Platzer Q1 2025 Earnings Presentation Transcript

Introduction by Johanna Hult Rensch (CEO)

Welcome to our presentation of the Q1 report of 2025. My name is Johanna Hult Rensch and with me I've got Ulrika Danielsson.

I would like to summarize the quarter. We have completed yet another good quarter despite the turbulent and changing macro environment. In the wake of this economic climate for the last two and a half years, it's even more important now than ever to focus on what we can influence. For us, that is staying close to the customer, focusing on our cash flow and our cost control.

The organization's hard work allows us to deliver an operating surplus that grows by 11% and an income from property management that increases by 16% compared to Q1 2024.

The rental market started a bit cautiously after the Christmas holiday, but it picked up as the quarter progressed. Most of the new letting is actually in our office business segment. Our renegotiations of existing leases reached an amount of about 36 million. I think this shows our ability to meet our customers' changing needs and that we are relevant with our products and in our attractive locations.

Financial Summary

As I mentioned, the operating surplus and the income of property management has increased, and also the rental income has increased. Of course, that is due to the acquisition of Minimo, our new office block that we acquired just before Christmas, and also the International English School that corresponded to about 8%. The balance is mainly due to the index and effects from lease renegotiations.

Along with good cost control, the net letting amounts to minus 3, or actually minus 2 if we look at our fully owned portfolio. If we also exclude the bankruptcy, we are just balancing on zero. Our tenant retention rate, meaning our existing tenants that stay in our portfolio but could have chosen to leave us, is up a little bit even more. That's up to 88% at the moment.

We are also, as previously reported, having a feedback from the Nordic Critic rating that confirmed our BBB rating and raised the outlook to stable, which we are very happy to have.

Recent Developments

Of course, it has been a quite intense start of the year. In the beginning of January, we recruited our future CFO that will take over after Ulrika. It's Jakob Nielsen who will join us here in July. We have also recruited our new Chief Legal Officer Christina Moynekheld, and I'm really looking forward to Platzer's continued journey together with Jakob and Christina and the rest of my dedicated teams.

As previously reported, we also sold the school in Sengoden for 552 million Swedish crowns to Infranote, and we also started a new project, a parking garage in Sudangwarden. On the same theme of this area, we have also transferred residential building rights worth 390 million krona to PIAB a week ago.

Very freshly announced is also our large letting to Speed Group in Surd Logistic Park that will spark off a new project. Starting this project has an investment volume of 350 million crowns. The annual rental is about 27 million and it's a 10-year lease.

Gothenburg Market Overview

Looking into the general terms of the Gothenburg market and economic outlook, it shows improved economic prospects across all sectors in the local regional GDP that has risen by 2% in the last quarter. Of course, this forecast does not fully account for the tariffs and potential trade wars that have been launched in the last few weeks. We have not yet seen the full effects of these tariffs and their presence or their absence, and neither the effects of such a trade war.

Looking back at where we stand, it is of course important to see that we still have some fundamentals that are really strong and stable. I want to mention those:

• We have an economy that should be quite resilient, with strong state finances and green transition investments

• We also have significant investments going into the defense system abroad

• An innovative business sector and the ability to adapt very quickly

If you look at historical matters, especially in the Gothenburg area, we have a very dynamic business sector spanning over 750 different industries. The green industry transition is very significant in this city. We are also geopolitically and industrially well positioned, and we have the only transatlantic port in the Nordics.

Many of the export companies are relatively well prepared. For example, Volvo has already been manufacturing their trucks in the States and supplies the full US market since many years back. However, we need to keep a close eye on what happens with tariffs and trade wars globally, which of course is of great importance to Gothenburg. Gothenburg is Sweden's export engine and has twice as high export volume as the rest of the country.

I believe that what will affect us most is how long it takes for the national economy and household spending to turn around. And that will likely be driven by the households, according to many experts.

