Welcome to Samhällsbyggnadsbolaget Q2 report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speaker, CEO, Leiv Synnes. Please go ahead. Good morning, everyone. This is Leiv Synnes, CEO of SBB. I've been here for a little bit more than 1 month. Before I start with the company presentation, I want to share some words about me. I've been in the real estate industry for two to three decades, first in the banking side, and then on the asset side. I worked with a peer called Akelius for two decades, where I worked with the property transaction and financing, controlling, and legal, and tax. I think three things to point out in this presentation. The first one is the excellent pool of assets that SBB has. The revenues grows with close to 10%, like-for-like, and the net operating income with close to 11%. We have a very strong operational track record, and also the occupancy rates increases, and the surplus ratio increases. We are in a strong operational trend in the company. The second part is the to discuss the strategic overview that the company has in plan to do. The aim with that is to strengthen the company's financial position, to improve the liquidity, and to improve the leverage, and take the journey back to investment-grade rating again. The highlights for the third quarter. Financial stability and liquidity are a top priority. We've been downgraded to sub-investment grade, and now we have embarked on the journey back to investment-grade again. We focus on the core business, which is strong residential assets and public properties to the community. As I mentioned, we have a very strong performance at the moment from the assets, and we have a mainly long-term debt. The assets contributes of SEK 131 billion, and the loan to value is 52%, and the vacancy rate is 3.7 years. We are well inside of our covenants with the loan to value of 52%, interest coverage of 2.9. The yield on the properties is currently 4.5%. Residential constitutes 1/4 of the company and the community service properties, 3/4. We have launched our strategic overview, and that includes to sell the whole company, parts of the company, or single assets. We have presented to the market some transactions, and we have also conducted some transactions, and we have also other processes in parallel. We are sure that we will be able to do some transaction strengthening the company. In the second quarter, we did some measurement to clean up the company a bit to make the company easier to understand. We have sold shares in GM. We have sold properties in municipalities, and we have divested shares in Heba. We have also started discussions with Brookfield regarding the 51% stake SBB has in the EduCo, which is properties for education. We have signed a letter of intent for approximately SEK 3 billion to sell to the tenants. We, as I mentioned, we have also other processes in parallel, both regarding new financing solutions and also investments. On the right hand on the page, you see the cash sources and cash uses. It's obvious that we needed to strengthen the liquidity. Some of the loan prolongations that we aimed for during the second quarter has due to the situation being moved, and we hope to make them in the third quarter instead, in order to improve the balance between cash sources and cash uses. Also worth mentioning that today, SBB lends SEK 14.5 billion to EduCo. One part of the discussions with Brookfield is to get that current intragroup loan prepaid, which will strengthen the company's financial situation quite substantially. If you go back and look a little bit on the core of the company, the property operations, we see rather strong figures at the moment. The rental income, like-for-like, as I mentioned earlier, is close to 10%, and the net operating income is close to 11%. Today, we actually don't see any downside risk on the revenues. The rent level on the residential part is below market, and we have long-term contracts with mainly public tenants, municipalities, and so on. If we look on the occupancy, it improved to 96.3%, a strong performance. We see an increasing demand for the spaces we have, and this will result in higher revenues in the quarters to come. We also see that the yield on the properties increases as a result of growing revenues and also, of course, somewhat lower property prices. I touched upon this a little bit, the market outlook for the main segments. The community service properties constitute 73% of the assets. On average, we have 11 years leases, and we have strong and secure tenants. We have very limited losses on the rents, and we have also indexation. And it's likely that we will continue to increase rents in the fourth quarter with the new indexation. The best case, at the moment, is that the CPI indexation will be 6%, meaning 6% growth in revenues automatically for the community service properties. If you look on the residential properties, it's 24% of the assets. We have strong demand for housing, we have low vacancy and low turnover. We have also, we are also constructing new properties. On the remaining volume of investments, we will get a 14% return. If we divide the net operating income from the properties with the remaining investments. At the moment, we are very reluctant to start up new construction work. Mainly, we will see a growth in revenues, and not so much growth in balance sheets when it come to residential properties. If we look on the consolidated income statement, if you look on the income for the quarter, we have a negative development. That is mainly