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Edited Transcript of CAST.ST earnings conference call or presentation 24-Jan-20 8:00am GMT

Q4 2019 Castellum AB Earnings Call

Göteborg Jan 31, 2020 (Thomson StreetEvents) -- Edited Transcript of Castellum AB earnings conference call or presentation Friday, January 24, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Henrik Saxborn

Castellum AB (publ) - CEO

* Ulrika Danielsson

Castellum AB (publ) - CFO

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Conference Call Participants

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* Erik Granström

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Niclas Hoglund

Nordea Markets, Research Division - Senior Analyst of Construction & Real Estate and Sector Coordinator

* Philip Hallberg

Danske Bank Markets Equity Research - Analyst

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Presentation

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Operator [1]

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Hello, everyone, and welcome to the Castellum Q4 Report 2019. Today, I am pleased to present CEO, Henrik Saxborn; and CFO, Ulrika Danielsson. (Operator Instructions)

I will now hand you over to Henrik Saxborn. Please go ahead.

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Henrik Saxborn, Castellum AB (publ) - CEO [2]

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Thank you very much, and welcome everyone to this Q4 2019. I will start to describe what we've done in 2019, and then we will also give you a view on what we see in front of us in this year and the next coming years.

And can we start, please, with changing the slide? So what we have done this year, 2019, we have worked hard with -- in the strong markets and we have worked with -- positioned us for the future. And it has been lot of ongoing many negotiations and a lot of working with the existing pipeline. So we have rented out in the same pace that we did 2019, more or less over SEK 400 million in contract volume. We have, in the last quarter, achieved new top rent levels in our portfolio. We have also seen contracts all over the portfolio getting to new levels, simply.

It has also been the year where we continue to renegotiate, and we have renegotiated in up to actually amazing 22%. That is already in the P&L. So the rent levels in the like-for-like portfolio has been going up with 4.4% compared with last year.

We have seen effects on our efficiency program, and we can -- I can proudly announce that we have saved SEK 60 million in the portfolio. And that has also been something that we have benefit from when we're achieving our 7% growth that we created this last year. So -- and the existing portfolio has been the strongest contributor to the growth in the portfolio in the last year.

We have also strengthened the balance sheet, and the properties have increased with SEK 4 billion and are now worth approximately SEK 95 billion. So to this, we should add that we've built properties for SEK 3 billion -- we bought properties for SEK 3 billion, but we sold also at the same time for SEK 4.5 billion. This means that we only invested SEK 2 billion this year, and that was a contributor also to that we lowered the LTV down to 43% together with the growth of the values, of course. And that is -- then we have constantly lowered the LTV since we bought Norrporten in 2016 and has one of the strongest or maybe the strongest balance sheet in the Nordics right now.

It's also been in a year when we took the next step in the Eurobond market and benefited from the attractive interest rates and longer durations. And we are -- we also made our new business, United Spaces, profitable. So all in all, an active year, stronger balance sheet and better position for the future to come.

And with that, I would think I'll leave the word to Ulrika. Next slide, please.

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Ulrika Danielsson, Castellum AB (publ) - CFO [3]

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So if we go to the P&L or the income statement. When we closed the book for 2019, we can conclude that income from property management increased with 7%. And that was due to a good rental market expressed in higher rental values, cost control, projects completed and lower funding cost. We also had a value uplift of roughly just above 4% due to strong cash flow, project gains and lower yields. And the last quarter's value uplift of roughly 1.5% was mainly cash flow driven. A negative change in derivatives, and then finally, taxes of roughly SEK 1.1 billion, of which SEK 165 million was cash flow driven. So this in all, together with a strong balance sheet, is the reason for the Board's proposed dividend of SEK 6.50 per share, and that is also an increase with 7%.

