Chief Financial Officer, Logistea
Logistea AB (LOGI B) Q2 2025 Earnings Call
Tune in for insights from CEO Niklas Zuckerman and CFO Philip Löfgren on acquisition pipeline, share-issue strategy, financing ...
Transcript (36 segments)
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Operator0:00
Welcome to Logistea Q2 earnings call 2025. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Nicholas Zuckerman and CFO Philip Löfgren. Please go ahead.
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Nicholas Zuckerman0:20
Good morning and welcome to the presentation of Logistea's first half year of 2025. Here to present is myself, Nicholas Zuckerman, and our CFO, Philip Löfgren. We will answer any questions after this presentation. You can submit written questions as they pop up. As some of you might remember, we had an old goal to reach 15 billion SEK worth of properties. We are today at a bit more than 15.2 billion SEK. Total rents for the first time exceeds 1 billion SEK, and we continue to report high occupancy and high net initial yield of 6.8%.
Looking at the financials for the first half year, we are reporting income of 511 million SEK, representing an increase of 131%. The NOI amounts to 456 million SEK, and the profit from property management amounts to 246 million, an increase by an impressive 267% compared to last year. And maybe most important, the profit from property management per share has increased by 74% compared to last year. The WALT remains high at 9.6 years, and the LTV net LTV is down to 47% following the rights issue undertaken a few weeks ago.
It's been a very active 2025 for us at Logistea. We have during the last quarter purchased two properties. The first one is a 36,000 square meter property fully leased to e-commerce company Leo on a 19-year lease. The second property is in Hamina, Finland, area 22,000 square meters, and the property is fully leased to a strong tenant on a 10-year lease. And we have furthermore this morning announced an acquisition of two properties in Ulricehamn and Tranemo in Sweden. Both properties are leased to AP&T, a leading industrial company providing production lines, automation systems, and hydraulic presses. The two properties, of which the one in Ulricehamn is by far the largest, comprise 19,000 square meters. AP&T has signed 15-year new triple net leases for both sites. The properties are not taken possession of yet and are therefore not included in the run rate.
As said, a very busy start of the year. We are actually reviewing almost one property per day. The transactions undertaken, looking at the profit from property management, 0.19 SEK per share. And if we include the last transaction we did this morning, we could add 0.22 SEK per share. And more expansion on this slide. As I said, we have reached a bit more than 15 billion SEK, and we're currently reporting a yield gap of 2.2%, being the difference between what the properties yield of 6.8% and the cost of debt being 4.6%. We continue to see good opportunities to expand the portfolio even further, and that is the main reason why the rights issue was undertaken during the spring.
Looking at the run rate, we could see that the NOI including the project properties amounts to 1 billion 14 million SEK. The profit from property management has increased by 184% in one year to 571 million SEK. As mentioned, the main drivers for the changes are acquired properties that account for 0.19 SEK per share. We have seen decreased costs in the debt portfolio, and that has improved the numbers by 0.05 SEK per share. On the negative side, we have seen an effect from the rights issue which lowered the profit from property management per share in the run rate by 0.08 SEK, and also we have seen negative effects that lower the numbers with 0.02 SEK per share.
Earnings per share, obviously a very important measure. You can see that we've seen an increase by 35% in one year, and the growth for this year is 12%. And in order to make sure that we have dry powder to take advantage of the current transaction market, we undertook a share issue in June. The share issue was directed to professional and institutional investors. We have noticed good interest in the share, and we decided to issue roughly 500 million SEK worth of new shares. And as said, the proceeds will be used for among others new investments like the one we did this morning, or yielding capex investment into our own existing portfolio.
To the left, our updated list of largest investors post this rights issue. Notable is that Broomman and Partners and Clearance Capital are new on that list. Both of them, as well as Fourth AP Fund and Lands for Sjöding, took large lot sizes in the direct issue. No material changes here other than that we have decreased the share of BB from previously 31% post merger, that is now down to 26%. Otherwise, as you can see, still the vast majority of the properties located in Sweden and Norway. High net initial yields throughout and long leases, especially long leases when outside of the Nordics.
We continue to report a high proportion of triple net and CPI index leases. Occupancy stands at still high 97%. The net letting for the quarter is negative at 4 million, mostly driven by two terminations. We do not see a trend that the leasing market is softer now compared to 6 months ago, and we are in good leasing discussions, but the processes are still fairly slow.
