EPRA NRV has been 17% adjusted for dividend during this time period. The historic development of financial ratios, you can find in the graphic form on Slide 22. We see the historic development of the equity/assets ratio, the loan-to-value and the interest cover ratio. And looking at the equity/assets ratio and the loan-to-value, and I believe that is actually true for the interest cover ratio also, the balance sheet key figures have actually never been stronger for us. Moving to Slide 23. Another important metric to illustrate financial stability is looking at net debt in relation to EBITDA. During the year, we have improved that ratio and brought it down slightly, and it now stands at 10.8x. On Slide 24, you can see the split of our sources of financing. A bit less than half of our financing comes from bilateral bank loans. 37% we financed via the Danish mortgage system. And 17% of the total debt portfolio of SEK 23 billion is financed via the bond market, both via our own MTN program and via SFF, Svensk Fastighetsfinansiering. On Slide 25, you can see the details of our loan portfolio. The average interest rate is 1.28%. It's actually 1.33% including costs of unutilized credit facilities. The average fixed interest period is 3.1 years, which is fully in line with the financing policy that we have. And the average loan maturity stands at 6.4 years. The historic development of these 2 numbers, you can find on Slide 26. And not least, the average loan maturity at above 6 years is a stable -- puts us in a stable financing position. Moving to Slide 27, you can see the historic development of available funds. That is unutilized credit facilities plus liquid funds at the end of each respective quarter. And available funds, we've brought them -- we've consciously brought them down slightly during Q3, as we basically see the whole economy moving out of the pandemic situation and thereby reducing the uncertainty in the economy overall. And as you are all aware, unutilized credit facilities also cost money. With that, I'll hand back the words to you, Ulrika.