So if we go to the next slide, please, and go into the NOI. So the story and the development of the NOI is pretty much the same as previous quarter, meaning that the biggest contributor is the like-for-like portfolio of pure management that increased SEK 190 million roughly. And that was mainly driven by top line growth and good cost control, followed by developments. And since we are in a [sell-off] in 2019, it means also that we lose cash flow compared to 1 year ago with SEK 172 million. And then finally, the co-working part delivers a positive result even if it's small. But in that industry, it is spread around.

So if we go to the next slide. We have the rental market. So if we look into the history, the rental market has, as you all know, been strong the last years, and the organization has therefore made a lot of renegotiation. And that is the reason for the like-for-like growth of 4.4% apart from index and rental income. But rental income is a net of rental levels, vacancies and incentives. So if you split that in different buckets, 5% is the actual increased rental levels. And however, we have some increased vacancies, but also lower income from tenants paying up for leaving earlier. And that means that the net top line growth is 4.4%. Another value-creating part is the development of the projects. So if we add that, the total growth in the portfolio is 7%. But as we have mentioned earlier, the net selling means that the top line growth lands on 4.4%.

So if we then go to the next slide and look into the market.

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Henrik Saxborn, Castellum AB (publ) - CEO [4]

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Yes. If you look at what we achieved on the rent -- net leasing, we had better last quarter 2019 than last year. We had a net leasing of SEK 14 million. And the growth was actually SEK 146 million. That made the net leasing ending up for the year minus SEK 24 million. This consists of mainly leasing out in the existing portfolio and less in the projects than we have seen in 2019. Going forward, we already know that we will have more signed contracts in the projects 2020 than last year, so it will be an important difference going forward. That means that we'll have one of the best leasings out of the new developments next year than we've ever seen. So to summarize, a good leasing activity, little bit more turnover in the leasing and portfolio than earlier years, good new contracts waiting for building permission or something similar.

So if we're looking at the supply, we can look at the next slide, please. It's very interesting actually, looking at the offices in the 3 cities that we take as an example. And this simply is that we can see that the supply is still too small in the near term. So even if you see a lot of more developments in the town, it will be built approximately 1% to 1.5% of the stock. And it's just in line with expected growth. This means that there's a very limited risk in the markets going forward. The reasons behind this is still slow zoning plans. And it means that we will still see low vacancy rates and need for more density in our existing offices. It's the same picture in all our cities except Copenhagen.

And we can look into rental levels and vacancies. If we take the next slide, please. We can conclude that the increase in average for the markets in Stockholm has -- according to analysts, the increase being approximately 7% all over the last year; and in Gothenburg, approximately 4% generally in office; and said that we increased our rents in the Q3, the P&L, with 22% on the done negotiations. And we also have noted that we have done the best rent levels that we've ever done. So for one example, we leased out in Stockholm our best CBD location for SEK 7,500 per square meter a year. And that's a new top rent that we signed. And we signed it actually 2 weeks ago. The same pattern is still in the rest of the towns in all of our markets. So we see still a strong demand in the market, and we still have very few left vacancies going forward. I mean you will see that when we go through the projects as well.

If we look at the logistics market, it's divided in attractive locations. There is more or less no vacancies in -- if it's efficient assets. This means that the rents are increasing in the last mile locations. If we look at something called the national or international logistics assets, the rents can be huge and be more or less anywhere in Sweden, you can say that rents are between SEK 500 to SEK 850 per square meter a year. And if they are located outside Stockholm, the rents will be approximately a little bit less than SEK 1,000 per square meter. If you are talking last mile, we now see top levels in our portfolio, SEK 1,740 per square meter in the year outside Stockholm. And if we're talking about outside Malmö and Gothenburg, the rents are up to SEK 1,000 compared with the old rent levels we had in the logistics asset.

So to summarize, a strong stable market and limited supply continues in our markets. And then we can take the next slide, please.

