Hello all InderesTV viewers and listeners. Sunborn International just organized their Capital Markets Day and I have the company's CEO, Hans Niemi, here with me today for an interview. Welcome, Hans. Always a pleasure to have you here.

Good afternoon. Tomas.

If we start off by the big picture, how would you summarize Sanborns capital markets today?

Well, first of all, it's our first ever Sunborn International PLC Capital Markets Day. And and what we brought to the table is perhaps a revision of our plans and strategies. I think we have more clarity on now on some of the timings of our development processes. We brought to the table our aims for the capital raise that we're going to be engaging for the various projects on different stages over the next six months. We announced the the new executive team with with Dale Hibbs joining the company and also talked about the sort of new financial targets for 2030, and talked about the 2025 financial results, which have obviously been disclosed earlier.

Yeah. So if we go into these one by one, but start off double clicking on your hotel pipeline, I guess you could say that for the upcoming years, the new London Hotel Vancouver and the relocation of the current London hotel are in the center stage. How are these new London and Vancouver hotels achieving a 40% EBITDA margin that you're targeting on this strategy period?

Well, it's it's a good question. Um, in London, with the existing assets that we've been running, we've been able to have a range of between 32 and 37% EBITDA margin. It kind of depends on the year. Um, it's impacted by the event centre next to us and the, the cycle of biannual events and whatnot. So but that's kind of where that product is able to go to. And what the new evolution series vessel does is it's a larger room base in a slightly larger hull model. So it's more efficient in terms of that. But also we have in the new ships is our new Sanborn energy system, your thermal energy system, and the latest advancement in Hvac systems and energy efficient plants and machinery. So that will play one part and the other one is the scale of economies that comes out of having more rooms, but pretty much the same fixed cost base and the same amount of staff. Of course, there's going to be a little difference there, but those will trickle down and I think we will be able to do even better than what we're forecasting here. There definitely is room for that. Um, Vancouver and London are not exactly the same, but the whole structure that we're building is based on the same hull model. Vancouver has 250 bedrooms, and then the London hotel model is geared towards 225 rooms. There's not a big difference there, but that's kind of where that bridge to EBITDA is going to come from.

So both of these are quite a bit larger than the current London Yacht Hotel, with its 138 rooms. But I guess the economics of the Vancouver hotel markets are also is also one thing affecting this projections for sure.

So as we disclosed in the CMD, Vancouver is one of the hottest property markets in North America and is is in demand, according to the city and the latest studies, around 10,000 hotel rooms are needed in the market, but it's a very long winded process for the local market to go through the development processes, which we know now by heart, because we've been spending the last four years doing that. And so the average time it takes to get permissions in Vancouver is, is up to seven, eight years. So that's going to drag on the on the supply of new hotel rooms to the market. Enter Sanborn speed to market. Pretty sizable product that we're delivering to the Vancouver Harbor area. And as we heard from Andrew Boise, one of our partners in Vancouver from the Harbour Flight Centre and Ledcor, um, it is the best prime real estate location for a hotel development in Vancouver. And so on its own. If you look at the address and Rep-pcr profiles for Vancouver, obviously that's been driven by the fact that there's a shortage of hotel rooms. So you have the best in class occupancies for the whole market. Um, five star occupancies and the whole market occupancies are very close to 90%. Um and the ADR are just astronomically high. And as new new developments come online and new hotel rooms are being built, that will surely impact the market. But we're expecting that market situation to last for the foreseeable future. And then you have big things coming in Vancouver like like the World Cup. That is just going to make it even even more crazier in terms of rates and occupancy. So I wish we were already there.

Yeah, but sounds like the timing is suitable for you guys. Correct. But considering the pipeline you laid out there, you're looking to begin the building of the Vancouver and London hotels this year or early next year. The latest. And at the same time, you're looking to relocate the current London hotel to Sevilla once the new hotel asset is ready. Isn't this quite a lot? Building two hotels at the same time, three hotel openings in three years isn't really going to lose his night of sleep. When he thinks about all this.

