Catella Interim Report January – September 2021
“Catella’s core real estate operations made positive progress and we continued to improve profitability and make strategic advances. Underlying income and operating profit are progressing in line with expectations. Principal Investments sale of Grand Central contributed SEK 229 M to operating profit in the third quarter last year. Adjusting for this sale, profit before items affecting comparability increased by 85 percent to SEK 48 M.”
Catella’s core real estate operations made positive progress and we continued to improve profitability and make strategic advances. Investor interest in Catella’s property funds remained strong in the quarter, Principal Investments continued to develop its business and Corporate Finance acted as a highly-regarded adviser on a seasonally more quiet property transaction market. Underlying income and operating profit are progressing in line with our expectations. Principal Investments sale of Grand Central contributed SEK 262 M in income and SEK 229 M to operating profit in the third quarter last year. Adjusting for this sale, profit before items affecting comparability increased by 85 percent to SEK 48 M.
Catella continued to see growing interest in its Property Investment Management offering. Despite strong inflow of funds, assets under management remained unchanged compared to the previous quarter, largely due to the termination of a couple of management agreements with low profitability, and a successful divestment in the UK. Principal Investments invested some SEK 100 M in ongoing projects. Furthermore, the business area divested a logistics property in France in the quarter, which contributed to Principal Investments’ operating profit of SEK 7 M. The third quarter is normally weak for Corporate Finance, and 2021 was no exception, although the Swedish M&A market and residential transactions in France remained strong.
Operating profit for the remaining operations was SEK 51 M (259). Here too, the difference was due to the positive contribution from Principal Investments sale of Grand Central in the third quarter 2020.
Significant interest in investments in Property Investment Management’s funds
Assets under management increased to SEK 112 Bn, up by nearly SEK 10 Bn year-on-year, adjusted for the divestment of CAM France and unchanged on the previous quarter. Two management mandates in Sweden and France totalling SEK 3.8 Bn were terminated in the quarter. This only had a marginal impact on operating profit and strengthens operating margin looking ahead. In the UK, APAM divested asset management mandates totalling SEK 1.3 Bn, generating some SEK 10 M in variable income. Total inflows amounted to SEK 5.7 Bn, mainly attributable to capital raisings in the new fund Catella European Residential III and in Catella Wohnen Europe.
Operating profit for the quarter totalled SEK 57 M, down SEK 35 M year-on-year as PIM realized SEK 85 M in income and SEK 53 M in operating profit in connection with Principal Investments sale of Grand Central. Adjusted for this, operating profit in PIM increased from SEK 39 M to SEK 57 M driven by sustained strong development of fixed management fees, which where up by 7 percent.
Increase in Principal Investments
In Principal Investments, portfolio companies’ total investments in development projects amounted to SEK 3.1 Bn at the end of the quarter, of which Catella’s invested capital was SEK 0.8 Bn. This corresponded to an increase of some SEK 0.4 Bn and SEK 0.1 Bn on the previous quarter.
We completed a logistics property in France in the quarter (Moussey II), generating profit of SEK 5 M. In the fourth quarter, full profit recognition is expected to contribute to IRR of over 70 percent and a multiple on equity of approximately 1.7x for the project. This is well above Catella’s target of average IRR of 20 percent in the business area.
We are pleased with the development in Catella's latest business area, last year's larger sale of Grand Central and also Moussey II during this quarter is proof that we, together with well-established partners, are developing attractive and profitable projects across Europe.
Current projects in Principal Investments are proceeding as planned, and in the coming quarters the divestment of the largest logistics property in the Infrahubs portfolio is planned. The 70,000 m2 plus property in Norrköping is the Nordic’s largest solar cell-powered facility. The tenant is Postnord TPL, with a contract that spans 10 years.
After the end of the quarter, Catella established a part-owned development company in Poland, where Catella intends to develop modern and sustainable rental properties alongside experienced partners. As a first step, student housing and rental properties are planned in one or several major cities over the coming two years.
A quieter quarter on the transaction market
As usual, the third quarter was weak for property transactions and Catella Corporate Finance returned stable profit in the circumstances. Income decreased to SEK 107 M (148) and operating profit decreased by SEK 9 M to SEK -3 M.
In the Nordics, income increased driven by a broader offering, as well as a major capital raising to Gladsheim Fastigheter in Sweden where we remain leading in the market. Income decreased in continental Europe, mainly driven by lower activity on the transaction market for commercial properties. It is pleasing that our broader offering in the residential segment, as a debt advisor and in connection with IPOs, continues to yield results even in a quieter quarter.
In the quarter, the fund Catella European Residential III was the first to be classified as ”dark green” under article 9 of SFDR, which we are proud of. The classification means that the fund’s investments have a direct positive impact on the environment and society, and do not negatively affect any other sustainability targets. We have noted strong interest in sustainable investments, which is in line with Catella’s goals and continued journey towards becoming a leading sustainable partner linking property and finance.
Our UK operations, APAM, was after the quarter selected for the prestigious investment management mandate as part of Greater Manchester Pension Fund’s SEK 9,3 Bn UK property portfolio. This shows that we are a long-term and attractive partner on the European property and investment market. Interest in asset management in PIM remains strong and future committed capital amounts to SEK 15.5 Bn, ensuring strong growth.
Principal Investments continued to invest in projects that meet our return requirements. Over the coming quarters, we will also realize some of the projects in the portfolio.
The fourth quarter is normally the most transaction-intensive for Corporate Finance and we have a strong pipeline, mainly on the Swedish and French markets.
At the end of the quarter, the financial position remained strong at SEK 1.7 Bn in cash and cash equivalents, and an equity ratio of 35 percent, which supports continued profitable growth.
Christoffer Abramson, CEO and President
Stockholm, Sweden, 11 November 2021
Invitation to presentation of the Interim Report
Catella will be presenting the Interim Report and answering questions in a teleconference today 11 November 2021 at 10 a.m. CET. The presentation will be in English and will be made by Catella’s CEO and President Christoffer Abramson and Catella’s CFO Mattias Brodin. To participate in the teleconference, go to www.catella.com or call +46 (0)8 505 583 58.
For further information, please contact:
Michel Fischier, Head of Investor Relations and Communications, tel. +46 (0)8 463 33 86
The information in this report is mandatory for Catella AB to publish in accordance with EU’s Market Abuse Regulation. This information was submitted to the market, through the agency of the below contact, for publication on 11 November 2021 at 07:00 a.m. CET.