Samhallsbyggnadsbolaget I Norden Ab Class B · OMXSTO:SBB_B
Samhallsbyggnadsbolaget I Norden Ab Class B — Investor Day (December 2018)
67 slides from Samhallsbyggnadsbolaget I Norden Ab Class B's investor day presentation, Dec 4, 2018
Slide 1: Today's presenters
TODAY’S PRESENTERS 12:30-13:00 14:10-14:30 Ilija Batljan & Oscar Lekander Krister Karlsson Founder & CEO Hea d of Business Development Deputy CEO, Real Estate Manager 13:00-13:40 14:30-14:50 Lars Thagesson & Jonny Göthberg Eva-Lotta Stridh & Rosel Ragnarsson Deputy CEO, COO Hea d of Property Ma nage
Slide 2: Strategy and new operational targets
Oslo, Midtbygget (DNB HQ) STRATEGY AND NEW OPERATIONAL TARGETS
Slide 3: Strategy going forward
STRATEGY GOING FORWARD 1 ▪ Continue to focus on community services properties, our core assets. 2 ▪ Unlock value through renovations and optimization of existing properties. 3 ▪ Strategic property development to significantly contribute to earnings over a business cycle. 4 ▪ Increase our efforts wit
Slide 4: New goals
NEW GOALS Objective The Company's objective is to acquire, manage and develop properties that will create a high risk-adjusted return for its shareholders Financial targets Operational targets Dividend policy3) NAV per share1) Income from building rights Growth target Property value SEK 40bn by >12%
Slide 5: Management
MANAGEMENT Management team Ilija Batljan – CEO Oscar Lekander – Head of Business Development Previous experience: Deputy CEO and Head of Business Development at Rikshem AB 2011 – 2016 21 Previous experience: Transaction Manager at Rikshem AB, Analyst NAI Svefa Education: MSc Real Estate Investment a
Slide 6: Board of Directors
BOARD OF DIRECTORS Board of Directors Lennart Schuss – Chairman of the board Hans Runesten – Member of the board Experience: Founding partner of Catella Corporate Finance Sweden Experience: Former CEO and current Chairman of Effnetplattformen AB Other significant assignments: Chairman of Gimmel Fast
Slide 7: Company overview
COMPANY OVERVIEW Samhällsbyggnadsbolaget i Norden AB (SBB) in brief Property value per region: 65% in regions of big Nordic cities ▪ SBB was founded in March 2016 by Ilija Batljan who previously served as deputy CEO of Rikshem and has a long and successful background in the Oslo community services r
Slide 8: Low-risk community service and residential properties complemented by residential development potential
LOW-RISK COMMUNITY SERVICE AND RESIDENTIAL PROPERTIES COMPLEMENTED BY RESIDENTIAL DEVELOPMENT POTENTIAL Community services properties Residential properties Other / building rights development SEK 15.4bn SEK 7.5bn 9% SEK 2.2bn 61% 30% Includes schools, elderly care, LSS-housing and Mainly constitute
Slide 9: Growth overview
GROWTH OVERVIEW Overview Market value per segment Total market value SEKm SEKm 10,00% 30 000 45 000 9,00% 25 637 25 122 40 000 23 816 25 000 40 000 8,00% 23 001 22 052 35 000 21 143 Growth target 7,00% 30 000 20 000 6,00% 16 892 25 000 2 180 2 559 5,00% 15 000 20 000 7 505 5 859 4,00% 15 000 10 000
Slide 10: Long term reliable partner for municipalities creates stable income
LONG TERM RELIABLE PARTNER FOR MUNICIPALITIES CREATES STABLE INCOME Income overview1) ▪ Long history of actively working with several History of municipalities in Sweden Classification Rental Income, SEKm % of Total acquiring from municipalities ▪ First transaction completed only 6 months after Resi
Slide 11: Earnings capacity property portfolio as of 30 September 2018
EARNINGS CAPACITY PROPERTY PORTFOLIO AS OF 30 SEPTEMBER 2018 Current earnings capability for the Group for 12 months SEKm Surplus ratio: 70% 1 600 1 400 498 1 200 27 42 60 1 000 382 800 1 637 600 1 139 400 766 200 0 Rental income Property costs NOI Central Profit from JV Financial Financial Operatio
Slide 12: Underlying megatrends support continued growth
UNDERLYING MEGATRENDS SUPPORT CONTINUED GROWTH Demographic change Sustainability and energy efficiency Urbanization | 12
Slide 13: In summary
IN SUMMARY 1 ▪ Sustainable and predictable cash flow remain the foundation of our activities. 2 ▪ Experienced development and transaction teams with strong track records. 3 ▪ Obtaining investment grade rating and lowering financing costs are continued focus areas. ▪ Significant potential from renova
Slide 14: Properties for the most important community service functions
Oslo, Midtbygget (DNB HQ) PROPERTIES FOR THE MOST IMPORTANT COMMUNITY SERVICE FUNCTIONS
Slide 15: What is a community service property?