Before passing on to Philip, I will say a few words on the market. We have seen a good pickup of transactions in Sweden the last weeks. Transactions within the logistics segment as well as the light industry segment. Interesting that both domestic and international investors are active on both the buying and selling side. Sweden is the market with the highest turnover, and it's still fairly slow in the other Nordic markets when it comes to our type of properties. And by that, I will hand over to Philip.
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Philip Löfgren9:14
Thank you, Nicholas. My name is, as most of you already know, Philip Löfgren, and I'm the CFO of Logistea. As you heard Nicholas saying, Logistea has grown a lot during the quarter both in the balance sheet but also in the earnings, which I will now present further into the financials. Logistea revenue for the quarter increased to 263 million compared to the previous quarter of 248 million. The increase is linked to the finalized acquisitions during the quarter and a smaller increase of the revenues in the like-for-like portfolio. The net operating income came out at 242 million, an increase from last quarter's 216 million, which is linked to both the acquisitions and a warmer quarter which kept heating and electricity costs down. The period was affected by FX effect of around 2.5 million.
The operating margin increased to around 90%, and the adjusted operating margin where we exclude the rent supplements from the revenues came in at around 95%, an increase from 90% a year ago. And the figure we tend to put the most focus on is the profit from property management, which increased to 131 million. Apart from a higher NOI, we have managed through negotiations and completed refinancing in the current loan portfolio to decrease the average interest rate from 4.8 to 4.6% in the quarter. That is a drop of around 40 bps this year, and I will explain more in the upcoming slides. Profit from property management per share, one of our financial targets, increased by 58% on the last 12 months basis and increased by 74% comparing the first half of this year with the first half of 2024.
As we heard earlier in the presentation, we issued 36 million new shares in June with the purpose of financing our future growth. The issue brought in 500 million, which balances the capital structure in a good way. Even though the issue price was slightly below the net asset value per share at the time being, we've proved that we invest our capital in good yielding property transactions and projects that create more shareholder value. In order to maximize the return on equity, we aim to secure a loan to value in new transactions of 50 to 60%, which we have managed during the period. At the end of the period, our LTV was stable at 48.4%.
As I mentioned both on the last page but also in previous earnings calls, we have had good negotiations with banks during the quarter which has resulted in, apart from the lowered margin, longer credit maturities. Loans that mature within the upcoming 12 months are a manageable 187 million, and the average capital maturity came out at 2.9 years compared with last quarter when we had 1.3 billion in debt maturing in one year. And the hedging ratio is stable at 73%, and the interest cover ratio has increased to 2.3 times compared to 2.1 times at the beginning of the year.
And our hard work with our finance portfolio, especially looking at the terms with the banks, is paying off as we have decreased the average banking margin from around 200 to 180 bps in the period. During the quarter we have refinanced around 1.9 billion with better terms. 600 million of those had a margin decrease of 85 bps. Apart from the decreased margins, the market interest rates have helped the average interest rate to decrease to 4.6%. So looking back at the earnings capacity we saw before, even though we have increased the loan amount by 17% this year, the net financial income has only decreased by less than 8%. And we have still unencumbered assets in Germany, Poland, and the Netherlands amounting to around 940 million, which we're working on getting into the banking system.
To sum up, the transactions made in the quarter together with the work with the loan portfolio has given us a good position to deliver on our financial goals and limitations. The profit from property management per share on the last 12 month basis adjusted for one-time effects are up for 58% in one year, while growth in the NRV per share is up 14% from a year ago. The loan to value ratio remains low at 48%, while the interest cover ratio continues to increase. If we deduct the income from the not yet finalized project property we have in the earnings capacity, our ICR is projected to increase from 2.3 to 2.5 times. So the key takeaways from this finance side are the decreased average interest rate from 5.0 to 4.6%, the improved credit maturities, strong profit, strong growth in profit from property management per share, and a position to fund more transactions with a cash balance of around 500 million. And back to Nicholas.
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Nicholas Zuckerman15:40
Good, and to summarize, as said, we have managed to grow the portfolio by approximately two billion SEK only this year, including the property announced this morning. Those together will add 22% on our profit from property management per share. We do believe there are still good deals to be done, and that's why one of the main reasons why we decided to undertake the rights issue in June, meaning that we now have dry powder to act if we find value-creating investments. So, opening up for questions, please.