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Ulrika Danielsson, Castellum AB (publ) - CFO [5]

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A little bit about the cost side. Just to say something about the property costs. They have moved downwards or decreased if we put higher property taxes apart despite selling (inaudible) costs or moving costs to other lines such as ground rent. And this has been created despite high unit prices in the market on heating, water supply, electricity, et cetera. And the main reason is the efficiency program that Henrik mentioned earlier that has so far saved us SEK 60 million.

If we then look into the interest rates cost or the interest rate expenses. Castellum, after last year's work with lowering the LTV, of course, that work has been supported by increased property values. But we have also worked with the level of debt in absolute amount. And since 2016, the debt portfolio has increased with only SEK 2 billion or 6%, while the property value has increased with SEK 24 billion or 34%. And as you all know, the last year's low interest rate environment has meant that the easiest way to bring down the average interest rate is to bring in new debt volume. Despite that, the [sterling] amount has increased with 6% and has almost the same volume as 1 year ago. We have reduced the funding costs with roughly 20 basis points in average.

So the duration in the interest rate portfolio is 3.3 years, and we are comfortable with that in this low interest rate environment. Another duration that is almost more important, since the margin paid to debt investor to bank is the main part of the funding cost, is the capital duration. And I do realize that companies have different ways to measure or look at this, either as a duration reflecting promises to lend money without knowing the funding cost or duration under which we know the funding cost. In Castellum, the first one we call capital duration, and that was 3.8 years at the year-end. The latter, we call credit price maturity, and it was 3.2 years at the year-end. And that, the last one, is the method that we are focusing on when looking into duration. So duration for Castellum is equal to knowing the funding cost.

And finally, taxes. Despite that Castellum has tax losses carried forward, we do pay tax. And that is due to -- that almost all of it are locked in, in acquired companies and cannot be used for the whole group. We also had bigger reconstructions and depreciations possibilities in the last quarter due to completion of projects, which means that we brought down the paid tax in the late quarter. And the efficient tax paid, if we would not have had any tax losses carried forward, was 9% for 2019. And maybe that can be a guidance for next year, everything equal.

And if we go to the balance sheet on the next slide. The balance sheet of Castellum is strong. And the LTV continues downwards and was at the end, 42.9%. The valuation yield was unchanged compared to Q3, 5.1%. And this strong balance sheet gives us an NAV at the end of December '19 SEK 180 per share, which indicates a growth of 11% despite a dividend compared to 1 year ago.

And when we do talk about NAVs, I think it's worth mentioning on the next slide, that new NAV metrics will be applied from Q1 2020, and they are aligned with EPRA's new definition from this year. And the very short version is that the 2 NAVs will became 3. And the NAV that Castellum are focused on is the long-term NAV or the EPRA NAV, and that will tomorrow be equal to EPRA NRV. So in the end, for Castellum, as we see it now, it's just a rebranding for us.

And if we go to the next picture, regarding the property portfolio. Castellum focus on office, public sector and logistics warehouses, and they together stand for 86% of the portfolio from a value point of view. And the biggest regional exposure is towards Stockholm, followed by Gothenburg or West as it says on the slide. And the average valuation yield is, as I said earlier, the same as in Q3 but 20 basis points lower compared to 1 year ago. And regarding uplift for the full year, offices have shown the biggest uplift, and from a geographical point of view, it is Stockholm that showed the highest uplift. But I will come back to valuation later.

And then, Henrik, the projects?

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Henrik Saxborn, Castellum AB (publ) - CEO [6]

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Now I think I will talk, if we look at the next slide, on property markets, giving you some view from the internal side. We have had a turnover in Sweden on SEK 218 billion approximately, and it's down 447 deals in the market. We have experienced huge interest for the direct market. We have seen that on the prices. We have seen foreign investors execute 30% of the deals, and that's a high figure of historical reasons. So you can more or less say that the simple way of looking at it: yields down, still continues down. And my view is that we see that continues into the market going forward. And you can more or less say that all types of existing assets in our part of the Nordics, with lower yields except for retail. So a very strong demand and less investor opportunities or any opportunities still in the market. So it's a strong -- extremely strong market that we're looking at.

