Kategori: Catella

The outlook on the transaction market improved slightly in the third quarter, although completed transactions did not increase notably on the European markets. The underlying sentiment is positive and there are indications that the gap between buyers and sellers’ expectations is closing, supporting increased transaction volumes going forward.

The main reason behind a brighter outlook is improved financing conditions and lower capital costs. Although transactions still take a long time to complete, market sentiment suggests that we can expect more and larger transactions looking ahead, as the market slowly but surely prices in lower capital costs.

At macro level, the outlook is also brightening with inflation under control in Europe and the US, and with key central banks in the midst of interest rate cuts. However, the outlook is not as bright in all markets, where some economies, such as Germany, continue to face challenges. In addition, the continued political uncertainty and ongoing conflicts that, besides human suffering, could lead to new inflationary pressure, increased oil prices and disruptions in logistics.

The European property market is showing signs of recovery, with some segments experiencing stabilization or even decreases in yields. This indicates that the negative trend observed over the past two years and the decline in property values may be near a turning point. Given the positive impact of increased transaction market activity across all Catella’s business areas, we are encouraged by indications from current dialogues we have across our European markets that a recovery is underway, with sellers’ and buyers’ price expectations increasingly aligning.

I recently had the opportunity to attend the property fair Expo Real in Munich with other colleagues. In comparison to just six months ago, the sentiment within the sector is markedly more positive, with a notable increase in discussing transactions based on well-founded and genuine interest.

Operating profit for the quarter amounted to SEK 19 M (32), the decrease attributable to non-recurring costs of SEK 13 M. Adjusted for this, profit was in line with the previous year, despite decreased revenue excluding commissions, assignment and production costs of almost SEK 10 M. The outcome is the result of our initiatives aimed at increasing efficiency and digitalising operations, thus reducing costs.

Balanced capital flows
The Investment Management business area takes pride in having successfully balanced in- and outflows in the core business during challenging times. The majority of capital inflows were generated in Asset Management through the growth of new mandates, where investors appoint us to manage and develop property portfolios and to reposition them in the current and future market. This demonstrates that our business model continues to generate growth opportunities even in a weaker and more hesitant market. The work associated with new investment products continued successfully in the quarter, and we are now moving out of the product development phase and towards actively seeking investments alongside new and high-profile investment partners.

During the quarter, the initiative to merge our two fund management companies – Catella Residential Investment Management (CRIM) and Catella Real Estate AG (CREAG) continued. The ultimate goal is to create a stronger, more efficient and larger fund platform in Investment Management. The merger will result in a more efficient capital raising function, improved coordination of investor relations, and stronger management and analysis capabilities.

Investment Management’s assets under management totalled SEK 151 Bn in the quarter, which represents a decrease of SEK 1 Bn compared to the end of the second quarter, primarily driven by exchange rate differences.

Planned divestments
In Principal Investments, the focus continues to be on developing and completing existing projects for divestment. In the fourth quarter, we expect to divest the French development project Polaxis. The divestments will further strengthen our liquidity and open up for new investment opportunities that meet our return requirements.

At the end of September, Kaktus Towers was awarded the prize “Europe’s Best Tall Building” by an international jury of architects at CTBUH’s (Council on Tall Buildings and Urban Habitat) conference in London. The award recognises both the building’s innovative architecture and its contribution to modern and sustainable residential concepts that satisfy the needs of today and tomorrow. We continue active dialogues with potential investors of a sale of this landmark in central Copenhagen.

Looking ahead, we are evaluating potential investments in both development projects and several European aggregation mandates with capital partners. With valuations stabilizing, we see attractive investment opportunities.

Signs of transaction market recovery
As previously mentioned above, we are beginning to see a brighter transaction market in Corporate Finance, although this has not yet translated into a notable increase in the number of transactions.

While transaction volumes in Europe were up slightly year-on-year, they remain well below the levels seen two years ago, when the downturn began. We are optimistic that the number of transactions will pick up on several markets in the fourth quarter, as this is the most transaction-heavy quarter in historical terms.

Green investments
In support of future green investments in the real estate industry, we established a Medium Term Note-program (MTN) in the quarter. In September, we issued new senior unsecured green bonds at a total amount of SEK 600 M, which attracted significant interest. The new green bonds are listed on Nasdaq Stockholm’s list for sustainable bonds. The issue is the first under our green bond framework.