Thank you. So let's say a few words about sustainability. Page 29. We continue with certification of existing properties now at a higher speed. These are the properties that we have been certified during 2021, the 3 last one during Q3. And we reached silver level in all of them, which is satisfying. We have been focusing for many years on investing in sustainable new properties, of course, with a higher certification levels, but also in improving things that will -- I mean, really matters in the older stock, like reducing energy consumption in existing buildings. And that is what pays off now when we add on the administration for certifications. Page 30. We have also during 2021 invested in solar cells at 8 premises, in total, 1 megawatt. We have 70 new electric charging stations in Helsingborg. But of even more importance, changing existing cooling systems into machines and gas with a lower climate impact, by that, we have actually reduced the risk of emissions with 646 tonnes of carbon dioxide gases. And still, Scope 3 is, of course, our largest challenge by far. We are already carbon dioxide-neutral in our Swedish property management, whatever that means. But regarding the impact from new buildings, it's hard to find the right way of action. Therefore, it's satisfying that now we have one of the first projects in Sweden where we can meet the demands for 0 carbon dioxide in Pulpeten 5, Kvartetten. This building will achieve triple certifications. And we -- it's especially satisfying, I would say, that we have reached this by working very hard, finding the right solutions but also by investing in existing properties. That is a competitive advantage when we talk to our customers. So let's go to investments in progress, Page 32. We have during the first 9 months 2021 invested SEK 755 million in ongoing project, and it remains SEK 1.333 billion to invest in already approved projects. We have projects ongoing, over SEK 2 billion. Overall, the projects continue according to plan in a good way. We are well protected, especially in the larger project against higher prices on materials. We see indications of a slowdown in price increase [ month ] during this autumn. But access to concrete is suddenly a topic, and I'm sure that we will see consequences. As we speak, laws and regulations are actually changing. But overall, it might also come some good out of this. If all projects invest a bit more in engineering and calculation, less material will be needed, and we will save both money and climate. Problems will always come up, and we will solve them. Page 33. Let's do a quick review of our largest projects. Kranen 2 is soon to be finished. In total, we invested SEK 237 million fully let and strong leases for Regional Council of Skåne and Malmö University, completion in Q4 '21. Page 34. Our largest investment ongoing, SEK 696 million, Kvartetten at Pulpeten in Hyllie, with 16,000 square meters lettable floor area, and it's now rising to the sky. Great efficiency, a warm inner core, the highest sustainable standard, as mentioned, just the right products for the future office. We have signed the first leases with Mindpark, a coworking actor; and Spill, a very popular restaurant with sustainability and focus. Extra-attractive for coming tenants, ongoing and intensifying discussions for approximately 80% of the area. So good attention for this project, which will be finished in Q2 '23. And we have no other vacancy in this area. Page 35. At Hindbygården 7, we are doing a project fully let to Beckhoff Automation, a state-of-the-art project office at a good transport location in Malmö, not the largest one, but a good product, completion in Q3 '22. Page 36. In Raffinaderiet 3 in Lund, we continue with the conversation -- conversion projects. We have signed several leases and now at top levels in Lund, over SEK 3,000 per square meter. Completion, a bit delayed to Q4 '22. And I also think that the investment will go up a bit, but still with a yield on cost at approximately 6%. This investment will give us 5,800 square meters modern offices with this industrial touch that's beside the central station. And maybe of even more interest is that now we are convinced that the timing for next project, next to this one, Posthornet Phase 2, it's getting closer. Page 37. We have also decided to start project Huggjärnet 13 in Helsingborg. It will be a facility for multi-tenant and logistic, and we'll build it in 2 phases. The first one will be completed in Q4 '22. On Page 38, back to Lund, right beside and -- between the research facilities MAX IV and ESS, we have now started this project Space, where Oatly will be the main tenant with their research and development team. They have auctions for the building, and we have more building right beside this project. The food tech sector is interesting also in Lund, and we will invest SEK 244 million. And what about future investments? Let's go to Page 40. Bläckhornet 1 in Malmö, the project we call Vista, this might be our next larger project that we put in production. Procurement is ongoing, and we are planning for the possibility to start the first phase with 400 parking spaces and a great sports hub late '21. And it's a unique opportunity to offer both good parking and a direct access to the train station. And that includes both this project Bläckhornet 1 and Pulpeten 5. Page 41, 4 possible projects in our 3 Swedish cities. Posthornet 1 is just beside Raffinaderiet, and that will provide the city center with larger areas than Raffinaderiet. Ideontorget is right beside the tram station at Ideon area; Polisen 7 in Helsingborg; and a bit of a redesign of Plåtförädlingen 15 and 18, where we now can offer up to 22,000 square meters gross floor area in logistic. And Page 42, a few other possibilities from the industrial segment. Rausgård 21 in Helsingborg, interesting area for a combination of office and logistic. We can both build and refurbish here, approximately 20,000 square meters. Grustaget 1 also in Helsingborg, also here approximately 20,000 square meters. Bilrutan 5 in Landskrona, 14,000 square meters logistic, with 20 meters up to the ceiling and right beside the highway. And in Sunnanå, where we have built for the Regional Council of Skåne and Veho Bil, we can add on 17,000 square meters logistic or production. Page 43. Of course, Nyhamnen, which was the area for logistic in the old days. That now will be in the city center. This picture and this land area will follow us for many years. And at the moment, it's a challenge with future rising sea level. That shows -- that slows down the process with the zoning planning. But this area will be built. Page 44. Smörkajen, it's one of the zoning plans that we work with in the area Nyhamnen. And we will at least be able to produce 10,000 to 13,000 square meters offices in this first project. And Page 45. Kranen 15, just at the entrance to the Dockan area from Nyhamnen. Our application for planning permission is still being processed, but at least, we might -- it's a possibility now that we get the decision to start the planning process now in November, but let's see. And we will have an architectural competition in this project as well. Page 46. Naboland 3 in Dockan, just a few hundred meters from [indiscernible]. Here, the planning permission is ready. And we can submit building permit application whenever we think that the timing is right. This can give us 8,000 square meters. And Page 47, let's go to Denmark. It's Ejby Industrivej 41, where Danske Bank has let the building. And it's a great land area, well worth developing into new use. The rent has been very low here. But it's a large area, very close to the new tram station, Letbanen, and its housing just beside this area. And we already have more building rights in this site. So we put this property in the process of urban development. And I expect value creation to come with a mix of living and working for this area. And Page 48, also Denmark in Hørkær. It's another example of ongoing city development project, with a mix of housing and offices. The offices are already built. But by increasing the density and combining offices with housing, this will be a more attractive area. We own part B to F in this picture. The zoning plan is expected to be approved in Q4 '21. And by that, let's summarize again. We see positive net letting. Rent levels continue to develop also positive. Tenants are ready for action. Several new leases from public sector. And we will continue to invest, focus on our earnings capacity and do so with continued stability. And by that, we are open for questions.

[Operator Instructions] And our first question comes from the line of Markus Henriksson of ABG.

A few questions from my side regarding the Danske Bank termination. When do they leave their premises?

They have left.

All right. So did it hit the figures already in Q3?

No, they paid rent for all of September.

Okay. Perfect. So net leasing was worth SEK 3 million here even with that large termination. And you seem to talk about a very positive outlook. Do you believe that will result in a relatively strong net leasing going forward as well, all else equal?

I definitely think that the activity is high, and we have several good discussions. So I expect us to continue in a very positive way. But as mentioned, of course, no guarantees, but I feel that things are really working well.

Okay. There's never any guarantees, I guess.

No. And of course, we'll continue to see terminations as well, but overall, it's definitely more positive things ongoing.

Yes. Discount is around SEK 2 million here in Q3 net. What's your view going forward?

Basically fading out.