Net Letting and Economic Activity

Looking into the net letting and the link to how that is correlated with the economic activity in this region, we can see that when we have had a weak economy, the net letting is normally also dipping with about six to nine months delay. We can see that in a few different places going back in history. Right now we are still of course in a weak economy, and we can also see that we are around zero when it comes to net letting.

What is also worth mentioning is that our vacancies in our portfolio are of course worth a lot of money - just over 200 million Swedish crowns. It's such a fantastic potential in those vacancies when it comes to our earnings. That's why we focus so dedicatedly on this in our daily work.

Portfolio Segments

We have two segments that complement each other very well, which is very evident in this type of economy. Gothenburg is of course an industrial and high knowledge-based city. We have the highest ranking on the list of the best logistics locations in the Nordics. This list combines hard criteria such as infrastructure, freight flows, land availability and logistics stocks with softer values, for instance, access to logistics expertise and regional cooperation. Gothenburg has topped this list 23 out of 24 years, which we should be very proud of. Our portfolio is located in the best location, close to the proximity of the harbor.

As I mentioned, we have also started a project just after the quarter. If we then look at the offices, transactions have picked up at the end of the year after almost three years of stagnation. Vacancy rate is fairly high - it's high for this market, about 12%, which is about 1% higher than a year ago. But we have very stable rentals.

If you look at the next slide, you can see that the rental development in both the A and B classification has been growing in the last years. The take-up in central Gothenburg has actually been around the five-year average if we look at 2024. It's a little bit early to say how 2025 develops.

But what is worth mentioning, I think, are the basics that actually drive the office market in Gothenburg. We have, during the last 10 years, had a 40% increase in office-intensive sectors. That's significantly faster growth than in other industries. During the recession since 2023, however, the growth has of course slowed down. But office employment is expected to grow faster as the economy strengthens, which also means that the vacancy level will decrease.

I find it very interesting to look at the chart in the upper right corner. It shows the distribution of different industries that use offices in the Gothenburg area. Here you can see that Gothenburg has a significantly higher proportion of business services working towards the industry sector, and we have a smaller portion that is IT and finance compared to Stockholm. This is actually quite interesting from an office usage perspective. The green area showing the industry that works close to our heavy industry is more present in the office premises.

However, the largest structural shift in the Gothenburg region is the investments in research and development. You can see in the statistics that the Gothenburg region has now taken over as the country's absolute leading center of research and development. In terms of where companies invest, we have 35% of Sweden's total R&D resources, and that's a substantial increase of 10 billion Swedish crowns in one year. The shift of Sweden's research resources is clearly towards Gothenburg, which is interesting to highlight in terms of what that means for the long-term growth of the city.

Sustainability

I also want to mention where we are from a sustainability point of view. Platzer has continuously and for many years actively worked with improving our sustainability impact. We aim for our property management to be climate neutral by 2030. Energy performance is becoming more and more relevant for property values going forward.

Therefore, I'm also very proud that our long-term efforts are visible in the results. We have reduced energy consumption by 4% during last year, and we have improved it by 39% during the last 10 years. If we look to the bar chart to the right, it shows how Platzer compares to other commercial property companies in Sweden. This is the Swedish Energy Agency network Bieloc that makes a comparison between property companies in terms of energy efficiency, and we are ranked as top three in this bar.

Now I'm handing over to Ulrika.

Financial Results by Ulrika Danielsson (CFO)

Thank you. Platzer starts the year with a growth in profit from property management of 16%, driven by stable growth in the like-for-like portfolio, contribution from completed developments, and transactions, where our acquisition of Minimo weighs heavily.

Administration is stable, as is the income from property management in our associated companies. Net financial items are slightly higher at first glance, but it is worth noting that a year ago we capitalized interest of roughly 8 million Swedish crowns, and now we are activating zero. Adjusted for this, the net financial items are slightly lower compared with a year ago despite a higher debt volume of roughly 800 million. This is mainly due to the fact that the STIBOR is significantly lower, but also because the company has entered into new interest rate derivatives when the market has had favorable pricing.

