Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AUM increased slightly compared to the last quarter despite currency headwinds, indicating resilience in the Investment Management business.
- Strong balance sheet and liquidity position, enabling opportunistic investments and continued project investments.
- Successful cost efficiency measures, reducing costs by SEK55 million year-over-year.
- Positive investor feedback on the new European Living Development strategy, targeting a 15% return.
- Increased activity and positive EBIT in Corporate Finance outside of France, showing regional strength.
Negative Points
- Net revenue decreased by SEK108 million or 24% due to lower transaction volumes and absence of performance-related fees.
- Continued low transaction volumes and capital inflows in the European real estate market.
- Significant FX headwinds, with a negative SEK24 million impact due to currency fluctuations.
- Corporate Finance segment remains weak, particularly in France, with transaction volumes down by almost 60% compared to 2022.
- Challenges in raising new funds, with the time to raise new funds globally having almost doubled in the last three years.
Q & A Highlights
Q: I think you mentioned last quarter you expected new Asset Management mandates to be the main source of growth during 2024. Does that mean that we can expect this to continue to contribute positively to AUM in Q3 and Q4 as well?
A: Well, we sure hope so. Every asset management company is working actively to grow their mandates. There's an increased need for active asset management across the entire real estate industry. We've seen significant growth in our Finnish operations, adding several hundred million euros of AUM in complex mandates. We are also working on in-sourcing asset management to increase our fees and decrease fee leakage to external parties.
Q: On Kaktus, what has the interest been like from investors so far?
A: It's a great asset, fully let with all commercial leases in place. The interest is high, but core investors have been cautious. We've had over a dozen active dialogues with large investors. With recent interest rate cuts and swap rates in Denmark down, the asset is becoming more attractive. We are not in a rush to execute at the wrong price point.
Q: Do you think potential buyers will be more keen to bid up the price if you wait for more rate cuts to materialize?
A: Short answer, yes. A fully stabilized asset in a lower interest rate environment is likely to fetch a better price. We have to balance this against our balance sheet exposure and cost of debt. It's a fine balancing act, but we feel confident about the asset's prospects.
Q: If Kaktus is still on the balance sheet when the bond matures, would the only option be to refinance the bond?
A: We are exploring a number of options, including preparing for a green bond framework to provide more flexibility. We have strong liquidity and our outstanding bond trades at a material premium, so we are in a good position.
Q: Regarding the CatWave transaction, could we expect the same amount of profit for the remaining part in 2025?
A: The amount of SEK8 million was based on the multiple of the EBIT in 2023. The following transaction next year will also be based on the 2024 EBIT numbers and the associated multiple.
Q: Can you quantify any cost synergies from the merger of Catella Residential Investment Management and Catella Real Estate AG?
A: We cannot disclose specific figures yet as the merger will be fully executed from January 1. However, we expect ongoing efficiencies in operations, not just on the cost side but also on the revenue-generating side.
Q: Are there any particular regions where you see more attractive opportunities in Principal Investments?
A: Generally, the UK is first in corrections, followed by the Nordics and Northern Europe. However, there are attractive opportunities across all markets we operate in, and we are looking at investments in 12 countries.
Q: How should we think about the development of the Corporate Finance segment given the expected market recovery in 2025?
A: We expect a slow recovery with some improvement in Q3 and Q4. The pipeline is strong, and we anticipate a rush in the fourth quarter. However, a real market recovery might take a few more months.
Q: What's the potential size of the green bond framework, and what could the interest rate profile look like?
A: We are preparing the green bond framework and will provide full communication when ready. We cannot disclose specific details at this time.
Q: What are your most important activities to ensure substantial inflows into funds?
A: Continuous capital raising efforts across Europe and delivering consistent strong performance. Investment activities and completing development projects that will be added into AUM are also critical.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