And then I guess, I'll let you go back to valuation, Ulrika.

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Ulrika Danielsson, Castellum AB (publ) - CFO [7]

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Sorry. The valuation on the next slide. We have an internal valuation in the balance sheet, and that amounted roughly SEK 95 billion. And this year as well as the previous years, we let an internal valuer, Forum, do a valuation on 55% from a valuation point of view of the portfolio. And that part of the portfolio reflects Castellum's spread, you could say, in different asset classes and geographic.

Comparing Castellum and the external valuation, it shows that Castellum is 1.8% above the external valuer with an average deviation of 6.2%. And that is well within the uncertainty scope that is normally 5% to 10% depending on type of asset. However, there is differences within different asset classes, where you could say that Castellum are more positive to logistics and public sector and less positive to retail compared to the external valuation. And that is about the same story as last year, but the differences is, however, smaller.

If you do look into our gross value changes the last quarter, it is mainly cash flow. And it should be like that in the market we are in and the fact that we know the CPI at least for 2020. And as you can see, the impact from selling is negative, and that is mainly connected to us leaving Sundsvall in the North and 4 retail assets in Uppsala. And that negative impact is, however, mitigated by a big deferred tax income further down into the P&L account.

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Henrik Saxborn, Castellum AB (publ) - CEO [8]

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And if you look at the next slide, please. We have this map over all the projects or developments. And I would just want to conclude that the pipeline is large. What you now see that we have SEK 10 billion plus SEK 4 billion under production. It means that we have SEK 14 billion that will be started or are under production all over Sweden at the moment. So it's not only large. It's also divided into many midsized projects. So we are not depending on one single one, no one zoning plan or one political decision. And that's very good going forward. And the yield on the total cost is attractive compared with the market yield still. The office are -- completed, on average on 6.5% or 6% yield compared with the market. And we still know that we can do logistics approximately at [5%] yield. So this is very profitable going forward, simply.

And we have -- if we go to the next slide, please. We can see the development pipeline that's ongoing. And here, we have the ongoing SEK 2.4 billion, and we are more or less going to double that during 2020 if it's according to plan. And the next coming phase of projects, together with the ones that are ongoing, has a good rent situation. So this looks really, really good. And I can also state that on the first line, we have Öskaret, and that's the same development that's called Stockholm [Vatten] earlier. And here, we state that we have 28% rented out. But we also will announce now today that we are renting out to our co-working concept. It means that we will only have 3,600 square meters left in that development in the first phase before we start to develop new parts of the development. And it's also a site where we have top rents on these markets.

So going forward to the next slide, please. We have some examples. I'm going to run through them quickly. We have the Swedish Courts. It's law courts that you know that we are building in Malmö. 25,000 square meters, SEK 1.2 billion. Here, we more or less only are -- we're only waiting for the building permission from the municipality. And when they sign, we will start the development, and you will see that coming into the net leasing. That's not in the figures right now. So that will come hopefully Q1 this year.

We can take the next slide, please. Here, we have some more developments. We have the GreenHaus; we are in Helsingborg right now. We have started 7,000 square meters. It will be completed summer '22. It's leased out now to 31% already before we started. It will also include all the new technique we have in-house. This will also be included, the service concept we have. So we're really looking forward to getting that on into the market.

And we also have here (foreign language). That's what's called Kungspassagen, and it's in Uppsala. And it's something we have worked with for a long time. It's 12,000 square meters, more or less on the train station in Uppsala. We have leased that out to 69%. It's under development. So it looks really, really good. It will be completed in '21.

We have Emigranten. That's on the left-hand side. It's 4,000 square meters, which is under marketing right now. It's the first house in the new area. That will be very interesting for the town. It will be a new area with apartments, offices and close to one of the best restaurant locations in Gothenburg on old industrial land, absolutely out by the water. It's somewhere I would like to live, but now we're building an office instead. So hopefully, we'll proceed as is going forward.

