Welcome to the SBB Audiocast Teleconference Q4 2021. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. Today, I am pleased to present Ilija Batljan, CEO. Speaker, please begin. Thank you very much. SBB is a social infrastructure champion in Europe. This first slide, you can see some of our assets. The building in orange is actually apartments for elderly in the city center of Linköping, which is one of the larger cities in Sweden. A long municipal lease for these properties and value of these properties is probably a half of the value of the condos surrounding the property. It's a very large potential in this property going forward. At the bottom on the slide, you can see one of our preschools. We are the largest owner of preschools in the Nordic and we own preschools in all four Nordic countries. This small picture is a picture of the most sustainable building in Europe Cultural Center that we have built 26,000 sq m completely in the wood. Even reserve power is done on a combination of the batteries and solar power. Probably the most sustainable building in Europe. Next slide, please. Focusing on sustainability and having long leases where we have almost 11 years average lease. On top of that, Swedish and regulated residentials with waiting lists is a great basis for an amazing value creation through profit from property management. You can see that we in this quarter are presenting an earnings capacity that is during 2021 increased with 85%. You see that our rental income in 2022 is expecting to be SEK 7 billion. You see that we have property costs including maintenance, and we take all property costs through P&L. We have NOI of SEK 5.1 billion. After some costs for central admin and financing costs, but also profit from joint venture and associated companies. Here is the cash profits from joint venture and associated companies. We will have SEK 5.2 billion in profit from property management for next 12 months rolling, and that is 2.96 crown per share. As many of you know, we are a team of 400 professionals, and there are 3,000 people working in our companies, and we are delivering very strong profit also from that organization through profits of our value add strategies. If you add our value add strategies and you also take into account that we are paying the dividends to D-shares, and taking into account that we are paying the dividends to or interest to hybrid. You will get to SEK 5.65 per share or SEK 8.2 billion. That is our adjusted operating profit to ordinary A and B shareholders in expected in 2021 as a basic earnings capacity. On top of that, we are running the projects that will deliver SEK 800 million in profit from property management. Summing up, we are saying that profits from property management will land between SEK 5.65 and SEK 6.2 per share in 2022. In 2021, we had great profit. Profit after tax for the period was SEK 35.8 billion, which is strong increase compared to the corresponding period of the previous year. That corresponds to SEK 17.2 per ordinary class A and B shares after dilution. Rental income SBB is inflation hedge, and our rental income increased like to like by 1.8% compared to corresponding period last year. For those of you that are following Nordic economies, inflation in 2020 was weighted for our countries, something like 0.35%. That means that we are delivering 145 basis points over inflation. In 2021, that is record. We usually deliver more than 100 basis points, but that is record high. Even stronger was net operating income like for like, that increased by 4.7%. That is very strong increase in net operating income for like for like portfolios and the strongest in relation to our closest competitors. For the full year 2022, earnings per ordinary share A and B are estimated to be SEK 8.10 per share. That is our forecast for 2022, is that we will deliver SEK 8.10 per share. On which, you have seen that we have illustrated, SEK 5.55 in our earnings capacity 12 months rolling. Next slide, please. The main force behind our strong numbers are coming from profit from property management, where that has been underpinned, as I said before, by strong like for like rental growth, corresponding to an increase of 1.8%. Like for like net operating income corresponding to increase of 4.7%. You can see that we deliver operating profit of SEK 5.4 billion. Adjusted for value changes in joint ventures and one-off costs, operating profit was SEK 3.4 billion, which is an increase of 31%. Adjusted for the value changes in joint ventures and one-off costs, we are delivering increased operating profit with 31%. EPRA NAV or our NAV have increased to 45.11 SEK per ordinary A and B shares. Very strong increase during the year. We are expecting to continue to increase our EPRA NAV through 2022. We have a relatively high net initial yield. When I said net initial yield, that means NOI yield. Our NOI yield is at 3.8%, which is almost double where the general residentials are traded. Our valuation yield is over 4%. One important thing where our property management is delivering is our cooperation with municipalities and with government-backed operation providers where we have been able to increase our WALT from 9 years to 11 years in the last part of 2021. That is very strong increase, and we are actually because we are taking in the portfolio some elderly care homes, some municipal buildings that we have built that are coming in Q1. We are expecting that our WALT will increase during this year, which is also unusual given such large portfolio that we have and given our long leases. An important point from 2021 and the part of the business that has delivered the best profit is our profit from property development. During 2021, we created 490,000 sq m new building rights. As you know, we have building rights at different phases. Important message for this is that building rights with granted zoning plan, meaning building rights with legal force, increased with 463,000-464,000 sq m during 2021. This is amazing. There are not many companies in Europe that have 464,000 building rights for residence. If you imagine that is exactly what has been