WHAT IS A COMMUNITY SERVICE PROPERTY? Definition of a community service property At least 75 percent of the rental income shall be from directly or indirectly tax-funded tenants | 15
Slide 16: Properties for the most important community service functions
PROPERTIES FOR THE MOST IMPORTANT COMMUNITY SERVICE FUNCTIONS Community services properties Residential properties Other / building rights development SEK 15.4bn SEK 7.5bn 9% SEK 2.2bn 61% 30% Includes schools, elderly care, LSS-housing and Mainly constitutes of rental apartments in Commercial prope
Slide 17: Community service properties – long contracts with stable counterparties
COMMUNITY SERVICE PROPERTIES – LONG CONTRACTS WITH STABLE COUNTERPARTIES SEK 15.4bn 609,567 sqm SEK 942m SEK 772m 7 years 97% 5.1% portfolio value Lettable area Rental income1) NOI 1) WAULT Occupancy rate Yield2) Distribution by region ▪ High predictability generated from Tampere Helsinki stable p
Slide 18: Community service properties – lease maturity structure
COMMUNITY SERVICE PROPERTIES – LONG CONTRACTS WITH STABLE COUNTERPARTIES Lease maturity structure 30% 28% 7 years “SBB's properties enjoy a long average lease Weighted term of seven years, and the majority of Average Lease 25% community services tenants renew their Maturity leases. For example, abou
Slide 19: Segment breakdown – community service properties
SEGMENT BREAKDOWN – COMMUNITY SERVICE PROPERTIES Breakdown Average rental income, SEK per sq.m. Classification SEKm of total rental income Elderly care 136 8.3% LSS (Group Housing) 152 9.3% Education 125 7.6% Health care 81 5.0% Municipality houses and ministry 128 7.8% Police and justice 17 1.0% Of
Slide 20: Community service – selected properties
COMMUNITY SERVICE – SELECTED PROPERTIES Oslo, Gullhaug Torg 4 Borlänge, Bordet 1 Borlänge, Spännaren 10 Tena nt is the Norwegian ministry of justice Tena nt is Kunskapsskolan Borl änge town hall, tenant is Borlänge municipality Karlshamn, Lasarettet 8 Sundsvall, Hermes 4 Borgholm, Öland 4 (LSS) Tena
Slide 21: Community service properties in Sweden
COMMUNITY SERVICE PROPERTIES IN SWEDEN SEKbn Facts 1 200 ▪ According to Boverket private companies currently accounts for 35 percent 1 000 1 000 200 800 of all new elderly care homes 800 ▪ Eight out of ten community service properties are today in public ownership. 800 The proportion is lower if new
Slide 22: Demographic changes
DEMOGRAPHIC CHANGES Average cost per person of different ages1) Population changes, age 80+ years compared to total population 200 190 180 177 In thousands SEK Index 100 = year 2005 170 160 150 140 130 126 120 110 100 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Co
Slide 23: Low-risk residential properties complemented by residential development potential
LOW-RISK RESIDENTIAL PROPERTIES COMPLEMENTED BY RESIDENTIAL DEVELOPMENT POTENTIAL Community services properties Residential properties Other / building rights development SEK 15.4bn SEK 7.5bn 9% SEK 2.2bn 61% 30% Includes schools, elderly care, LSS-housing and Mainly constitutes of rental apartments
Slide 24: Residential properties – low tenant dependency and high occupancy rate
RESIDENTIAL PROPERTIES – LOW TENANT DEPENDENCY AND HIGH OCCUPANCY RATE SEK 7.5bn 608,558 sqm SEK 581m SEK 304m SEK 955 98% 4.2% portfolio value Lettable area Rental income1) NOI 1) Rental income / sqm Occupancy rate Yield2) Distribution by region Cities with an Nothern Sweden 17% underlying ▪ Resi
Slide 25: Property management organisation (I/II)
PROPERTY MANAGEMENT ORGANISATION (I/II) Organisation model Property management COO/Deputy CEO Country office Lars Thagesson Regional office Branch office Head of Property Management Jonny Göthberg Technical Manager Västerås Peter Olausson Bollnäs Borlänge & Falun Söderhamn Region North Uppsala Karls
Slide 26: Property management organisation (II/II)