And the last one on the right-hand side is down in Lund. I would also want that as [operations], not only offices. It's also service and logistics for the cities we are in. This is something we can build rather quickly and get in high density, into the areas we are. And with good leasing activity, this will start and support the cash flows already the next coming year.

And the last one is Säve airport. We have -- had been talking about that earlier. But what's important now is that we completed the acquisition on Säve in the end of last year, and that was a really favorable deal for us. It means that we can invest with lower investments with SEK 1 billion compared with what was done in the first deal. It means also that we can move faster. And as we started earlier, we -- where we have stated earlier simply, is that we expect to invest approximately SEK 10 billion in the coming years in this area. It will be logistics, but it will also be development center for sustainable transportation both in the air and on land, and the biggest heliport in the Nordics. So this is extremely interesting.

And on the next slide, you have hopefully seen in the results, we turned United Spaces around. And it had positive figures in this already on this year. So it's very positive and it's sustainable. But what's new is that we will now then start on 4 new sites in 2020, 2021 in Uppsala, Stockholm, Helsingborg and Gothenburg. And together, they will double the volume and it will be more to come, simply like that.

So then we'll go to the next slide, please.

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Ulrika Danielsson, Castellum AB (publ) - CFO [9]

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Then funding costs. Just on that flexibility, I want to have many tools in the toolbox in order to match the organization or the profit portfolio's need for money. We have been active in 3 markets or used 3 tools for quite a while now: the banks, the bond market and the CP market. We experience good access to funding with the Nordic banks, and at the moment, stable margins despite new regulation put onto them. However, that can change, and it will almost likely do.

The demand in the bond market is good. There is a lot of money out there seeking placement. Focus on the market is, as we experienced it, 2 to 5 years in the Swedish bond market even if you can do a bit longer duration in smaller amounts, but a little bit longer in the Eurobond market, up to 7 to 8 years.

And the short part of the capital market, the so-called CP market is stable. The prices in absolute amount has increased due to increased STIBOR. But the spread has come down. So despite that, we continue to see the CP market as a cost arbitrage compared to lending in banks and has a volume outstanding of roughly SEK 5 billion. That, of course, is fully backed up by unused credit facilities.

And what have Castellum done in 2019? If we look into the next slide. So when we closed the books for 2019, we can state that we have a negotiated SEK 7.8 billion in bank debt and prolonged the duration. We have closed down bank debt of roughly SEK 1.6 billion. We are issuing to Swedish bond market. We have issued SEK 4.1 billion on different duration from 2 to 10 years. We have issued NOK 850 million for a tenured bond and EUR 400 million for 7 years. So high activity. At the moment, we do see that even if we have issued a lot of bonds, that we still will have a considerable volume of bank debt, mainly in RCF, since, as I said earlier, they offer good liquidity and flexibility for us.

And regarding the CP market, we still continue that -- to use that market for cost reasons. At the year-end, we have roughly SEK 20 billion in non-used debt commitments, of which roughly half is back up for CPs and liquidity reserve. The rest stands ready for being used. So with that said, the access to different debt funding sources, different debt markets, together with really strong balance sheet and good underlying cash flow, means that Castellum has a really strong financial position going forward.

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Henrik Saxborn, Castellum AB (publ) - CEO [10]

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And if we take the next slide, I think that's maybe the most important one, what's going to happen in 2020. If we look into the market, we still can see the Nordics looking just in a stable position as it is now going forward. We can't see anything else than it's a huge demand. In our view, with more to come on the value growth, we can see the direct market has capacity to create stronger returns. And we're also seeing the return on equity -- or the demands on return on equity will be going down. So we are positive on value growth going forward. We can see the supply will still be limited to 1% to 1.5%. And in the near future, we can't see anything else that would interrupt the market in that respect.