driving our strong profit from property development. As you that have been following us for years know that we are selling those building rights without putting in cash in construction. We are creating large amount of value. In 2021, profit from property development was SEK 6.6 billion. In Q4, this profit was almost SEK 4 billion. An amazing delivery from our property development team. Another important point, of course, those building rights are also delivering cash to us. Just in Q4, we sold building rights getting cash of SEK 2.6 billion. I will come back to that. Another important point that has supported our credit metrics in last part of 2021 has been our disposals. During 2021, we sold properties for SEK 19.4 billion with profit of SEK 3.1 billion, of which SEK 850 million has been reported as realized value changes. The rest has been reported as unrealized value changes in the periods before closing. This is just showing you that we despite that increased valuation based on sold properties, even on top of that, we are delivering almost SEK 1 billion in realized value changes in 2021. Total disposal in Q4 has been SEK 12.6 billion. We get SEK 12.6 billion in cash in Q4, and that has been backed by selling investment properties, cash coming from selling investment properties for a total of around SEK 10 billion and building rights and development properties, SEK 2.6 billion. This has been one important point that has supported our opportunity to acquire Amasten. That deal has been almost fully financed by cash from selling the properties and also doing great profits from that. Next slide, please. Of course, our sales and divestment of properties and divestment of building rights has been very supportive to deliver on our key ratios. We have been successful in integrating Hemfosa, integrating Offentliga Hus, integrating Amasten already. We have a very strong track record of fast and successful integration of recent acquisitions, and we are successful in achieving anticipated synergies. Those divestments in Q4 have strengthened our credit metrics. As you can see, we are reported according to S&P's way to do the math, where the hybrids are counted as 50% equity and 50% debt. We are delivering reported numbers below 55%. That is the threshold put on by S&P. We have in Q4 2021 adjusted debt-to-equity ratio of 63.8% reported. If you take into account that we have additional SEK 4 billion that are loans to our joint ventures and additional SEK 2 billion that are coming in cash from the sold properties, then you will arrive at 52%. Taking into account also our income, Tellberg's forward looking, we are landing at 47%. Reported 53.8%. Here the management has shown commitment to deliver on adjusted debt to debt plus equity remaining well below 55%, and despite increased focus on acquiring large low-risk rent-regulated residential in greater cities, its main focus on Stockholm. That has been main change in portfolio in Q4 that we have strongly increased our residential portfolio. You can also look at our ICR that is also increasing very strongly. Also here we have strong focus from management to deliver. According to our financial policy, we should have interest coverage ratio above 3 times. Our interest coverage ratio adjusted in accordance with S&P is 4.1 times and will increase significantly in 2022. Our strong EBITDA margin, which is very strong, given large portion of portfolio being Swedish rent-regulated residentials landed at 69.4%. We are expecting in 2022 rental income to increase with 3.5-4% like for like. Strong base for continuing growth. If we continue to the next slide, please. Just to illustrate how big shifts, and you can see some of properties that we have developed at this slide in a very good location. We actually get the prize as the best landlord in a competition from Hyresgästföreningen. We have been voted by our tenants. I don't know, maybe for you financial guys that is not important, but for us, delivering services to our tenants is the most important that we can do. We have been voted as the best landlord by Hyresgästföreningen in Sweden by our tenants. Swedish rent-regulated residentials have more stable rents than the European peers, and those are mostly good assets in real estate space. SBB rents are well below market rent. SBB average rent is SEK 1,132, which is compared to new construction of SEK 1,850 per sq m. This is an amazing asset with long-term value creation potential. We are also continuing to renovate apartments that are deemed to have a high utility value. That is, of course, giving us opportunity to negotiate a significantly higher normative rent, which focus on sustainability. We are delivering strong yield on cost 5%-7%, sometimes 8% of our investments in the sustainability related measures. Next slide, please. On this slide, we said a few years ago that we are going to have the strongest EPRA earnings growth per share, and we have been continuing to delivery on that. In 2019, we have 74%. In 2020, we had 41%. In 2021, EPRA earnings growth per share, 60%. EPRA earnings, 45.11 SEK per share. Also backed by strong increase in our earnings capacity that you can see started in 2017 with 0.67 SEK per share, and now at the end of Q4 is 5.65 SEK per share. Strong delivery both on profit from property management, but also delivery from property development and other value-adding strategies that are growing EPRA NAV very, very strongly quarter for quarter. Next slide, please. SBB operate in the world's safest real estate classes, community-based properties in the Nordics, where 100% of the tenants are sovereign or state-financed organizations and highly regulated Swedish residentials. Our properties are very attractive. We have SEK 160 billion on properties in 4 countries. We have passing rent of SEK 7 billion, as I mentioned before. Relatively high net initial yield or NOI yield of 3.8%, almost double what our competitor in German residential space have. We have among the longest hold in the market, 11 years. At the end of the fourth quarter, our average interest rates were 1.1%, and it should be even lower if it was not for some