ProShares Short SmallCap600 Price & Performance (SBB)

And thank you very much for taking the time and listening in. With me in the room, I have today's presenters, Sines, CEO, who will guide you through the last quarter and last year's events. And And we'll comment a lot about the strategy going forward. Daniel Telberg, Finance Director, will guide you through the numbers. And lastly, [indiscernible] The presentation will, as always, be followed by a short Q and A session at the end. So with that said, Leif go ahead. Thank you, Helena.

I'm glad to see that the rental growth is there. We increased the rent by 5.5% in the like for like portfolio. And when we look on the net operating income, it increased by 7% like for like, which is very good and It's like illustrate the strong portfolio that has to be as We still have financial stability and liquidity as I core focus. And we try to reduce the debt as much as possible in order to strengthen the company. And in the last twenty four months, we have reduced the debt by 32,000,000,000 zed. We feel that the valuations on the properties are stabilizing. And we hope are hopeful that we will get some tailwind in 2025. With some hopefully right off on the property side. Which will be very helpful. We continue to deliver on the long term strategy when we see improvements in the how we structure the company. In 2024, we listed Zviefalstater which is now the largest listed pure residential company in Sweden. And we're very happy about that. And we see good progress in Seiyafas Jiete. And also in all of the residential assets we have in the FPD Group. We have delivered some development gains We have developed properties in [indiscernible] And we have sold them or planned to agreed to sell them.

For 1,400,000,000.0 which is very good and illustrates also the good step we have here in SPV that deliver projects with good gains. Continue with the focus to make S2B more transparent. And one part of that is to dissolve joint ventures and reduce the number of associated companies. So we have dissolved joint venture for the amount of SEK20 billion. During the year. And if you look on the community [indiscernible] First, let me tell you about the completed steps that we have done here in S2B. In the Educational Properties, we feel that Nordiskers is now fully structured. [indiscernible] With access to cheap and long term funding. We see that the residential, we have taken care of that with IPO of Svyatas Theatre and also the restructuring of the debt in Sverdas Theater. [indiscernible] and also we have the PPI, the public property investment in Norway, which is associated with company in SPB. Received that it will be [indiscernible] And the remaining segments is the community properties, which still is on the to do list for us. And we will put focus on that that part of the S2B group. From now on with the aim to lower the vacancies increase the rent level and add lapping areas.

I think the properties performed well. But I think that they can perform even better if you put little bit more effort into the operation. We will add resources, particularly with the value add progress that we have in So from an operational standpoint, we will divide the portfolio into two. Main areas. One is the cash flow the pure cash flow properties, And then we have a smaller part with properties that need some development. And then we will put in more resources to work with the value add projects that we have. And roughly, you can say that the cash flow profit is 90% and value held drop is 10% of the holdings. And if we look on the The big picture on the group structure, We believe that we are transforming ourselves to a very with three main areas the community properties, the residential properties, and the educational properties. And the aim is, of course, to make it easier for you guys to understand SPV. In the end, it will lead to more funding options for us. If you look digging into the community, it's a leading and scalable platform. And the largest asset in the community property portfolio is Eldercare.

Long term, I rental agreements with publicly financed tenants making the operations very stable. And the amount of assets is NOK44 billion And the residential, mainly consists of the holdings we have in Svera Pass Theatre. We also have a joint venture together with Morgan Stanley and then we have a couple of billion that we own 100%. And think we now when we have put most of the assets into Svera's theater, we can benefit from economies of scale. And also a pure focus for the management in the residential part of the business to increase the rents and reduce the costs. I think we will see improving net operating income from the residential properties in twenty five and onwards. Will be very helpful I will touch upon the educational part of the company, which is co owned with Brookfield. Which brings a lot of expertise on how to manage and grow our infrastructure [indiscernible] also helps us with getting long term So Nurrikers are now one of the safest asset pools combined with very safe long term funding. Making the risk in the Nordicus very low. If you look on the It have decreased a little bit during 2024.

One part of that is that we have deconsolidated some part of the operations, which is stable. [indiscernible] So if we would include the joint ventures with Gosselik into the figures. There is no material drop in occupancy rate. So the operations in SPB is stable. Thank you, Lei. So let's go more into detail on the financial statements. On a light for light basis, rental income for the full year increased by 5.5% compared '23.