If we look at the customer side, developments continue towards e-commerce in the logistics. It's strong. It needs to be rebooted. It needs to be -- have new structures. And you will still see tenants looking for efficient way to supporting the e-commerce that are growing. You will see strong developments going forward on sustainability. It's really here now in the Nordics. Your wish is to be more efficient, and you, therefore, want to have more density in your office since the prices is still stable or upwards simply for the tenants.

If you're looking at the Castellum way or just Castellum, I can conclude now that we are very strong. We have a strong balance sheet, and we can create our own growth. And I think that's one of the most important things. Whatever happens, we can do this. We have capacity in development pipeline. We have existing portfolio that gives us growth and better quality than we ever had.

So we know that we can start SEK 10 billion in the next coming 2 years. That will, of course, impact the (inaudible) positively in 2021. And in the existing portfolio, there are 3 things that we'll be able to create growth: still the renegotiation power, more efficiency that we have shown that we can do and we will continue doing. We know the knowledge and we know what we're going to do. And this strong balance sheet that are coming back to you that we will benefit from. So we have the capacity to take care of our tenants, simply.

So I then want to conclude this, and thank you for listening. And start with some questions. If we take the next slide, please. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes with the line of Niclas Hoglund from Nordea.

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Niclas Hoglund, Nordea Markets, Research Division - Senior Analyst of Construction & Real Estate and Sector Coordinator [2]

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Niclas Hoglund, Nordea. A couple of questions from my side. If we first start out with the rental market. I mean you give a pretty positive view here. You weren't that positive in the first quarter of the year, but then it seems like things have been turning on the positive side. You're mentioning that you're awaiting this sort of building permits for 2020 and should be then supported on -- at least on the gross letting side. Could you share some numbers in total and the timing, we know the sort of court in Malmö, but for the other projects?

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Henrik Saxborn, Castellum AB (publ) - CEO [3]

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I can say that, that's the big bulk that we will start with, it's the 2 ones in Malmo. And as you said, this court -- the court will -- we are waiting for that one, hopefully Q1 then. I think you have to wait another quarter on E.ON, and then we hopefully will have the permission in place there. Then we have smaller projects that we have not named. That is the same category. And they will give us permission during the year, I expect. So you will have a line of midsized ones coming in more or less in a stable pace then going forward in the rest. But the big difference is, of course, that we will start over SEK 2.5 billion -- around SEK 2.5 billion in the first half year.

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Niclas Hoglund, Nordea Markets, Research Division - Senior Analyst of Construction & Real Estate and Sector Coordinator [4]

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Right. And any numbers that you would like to share with us? If Malmö's [sales] is around [105] or something like that?

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Henrik Saxborn, Castellum AB (publ) - CEO [5]

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Sorry, excuse me, I didn't get it. Is it around...

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Niclas Hoglund, Nordea Markets, Research Division - Senior Analyst of Construction & Real Estate and Sector Coordinator [6]

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Sizes. I mean could you share some numbers on growth...

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Henrik Saxborn, Castellum AB (publ) - CEO [7]

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I would love to come back to that. Simply take the -- so say, simply take out the SEK 2.5 billion that we talked about and then pace into the numbers the rest of the 10 going for this 2 years then going forward.

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Niclas Hoglund, Nordea Markets, Research Division - Senior Analyst of Construction & Real Estate and Sector Coordinator [8]

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Right. And my second question is related to the property market. You had a pretty decent finish to the year, close to 1.6% revaluation support. I was a little bit surprised that yield assumptions remain unchanged given that we -- at least, we have seen a couple of transactions and we've been talking about a pretty good demand. So why aren't the yields coming down?