higher interest rate loans in Amasten, in the company that we have acquired. We used to be able to get rid of that kind of high-interest financing as soon as we take over the company. We will do the same job also this time. I'm looking at our Finance Chief Lotta, and she's just showing thumbs up. We will make sure so we can continue to have low interest rates. If you look at our portfolio book values, you will see that our portfolio is located in major cities and university towns across the Nordics. Particularly also our building-wise portfolio is located mainly in Stockholm and other major cities. That is why we have been able to make such amount of cash in 2021 Q4 by selling building rights. Next slide, please. Another important message from this quarter is that, of course, as many of you know, we are creating values from AAA assets because we have exposure to Sweden, Norway, and Denmark that are 3 of 8 AAA-rated countries. We have Finland that is AA class. As you can see here, our income. 50% of our income is coming from residentials, either rent-regulated residentials or publicly funded residentials for elderly people or people with disabilities. Even higher share of value is related to residentials. 54% of our property value is related to residentials. We have education, 28% of income and 28% of value. That is 78%, and then we have 6% hospitals. We have some government infrastructure and city halls, 7%. We have very small part of our portfolio that is public offices. It's just 5% now. As some of you know, we have been selling offices since we acquired Heimstaden in late 2018. We are creating value from underutilized land, and we have properties, or our total, we have 5.4 million sq m in properties. On top of that, we have 3.5 million sq m on building rights. That is in total 9 million sq m. As Mark Twain say, "Buy land, they don't make it anymore." If you have long cash flow on those, as we are showing at this slide with 11 years WALT, then it is even more cash in those properties in that land. Next slide, please. One important move that we have done in 2021 was developing our relationships and getting even more competence and getting more power in the operational excellence through our joint ventures and associated company. We have, at the end of Q4, joint ventures with total value of SEK 90 billion. That is one of the largest. Our joint ventures together are one of the largest real estate companies in the Nordics, SEK 90 billion. Our share of that is SEK 35 billion. Those joint ventures have also a relatively low LTV. They don't have such exposure to different instruments. They have LTV of 37%. Our larger joint ventures are the actually joint ventures that we have cooperation with different investors. We have Svenska Handelsbyggnader or SHB. There we have property value of SEK 10.4 billion at the end of Q4. This is pure property management company. Public Property Invest in Norway, SEK 8.7 billion, pure property management company. SBB Kåpan are the pure residential company in Stockholm with SEK 5.7 billion. We have JM that you know which is developed with largest development pipeline in Stockholm with 36,000 apartments in development pipeline. We see that there is very good potential for us going forward. We have Kåpan, which is also a large Stockholm player owning rent-regulated residentials and apartments for elderly people and so on and so forth. It is very important to see that we have a strong value creation and strong recurring profit from our joint ventures. Next slide, please. As we mentioned before, one of the main reasons for us being able to deliver on both profit but also on deleveraging in Q4 has been our property development. Our property development team has continued to expand and continued to deliver and sell building rights. In Q4, they sold building rights for SEK 2.6 billion in cash. There are not many companies in Europe that can take out SEK 2.6 billion in cash through a quarter. That was very good performance. However, our building rights are still very low valued. We are estimating potential profit from the building rights to SEK 21.4 billion. That is without any penny of new investments. We have SEK 21.4 billion outside of the balance sheet that will just go through these administrative processes and to getting legal force and to get value of additional SEK 21.4 billion. SEK 21.4 billion. That is a large amount of cash and a large amount of equity outside of the balance sheet. Next slide, please. However, as a long-term partner, we have been saying that we have ambition to increase our dividend the next 100 years, and we also think with our company in the generations. For example, my daughter is working in the company, and I hope that my grandchildren will work in the company. I hope that Lotta, our finance chief, as her grandchildren will work in our company. Because we are a family business together with our 200, more than 200, shareholders. We are most owned company, next most owned company among small investors after Investor. We are feeling that we are working for them every day. They want us to have this hundred-year focus. They want us to be climate positive in the entire value chain because this is an issue for their kids. That is why we are investing large amounts of money in reducing energy usage and the climate impact. We have as a target to do it with 5% per year. We are on track to deliver. We will deliver more numbers in our annual report. We are also building 50% of our new construction in wood. As I said before, we built last year and that was finished at the end of last year in Skellefteå, one of the richest municipalities in Sweden, the most sustainable building ever built. 