Sponda Financial Results Q August 2015

Transcription

1 Sponda Financial Results Q August 2015

2 Highlights for the period Kari Inkinen

3 Sponda s Q in brief Despite disposals, cash flow is strong. - Key figures have improved q-on-q and annually. - CEPS is up 0.03 /share y-on-y and NAV improved 0.09 /share y-on-y. Like-for-like rents in Finnish portfolio on a positive path. Occupancy rate at 86.3% (Q2 2014: 85.7%). - Disposal of assets at the end of June had a slightly negative impact on the occupancy rate (40 bps). 3

4 Sponda s Q in brief One small property development project completed in Lassila, Helsinki. - Main tenant, Kone Elevators, moved in at the end of June. Disposals of two properties in Russia successfully completed. - One office building and one shopping centre were sold at the end of June. - Price reflects the fair value at the end of March

5 Development and modernization investments For the three greenfield projects Sponda expects 15% development gain. Leasable area m² Estimated completion Total investment M Investment by the end of June 2015 Pre-let % Estimated market rent Eur/m²/month Greenfield developments Ratina shopping centre, Tampere 53,000 Summer N/A Ilmala office property, Helsinki 18,500 End of Lassila office property, Helsinki 4,600 June Modernization investments Keskuskatu 1b, Helsinki 2,048 September Total 78,

6 Sponda Q2 2015: Performance highlights 4-6/15 Change, % 4-6/14 1-6/15 Change, % 1-6/ /14 Total revenue, M 59.4 (5.1) (7.5) Net Operating Income, M 42.5 (6.6) (8.2) Operating profit, M Cash flow from operations/share, Earnings/share, NAV/share, EPRA NAV/share, Economic occupancy rate, %

7 Risk allocation of Sponda s portfolio Total of the office and shopping centres properties portfolio, EUR 2.6 billion (excl. Russia, Property Development, Logistics) Vantaa total 0.5% Rest of HMA 14% Oulu 3.0% Tampere 9.5% Espoo total 7.0% 22% 44% 7

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9 Sponda s priorities in 2015 Occupancy rate development Our target is to keep occupancy rate at the end-of-2014 level at minimum. At the end of June 2015, our occupancy rate was 86.3%. Implementing our strategy We will continue the non-core property disposals. To-date we have sold properties for EUR 56.4 m. Stable cash flow from operations per share Focus in property development We aim to maintain our ability to pay stable dividend. During 2015, four large property development projects will be completed. Our target is to start at least one large development project in Dividend paid for fy 2014 was EUR In March we announced a start of Ratina shopping centre. 9

10 Major Trends in Q Kari Inkinen

11 Finnish Market The Ministry of Finance has changed the GDP growth for The new estimate is 0.3%. - Exports will increase modestly in Private consumption is expected to pick up with rising real household income and improving consumer expectations. Property transaction volume was a record-high EUR 2.2 billion during the second quarter and EUR 2.6 billion in total for the first half of the year. - International investors accounted for 39% of the deals. Sources: KTI, Mof F 11

12 Vacancy rates in the HMA Source: Catella Property 12

13 Office Sector Market and Sponda HMA office market vacancy is 13% but is estimated to have increased during Q Yields in the Helsinki CBD market have continued to decrease. Office rental market is particularly active in CBD and Ruoholahti areas. The trend in demand is for smaller space and more flexible leases. Sponda Office Segment Performance Occupancy rate was 88.1% (Q2 2014: 87.9%). Like-for-like rents were up by 1.8%. 13

14 Retail Sector Market and Sponda According to Catella, the increase in vacancy in retail properties has levelled out. City centers are preferred locations for the retailers. Consumer confidence in Finland is estimated to improve. - According to MofF, private consumption will increase due to rising income and improving consumer expectations. In Tampere the market is solid, and Ratina shopping centre development will give it a further boost. Sponda Shopping Centres performance Occupancy rate was 89.8% (Q2 2014: 90.4%). Like-for-like rents were up by 2.5%. 14

15 Logistics Sector Market and Sponda Logistics rental activity has picked up during Potential tenants are looking for flexible space with flexible lease agreement. The activity in the transaction market in the logistics sector has increased. Sponda Logistics Segment performance Occupancy rate was 68.6% (Q2 2014: 71.9%) ¹). Like-for-like rents were up by 18.8% due to occupancy improvement and changes in monthly income & expenditure. ¹) Not a l-f-l number as Sponda sold logistics assets for EUR million in September