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Henrik Saxborn, Castellum AB (publ) - CEO [9]

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I think it's 2 reasons, actually. I mean first of all, it's the value. I mean in this [deviation], you have different things. But if we start with the value, we are in a pattern of lower yields, as we have explained. And it's just where are we right now that is very complicated to getting right price, honestly. So I'm positive on deals going forward. So I have that set. The second thing is actually in -- this is in our numbers. One figure that gives us a little bit more tricky is called the vacancy figures that are changing in that valuation. That gives you the -- we are still on the 5.1% in that one. I can support your view and say let's see where we are in Q1 and Q2.

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Niclas Hoglund, Nordea Markets, Research Division - Senior Analyst of Construction & Real Estate and Sector Coordinator [10]

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Then on my final question. I mean given the quite positive outlook and the support from projects and short-term value, so why are you keeping your balance sheet this strong right now? Isn't it good opportunity to sort of utilize this strength? Or are you waiting for something to happen?

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Henrik Saxborn, Castellum AB (publ) - CEO [11]

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We want to do really good deals, of course, and are cautious on that one. But I think we definitely would like to in the future benefit from the strong balance sheet.

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Operator [12]

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Our next question comes from the line of Philip Hallberg from Danske Bank.

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Philip Hallberg, Danske Bank Markets Equity Research - Analyst [13]

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Yes. I wondered if you could shed some light regarding the quite large terminations that you had here in Q4 in both region Western and the mid-region. I know that in Q3, you talked about you moving around some tenants in the logistics side. But could you give any updates regarding this quarter?

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Henrik Saxborn, Castellum AB (publ) - CEO [14]

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No, I agree. We have -- I think you're going to expect -- we're expecting higher turnover in the portfolio going forward. I think that's part of the pattern you see in the market. And in this case, on the negative side -- I mean, I like to talk about the positive and negative, but if we're going to talk only on the negative, I think I know that this is -- the largest ones is 2 larger contracts that are giving us notice. One is definitely moving, and one other we really hope to renegotiate and keeping them in our assets.

But yes, we still expect a turnover. The ones that we're talking about is, in this case, I should say, more or less government in the investments or government companies. But that said, it's not a trend or anything. It's more something that you see all over the place. We're helping our tenants to get more efficient. So this is something we're getting used to. So think in the future of turnover, that we have to be a winner. We're going to be a winner in that, but on the negative side, simply. But the most important part is that we turned around the last Q4 net leasing to a positive figure compared with last year.

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Philip Hallberg, Danske Bank Markets Equity Research - Analyst [15]

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Okay. And then I have another question regarding -- you talked about, and you've talked about this for quite some time, that it's a very fierce competition on the transaction market and that the way going forward is more related to project investments. You stated you have roughly SEK 10 billion to invest here in the coming 2 years. But I guess this is true for most other companies as well. And we have seen a quite large ramp up between both listed and unlisted players within project development. So I'm not worried about the supply side, but what are your views on competition for new tenants going forward in relation to new project investments?

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Henrik Saxborn, Castellum AB (publ) - CEO [16]

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I think it's very important to look at the pre-let figures on the developments. And that's why we focus on that. And we have high demand on pre-let before we're starting. And I think -- and from our side. And the good thing with the pipeline or developments is that during the last minute, you can decide if you're going to do it or not going to do it compared with the market. So I think that's the figure they're going to look at.

And as we stated earlier, we are looking at what's possible to build and a plan to build the next coming years. It looks that we still are on a pace of 1% to 1.5%. And I was actually expecting that figure is going to be higher. But we are 1%, 1.5% going forward in the next [company sales] what we can see at least in our towns. So on the competition side, I would honestly love to say that we were in the other towns building a little bit more to support the growth that are in the towns right now. So not worried at this moment. And that's, of course, something that we're following very, very closely.

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Operator [17]

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(Operator Instructions) Our next question comes from the line of Erik Granström from Carnegie.