26,000 built in wood and with very strong environmental performance, also getting the highest certification. We are also continuing to deliver on our social sustainability. As you know, we have been rated by ISS ESG as the strongest company in the social space in terms of social sustainability. We are continuing to deleverage in order to deliver on our target to achieve a BBB+ rating and A- rating. We are also heading for 100% sustainable financing. Right now our bonds, some of our bonds are cheap, so we will look at those that are not sustainable. We will investigate that in next few days, how we can use the market situation to continue to move to get less of unsustainable financing because we have to focus to have 100% sustainable financing. Next slide, please. We have among the highest ratings from different sustainability agencies, MSCI, but Sustainalytics. We have a highest rating among the peers by Sustainalytics in our category with even a few years ago, we actually get this regional top-rated 2022, which is in the comparison with 4,000 comparable companies that Sustainalytics is rating. This is, of course, very important for us, and it's important, our people has incentive programs that are that are connected to sustainability delivery, and this is going to be one of our main focus also going forward. Trying to summarize and first, summarizing with few points on general term about SBB or Samhällsbyggnadsbolaget i Norden. It was someone that said that it's difficult to pronounce. I can, I think we can have a training on this. Samhällsbyggnadsbolaget i Norden. Samhällsbyggnadsbolaget i Norden. It's very good for you to remember the name. Samhällsbyggnadsbolaget i Norden or SBB to make it easy for you. SBB is social infrastructure champion in Europe. On this slide 13, you see some of our main strengths. Number 1, we have stable cash flow with large cash conversion backed by AAA countries. Number 2, we have strong growth fueled by unique investment platform combining property management with our three value add strategies, building rights, development, new production, investments in existing portfolio and value adding transactions. We have this long-term 100-year horizon. That is why we are proposing to increase dividend from 1 SEK per share to 1.32 SEK per share. Since 2017, we have increased dividend by 1,220%. This dividend will be if our annual general meeting so decide paid monthly. We are looking forward to that. Small investors in Sweden and Nordics are looking forward to that, and we will make sure to deliver on that. Rating. We have strong rating ratios, strong key ratios. We think that we have delivered all key ratios for BBB+. We will continue to deleverage in 2022. We are now in a very strong position in order to achieve BBB+, and that is our key priority. Because we do think that we do not need new acquisitions because we have strong organic growth. Now we will prioritize to use the cash that is coming from selling building rights to deleverage during 2022 in order to deliver our highest priority for 2022, which is BBB+ rating. Finally, our 100-year perspective, again, we focus on strategic sustainability because that is the only way going forward, and that is the core of our business model. That is the most important stuff that you heard in this, how to say, big summary. However, it is always best to let numbers talk. I will finish my presentation by giving you few numbers, focusing on continuing delivery on operations and cash conversion. Number one, SBB's rolling 12 months earnings capacity rose by 102% compared with the fourth quarter of 2020 and amounting to SEK 8.2 billion at the end of 2021. As of 31 December 2021, earnings capacity per series A and B ordinary share was SEK 5.65, an increase of 85% over the past year. For the 2022 full year, we forecast earnings of SEK 8.10 per share per series A and B ordinary share. Number two, SBB's income comprises secure cash flows from property management of social infrastructure in which residential and LSS housing constitute 54% of the property value and 50% of the rental income. Educational properties make up 28% of both property value and rental income. Our average lease term is 11 years, the longest of any major European property company. We supplement our uniquely secure property management with three revenue generating and value-adding strategies, building right development, new production and investments in existing portfolios, and value-adding transactions. The value-adding strategies strengthen SBB's earnings, helping generate value over time, but also delivering, for example, strong cash flow of SEK 10.6 billion in Q4 2021, helping to fund the must and need. This also contribute to earnings per series A and B ordinary share of SEK 17.35 and produce strong cash flow over the year. Number three, total disposal during full year 2021 was SEK 19.4 billion, with profit of SEK 3.1 billion, of which SEK 0.9 billion has been reported as realized value changes. The rest has been reported as unrealized value changes in the periods before closing. Number four, the interest coverage ratio continued to increase according to S&P definition of ICR, including 50% hybrid as the debt. That was 4.1 times. We also deliver strong EBITDA margin of 69.4%, demonstrating successful integration of recent acquisitions, achieving the anticipated synergies, and establishing an operational track record with a mature portfolio that is over-performing. Rental income increased 2021 like for like by 1.8% compared to the corresponding period last year, 1.5%, which is 1.45% over CPI. Net operating income increased even more like for like 4.7%. We are looking forward to achieve 3.5%-4% also in 2022. SBB is an amazing inflation hedge. Thank you very much. Please, Green. Okay. We will now go to Q&A. We have almost 1,000 people following the webcast and 100 people on the phone line. We understand that there will be a lot of questions both on the report and the short seller report published earlier this week. We ask you to keep your questions brief. We ask you to not repeat questions that have already been asked, and the Q&A session will go on for 45 minutes. With that said, operator, we can start with the Q&A from the phone line. Thank you. Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad. The first question is coming from Fredrik Stensved at ABG. Your line is now open. Thank you and good morning, Ilija. I want to start off with the earnings capacity. You have announced a couple of transactions lately from Wallenstam, Ystad, Halmstad, and Kalmar Municipality. Are any of these transactions included in the earnings capacity? Nothing is included. Okay, great. Some of the sort of municipality deals. Require a formal approval. What is the best guess on when that can happen and for this deal to be completed or closed? It is always the same, Fredrik. It is like 50/50. We are the only player that has been successful to complete deals with municipalities. We are never including those deals in our earnings capacity before they are closed. We look forward to close the majority of those deals. All right, one more question on the earnings capacity. I guess all your public properties have the standard CPI from first of January, and then the residential properties will have the indexation a few months later. What is included and what is not included in the earnings capacity in terms of CPI? Nothing is included on rent-regulated residentials. The only income that is taken into account. Only the income that was in place was included. No negotiations, no increase from negotiations from tenant association. Now you can see half of our portfolio is commercial residentials. Nothing of that is included. All right. The CPI for the public properties, that's included? That was. This is taken directly from economic system, so that is probably included. Thank you. Then I have a few detailed questions on the EPRA earnings that there was a discussion during the Q3 conference call. First of all, the adjustment you do for JV should that be interpreted as value changes and tax in JVs? And then secondly, I believe you started with this adjustment in 2021, so there's no adjustment for 2020, which makes the year-over-year figure appear relatively low. Is this correctly understood? That is correct. We have adjusted in 2021 for the value changes in joint venture impact. It's exactly so. Perfect. Final question. However here, Fredrik, it's important to see that we are building large cash flow generations from the joint ventures. We will probably have SEK 1.2 billion in 2022 coming from joint ventures. Perfect. Last, final question from me. I noted that there was 100 people on the telephone line. We have all seen, you know, increased credit spreads and significantly higher implied yields for long-term bonds across the whole real estate space in the last month or so. How should we think about this going forward for SBB? Should we expect sort of a shorter interest maturity in order to keep the low interest rate? Or should we expect SBB to stay at three, four, five years? The interesting point here, Fredrik, is that our longest bonds are the cheapest ones. We have fixed interest rate longer than four years. We will continue to have long maturities. That is important for us. I said before, we will also look to buy back some bonds that are not sustainable. We want to have 100% sustainable financing. Going forward, we will prioritize because we have strong position, and we will prioritize to buy back the unsustainable bonds. That's clear. Thank you. Thank you, Fredrik. The next question coming from Marcus Schmidt at Crispin Capital. Line is now open. Yeah. Yeah. Thanks for taking the questions. I have a couple. For the start, I cannot avoid this. Will you launch a special audit by independent auditors that will address the allegations by Viceroy, particularly the allegations that you boost property valuations by selling assets and funding the sale as a minority buyer at the same time? There were no remarks in the slides. How do you see this topic? Are there any to-dos on your side to increase further transparency or make changes to the structure, for instance, changing board composition or other measures? The first question. Thanks, Marcus. We will never let criminals affect our company. That's it. We have published answers on the short sales report this morning. That has been done together with external lawyer with Vinge. We are also filing to police and to financial authorities, so they will investigate the criminals. Concerning SBB's fair value, our properties are valued every quarter, Marcus, every quarter by international independent valuers, and those are fine. Also, if you, Marcus, if you are in real estate business, please also look at the report that we published that average implicit revaluation of large Swedish real estate companies has been sector average 10.3%. If you take into account our strong performance from property development and from selling properties and building rights, that means that our increase in the value is below the average. Okay. Yeah. There's another question I have, and that is what I'd like to understand better is on your maintenance expense in the P&L. But what I'm intersested in- Marcus, let me be very clear on that one. Yeah. We are taking all of maintenance through P&L. Okay. There is basically no maintenance CapEx investment need. So is that correct? No. All of maintenance is taken through P&L. Is there? That is. Yeah. Marcus, that is according to IFRS. Yeah. That is just. is there a maintenance investment need based on the agreements with your tenants? No. No. Okay. No. That is, Marcus, the only. This is important. I hope to see you in Sweden to visit us, so we can show. We actually. When we, for example, renovate all maintenance, for example, for our residentials including P&L. If the tenants move, then we have opportunity to negotiate with tenant association to get increased rent. If we do that, then we invest and upgrade the standard in apartment. For that, we use to double the yield. We will be happy to show you if you visit Sweden. Please visit us, and we will show you how this is working in place. Okay. One final question from me, and that is in terms of the strategy. I would like to know if you think it's maybe time to shift away from growing aggressively and focus more on cash retention. I think the final sentence you gave during your presentation implies this a little, because I see two issues here. When I look into other Viceroy cases, it's very difficult to rebuild investor trust. It takes basically one second to destroy a reputation, and it takes many years, if not forever, to rebuild this when I