Okay. And then extremely strong balance sheet as you show in the presentation. What's your current view on transactions? Should we expect it to be active? What do you currently see on the direct market in your submarkets?

Active definitely on -- if the -- if it -- property is right for us. But we're not the large portfolio figures at the moment. But definitely, I think that we will find things that we can add on to our portfolio in a positive way.

Okay. So you expect at least to be a net buyer in the next 12 months?

Yes, definitely. Yes. I hope so.

Okay. Last question regarding financing. You had around SEK 10 billion in debt maturing in Q2. Now it's down to SEK 6.9 billion; interest rate, 1.17%. Could you walk us through what margins you expect or what you see at the moment in the financing market?

We have interest maturities, basically, the portion of our debts which are not covered by interest rate swaps. So I mean, for that portion, you should, of course, well, make your own guess of where STIBOR or how STIBOR will develop over the coming months. Regarding the margins that we pay on our bilateral bank loans, the latest renegotiations that we've done have meant decreasing margins. And you can say that on the bond market, and that is basically public information, you can also say that margins are in a historical perspective quite favorable at the moment.

The next question comes from the line of Jacob (sic) [ Stefan ] Andersson of SEB.

Just a couple of follow-ups then. Going to the Copenhagen premises there. I understand that you will develop the whole site, with new of those. But if we look at the actual buildings that are available now, are you thinking about doing adjustments on them before you go out to the market? Or are they available to rent out already? And I'm just trying to understand how quickly you can actually put them to the market.

I think that the wisest thing we can do with this site is to do a city planning projects, totally changing of the area actually. It's -- the building today is very much dark areas, underground and a very low building. So we need higher density and a mixture of housing and workplaces for this area. It's an excellent large plot, but -- so it will be filled with more density. And I think that's the best thing to do with this. And of course, we have seen the really low price for this lease for a long time. It's, of course, affected of the quality of the building. So of course, if something very special happens, we can rent it to someone. But I think it's better for us to do a city planning project.

So just so I understand. Then it would be -- that vacancy will be an [ active ] project and then -- in your presentation. And then we -- I mean, it's like 2, 3, 4 years before it's back on the market? Or just so I understand roughly.

Yes. I would say that when we -- if we look at the timing in Hørkær, the other project I mentioned in Denmark, I think the city planning project has been quite quick actually, almost quicker than in Sweden. But it's also hard to predict the timing of making new [ ceiling ] plans and such. But expect 2 to 3 years at least.

Yes. Okay. Good. And then on the markets, how do you see interest for, when looking at the new tenants coming in, interest for already established premises that are already built versus the discussions on something that are about to be developed that are further out? Do you see any difference in discussions there?

No, not really. Of course, it's very much about the quality and the location and how flexible the areas is for each tenant. So I wouldn't say that we see any special -- and I also would say that we have very good premises with high quality. So therefore, we do new deals both in the older stock and in the new build. So -- but it's all about the quality and the location, of course. And also, as I mentioned, flexibility in the whole area, if we can provide possibility for tenants to grow with us for a shorter time than the lease agreement period, that's very positive. And that is one of the things that we try to offer them as much as possible.

Yes. And then going into the project portfolio a little bit. You mentioned Posthornet 2, I think, and Bläckhornet 1 being close to getting them going, so to speak. If you look at those 2 projects, what is it -- and it might be different, but what is it lacking for you to go ahead? Are we talking about tenants coming in? Or is it more approvals?

No, it's not approvals. It's more about the timing for us when we -- for if we look at Bläckhornet, for example, I think that the timing for starting building these parking space and sports hub will be very soon coming up because that's a service to -- also to Pulpeten 5. We want those 2 projects to be finished almost at the same time, and that's a good thing. But when we start to do Phase 2 in this stuff, it's depending on the situation, how does we feel that the interest for additional 20,000 square meters in Hyllie will be? So when we sign leases in Pulpeten 5, then we think that the right time is to start the next project. So it's more a part of timing. And it's the same thing with Posthornet in Lund. And what I mentioned is that I think that, that time when we make the decision is getting closer, maybe a bit closer than I would have expected to be actually because the demand is there. So it's a good thing.

So in essence, when you say timing, what you mean is that signing up some tenants, that's really what we're talking about, the pace of getting those in?

It doesn't necessarily mean that we need to have signed leases at this exact building. But we have seen that the competition in the area and the product that we can offer is right for the moment. But of course, it's not -- you cannot only calculate this timing. You have to feel if that is right.

So you would also be willing to start the project if you don't have anything -- any tenants at all if you think it's in the area where there is a good demand and you're very confident that, that's really also [indiscernible]?

Yes, we do that as well when we think it's the right thing, the right product and the right location and the right time.