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Erik Granström, Carnegie Investment Bank AB, Research Division - Financial Analyst [18]

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I had a few questions as well. I would like to start off, first off, with your investment page within the portfolio. You're reaching close to SEK 3 billion for 2019 or close to SEK 2.8 billion, which has been sort of the figure that you've had for a number of years now. It seems to me, Henrik, that now your project portfolio is increasing. Is this still sort of a figure that we should expect for 2020 and going forward? Or do you, already at this point, are able to give us some other figure for 2020 in terms of your planning?

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Henrik Saxborn, Castellum AB (publ) - CEO [19]

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No, I would like you -- I will, in this pace -- the pace that we will have 12 months from now, I expect that the pace for that month is going to be doubled than it is right now. Means that we can't get the volumes up but more quicker. And it's all depending on the big 2 ones now going forward when they start. But the pace is going to go up. So we're going to double the pace on the development side. And it's just a question about when to start simply. So if you take an isolated 1 month from December compared with the 1 month December now -- 1 year, I think it's doubled. So if we give you the rough figure where we're going to go for the 2 deals on 2020, maybe we're going to pace it up to SEK 3.5 billion, something like that, to be honest. But we are going for double the pace simply going forward. Was that clear?

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Erik Granström, Carnegie Investment Bank AB, Research Division - Financial Analyst [20]

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Yes. Absolutely. Perfectly clear. Just to sort of go back again and talk about those 2 main projects that you have in Malmö, it seems like they've been a little bit delayed in terms of the permission process or the permit process. Do you feel -- right now, is that Q1, Q2 indication, is that something you have more firmly now from the invested parties in the discussion? Or is this still a little bit up for grabs?

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Henrik Saxborn, Castellum AB (publ) - CEO [21]

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You have to -- if I divide them, we take the courts first. They are, I should say, the permits going to be in March, April, according to plan, to be 100% clear. I don't have any documents more that they have to be signed, except the building permission. Then we're done. The contract is done. Everything, contract, everything is done. It's just the building permission coming forward.

On the E.ON side, it's still under design compared -- because of some government demands that we have to clear. So that's out of our hands. But we are still waiting for getting that through the procedures. And if that takes 1 or 2 months longer, we don't know. So I should paste that in during the Q2 right now. And if that moves, then we'll come back with more information simply.

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Erik Granström, Carnegie Investment Bank AB, Research Division - Financial Analyst [22]

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Okay. And my final question was actually regarding your -- so your trend or your plan that you had for Finland. It's been 1.5 years now, I believe, since you made your first, and at this point, only acquisition in Helsinki. You were looking into increasing your portfolio there because I assume you would like to get some more economies of scale. What's the plan in Finland? Is competition simply too high? Or is it something else that have sort of changed your mind or view of Finland and Helsinki?

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Henrik Saxborn, Castellum AB (publ) - CEO [23]

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No. Simply, we're not the only one in love with Finland, to be honest. So we're not dancing right now. Someone is stealing the bride on the dance floor all the time. So yes, it's a good competition. It makes us a little bit slower, and we have all the time to adjust our requirements for return. So we're looking into that. And honestly, we're spending a lot of time on how we will look in Helsinki, what's the opportunities going forward. My view on growth is still the same as it was earlier. But we're not the only one to want to dance, simply.

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Erik Granström, Carnegie Investment Bank AB, Research Division - Financial Analyst [24]

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Okay. So a little bit more aggressive on the dance floor and you should be good to go.

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Henrik Saxborn, Castellum AB (publ) - CEO [25]

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Yes.

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Operator [26]

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And as there are no further questions registered at the moment, I will hand the word back to the speakers. Please go ahead.

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Henrik Saxborn, Castellum AB (publ) - CEO [27]

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Yes. We're thanking everyone for listening. And if we don't have any touch with you in the next coming 2, 3 months, we hope to have a call with you in April again. Thank you very much.

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Operator [28]

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And this now concludes our conference call. Thank you all for attending, and you may now disconnect your lines.