PROPERTY MANAGEMENT ORGANISATION (II/II) ▪ Total portfolio consist of 780 properties in 139 municipalities around the Nordics. ▪ The property management organisation consist of approximately 100 employees with in-house property managers, technicians, property caretakers and leasing administration. ▪
Slide 27: Residential – selected properties
RESIDENTIAL – SELECTED PROPERTIES Västervik, Fabrikanten 10-11 Karlstad, Letten 1,2,5 & 6 Borlänge, Lisselhagen 4 Oskarshamn, Emmekalv 4:55 Stockholm, Skrubbhyveln 4 Skara, Yggdrasil 1 & 2 | 27
Slide 28: In summary
IN SUMMARY 1 ▪ High level of predictability from stable and publicly financed tenants. 2 ▪ Average lease maturities of 7 years. 3 ▪ Approx. 1 percent of total community service property market in Sweden. 4 ▪ Residential assets in growth cities implies low risk. 5 ▪ Systematic approach to refurbishme
Slide 29: Value-creating residential development and sustainability
Oslo, Midtbygget (DNB HQ) VALUE-CREATING RESIDENTIAL DEVELOPMENT AND SUSTAINABILITY
Slide 30: Value-creating residential development
VALUE-CREATING RESIDENTIAL DEVELOPMENT SBB's value-creating residential development generates results for: Society Tenants Owners | 30
Slide 31: Value-creating residential development
VALUE-CREATING RESIDENTIAL DEVELOPMENT Increased property value is achieved through improved net operating created by: • Smart value-Creating renovations to a new modern standard are carried out on the basis of a standardized process which generates increased revenue • Lowering operating costs throu
Slide 32: Value-creating residential development
VALUE-CREATING RESIDENTIAL DEVELOPMENT • Space efficient 2 rok instead of large 1 rok • Possibility of separate bedroom • The apartment is streamlined and reaches out to a broader target group 1 rok on 41 sq.m. with 41 sq.m. with new floor plan existing floor plan. as 2 rok. | 32
Slide 33: Value-adding renovations
VALUE-ADDING RENOVATIONS | 33
Slide 34: Value-adding renovations
VALUE-ADDING RENOVATIONS • The apartment is made space efficient and enables more people to live on the same surface • Additional bedrooms are created • The apartment is complemented by a toilet that also is made handicap adapted 3 rok on 85 m2 with 4 rok on 85 m2 with existing floor plan new floor
Slide 35: Value-adding renovations
VALUE-ADDING RENOVATIONS | 35
Slide 36: Value-adding renovations
VALUE-ADDING RENOVATIONS Apartment type Apartment points • Normative rent is negotiated from a fictitious apartment of 1 rks 24 1 rkv 27 3 rok and 77 m2 1 rk 34 2 rkv 34 1,5 rk 37 • The rent for a specific 2 rk 40 apartment is calculated from 2,5 rk 42 Annual rent x 121 3 rk 44 Normative rent= RH x7
Slide 37: Energy-saving projects
ENERGY-SAVING PROJECTS Distribution of purchase d energy 30 000 25 000 20 000 15 000 10 000 5 000 0 Building Heating Hotwater Building Heating Hotwater electricity from from electricity from from before district district after district district projekt heating heating project heating heating before
Slide 38: Supporting the transition towards a more sustainable world
SUPPORTING THE TRANSITION TOWARDS A MORE SUSTAINABLE WORLD Focus on reducing CO2 within the property portfolio Environmental initiatives employed 8 000 SEKm Portfolio CO2 emissions (tons/year) Power consumption 6 000 6 510 6 184 Domestic Bui lding 5 859 5 533 ▪ A definite environmental perspective s
Slide 39: Engaging young people and creating summer jobs
ENGAGING YOUNG PEOPLE AND CREATING SUMMER JOBS | 39
Slide 40: SBB green bond framework
SBB GREEN BOND FRAMEWORK ▪ Social engagement is important to SBB and throughout its operations the company wishes to contribute to a sustainable society with functional properties where residents are able to influence their immediate surroundings through close dialogue with SBB as owner and property
Slide 41: In summary