In the quarter, we also continued the process associated with the implementation of CSRD (Corporate Sustainability Reporting Directive) – a new EU Directive aimed at increasing transparency and responsibility relating to corporate sustainability reporting.

Outlook
I am humbled by the confidence the Board has placed in me to lead Catella into the future during the recruitment of a permanent CEO. As indicated above, I am optimistic about the near future after more than two challenging years.

We have done and continue to do the right things. During the period of reduced activity, we have worked diligently to improve efficiency and adapt the organization. We have maintained a strong liquidity and a strong capital position and are now well-positioned to take advantage of the upturn. Our upcoming divestments will further strengthen our position. As the market improves, Catella is in a strong position to capture and capitalize on the opportunities arising, and continue to create value for our customers and shareholders in the future.

Catella presents the Interim Report and answers questions today at 10 a.m. CET.
To participate, go to https://financialhearings.com/event/48742

Daniel Gorosch, interim CEO and President
Stockholm, Sweden, 07 November 2024

The nomination committee before the annual general meeting 2025 comprises Eje Wictorson, appointed by Claesson & Anderzén, Ruben Visser, appointed by Gran Fondo Capital, and Oscar Karlsson, appointed by Alcur Fonder. Eje Wictorson has been appointed as chairman of the nomination committee.

Information about the work of the nomination committee can be found on the company’s website, www.catella.com. Shareholders who wish to submit proposals to the nomination committee may do so in writing via e-mail to valberedning@catella.se or by post to Catella AB, Att: Nomination Committee, P.O. Box 5894, SE-102 40 Stockholm, Sweden.

The annual general meeting in Catella AB will be held on Tuesday, 20 May 2025 in Stockholm.

”The Board would like to express its sincere gratitude to Christoffer Abramson for his three and a half years as CEO and President. He has contributed to the streamlining of Catella and the company’s continued growth through a cautious and challenging market. At the same time, he has also implemented significant changes and successfully highlighted our strong synergies within the Group and strengthened our Pan-European platform”, says Sofia Watt, Chairman of the Board of Catella.

”Daniel Gorosch, currently CEO of Corporate Finance Sweden, has previously held CEO positions at Colliers Sverige and JLL Sverige and has solid experience in the transaction market. Overall, the Board is convinced that he can quickly and effectively take on the role as acting CEO and President and lead Catella forward in a market that is showing signs of cautious optimism”, Sofia Watt continues.

For further information, please contact:
Sofia Watt
Chairman of the Board
+44 75 01 191 317

Veronica Hjelte
Head of Group Communications
+46 8 643 33 17
veronica.hjelte@catella.se

An amount corresponding to the proceeds of the New Green Bonds will be utilised in accordance with the Company’s green bond framework, including to finance the repurchase of the Existing Bonds under the Tender Offer (as defined below).

In connection with the announcement that Catella contemplated an issue of the New Green Bonds, Catella has offered holders of the Issuer’s outstanding senior unsecured floating rate bonds with ISIN: SE0015660444 and with an outstanding nominal amount of SEK 1,250 million (the “Existing Bonds”) to tender (subject to a transaction cap) their Existing Bonds for purchase by the Issuer for cash (the “Tender Offer”) at a price of 100.95 per cent of the nominal amount, plus accrued and unpaid interest.

The Tender Offer expired at 12:00 CET on 29 August 2024. Settlement of the Tender Offer is expected to occur on or about 6 September 2024. The full terms and conditions for the Tender Offer are available in the tender information document, which is available in the following link: www.catella.com/bonds.

DNB Bank ASA, filial Sverige, and Nordea Bank Abp have acted as joint arrangers and bookrunners in connection with the issuance of the New Green Bonds and as dealer managers and tender agents for the Tender Offer. Advokatfirman Cederquist KB has acted as legal counsel.

The property transaction market remained hesitant in the second quarter. While inflation expectations continued to fall, central banks are generally cautious about interest rate cuts. In addition, elections were held in two of Europe’s largest economies and the Olympic Games were staged in Paris, which further slowed activity in our largest markets.
The value of European property assets has continuously fallen over the past seven quarters. However, the decrease in the last quarter was the lowest since the price correction began in the third quarter of 2022. With a touch of optimism, this can be interpreted as indicating that the market is slowly returning to levels where seller and buyer expectations will soon meet.