Having costs under control with low maintenance cost provides a strong net operating income growth of 7.1%. This achievement is the result on our continued debt For the full year, 63% of the consolidated net operating income was generated from community but also with a strong contributions from Residential [indiscernible] During the quarter, net operating income continued to grow strong and improved like for like with almost 10%. Administration and restructuring expense remains high during the quarter driven by legal process, but also additional organizational costs in Sverdrupter, being the first quarter as a listed company. The ambition for reducing admin cost by 50% by the end of twenty twenty five remains and the work is on track. Changes in property value was almost flat compared to $3,000,000,000 down in Q4 prior year. Where the slightly negative movement for the quarter is primarily driven by realized changes in value from final settlements of previous transactions. Improvements of results from associated companies and joint ventures are mainly driven by changes of property values leveling off in JVs as well. Net interest improves compared to previous year due to contributions from on lending joint ventures. While the shift in other financial items [indiscernible] by FX differences.

During the year, consolidated property portfolio has decreased by 20,000,000,000 primarily driven by properties being deconsolidated into established joint ventures. During the quarter, NOK1.8 billion of acquisition has been reported due to a acquiring stakes from JW Partners. While having a very small cash flow effect. Goodwill was impaired in the third quarter by SEK 1,400,000,000.0, but kept intact in Q4 due to stronger market conditions. Reducing debt and improved balance sheet remains our key priority. I will hand over to Helena to elaborate on that further.

Yes. Thank you very much, Daniel. As you are very well aware, our main focus has to be been during the past eighteen months to reduce the debt level significantly and also to to make the the circle of sources of financing wider as the bond market was shut down to us in May 2023. However, our long term ambition is still to return to investment grade rating We realized that that road has already commenced and I think that we expect it to take some time. During 2024, we saw an increase in the loan to value, and that was mainly due to the dividend payout we executed in 2024. As a backlog and also on the property value change. But during the last quarter, you can see that the L3 level has come down a little 1%, but at least it has come down to 61%. And I think that is a good sign that the market has turned around. On property valuation. We have a secured loan to value of 20% and an interest coverage ratio at two point zero. The company has benefited tremendously during the past two years for the attractive long term funding that was put in place already during '20 This has meant that we have the bulk of our maturities after 2026 namely around 70%.

And It has meant that we still have an average debt maturity of two point nine years. And we are at interest rate maturity of three point one years. As I said, the as we have been amortizing debt rather than letting the new higher interest rate feed into our profit and loss statement, we still have a very, very low average interest rate of 2.43%. We realized that the debt level is still too high and we would like to bring it down significantly. We will do that by we will make no additional dividend for the foreseeable future. We will be very cautious around the new property investments. And we have we will have make very, very limited new acquisition. Will use the cash flow to repay maturing debt in order to decrease the debt level. We will also We will also make direct sales of of a fully owned real estate And also we have identified €10,000,000,000 of non core assets which we will sell in the years to come. And if that is not enough, we will raise equity in subsidiaries to address coming maturity. For instance, the 2026 maturity in August of twenty twenty six, which is the next one upcoming.

Overall, we have had we have and still have a very, very constructive dialogue with all the banks. And as you can understand, this dialogue has been made a lot easier with the when we have been able to put a little litigation behind us. And it's a very constructive climate. Also, I would like to mention that we feel a very strong support from our bondholders. And some of them has articulated very clearly that they would like to see us back in the bond market sooner rather than later. As we write in the report, we we appreciate that that some of the bondholders are still [indiscernible] those of you who would like to exchange those bonds, for newly issued bonds in the holding company, we invite everyone to reach out to us and we will address separately. Leif, time to summarize. Thank you, Helena.

We have created a decentralized group structure with three The three focus business areas and we have strong brand name in those business areas. We have Nordicas, [indiscernible] All of these properties companies have investment grade like funding. And they are growing at the moment. Through construction of buildings or through acquisitions. So each of our core holdings will will grow during the year, which is very helpful. We still need to reduce the debt and that will be mainly done by selling other assets that sits in the parents. It can be residential properties outside, say, a Faust Theatre or some direct lending to subsidiaries or associated companies. Has to be operating countries with strong credit rating and favorable population growth. And you can see some of the effects in the growth in revenues and the growth in net operating income. And we expect further growth in the like for like income and net operating income for 2025 and onwards. So feel strongly about and we are very positive about development in the underlying property portfolio. We believe also that the tide the wind has changed in the the propane market. So from a couple of years, we're declining property values, we are more hopeful to this year that we will see some value growth in the assets And that will help us to improve the financial stability in the group.