16 Russia Market and Sponda The GDP growth in 2015 is estimated to be -2.7% (World Bank) or -5.0% (MofF, Finland). Transaction volume was USD 1.1 billion in Q According to CBRE, the vacancy rate in Moscow offices increased to 17%. According to CBRE, the commercial real estate market in Moscow seems to be around its cyclical low. The rental rates for offices: - Prime class-a offices USD/m²/yr. - A-class offices USD/m²/yr. - B-class offices USD/m²/yr. Russia Occupancy was 84.5% ¹) (Q2 2014: 89.0%). Like-for-like rents were down by 4.6% due to reduction in rent levels. 5% ¹) Not a l-f-l number as Sponda sold two assets from Moscow in June

17 Financials Kari Inkinen

18 Profit & loss statement M 4-6/ / / / /2014 Total revenue Expenses (16.9) (17.1) (34.5) (36.7) (70.6) Net operating income Profit on sale of inv. Properties (1.0) 0.5 (1.5) Valuation gain / loss (1.8) (0.2) Profit on sale of trading properties SGA expenses (5.0) (5.6) (10.9) (11.1) (22.1) Share of profit from associated companies (3.5) Other operating income/expenses (0.2) (0.5) 0.3 (0.6) (1.2) Operating profit Financial income and expenses (11.2) (14.5) (23.8) (29.9) (55.9) Profit before taxes Taxes from previous and current fin. years (0.7) (0.7) (1.5) (1.2) (1.8) Deferred taxes (12.5) (4.1) (15.5) (7.1) (20.4) Profit for the period

19 Valuation gains/losses M 4-6/ / / / /2014 Changes in yield requirements (Finland) Changes in yield requirements (Russia) (7.4) 0.0 (7.4) 0.0 (10.0) Profit/loss from property development projects Modernization investments (9.7) (10.7) (20.7) (16.2) (42.0) Change in market rents and maintenance costs (Finland) Change in market rents and maintenance costs (Russia) (2.8) 0.4 (15.3) (6.8) (19.3) Change in exchange rates (1.1) Investment properties, total (2.8) (3.9) Real estate funds 0.0 (2.7) 0.0 (2.6) (1.8) Realised gains/losses in re funds Group, total (1.8) (0.2) 19

20 Financing Q2/2015 Q1/2015 Q4/2014 Q3/2014 Q2/2014 Equity ratio, % Average interest rate, % Hedging, % Average loan maturity, yrs Average fixed interest rate period, yrs Interest cover ratio 3.4x 3.5x 3.3x 3.3x 3.2x Loan to Value, % Covenants at: Equity ratio, 28% (long-term ER target: 40% ICR 1.75x 20

21 M Loan maturities 30 June 2015 Interest-bearing debt EUR 1,768.6 million Unused financing limits EUR 510 million Bank loans Syndicated loans Bonds Commercial papers

22 Business Update Kari Inkinen

23 Like-for-like development in Q Like-for-like net rental growth has been calculated from a portfolio that Sponda has held for 2 years excluding acquisitions, disposals and property development. Like-for-like net rental growth, % Like-for-like net rental growth, M 23

24 Economic vacancy rate 2009 Q Q4/2009 Q4/2010 Q4/2011 Q4/12 Q4/13 Q4/14 Q2/15 Office 11.9% Shopping Centres 10.2 % Logistics 31.4 % Russia 15.5 % Total property portfolio 13.7 % HMA market office vacancy 13.0 % 24

25 Lease agreements in Q Pcs M² /m²/month (avg)* New agreements that came into force during the period Agreements that ended during the period Agreements that were extended during the period *) Agreements that came into force and ended do not necessarily correlate with same sector or space. All lease agreements in Finland are linked to CPI. Ten largest tenants account for 31 % of rental income. 25

26 Investment portfolio development We are creating value by property development and active portfolio management. Our aim is to sell non-core assets classified as such either by location or development potential. M Q Property development investments Maintenance investments/ Tenant improvements Acquisitions Disposals