IN SUMMARY 1 ▪ Target to renovate 600 apartments/year. 2 ▪ Renovations on an apartment by apartment basis in a residential building when a tenant decides to move out. 3 ▪ For every krona invested, we double the yield. ▪ Strong focus on sustainability, we aim to reduce the energy consumption by 30% i
Slide 42: Property development
PROPERTY DEVELOPMENT
Slide 43: Low-risk community service and residential properties complemented by residential development potential
LOW-RISK COMMUNITY SERVICE AND RESIDENTIAL PROPERTIES COMPLEMENTED BY RESIDENTIAL DEVELOPMENT POTENTIAL Community services properties Residential properties Other / building rights development SEK 15.4bn SEK 7.5bn 9% SEK 2.2bn 61% 30% Includes schools, elderly care, LSS-housing and Mainly constitute
Slide 44: Team property development
TEAM Team Property Development Malin Dymling – Property Developer Krister Karlsson – Vice president and Head of Property Development Prior experience: Deputy project manager, HSB Bostad. Prior experience: Property Development Manager, Rikshem AB Education: Civil Engineer, Real Estate and Constructio
Slide 45: Planning projects; two variants
PLANNING PROJECTS; TWO VARIANTS Development Properties Properties with cash-flow that are acquired by SBB in order to be developed and create building rights for housing and community service buildings. Current residential or community service properties Housing or community service properties withi
Slide 46: Strategic property development
STRATEGIC PROPERTY DEVELOPMENT ▪ Aim is to generate an annual average of SEK 250-400m in earnings. ▪ SBB works actively in identifying cash-flow properties with a 5-7 % yield and where SBB sees an opportunity to develop building rights for residential and/or community service properties within 1-5 y
Slide 47: Development example – Nyköping Raspen 1-3
DEVELOPMENT EXAMPLE – NYKÖPING RASPEN 1-3 | 47
Slide 48: Development example – Nyköping Raspen 1-3
DEVELOPMENT EXAMPLE – NYKÖPING RASPEN 1-3 | 48
Slide 49: Development example – Nyköping Raspen 1-3
DEVELOPMENT EXAMPLE– NYKÖPING RASPEN 1-3 Motives for the acquisition ▪ New station for Ostlänken, the new east coast high-speed railway, (35-40 minutes to Stockholm C) as well as close to Stockholm Skavsta Airport (Stockholms second busiest international airport) ▪ Annual growth of 700-800 people pe
Slide 50: Development example – Nyköping Raspen 1-3
DEVELOPMENT EXAMPLE – NYKÖPING RASPEN 1-3 SEKm Note: Sales building rights 501 Of which SEK 192.5m is sold; approx. SEK 3,200/sq.m. Estimated JV profits 274 Residential projects 15 % margin NOI 78 Sum Income 853 Acquisitions - 200 Redevelopment costs - 80 SEK 500/sq.m. GFA Decontamination costs - 60
Slide 51: Development example – Nykvarn Kaffebryggaren 1
DEVELOPMENT EXAMPLE – NYKVARN KAFFEBRYGGAREN 1 • Development on own land besides existing residential- and community service properties. • A newly adopted zoning plan in central Nykvarn in Stockholm Region. • Total volume of 33,500 sq.m. building rights whereof: • 7,000 sq.m. is related to extension
Slide 52: Development portfolio per 2018-09-30
DEVELOPMENT PORTFOLIO PER 2018-09-30 • 310,000 sq.m. GFA in Stockholm region. • 580,000 sq.m. GFA in larger cities and/or university cities • 360,000 sq.m. have been through the formal planning consultation process (including plans where zoning plan already has been granted) • Of which is sold but n
Slide 53: Valuation and performance
VALUATION AND PERFORMANCE • External valuation of building rights in accordance with SBB’s valuation policy. Value changes are reported as unrealised value changes until closing. • Total building right portfolio of 892,000 sq.m. GFA. • Total book value of current building right portfolio of SEK 1,28
Slide 54: In summary
IN SUMMARY 1 ▪ Average annual result of SEK 250 – 400m. 2 ▪ Agenda 2030 goal 11 about sustainable development. 3 ▪ Cash-flow during the zoning process. 4 ▪ SEK 1,411m (SEK 3,492/sq.m.) building rights sold. | 54