due to that we have divested assets. As I mentioned before, the like-for-like portfolio performs very well. We have also conducted external valuations of all our properties, and the result is that there is a negative value growth quarter to quarter. For the first half of this year, we have a negative change in value of close to SEK 6 billion. We have also chosen to divest and clean up the company, so we have sold associated companies and joint venture, and that have created a loss of SEK 3.3 billion. We have also translation losses, mainly due to the fact that we have more loans in euro compared to the assets in euro. All in all, we make a loss for the period for close to SEK 10 billion. As I mentioned in the slide earlier, the loan to value is 52%. The secured loan-to-value is 19%, and the interest coverage ratio is 2.9. We are far away from the covenants we have in the loan agreements. We're not happy of these figures. We would like to improve them. We intend to strengthen the balance sheet and also to reduce debt in order to improve the key figures and take us back to investment-grade rating. SBB is a company that does things. We have acted actively from the beginning when the company was started, and we have also acted the previous year. If you look one year back until now, we have decreased the debt with close to SEK 18 billion. SBB has been very good at reducing debt. We have done it by, partly by divesting assets, and partly by raising equity through subsidiaries. One main transaction was the sale of 49% of the educational portfolio to Brookfield. The ambition is to continue to be active in order to reduce debt. It's easier to reduce debt when you have good assets. On average, the interest rate maturity is 3.3 years, and close to 60% of the debt, of the interest rate debt is hedged, is maturing after three years. If we make the company a little bit smaller by divesting or raising equity through subsidiaries, we intend to mainly repay short-term debt in order to reduce the effect of the higher interest rate environment. We will keep the low-yielding debt, and we will have a profitable company in the years to come. To summarize, financial stability and liquidity are top priorities for the group. We focus on the core business. We have very well performing assets, and we will make sure that this continue to be the case. We will try to improve the net operating income even further and increase the occupancy rate. We will try to have a good way path to back to the investment-grade rating. Okay, thank you, Leiv. We will now take some questions. We are, however, a bit limited on time, so we will only be able to take a few. I see that we have a few questions. I urge you to try to limit your questions to only one per person, if possible. Operator, do we have any questions from the call? If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Michael Johansson from Arctic Securities. Please go ahead. Good morning. Thank you for the presentation and for taking my questions. I'll try to limit myself to two questions, if it's okay. To start off with, the large negative value revision of SEK 6 billion, was part of that taken to reflect levels in ongoing discussions? I think the valuation is done by external firms. They take a picture on the market as a whole, and not in individual discussions we're currently having. Okay, understood. Thank you. The restricted cash is now reported at zero, compared to SEK 1 billion as of Q1 2023. Can you comment on how this has been resolved? As to be in the past, I've had the financial solutions, and for those, we have pledged cash. We have cleaned up the company a bit and deleted those arrangements, so there is no need to pledge cash anymore. All right. Thank you, very much. If I may just add one quick question as well. How much do you need to divest for to feel comfortable with the refinancing risk? That's a good question. We are currently doing a strategic overview, and one part of that is selling assets, but we can also raise equity through subsidiaries. We have done it with Brookfield. We took in a partner for our educational properties, and we can do the same with other parts of the group. It's we are not sure yet if the whole recovery scenario from a likely credit perspective, needs to come from divestment. It can also be that we take on partners that will help us to strengthen the company. All right. Thank you. That's all for me. The next question comes from Jonathan Kownator from GS. Please go ahead. Good morning, thank you for taking my question. My first question would be, you're referencing in your report that a new equity can be found by means of capital net from stock market. Just wanted to understand better what that reference is. You've talked about raising equity issues to subsidiaries. Will you consider also raising straight equity from the stock market? I have another one as well on the creative. Thanks. Yes, we have in the earlier quarters, reflected on the potential IPO of Sveafastigheter, which is the residential part of the SBB group. Should that happen later this year, the company will receive equity. Okay. Thanks. Very clear. Just to come back to slide three, I think you're showing a gap up to SEK 8 billion of liquidity over the next 12 months, if I understand correctly. What are the options from here? Is it mainly try and come to a deal with Brookfield, including the repayment of that SEK 14.5 billion loan? I mean, how are you thinking about equity rate? You said also something about equity subsidiaries. What part of