I believe. I believe our development director likes a challenge and has an has a background of of operating and opening multiple hotels around the world. So does the rest of our team with Mark and other key team members in the operating side. We are, of course, going to be looking at very carefully the construction timing and what the deployment, you know, the sequences are going to be. You have to remember that the Vancouver is pretty far away on the other side of the Atlantic in the Pacific Ocean. So the delivery times and when these ships come out of the construction phase, will depend on the final timing of the financing, on the construction schedule and the design phases. So we're not preparing to do them exactly at the same time, but kind of in the similar timing, maybe sequencing them. And I have to point out that we opened up London and Gibraltar in 2014 exactly at the same time. And so yes, it's a challenge for any team, but I think we have a team and resources to actually accomplish that.

And I guess there's quite a lot of preparations you can already do prior to the age zero date.

Absolutely. Yeah. And the work starts, you know, months, if not a year before any of these kind of projects come online. So the beauty of, of London is that we already have an existing asset. We've been there for, you know, 20 years operating. So we have a well-established track record. Team members who understand the market. We have the clients and marketing departments. So in a sense, when you're changing an existing product, there is no opening period per se. And you can start those works and, and the sales and marketing as you're already doing that. So it's a very different case. Vancouver is a new market. So we would typically look at a year, year and a half before we start all the sort of key processes for establishing our sales and marketing teams and whatnot. So that's a different kind of case. Saville is also a new market for us and a new product, but I do believe very strongly that that opening these hotels in this timeline is not an issue.

Yeah. Speaking of Saville, you oftentimes highlight how well your London hotel is doing comparable compared to the local comp set, but according to your estimates, you could. By retrofitting the London Yacht Hotel and moving it to Seville, you could even improve its profitability from the current level. So what are you looking to do to the hotel asset per se, and what kind of other factors factor into this assumption of improving profitability?

Well, if we if we look at the relocation plan of of the existing London hotel to Seville, I think we are being pragmatic and prudent in our estimations. We've said that the whole process from exiting deployment, some hull works and sort of preparing for the next 20 years of operations in Seville. And then the opening phase is infrastructure that we need to build. We are benchmarking 5 to €6 million for that. So by no means are we saying that the hotel needs five, €6 million of investment. That's going to go towards the different sequences of the relocation to Seville. The hotel is in a fantastic condition, both technically and outfitting wise, and the experience for the clients is at the highest, highest quality. But it is a sort of older product, one of the first prototypes that we built. Um, and, and that's why we are going to be retrofitting some of our energy systems into it. Um, whereas the new hotels are, you know, best in class in energy consumption, heat pump systems and thermal energy systems. But we can retrofit some of that into the existing hotel. That's part of the plan. Um, and in terms of the outfitting, of course, when you're going to Seville, you need to look at the Mediterranean, um, flavor and feel. And those are the things we're looking at the experiential installations and how to, to improve the customer experience, how that's trickling down into profitability for us. Um, the rates in civil or super high occupancy is really, really good. We're located next to the area of area where you have some of the biggest events in the city. A couple of times a year and the labor cost in Seville is reasonable or more in agreement for the 30 years plus license to to be there is, is, is agreed and negotiated. And it's a very reasonable level. So those things will trickle down into what I say. Seville will meet or exceed our profitability in London.

Okay, I'm looking forward to see what you can do in that location. But moving on to your other hotel, the Gibraltar asset, you didn't really provide too much color on the future of this hotel. Previously, it's been on the table that you would build a joint, venture around it, or relocate that current asset to a market that would be more suitable to its size. So what should we think about that as it going forward?

Well, that joint venture process And the ultimate replacement of the Gibraltar asset with a new asset is is continuing. We've done the refinancing program in in Gibraltar for that specific reason. So so that we have three years plus two years, um, sequencing of new financing at a more affordable rate. I would have to add to that. Um, that is for the purpose of that, we have enough time that we're not painting ourselves in the corner of having to do something at a certain time and agreeing to certain terms and conditions in terms of the future plan of that ship. In the meantime, we continue operating that hotel in Gibraltar. We are just focused a lot of resources and team members to continue now improving the service levels. Um, looking at the performance, we have high hopes that the Gibraltar organically will able to improve its results. It had a fantastic, uh, four quarters subsequent quarters of growth in double digits. um. And then the first quarter of this year did not meet our expectations, but that was to do with the market geopolitical things, many things playing out in that. And I think that's a blip in our in our plan. And that's certainly not expected to continue. Um, and you'll just have to wait until the August time when our results come out for the Q2. Um, but Gibraltar on its own will will continue operating, improving its results. But with this joint venture endeavor and the ultimate transfer of the vessel to a new location that we will disclose when, when, when we get to that point where we can, uh, is, is expected to have a very material positive impact into our both capital stack for development and in terms of our annual EBITDA generation from that particular flagship asset that we have. And remember, this is the largest asset that we have, and it is definitely underperforming at the moment. We think that it has the potential to doing three times the EBITDA that is currently doing. And that's what the company is doing. We're going to drive it to the point where we can get the maximum optimized performance out of it.