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Operator16:36
If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.
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Frederick16:51
Morning. Do you hear me?
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Nicholas Zuckerman17:03
Yes.
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Frederick17:06
Perfect. I don't think I was introduced. This is Frederick from ABG. A couple of questions maybe starting where you ended, Philip, on margins. You talk a lot about the delta and the margins coming down. Can you specify the new margins you get in different countries today?
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Philip Löfgren17:34
Yes, for sure. The new margins we've received on new loans on the transactions being done are around 150 to 170 bps, and it's evenly shared in between all the countries.
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Frederick17:57
Perfect. And I think we've had this discussion before, and you've been on the topic of moving some of the bond debt to bank debt for some of the countries outside of the Nordics. Is there an update on that?
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Philip Löfgren18:15
Yeah, it's actually not a move from bond to bank debt. The properties located outside of the Nordics, they are unleveraged apart from Belgium where you see bank financing. So still where we're trying to get bank financing are the properties located in Poland, Germany, and the Netherlands. It's nothing signed even though we are in progress in one of the countries where we've come pretty far, I would say, but nothing signed yet.
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Frederick18:54
All right. And if, let's in theory assume that you don't get bank financing in those markets, would you sell those properties or continue to finance it or keep it unlevered as you point out?
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Philip Löfgren19:10
What we said is that now we're in the process trying to get as much and as good bank financing as possible, and we'll probably give ourselves at least the coming quarter to see how far we get and on what terms, and then we'll need to decide based on the financing received whether to keep or not. But the process in the three countries is progressing pretty well, so we'll give ourselves at least another quarter to see where we get.
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Frederick19:43
Yeah, fair enough. Good. And then on letting, I do appreciate that the quarterly figure and the rate figure is very small in relation to the total property portfolio. But is there anything to call out on the terminations either in terms of when are these tenants leaving and if there's anything specific in one region or one country doing the majority?
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Nicholas Zuckerman20:20
Yeah. So the two terminations that we have had during this quarter, one has left and one will leave at the end of the year. There is no trend as such that the leasing market is worse compared to the previous six months, probably rather the opposite. So we are in a couple of good leasing situations. It takes longer, but it's not like we have lost potential new tenants during the quarter. Obviously we are facing a small negative net letting, but there is no trend as such when it comes to our type of properties and our type of tenants, I would say.
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Frederick21:14
Understood. And then finally, last question maybe partly on the same theme of longer discussions, and I guess we hear this from several companies in the space as of right now. You have previously concluded that you do want to start significant projects. Now the transaction market to you at least seems to be very liquid and open, and you're very active. Is the project leg of the business of lower priority now, or should we expect something in terms of project starts for the next say 6 to 12 months?
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Nicholas Zuckerman22:06
We're hoping to do one or maybe two projects in the coming 12 months. Nothing is signed obviously because then we would have let you know. But going back to the discussion where you started, obviously if we are to do projects, the yield on those needs to be in line or hopefully a bit higher compared to buying a similar type of property standing with a lease. But one should also remember that projects are brand new buildings, so you could live with yields that are in line with what we're buying existing properties. It's not intentional that we have slowed down the process of trying to find new development tenants. It's just the case that we haven't signed any leases yet, but we're still trying to do so.
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Frederick23:17
Understood. Thanks, Frederick. That's very clear.
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Operator23:26
As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.
There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.
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Nicholas Zuckerman23:50
Good. We actually just got a written question. You reported a fairly sizable positive property value change in Q2 which was mainly explained by yield contraction of one bps. Can you please elaborate how the small yield shift can explain such large value change? Yes, sure. This is from David at David Flemish at Modia. So you're correct in the sense that the yield compression is fairly low. That is part of the positive property value change. The other part is that basically we have, as explained, bought properties of two billion SEK over the past five or six months, and basically those properties have been bought at higher yields compared to the average yield in the portfolio. So that would also make a value impact on the total portfolio even though overall the change on the yield requirements is just slightly down.
Then it seems like we don't have anything in writing and no one is in the queue for asking questions. So I guess that has to do with the time of the year or that the report was self-explaining, or maybe both. But obviously if there are any questions popping up during the day or during the summer, just let Philip or myself know and we'll do our best to answer those. And otherwise we'll wish you all a great summer holiday.
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Philip Löfgren25:55
Yeah, perfect.