All in all, this means that the income from property management amounts to roughly 195 million, corresponding to a growth of 16%.

Property values are stable, adjusted for the school that we sold in February this year. The portfolio value basically increases with investments made. The pace of investment right now is somewhat low, which is natural considering that the company has not started any major projects during this recession, but has chosen to work on strengthening the cash flow and regulating the capital structure through, among other things, divestments.

More divestments have been carried out since the end of the period. In early April, we sold two residential building rights with an underlying property value of roughly 390 million. Thus, from December last year until today, we have divested properties worth roughly 1.1 billion, of which residential building rights amount to roughly 580 million.

After changes in the value of derivatives and taxes, the profit bottom line amounted to 186 million. Strong underlying earnings combined with divestments result in stable or strengthened credit-related KPIs. Our net debt to EBITDA is declining, based on strengthening cash flow, divestments, and Minimo accelerating. In terms of flow, the LTV is lower. If we adjust for the residential building rights that have been sold after the end of this period, the LTV falls another 50 to 60 basis points, all other things being equal.

Thus, a good quarter and a strong start to 2025 with a high pace - a pace that continued into early April with further sales and project start on the logistics side.

Rental Income and NOI

The company has created increased rental income of 10% and increased NOI by 11%. If we look at like-for-like, meaning properties that have been under management for two years, income increased by 1.9%, which is above CPI. The higher rate of increase is partly due to increased rent supplements and partly to the effects of previous renegotiations.

The first quarter was mild with lower energy consumption, lower energy prices, and lower cost for snow removal. But this has been offset by other things such as high maintenance, which is why we see a cost increase of 2 million Swedish crowns in the like-for-like. Overall, a stable development of 1.7% in the NOI.

The projects as well as transactions have contributed with new NOI, where Minimo that we bought at the end of last year of course has a big impact on the numbers. Stable development in the like-for-like in combination with completed projects and above all completed transactions resulted in the growth in the NOI of 11%.

Fixed Income Market

If we leave the stable and move to something that is really not stable and that has been like a roller coaster - the fixed income market and our actions in such a volatile environment. In Q1, we continued with what we started in the autumn, extending the duration and reducing exposure to short material maturities in order to achieve greater predictability of our earnings.

We have thus taken new swaps this quarter at levels that continue to hold up well versus the pricing in the market at the moment. And we have continued to act in April. Our actions mean basically unchanged average interest rates all-in versus the beginning of the year, where the interest rate itself is slightly lower but the cost for unused credit commitments is slightly higher as a result of a larger buffer.

At the same time, we now have a somewhat more even maturity structure and an extended duration despite the fact that one quarter has passed. Based on the external situation, we have thus strengthened our risk profile and increased the predictability without sacrificing our funding costs.

We have also been active in the bond market. Immediately after our Q4 report was released, we issued bonds in order to test our upgraded rating. With the company's instrument rating being given investment grade status, the investor base was broadened. The interest was great. We issued a four-year bond at 150 basis points, which was 65 basis points below our old curve. In the beginning of March, we made another 4-year but then at 242 basis points, thus another 8 basis points down.

Since then, the bond market has tightened somewhat and generally there has been a rally upwards in the last month of 15 to 20 basis points based on what is happening in the world around us. For us, the setup has been somewhat smaller. Thus, we can conclude that the upgrade has had the desired effect: a broadened investor base and thus access to more volume at competitive price levels.

We have good dialogues with our relationship banks. We have not made any major renegotiations in the first quarter, but instead extended some agreements over the next 12 months. We have about 5 billion to be refinanced, adjusted for outstanding CPs, of which about 2.7 billion matures in Q1 2026. So we have time to handle this. We also have a buffer in place which makes us feel extra safe in these turbulent times.