For Catella, we note that capital inflows and outflows in the core property funds business remain limited. We consider the latter a sign of strength in the currently challenging market conditions.
The Asset Management business delivered AUM growth from managing and developing property portfolios and repositioning assets to meet current market demands. This is evidence that our business model continues to generate growth opportunities even in a weaker and more hesitant transaction market.

Operating profit for the quarter was SEK 35 M, down SEK 53 M, mainly driven by significantly lower variable income in Investment Management (SEK -99 M) in year-on-year terms. In the quarter, we divested half our stake in asset management company CatWave to Söderberg och Partners, which already held 51 per cent in the company. The divestment had a positive effect on the profit of SEK 18 M, and in 2025 the remaining share of the operations are expected to be divested in 2025.
On the cost side, our initiatives aimed at increasing efficiency and digitalizing operations continue to yield positive results compared to the previous year, with costs down by SEK 55 M.

As part of our sustainability work, we published our first Principal Adverse Impact (PAI) report in the quarter. We consider it important to follow the EU regulatory framework for sustainable finance and to maintain a responsible investment strategy. In the quarter we also completed the United Nations Principles for Responsible Investment reporting (UNPRI) for the second year running. By being part of UNPRI we demonstrate that we maintain a responsible attitude and transparency towards investors and other stakeholders. As a further step on our sustainability journey, we are preparing for a green framework to enable the issuance of green bonds in the future.

Larger and more efficient fund platform
In order to take another step towards a stronger, more efficient, and larger fund platform in Investment Management, we communicated the merger of our two fund companies – Catella Residential Investment Management (CRIM) and Catella Real Estate AG (CREAG) in the quarter. CRIM’s focus is a fund offering aimed at European residential properties, while CREAG’s focus is commercial properties. By merging the front office in the new Catella Investment Management GmbH we are creating a more efficient function for capital raising, more coordinated investor relations, and stronger management and research operations. At the same time, CREAG can focus exclusively on cost-efficient growth, and on offering fund administration to Catella and external operators.
As previously mentioned, we have now actively started to raise capital for our new product strategy “European Living Development”. The strategy satisfies the extensive structural supply shortage of modern, sustainable and affordable housing in different segments. Supported by AI tools that identify attractive areas for investment projects and a higher return profile, it meets the investor demand of tomorrow. While the initial feedback from investors has been positive, both in terms of the strategy and pipeline, one must be humble by the fact that capital raising for new strategies takes longer in today’s market.

Assets under management in Investment Management totalled SEK 153 Bn in the quarter, which represents an increase of SEK 1 Bn in the previous quarter. As mentioned, growth is mainly derived from Asset Management and primarily Finland, where we signed several major mandates in the quarter.

Continued focus on completion
In Principal Investments, the focus remains on development and completion of existing projects for sale.
Our Kaktus investment project now has all lease agreements in place and we continue to look for the right buyer for the property.
Looking ahead, we are reviewing several potential investments, both in development projects where land prices have reached levels that support our return requirements and more European aggregation mandates with capital partners. With valuations that are now appearing to stabilize at a new level, we are seeing attractive investment opportunities.

Weak transaction market continued in second quarter
Although transaction volumes in Europe increased slightly on the previous quarter (+7 percent), volumes remained down by -59 percent compared to 2022, when the downturn started. We noted some increase in Corporate Finance activity in northern Europe, where a large degree of price corrections have already materialized. In southern Europe, and particularly in France, transaction volumes have been extremely low, driven by slower revaluation, political uncertainty and a challenging financing market.
In the second half of the year, we expect to see more deals completed in our pipeline.

Outlook
It is still too early to say that we have hit the bottom, but based on the dialogues we are having with investors, interest in investing in properties as an asset class is gradually increasing once again.
We have completed and are completing the necessary initiatives to increase efficiency and digitalize our operations. Some will take effect as early as this year, while others will contribute towards strengthening Catella’s growth and profitability when the market begins to recover.

Catella presents the Interim Report and answers questions today at 10 a.m. CET.
To participate, go to https://financialhearings.com/event/48741

Christoffer Abramson, CEO and President
Stockholm, Sweden, 21 August 2024