Okay. And my final question then when it comes to -- when talking about using different materials in construction and the Scope 2, 3 and all this coming in. We're seeing lots of trials and early moves in using more wood in the material on the fundamental of the buildings. And there's pros and cons of that, of course. But what is your -- do you have any insights and view on that development to replace concrete to some extent?

Yes, I have a lot. Actually, I have been working with these questions some years ago. It's one of my special areas. So I really like these questions, I must say. And I think it's interesting that we -- that discussion on this area is a bit all over the place today because this really interests me. I think that different kind of materials and different kind of products, you have to find the right place for them to use the material the best way it can be. Concrete and steel is excellent products, but you have to use them where they do their best. And it's the same thing with wood. For Pulpeten 5, I'm really thrilled that we have done the work very properly to find solution for this, to getting the certification 0 carbon dioxide neutral. And we have done that still with slabs in concrete. And we have a frame in steel. We have really large flexibility with the not so many structure in the office areas, for example. And that's an important factor for the long-term perspective. So -- but we can reduce the amount of materials by calculation and really be careful where to put different kind of materials. But wood is also an excellent materials but especially for shorter [Foreign Language], what now that can be in English. So I follow those questions with different kind of materials in the right place. And I think that you cannot say that materials disqualify themselves by being just the materials. Many materials are excellent, but you have to use them on the right place. I never thought that, at least I think, that I could be able to talk so much about this question in this -- in the Q3 report, but I love it. So please, come back. We can talk more.

Let's pick this up later. I don't think it's the right forum.

Yes. Sorry.

But yes, it's definitely the interest all over the place. So...

Yes.

Our next question comes from the line of Fredric Cyon of Carnegie.

We'll see if you will rate my question as [indiscernible]. But on vacancy, most likely more boring, vacancy was down 1% quarter-on-quarter, and that improvement is not -- we have not taken into account Danske rights in the vacancy of 8% because they left at the end of the quarter.

The [ AP ] industry with property, we've classified in the table on Page 10 in the report as projects because as Ulrika explained in the presentation, our intention is to, well, to do something more...

Value uplifting with that project, with that site. So...

Yes. So that has, of course, affected the 92% in occupancy rate, excluding projects and land.

Yes. Yes, that makes perfect sense. And with regards to them leaving, have you already reduced your book value for that particular asset?

Yes, but we haven't changed the value actually because the value will be raising when we do this -- the value is quite low according to the low rents that have been paid before. So the value is the same.

I see. And I would imagine that the land adjacent to those buildings are pretty low. And how many resi units do you think could be developed on this site?

I have no calculation for that. But as you can see in the picture, the land area is very large. And I think we have considerable positive effects there to come.

So the main thing you are likely to work on is getting zoning permissions for resi unit. Is that fair to say?

Yes, yes.

Our next question comes from the line of Markus Henriksson at ABG.

Just one follow-up on projects from Stefan earlier. I was thinking about your logistics projects. Some of these have been in the potential future investments for quite some time now. And the market is very strong. What's holding you back in Malmö, Landskrona, Helsingborg for these projects?

We have started building in Helsingborg. And I think we have ongoing discussions for refurbishment of one -- a few of these existing buildings. So it's only a matter of timing when it comes to tenant discussions.

And we have a follow-up question come through from Jacob (sic) [ Stefan ] Andersson at SEB.

Sorry. Just one thing that popped up as well. You told you have a very interested -- interesting projects, of course, in Malmö in the harbor there in [indiscernible]. Just your comment there about some delays with the discussions with the city when it comes to sea levels and so on. Maybe could you elaborate on how severe those discussions are? I mean, we see that the -- it's not always easy to deal with these questions, I guess, so if you can elaborate a little bit more.

No, it's not, and it's not only in our zoning plan project. It's for the whole area. So it's of great importance for the municipality to solve them as a whole for the whole area. It's more that it, of course, affects the timing for the zoning plans. But I think that the municipality is active even if we always want more activity. So -- and -- but it's -- of course, it's difficult questions, but they will be solved in one way or another because this area will be built, of course.

Just so I understand, is it about -- is it just formality? Or is it building in different ways, raising the levels or cost increase and so on? What is the issue here? What is the solutions?

The issue is not only for this area. It's for the whole city of Malmö. So it's the landfills and [indiscernible]. It's discussions between landfills and the municipality actually at the moment. Questions like, okay, so it's raining and it's going from the right direction and the sea level is 0, level is rising, all of those things. At the same time, what will happen on the streets? Can the fire [Foreign Language].

Fire brigade.

Fire brigade really get access to these buildings? Such questions. So it's not -- well, it's such questions.

And as there are no further questions on the line, I'll hand back to our speakers for the closing comments.

Okay. In that case, we just want to say thank you very much for listening in.

Thank you very much. And please come back, and I want to speak more about concrete and the fire brigade as well. Thank you for listening in.

Thank you. Bye.