We have had a high pace, and I would say that we are in a much better financial position than a year ago on all levels. We have also continued the shift compared to the turn of the year. This means that we are much stronger than before, which is needed in the highly unpredictable world we now live in, and that enables us to continue to invest for existing and new customers.

But over to you now, Johanna.

Future Outlook by Johanna Hult Rensch (CEO)

Let us look into the future with these good earnings and from a strong Q1, and also from a strong delivery during last year. We are putting time behind us where we are better positioned now to face these challenging worlds that Ulrika mentioned.

Our greatest key to success has been our ability to focus on our work with our customers, both new and old, and to fill our vacant premises and secure future cash flow. This gives us the strength to continue to develop our business and our beloved city of Gothenburg.

We have started two projects recently: the parking garage in Sradre Engoden and, as announced earlier today, the Project V3 in Surrey Logistic Park, which comes together with this lease agreement with Speed Group of 27 million Swedish crowns.

We have also worked actively in the transaction market. We have sold residential building rights of about 390 million Swedish crowns. And we are currently also in the open market testing the price and interest for the V4 logistic project that we have completed in Syriz Logistic Park. Together with Catena Boque, we have the first right of refusal to acquire this building, but have decided to test the price in the open market.

Future Opportunities

Let us look into the opportunities ahead. We have around 300,000 square meters in product volume ahead of us, and around 55,000 of those are in the planning stage. We have projects in all different stages. We have detailed regulation plans. We have projects that can be started in the very near future.

What we focus on in the near future is what we can see here in the picture. Here we can see the port view in the harbor of Arendal, and this is a project that is in the building permit stage with direct access to the quay. We have also refurbishment projects and energy efficiency projects, which the picture in the lower right corner can represent. This one is in Gamlestaden, and we are focusing on these refurbishment projects together with the logistic projects, which are very limited risk and also fairly good size, and also create cash flow fairly quickly.

If we look at a little bit more long term, we have of course opportunities in terms of the office segment. We plan to acquire the building rights of Lilla Bumen. We now call that project the Big Blue or "Det Stora Blå." Here you can see a teaser on how we will package that project.

We have also handed in an application for the detailed regulation plan for Medicine Barrier, which is close to Sahlgrenska University Hospital where we are the largest property owners at the moment. We have submitted this planning application together with Akademiska Hus.

We have historically had very good timing of our completed and fully leased office projects such as Kineum and Merkur Göta Vesta. This gives us now a boost in the rental development and operating net growth. In the right market situation, we will of course run large office projects again. But at the moment, this is of course not where we will start in the near future, but we are planning to be ready when the market is there.

Conclusion

To summarize, in this turbulent world, we continue to focus on what we can influence. We are staying close to our customers, we are increasing and focusing on our cash flow and our vacancies. Our single greatest success has been and will continue to be our ability to work close to our customers. This gives us the strength to continue to develop both projects and our city and our company.

Of course, with these strong earnings from this quarter and from last year behind us, and with the acquisition of Minimo and the divestments that we have also carried through, we are better equipped than we were a year ago. And as Ulrika mentioned, this also shows in our figures in terms of credit-related key figures that are all strengthened. We have a better rating that means better pricing and flexibility for future capital or borrowed money for us. And that bodes very well for the future.

We own a lot of building rights with great potential long term. And we have also product opportunities in the short term that can give us fast cash flow growth. So in the near term, we focus on quick and ready-to-start logistic projects in Sweden's best location and refurbishment projects in the office segment. In the long term, we would like to keep to larger projects when the market is right.

We continuously also work with reviewing our portfolio, acquire what we think strengthens us and divest what we do not think we can further refine. And we integrate sustainability into everything that we do.

The organization has shown historically that we can deliver in a tough economy, and our local market knowledge and our close proximity to our customers are our strength. Despite really quite big bumps on the road, hopefully the economy will recover and continue to go in the right direction again, and we will meet a more vibrant rental market with that. It will of course not happen by itself, but we are willing to put in the hard work that is required.