Slide 55: Capital structure and financing
Oslo, Midtbygget (DNB HQ) CAPITAL STRUCTURE AND FINANCING
Slide 56: Team finance & investor relations
TEAM FINANCE & INVESTOR RELATIONS Eva-Lotta Stridh – CFO Rosel Ragnarsson – Head of Finance Tomas Pettersson – Group Controller Adrian Westman – Head of Investor Relations Johan Ronngaard – Business Controller Marika Dimming – Investor Relations & Head of Sustainability Annica Eén – Business Control
Slide 57: Balance sheet
BALANCE SHEET Assets Capital structure 92,8% 36,4% Investment properties - Equity - SEK 9.9 billion SEK 25.1 billion Bond loans - SEK 6.4 billion Shares in associated companies/jv - SEK 0.1 25,8% 23,7% Liabilities credit institutions - billion SEK 7.0 billion Receivable associated companies/jv - SEK
Slide 58: Share of equity
SHARE OF EQUITY Equity structure Hybrid bond ▪ Fra mework SEK 2.5 bi llion 5% 2% ▪ Is sued SEK 2 billion as per 30-09-2018 ▪ Reported as equity Common stock ▪ Perpetual 20% Hybrid bond ▪ Ca n only be redeemed by the issuer ▪ No voti ng ri ght Preference share ▪ Di vi dend i s paid quartely SBB ▪ Int
Slide 59: Class D shares
CLASS D SHARES Strengthening the balance sheet through issue of Class D shares ▪ SBB has announced an offer to all preference shareholders in SBB to exchange their preference shares against newly issued Cla ss D shares in SBB. The exchange offer means that SBB offers 20 common stock D shares in SBB
Slide 60: Financing
FINANCING Activities during Autumn 2018 ▪ SEK/NOK Bond Buybacks ▪ Renegotiated bank loans ▪ Repaid ”expensive” loans prior to maturity ▪ Issued additional unsecured bonds ▪ Increased the proportion of back-up facilities ▪ Set up SEK and EUR Commercial Paper Programmes | 60
Slide 61: Financing
FINANCING Distribution of debt as per 2018-09-30 Finance policy Bonds Bank loans Covenants Bonds SEK 6,484m LTV < 55% Unsecured SEK 1,452m SEK 6,998m Decrease Secured NOK 3,971m and SEK 683m ICR > 2.5 times Equity Ratio > 35% refinancing risk Commercial paper Back-up facilities Minimum 50% of outsta
Slide 62: Debt maturity structure as of September 2018
DEBT MATURITY STRUCTURE AS OF 30 SEPTEMBER 2018 Debt maturity structure Comments SEKm 5 000 ▪ Bank debt is provided by several banks to increase competition and 4 500 funding availability while reducing the dependency and risk of a sole 4 737 4 000 lender 3 500 3 000 3 297 3 166 ▪ SBB has issued sec
Slide 63: Significant changes to the debt portfolio
SIGNIFICANT CHANGES TO THE DEBT PORTFOLIO 1 ▪ Maturing April 2020 bought back SEK 1,315m Buy Back Unsecured (6.00%) Bonds ▪ Maturing Dec 2021 bought back SEK 48m (3.65%) 2 Buy Back Secured ▪ Maturing Dec 2020 bought back NOK 150m Bonds J B121 (5.75%) 3 ▪ Post Q3 we have issued a senior unsecured New
Slide 64: Current outstanding senior unsecured / hybrid bonds
CURRENT OUTSTANDING SENIOR UNSECURED / HYBRID BONDS Amount, Issuer ISIN-code Bond Maturity SEKm Rank Price Interest rate Type Yield SBB SE0011725514 SBBNORD 10/03/22 03/10/2022 1,000 Sr Unsecured 99.500 3.60 (no floor) FRN 3.355% SBB SE0010869123 SBBNORD 20/12/19 20/12/2019 300 Sr Unsecured 100.354
Slide 65: Decreasing new issue spreads
DECREASING NEW ISSUE SPREADS NEW ISSUE SPREADS HAVE DECREASED SIGNIFICANTLY FOR SBB Discount margin Bps Moody’s announces B1 700 rating (Stable outlook) 650 600 550 S&P BB rating affirmed 500 (Stable outlook) S&P announces BB rating 450 (Stable outlook) 400 374 Bps Maturity 10/03/2022 350 335 Bps Ma
Slide 66: Concluding remarks
CONCLUDING REMARKS 1 ▪ Continue to focus on community services properties, our core assets. 2 ▪ Unlock value through renovations and optimization of existing properties. 3 ▪ Strategic property development to significantly contribute to earnings over a business cycle. 4 ▪ Increase our efforts within
Slide 67: Thank you!
THANK YOU! SBB Samhdllsbyggnadsbolaget {SBB) is
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