So net selling assets on the parental level combined with value growth of the assets And I will will help us to recover the financial stability in SPP. So for 2025, we are very hopeful that we will see improving figures throughout the years.

Thank you for that. And now we are ready to move on to the Q and A session. Operator, will you assist?

If you wish to ask a question, If you wish to withdraw your question, please dial 6 on your telephone keypad. The next question comes from Mary Pollack from Credit Sights. Please go ahead.

Good morning. Thank you for taking A few from me. The first is again on that $2,500,000,000 facility that you have Could you provide any more detail on tenure and cost of that facility? And also is that where does that sit? Is it At the the previous issuer, if you will, or the new issuer level? And is it secured on anything?

I think we rather not given more details other than what we have written in the finance in the finance pages of the report. So I will redirect you to read them.

Okay. And you mentioned in the report that it showed it was possible to refinance bank loans reaching maturity over the full year. Could you clarify, are the only bank loans at the residential subsidiary? Or have you also been able to refinance on the community secured on the community services properties or other properties that sit at the parent.

We have been able to refinance bank loans in the parent. Just before Christmas, we we informed about that we have dissolved a larger or two joint ventures, which we had [indiscernible] the bank loans that came with them in the parent with a large reputable Scandinavian bank.

But those were JV bank loans? They 100% owned by SBB?

They are now a % owned.

Okay. Thank you. And my last question is, it looks like occupancy ticked up and like for like growth was a little bit slower than I expected. So could you talk about the drivers there in the quarter?

The drivers behind the growth in income is to a large extent indexation of rents. Due to the inflation in the previous years. [indiscernible] community sector to slow to show a little bit slower pace in rental growth in 2025 due to lower indexation. [indiscernible] expect that the residential properties will continue with high rental growth. And high growth in net operating income. And on the cost side, we believe that we with more focused business lines, we will be able to cut costs. So hopefully, the net operating income thereby will grow faster than the [indiscernible] Thanks. And on the occupancy, I know it was only up a tiny amount, but it excuse me, the occupancy was down a tiny amount in the quarter and over the full year. Can you talk a little bit about that?

Yes, we were hit by some vacancies particularly in Finland during the third quarter. But If we include as I said, if we include the joint ventures that we have into the figures, there is no big movement in the occupation rate. And that is due to the fact that we have large pool of residential properties with stable occupancy rate. More or less from year to year. And also we have long leases with publicly funded tenants to a large extent. You should expect very low volatility in the occupancy rate for SPB going forward.

Thank you very much. Next one to ask question. The next question comes from Frederic Stenzveld from ABG Sundal Collier.

Please go ahead.

Thank you and good morning. First of all, can you sort of shed some light or elaborate a bit more on the €10,000,000,000 of non strategic assets. Would you talk about how much of that is it's rest of it? How much is public properties? How much are the loans, the JVs, etcetera?

We have We have distold some residential joint ventures with Freya Wick and Mineulia during 2024, Ouyendo twenty twenty four. [indiscernible] It's not like I must sell it now because the next big bond maturities in the second half of twenty twenty. Six. So we have the time on our side. [indiscernible] residential holdings to Syophas Theatre and thereby we don't need to hold the residential assets in the parent. So those properties are on the list. And we also have the residential properties together together with Morgan Stanley in a joint venture. We believe that the residential properties will have a strong development. So there is no like need for a quick fix. We will take our time and when we see an opportunity to divest at the joint venture, we we probably will do it. So that is the larger part of the €10,000,000,000 and that we also have claims on subsidiaries or associated companies. That we would like to reduce. So we don't intend to prolong the lending to joint ventures, meaning that a parent will get some cash from the associated companies. And together with the disposal of residential assets that we expect that will add up to €10,000,000,000 in the next years.