think about some German cases. This old real estate business model of leveraging the balance sheet to finance portfolio growth is probably more difficult going forward. The second issue I have is in that context, in an environment of potentially at least slightly rising interest rates, the real estate business model becomes a bit harder. So is it maybe not time to focus more on generating cash flows, in the best case, use excess cash flows to delever instead of focusing on growth or aggressive growth? Maybe you could comment. Yeah. I agree. Marcus, I agree with you. However, as I said before, criminals, they, the Swedish authorities will deal with those guys that have been considering to try to affect the response and- It's yeah. It's apart from the Viceroy stuff. It's also more related to the changing interest rate environment. I will answer your real question because those are important. The first one is that it's exactly as I said. We see opportunity now because we have grown. We have very strong cash flow conversion to consolidate and to deleverage in order to achieve BBB+. That is the board's main priority for 2022. At the same time, Marcus, it is important to understand that we are actually inflation hedged. We did in and I don't know if you are following other companies, but we did in 2021, 1.8% like to like, which is 145 basis points over inflation in 2020 in our weighted. So that is 145 basis points over inflation. On NOI, we did 4.7%, which is very strong. This year we are expecting 3.5%-4% increase in our both rental income like for like and NOI like for like. We see at the same time that it is a good opportunity for us to focus on deleveraging and to focus on achieving BBB+ rating. At the same time, we will have continued to have strong cash coming from our building rights that doesn't require large investment because as I said before, we delivered 467,000 legal force zoning plans in 2020. That is I don't know if you are specialized in real estate, Marcus, but that is amazing amount. To deliver those building rights is just our staff that is required. In this environment, I also commented before the issue of interest rates. We are expecting interest rates to rise, and we are ready to meet the challenge, but given that our income is inflation hedged, and given that our longest bonds are the ones with the lowest interest rate, we will use our firepower over the next few months to buy back unsustainable bonds. That is one of the issues that board is looking at, and we will probably come back to that in days to come. Because in those times when interest rates are increased, it is important to focus on sustainability. Okay. Thank you very much. Thank you. The next question is coming from Fredric Cyon at Carnegie. Please go ahead. Yes, two questions from me. Starting off with the earnings capacity, adjusting for the JVs, it's about SEK 300 million underlying for full year 2021. When I look at the earnings capacity, you state that the JVs will contribute to it by SEK 1.1 billion. Will SEK 1.1 billion be the contribution also under EPRA earnings, or they need any adjustment to get to the SEK 1.1 billion in the EPRA earnings impact? Yeah. That is one point. In earnings capacity, it's only cash. There are no valuation changes in earnings capacity, and that is for JVs. It's only full cash backing. That means that we will probably have SEK 1.1 billion-SEK 1.2 billion that will affect the EPRA earnings. Okay. One point one billion addition from to EPRA earnings from JVs. That's clear. The second question relates to project investments. In last year, you invested SEK 3.9 billion. That's almost 100% up versus 2020. It seems that like you're ramping up project investments also moving into 2022. Should we expect more than SEK 5 billion in investment into existing properties and new projects? No. As I said before, Fredric, we have a very good opportunity there to navigate by ourselves to refurbish or to increase the standard when we think that is best economically for us and for our tenants. You should not expect more than that. Okay. It's gonna be approximately SEK 4 billion in investment in 2022. Yeah. It's. It can be even lower. It is. We don't have any CapEx in that way that we are obliged to do anything. We can do that that is delivering strong cash flows and strong profits to our investors and to look at to compare to other opportunities. Okay. Thank you very much. Thank you. The next question is coming from Bertrand Hiltzon at Carlsquare. Yes. Hello. Very impressive everything, but I have a question on your remark on the entry on the German market. You said, and I have heard it before, that NOI yield is much lower than in Sweden and your yield requirements. Do you find it challenging to make your acquisitions there now given those key rates? Hi, Bertrand. Germany is very expensive right now. You can see in our numbers that we are delivering a NOI yield of 3.8%. In Germany you have to pay to get like 2.1%. That is in an environment where interest rates are increasing. That is not efficient investment for us. We have parked our. We have been building infrastructure, so we are ready when it's time. We do think that we have a great opportunity this year to focus to achieve BBB+ rating by deleveraging and to focus on organic growth. We will not go in Germany right now. Okay. It's too expensive. That is the only reason. We like Germany. It's a beautiful country, great people. I mean, we like residentials in Germany. It's beautiful asset class. I still argue that Swedish rent-regulated residentials and our community-based properties are the lowest risk asset classes in Europe. Second to us are German residentials. We like the space, but it's very expensive. That's it. The next question is coming from Clark McPherson at Clearance Capital. Hi. Good morning. A couple questions from me. First of all, I see on the balance sheet, specifically, the increased use of commercial paper from Q3 to year-end. I wonder what your strategy is for this, whether you intend to try and turn this out and reduce the reliance on that, and relate- Usually I- Sorry, go. Sorry. If I fix that