the portfolio would be an equivalent to the education business that could be a standalone entity? Thank you. A good question there. If I remember out of my head here, we have EUR 1.6 billion-EUR 1.8 billion of elder care homes. If you add other publicly financed homes, it's close to EUR 2 billion. That's the portfolio. If we add also other kind of public financing, financed properties, it's up to EUR 4 billion, and that could be a subsidiary. If we put together the, all the young ventures and collaborations we have in the residential space, it would be around EUR 4.5 billion in the, in that asset. We have two large entities that could attract money from the capital market. Then, of course, we still own 51% of the educational properties. Okay, very clear. Last question for me, if I may. You've just announced a recent disposal of assets. Can you comment on where this is good value? Please. Thank you. Yes. First, it's a strength, I would say, in this market, to have assets that grow revenue so rapidly and will limited downside risk. Of course, we have strong tenants. It's the municipalities and other organizations. They are not equally affected on the current market conditions, I would say. We understand that they look favorable upon the potential to buy some assets. We at the moment, we review all the offers we get from those kind of tenants. A part of those offers we have signed a letter of intent with. Sorry, just coming back to the question. The recent properties you've already sold to municipalities, I think, you know, post close perhaps, but are you able to comment on those sold properties already? Where was the pricing versus latest value? Yes, the pricing was a bit lower than the latest fair value in the books. It was fast process with the municipality that preferred to own the buildings. Mm-hmm. The yield when we sold it was around 4.1%. That was the yield on the books. Are you able to comment on? Yield. that you achieved, on the table? Yeah, yield on actual costs. I apologize. I didn't get the answer. Yeah. If you divide the net operating income from the properties with the price, you sold them at, then you get 4.1%. 4.1% was the disposal yield? Yeah. All right. What was the book value yield? Sorry. We need to take on the other questions. We are a bit limited on time, but please feel free to email to the IR email, and we will start to answer more of your questions. Thank you. Thank you so much. The next question comes from Ash Thomas-Watson from Polus Capital. Please go ahead. Question. In the cash flow statement for the quarter, there is a large outflow in other non-current receivables of about SEK 1.2 billion. Would you be able to explain what that relates to, please? Good and detailed question. I need to check it out there. What did you say now, Ian? Was it the change in other long-term assets? It was the change in other non-current receivables, so in the investment activity section of the cash flow statement. I see -SEK 1.172 billion. My guess was that relates to the transaction which eliminated the pledged cash, but we just love some insight. Yes. We did one of those transactions with that size, and it is active. That's the item on that row. But it's correct that we have done such transactions. We have re-released the pledged assets instead, lent money to another company Yeah. Understood. Understood. Thank you. Look, I know you may not be able to comment on this, but are you able to give us any color around the possible valuations you're discussing for the Brookfield transaction? Good question there. No, at the moment, we would not like to publicly speak about that, those discussions, and we would like to come back to you on that topic when we have done the transaction, if we do the transaction. Understood. Okay. Well, thank you for taking my questions. this will be- The next question comes from Michael Levin, from Ericsson. Please go ahead. For a presentation late. I have one question relating to the cash flow. Previously, you stated that you have sufficient cash flows from operations to pay and even increase dividend each year, but neither the last two quarters or last 12 months have cash flow from operations before changes in working capital that are higher than paid dividends. A, what is basically the explanation to the very weak operating cash flows the last four quarters? B, if you can say something regarding your view on the ability to pay dividends going forward. Thanks. Yes. I think I'm a bit more conservative on this topic. My first aim would be to strengthen the liquidity position and also the balance sheet in general of the company, and be somewhat reluctant to pay a dividend before the financials looks more stable. That's my view. I don't see any dividend in the foreseeable future, meaning one to two years. Depends also how fast this take overview goes. I also think that we should work and continue to work with improving the cash flow in the company. Not only the operating cash flow, but also the investments to... That are we currently working with. We are finishing the project we have started, and we are very cautious of starting new projects. We will be in a positive trend in reducing the investments in the group, and bringing up the cash flow in general. Okay. Thank you. Okay. Thank you, everyone. This is unfortunately all that we have time for during this call. Please, if you have further questions, please address them to our ir@sbbnorden.se, our email, and we will make sure to answer all your questions. Thank you so much for calling in today.