Secondly, can you explain why financial income has been so high now in Q3 and Q4. It's between $2.42 €50,000,000 per quarter or almost €1,000,000,000 on an annualized annualized run rate or annualized basis. So how or where is that coming from?

Yes. So as we said in the presentation, we have contributions from under lending to our joint venture and that is primarily with Cars Lake, we which was established during the year.

So that's why you have the increase in year.

Yes. But the loan to the social facilities is what's 3,500,000,000.0 And this is NOK 1,000,000,000 of annualized level. So that would sort of imply 30% interest rate. I guess we're not at that level. So is there any additional [indiscernible] [indiscernible] We deconsolidated Nordicers. [indiscernible] a loan to associate the companies that So you will see the rental income there in the the financial income. Previously, it was like a payment for ourselves. Because it was consolidated.

That is a bigger part of the increase.

Okay. So it's basically the €4,000,000,000 loans in Orkhus and the €3,500,000,000 loans to social facility. That's what make up €1,000,000,000 in run rate. The loan to Nurrikas is EUR 5,000,000,000.

Euros but it is €5,000,000,000 billion euros The value of it is in our books is 4,000,000,000 Okay. So that sort of implies that the interest rate is what 11%, 12% on average today, is that is that a fair assumption?

Yes. We used the market trend at that point of time when we reconsolidated the properties. [indiscernible] yes, the final one on that theme, because I'm just trying to get a sense of what this line item will be in the future as well. When I look at the earnings capacity, there isn't any financial income. So why is there a difference here?

Yeah. I'll say in that's a good question. I think we let me check in the on the capacity, but I think it might be like a normalized situation then.

Okay.

And we don't add up the financial income in that Okay. Maybe we can come back to you on that one. Thank you.

We expect the loan to Nurrikas, for example, to mature and we will not prolong it. So thereby, that will be in now like a ton of flow of cash flow from Orica's Okay.

Yes.

Next question?

The next question comes from Uthman Eliyaraki from Fidelity International. Please Yes. Hi, guys. Thanks for taking my questions.

Just two for me, please. The first one is you mentioned possibility to come back to the bond market at at some point, what would be the trigger for you to to come back. We did [indiscernible] Price compression or any other other thing in your mind?

Yes, the trigger, I think we will try to master as much liquidity as we can. In order to repay all the maturing debt. From the upcoming bonds. We believe that the bond market now is open to us. Even though the spreads are wide. So but it's good if we should for whatever reason fail to to trade liquidity. Then we believe that we now have the opportunity to raise the from the bond market instead So I would say the trigger would then be that we we feel that we would like to have the disposal of assets at a later stage rather than this year. For whatever reason. One reason could be that we believe strongly in the development of the value of those assets. And we believe that it's better to sell them next year instead of this year.

Okay. Okay. You just have to say that for the '26 you will more rely on I think it's also rather than a newborn to refinance or do you think differently?

The plan at the moment is to repay the repay the '26 bond with liquidity. That we get from the investments of assets.

But of course, if we would fail to do that or like we feel that we would like to delay the divestments, then we might do a small bond instead.

And I think it's That's my second question.

Yes. I think it should be seen in the light that that we are slowly but very surely returning to a normalized situation. And in that situation, we still see the clear need to bring down the debt level, but that doesn't out rule our ourselves from tapping into the bond market should it be very favorable conditions for that. Okay. Makes sense. Thanks. And my second question is on the [indiscernible] I mean, do you have a timeline in mind I know it's not necessarily a very easy liquidity source for you, but what kind of timeline do you have in mind? [indiscernible] Yes, we could do it quickly, but usually have a counterparty that have a saying as well. So So that we will, of course, negotiate with with Nurrikas and see what we can do. And if the if the terms is not favorable, we will wait And it could be so that we will wait until maturity in 2029 to receive the it can also be that we agree at a earlier stage.

Okay. Thank you very much.

Thank you.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Please go ahead.

Thank you very much. Leif?

Thank you for listening and thanks thanks for all the good questions. At the moment, we feel that we have a tailwind We feel that the rental income is growing. The net operating income is is growing. And we believe that in 2025, Hopefully, we'll see some revaluations on the properties so that loan to value will start to decrease Thank you for listening.