and then you continue. Sorry for the interruption. That usually when we acquire the new companies in order to be very able to restructure if it's needed. Our focus is to continue to prolong our debt maturity. That is just part of our dealing with creating a position to get in new acquisition. Okay. Understood. Related to that, I see that you had the bank line coverage, and I see that you report unutilized bank lines of SEK 11.87 billion. I wonder if you could give us some granularity on what proportion of those bank lines, if any, are maturing within the next 12 months. Nothing is maturing within 12 months. I don't know how good you know the Swedish bank market. In Sweden, banks are usually working with 3 years horizon and this stuff is rolling in that way in order to make sure that always those are longer than 12 months and have period of 3. So this is the standard that how we deal with this in Sweden. Sure. Okay. That's it. On page 27 of the report, I see there was a mention of the use of total return swaps. I'm just wondering what that relates to specifically. Is that part of the, is it part of the acquisition of shares and potential targets? Just wondering if we could get some more clarity on that. Can you please. Okay. I didn't understand the question. It's probably my English is not. Please just be specific because I have difficulty to see how this is connected to the acquisition. Can you please just repeat the question? Yeah. On page 27 of the report, you note a booking for total return swaps. I'm just wondering what they relate to and how significant your use of TRS is. Sorry, it's just page 27 I think it is. It's not significant. It has been used among others in roles which acquiring Amasten. That is for that one. Right. Okay. Then last question, you mentioned that you could take the current market opportunities to refinance debt that's not sustainable. Would that include or could that include your hybrids? I know some of them were only recently issued in 2020, 2021, but I'm wondering if that could be a potential target. Hybrids, we like the hybrids and we are delivering good return to our investors. Hybrids are permanent part of our equity structure. Unsecured bonds, then I think when I said that, then I mean it means senior bonds. Hybrids are long-term permanent part of our equity structure. Okay, great. That's clear. Thanks for that. Thank you, Clark. The next question is coming from Patrick Noel at Aviva Investors France. Please go ahead. Hello. I have two question. Firstly, about your deleveraging. I see you deleveraged a lot in 2020, but I see also that in 2021, it looks that there is, at the contrary, you're releveraging because your loan to value increased from 35% to 30% to 40. From 35 to 40%. Can you give me more colors about that? Because it puzzled me because you said you were trying to deleverage. Yeah, thanks. Thanks for the question. That is of course the part of that is probably affected that we had even a larger cash position at the end of 2020. At the end of 2021, we had a cash position of almost SEK 10 billion. At the end of 2021, we had cash position of almost SEK 10 billion and have larger balance sheet. Those SEK 10 billion are having less effect than we had much stronger cash position at the end of 2020. I should argue that we in 2021 have retained our strong position, and we are continuing to deleverage in 2022. Okay. What is the amount of your real estate portfolio? Do you give this KPI? It is all our properties that are not rent regulated residentials are having CPI indexation, but also rent regulated residentials. It is utility cost system, you know. So you have to negotiate with tenant association. So you usually get- I mean, no, my question is simple. It's also could you give me the valuation of your portfolio, gross asset value, if you prefer? Our property value was SEK 149 billion. With the valuation yield over 4% and with the delivered yield or NOI yield of 3.8%. Okay. On top of that. Thank you. On top of that, we control joint ventures with SEK 90 billion in value and our share of that value. That is not fully, of course, not fully in our accounts because in our accounts it's booked at what we have paid for those. It is SEK 35 billion. You can say that we own the property for SEK 150 billion, control additional SEK 90 billion, and of those SEK 35 billion are those that are SBB's share, so that should be in total SEK 185 billion. Okay. Thank you. Last question is about the Viceroy report. Let's say that Viceroy report is totally wrong. Even though- We cannot say anything about that. We have published all answers. I mean- I'm afraid that you could have financing problems like we can see for Adler with the banks and the financial market, and you could be obliged to sell some assets very quickly. You should not be afraid that those shorters have tried to make you afraid. They have tried to take your money by shorting the bonds. Bonds are recovering this morning and the criminals will be dealt with by Swedish authorities. Our answers, you can find everything in our report that has been written by an external law firm that has been there, that has been doing that. We also find the criminal. We have also filed the note for criminal investigation that will be sent by our board this morning. Criminals will be dealt with by Swedish authorities. We focus on our business to deliver to you the best return if you invest in our instruments. Okay. Thank you. Thank you. The next question is coming from Axel Stenbeck. Please go ahead. Hi, Ilija. I noticed that if you look at your property value by segment, residential has become much larger in the last year. How do you see the residential side playing for SBB going forward? We have strong position in residential markets, particularly in Stockholm. I don't know if you follow, but our daughter company, Sveafastigheter, has won the largest share of these municipal competitions last four years to get space to build new residentials, rent regulated residentials in Stockholm. We have a very strong position to continue organically to grow our residential portfolio. Because as I said before, in 