Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fastighets AB Balder (BALDF, Financial) reported an 8% increase in rental income and NOI compared to the same quarter last year.
- The company's occupancy rate remains high at 96%, indicating strong demand for its properties.
- Net debt to assets improved slightly to 49.8%, showing progress in deleveraging efforts.
- The company has a diversified portfolio across Nordic countries and property categories, reducing risk exposure.
- Funding conditions have improved, with new finance contracts at the same level as average margins in all loans.
Negative Points
- Profit from property management decreased due to higher interest rate costs.
- The company has been slow in starting new projects, leading to a decrease in investments.
- The Finnish residential market remains soft, with only slight improvements expected next year.
- The company is currently in a holding pattern for expansion, focusing more on debt amortization.
- There is uncertainty regarding the timing of market recovery and rental growth, particularly in Helsinki.
Q & A Highlights
Q: How long do you think you will stay in this sort of holding back on expansion mode? When can we see you pushing the accelerator again?
A: We are directing more cash flows to debt amortization due to current valuation yields. Once net operating income translates into value increases, we can adopt a more growth-oriented capital allocation. This could be a few quarters away, but it's uncertain.
Q: When do you expect to get back in the Eurobond market issuing new bonds?
A: We don't need to issue in the Eurobond market for a long time due to our existing outstanding amounts. However, we will likely focus on the SEK market this year and consider the Eurobond market towards the end of the year or next year.
Q: Could you talk about the investment markets and any scope for asset rotation or disposals?
A: We don't feel the need for disposals. We will focus on completing projects and improving what we have. Debt amortization is driven by retaining cash flow, and the combination of debt amortization and growing NOI is quite effective.
Q: What are your expectations for the Helsinki residential market, given its current softness?
A: We expect improvements in 2025. Currently, we have slightly lower vacancy and better NOI than last year. The market should stabilize as completions decrease and new construction starts remain low.
Q: Could you highlight the dividends from joint ventures and any potential inflow in the second half of 2024?
A: Dividends from joint ventures were SEK650 million in the quarter. We don't expect the same big inflow in the second half of the year, but the overall status of joint ventures is similar to Balder, with completed projects generating cash flow.
Q: If you were to increase your investment base in the second half of this year, where do you see the best risk-reward?
A: We would look for opportunities in all our markets. There might be value in Finland and Norway, while Copenhagen remains competitive. We have a lot of building rights, so we don't need to buy more.
Q: Any changes in tenant demand for your office portfolio due to hybrid work trends?
A: We haven't seen any big changes in tenant demand. The office market in Stockholm and Gothenburg remains stable, with no significant impact from hybrid work trends.
Q: Could you elaborate on the rental increase you see in the Finnish residential market for this year and next year?
A: This year, the like-for-like rental increase in Finland is around 1-2%. We expect a better rental market in 2025 as completions decrease and urbanization trends continue.
Q: When do you think it's the right time to start new construction projects?
A: We don't plan to start any new projects this year or next year. We might consider some condominium projects if the market remains stable, but we have the flexibility to wait.
Q: How does your new funding profile match with S&P's concerns about liquidity and debt maturities?
A: Our liquidity and debt profile have improved significantly. We fulfill all criteria, and it's a matter of time before S&P removes the negative outlook.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
