Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Wallenstam AB (FRA:WAE) has started approximately 170 new apartments in Stockholm and Gothenburg, expanding its housing portfolio in key growth regions.

• The company has entered the commercial segment in CBD Stockholm, acquiring a property with an assessed value of SEK2.8 billion, which is expected to enhance its portfolio.

• Net Operating Income (NOI) increased by 11% compared to last year, reflecting strong operational performance.

• Rental income rose by 7%, driven by both new constructions and existing holdings, indicating robust demand.

• Operating expenses decreased by 3%, primarily due to a significant reduction in electricity prices, contributing to improved financial efficiency.

Negative Points

• The commercial holding in Gothenburg has a vacancy rate of 6%, indicating challenges in fully leasing commercial spaces.

• It takes longer to sign new contracts with tenants, suggesting potential difficulties in tenant acquisition.

• Participation in profit losses of associated companies resulted in a write-down of SEK152 million, impacting financial results.

• The total result after tax for the quarter was negative, partly due to value changes in interest rate derivatives.

• Higher expenses related to property management and weather-related costs increased by SEK28 million and SEK3 million respectively, affecting overall cost management.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with FRA:WAE.

Q: Can you provide more details on the recent property acquisition in Stockholm? A: Susann Linde, CFO, explained that Wallenstam has entered the commercial segment in CBD Stockholm with the acquisition of the iconic scraper at Sergels Torg. The purchase price is based on an assessed property value of SEK2.8 billion. The company plans to refine and modernize the building to create attractive premises with amazing views over Central Stockholm.

Q: How has the rental income performed this quarter? A: Susann Linde reported that rental income increased by SEK151 million, up by 7% compared to last year. This growth is attributed to both completed new constructions and comparable holdings. The commercial base rent increased by almost 6%, and residential rents saw a total growth of 4.5% following negotiations with the Tenants' Association.

Q: What are the current vacancy rates for your properties? A: The residential holdings are fully let, while the commercial holdings in Gothenburg have a vacancy rate of 6%. The company is focusing on retaining existing tenants as it takes longer to sign new contracts.