2022, we are focusing on deleveraging and organic growth, and that means that the residentials probably will be large part of our value at the end of 2022. At the end of 2022, how many% do you see residential make up your total property value? Right now we have 54% of property value that is rent regulated and publicly funded residentials. I do think that we'll be probably past 60% at the end of 2022, to be at 70% in 2023. Great. Thank you. Thank you. Next question is coming from Tim Mortensen at DNB Markets. Hi, this is Simon from DNB. Just a few questions on hedging of currency. In the report you state that you use natural hedging, but in the period you also notice you have taken a charge of SEK 175 million attributed to translation difference of loans in euros. Just to help us, how are the company actually hedging against currency volatility? It is very easy, Simon. You can think 2020 and 2021. In 2020 we had profit of SEK 158 million. In 2021 we had loss on this translation gains of SEK 175 million. That is insignificant because we are a long-term investor and we are not speculating. We have assets in both Denmark, Finland, and Norway. We use natural hedging, and then we use cross-currency swaps and other derivatives to hedge our currency exposure. Okay. Thank you. Just also on interest rate hedging. In the Q3 report you had 8% of variable interest rate exposure. This seems to have grown to 26% in the Q4 report. At the same time we also noticed that the duration period is now 3.6 years versus 4.2 in the Q3 report. Lower hedging and shorter duration. Can you please help us a bit understand the profile of the durations of the interest rate hedges, especially given that market interest rates seems to be on the rise? It's very easy, Simon. We published all of our largest loans are European bonds, and those are at fixed interest rates. You can find all of those in reports. The reason why this is because the other companies are not hedging. That is typical Nordic situation because we have been the ones that have been most focusing on hedging. We bought Offentliga Hus. They have bonds that have been expensive for us to buy back. Probably we will look at those in dates, and they were not hedged. We had also a master with a very low hedge, and then we also used to clean up some positions at the end of the year. That is just traditional. We are very focused to prolong our debt maturity and our fixed interest rate. Thank you. All my other question has been asked by other people. Perfect. Thank you. Great. We will stop the questions from the phone line there. We have a few email questions. We'll try to select things that we have not been raised so far. We'll take them quickly, and then we'll wrap this up. Where have you funded acquisitions with B shares? Is the rent payable contractually linked to your capacity to pay dividends? That is, our B shares are publicly traded, so everyone can buy our B shares. Can you confirm that you have absolutely no contractual obligations to maintain refurbished properties in your lease agreement? Obviously, you will maintain according to your own standard, but I'm asking for obligations vis-à-vis tenants. We don't have any obligations to anyone. Our long lease is actually that tenants have obligation to maintain properties in the standard that is good. If they leave that we can rent out to other people to other businesses. Do you have a timeline in mind for an upgrade to BBB from S&P and Fitch, considering the ratings have a positive outlook? And do you feel that the current market volatility undermines your access to finance and hence a potential upgrade? We have good access to finance, and we are looking forward to be upgraded. This is an additional year where we are delivering on all thresholds. Secondly, could you give us a bit more information on your acquisition strategy for 2022 and ahead in order to achieve your targeted portfolio of SEK 300 billion? We don't need to do new acquisitions in 2022 in order to achieve our target for 2026. 2022 is going to be a year where we continue to deleverage and focus on BBB+ rating. In terms of the significant increase in investments in JVs and associated companies, should we expect this number to further increase or have you a cap on such investments? We will not have any caps, but just in terms of numbers, we have a balance sheet of SEK 295 billion. Our exposure to joint ventures is relatively low, and the main exposure to joint ventures is through the properties that are operational. It is cash flow generating properties. You always refer to safe, sound, and stable cash flow. From what I can tell, both your operating and free cash flow are consistently inconsistent on both a quarterly and yearly basis. Could you please educate me what I'm missing, not understanding properly regarding your cash flow? It is very easy. You can just call our CFO. We are delivering all of the numbers how they are, and it is according to IFRS. So you can see that we have a large cash conversion, otherwise we could not use that cash to invest in the new properties and continue to build our strong and profitable growth. Great. That was that. Just as a reminder before wrapping this up, we have received a lot of questions on the short-seller report published earlier this week. We at around ten this morning published a full response to that report, going through it in detail. You will find that statement with all information relating to it on the website. It has been published as a press release, and you will find it in the media section under press releases. With that being said, Ilija, you can maybe provide a few concluding remarks. Thank you, Adrian. Our message is very clear, and that is summarized in slide 13 in presentation. We have stable cash flows with large cash conversion. We have strong organic growth. We will increase the dividend if shareholders will to 1.32 SEK per share to be paid monthly. In 2022, we have a strong focus on deleveraging and achieving BBB+ rating. We will also look to buy back some unsustainable bonds in the days and weeks to come. Thank you very much, and thank you for listening.