27 Prospects and financial targets Net operating income Sponda estimates that the net operating income for 2015 will amount to EUR million. The estimate is based on the company s view of property sales to be completed and the development of rental operations during the year. EPRA Earnings Sponda estimates that company adjusted EPRA Earnings in 2015 will amount to EUR million. This outlook is based on the development of net operating income and the company s estimate of the development of financial expenses. Financial targets Long-term equity ratio target is 40 %. Dividend policy is to pay approx. 50 % of the operational cash earnings per share, taking into account of the economic situation and company s development needs. 27

28 Pia Arrhenius Senior Vice President, Corporate Planning and IR Tel:

29 Strategy Main goals of Sponda s strategy are to simplify the business as a whole, to have more focused property portfolio, and to grow profitably. To achieve the strategic goals, Sponda is: - Selling the logistics portfolio; - Selling the Russian portfolio; - Selling the properties in Turku; and - Investing in prime properties in Helsinki and Tampere. 29

30 Largest Shareholders 31 July 2015 Major shareholders No. of shares Holding % 1. Oy PALSK Ab 42,163, Varma Mutual Pension Insurance Company 29,083, HC Fastigheter Holding Oy Ab 28,484, The State Pension Fund 3,200, Tiiviste-Group Oy 1,000, Erikoissijoitusrahasto Visio Allocator 949, Norvestia plc 718, Danske Invest Finnish Equity Fund 673, Odin Eiendom 631, I.A. von Julins STB 570, Nominee-registered shareholders 49.7% of the total 30

31 Overview of the current reporting segments Fair value 1 Valuation yield 2 Net initial yield 3 % of portfolio 4 60% Office M 6.3% 5.9% Shopping Centres M 5.7% 4.6% 23% Logistics M 8.3% 4.6% 7% Property Development M n/m n/m 5% Russia M 10.4% 6.1% 5% Property Investment Companies M (Investments) Notes: 1) Fair value of investment properties as at 30 June ) Average valuation yield requirement as at 30 June ) Net initial yield of the segment as at 30 June ) Share of total fair value of properties as 30 June

32 Office market statistics and Sponda s holdings Source: Catella Property, Sponda Vacancy 10.5% Rental level avg /m²/yr Yield avg % 3% Vacancy 9.4% Rental levels /m²/yr Yield avg % <1% 9% 84% Vacancy 8.6% Rental levels /m²/yr Yield avg % Vacancy avg 13.0% Rental levels /m²/yr Yield % Vacancy avg 17% Rental levels $ /m²/yr Yield 10-13% <1% 5% 32

33 Lease agreement composition Q Lease maturity profile, % of rental income Tenant breakdown by sector¹ Average lease maturity Office Shopping centres Logistics Russia Q Q Note 1: Based on rental income Total 0,0 2,0 4,0 6,0 8,0 33

34 Balance sheet M ASSETS Investment properties 3, , ,142.1 Other non-current assets Fixed assets & other non-current assets, total 3, , ,393.0 Current assets, total Assets, total 3, , ,449.2 SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity, total 1, , ,411.5 Non-current liabilities, total 1, , ,413.6 Current liabilities, total Shareholders equity and liabilities, total 3, , ,

35 NAV/share and EPRA NAV/share 6 5,5 5 4,5 4 3,5 5,07 5,12 5,22 5,29 5,18 5,31 5,39 5,30 4,83 4,77 4,82 4,88 4,84 4,59 4,64 4,56 4,66 4,68 4,45 4,38 4,43 4,50 4,49 4,56 4,63 4,50 4,27 4,12 4,19 4,01 4,01 3,99 3,88 3,86 3,92 3,93 4,06 4,17 4,10 4,03 3,90 3,82 3,82 3,60 3,63 3,68 3,56 3,62 3,55 3,58 3,46 3,42 3,45 Closing price NAV EPRANAV 3 3,09 3,19 3,12 3,09 2,95 2,82 2,5 2,

36 EPRA NAV calculation 5.47 /share ,4 16,8 0,1 1549, , ,7 14, Equity attributable to equity holders of parent company Other equity reserve Fair value of financial instruments Goodwill relating to deferred tax liability on properties Deferred tax Deferred tax from investment from shares in properties*) associated companies*) Capitalized borrowing cost Total *) Deferred tax relating to fair valuation of property and interest rate derivatives 36