Yeah. Surely your largest asset, if you're able to utilize it more efficiently, is going to have a positive result on your performance. But one of the key topics you mentioned early on during the Capital Markets Day was the upcoming fundraising. We're looking to issue new equity for €50 million. How should we think about it? Are you trying to or planning on issuing equity at the parent company level? Or are you also looking into, well, issuing equity on the local subsidiary or asset based level?

Yeah. Well spotted. And it's a key question for the company's strategy. So yes, we've identified now that in order for us to do not just the, the, the, the developments in Vancouver and London and Seville, but also to do with some of the parts of Gibraltar's development and developing our future pipeline, continuing to work on parallel in multiple cities so that we are always in a, in a, in a opportunity to, to push the button for the next vessel to be built that needs cash and funding. So we are tapping into the the asset backed financing and the, and the potential bonds and green equity, those all form part of our cap stack. So what we identified is that €50 million is, is the target for raising at both the parent company level and at the subsidiary company development levels. And so we are not specifying at this time yet. We're going to come out with a equity raised plan. And we've done soundings in different markets. When we did the OTC listing in New York earlier this year. Previous to that, we had multiple soundings and presentations to the OTC market and local investors in New York. We did the same in London. We did the same in Stockholm. There's a great deal of interest from the international investment community to these types of of environmentally friendly, unique, kind of techy hospitality, property investments that has a lot going for. It has a global audience for it and opportunity to grow the business. So we have a lot of interested parties in, in these, these conversations. And that's kind of where we're going to be lining up our equity raise, where that's going to be hitting, whether we're going to take more partners in Vancouver, where there's going to be a more more equity investments directly in London or in Seville. We are not adverse to having investors in the subsidiary company levels, but we are protecting the interest of our shareholders by optimizing that. So, you know, we don't want to lose out on, on, on, um, you know, cash flow coming out of the operating companies by giving away too much of a portion out of them. But it's also about reinforcing our ties with the local partners. Um, I think it's really key to find always the best partners who can help you deliver your, your strategy in that city. If we go to Vancouver, we found Ledcor and Vancouver Harbour Flight Centre. What a great partner to have. And so it's important to find those relationships and those those partners for your projects. And so that's definitely part of the game. And so this 50 million is a target raise. We are not depicting at this time exactly where that's going to come and have very much in mind the, you know, the well-being and share value of our, our, our shareholders.

But just to clarify, once the new hotel assets are up and running, we could be in a situation where a partner owns part of the asset per se, or even the.

Some minority part. Yes, it is possible. The other thing that we're also exploring, which is very, very interesting, is, as we said, that there's a billion and a half euro pipeline over the next decade or so. And one way of accelerating our growth is to look at building these in somebody else's balance sheet, or doing a sort of fund arrangement on some of the assets, because these are long term assets with really, really great cash flow. So there's other solutions there. So we will try to optimise that. But we're just flagging. Is that in order for us to raise the sufficient amount of asset backed financing with the ECA credit, there's a certain amount of of capital on the equity side that needs to be put on the table. And if we want to do everything that we do without perhaps looking at putting in somebody else's balance sheet, um, or not launching other types of securities like unsecured or secured bonds. Um, that's kind of what we're going for. So just flagging the target at this stage.

But considering the fact that you highlighted that you have a pipeline of 3500 hotel rooms that you're looking at, I mean, it seems obvious to me as an analyst that it is the financing side of the puzzle that is the bigger hurdle to grow than being able to.

And, and out of that, also where we're expecting the, the future joint venture process with Gibraltar to play a part in this, um, in this capital raise as well.

Okay. That's a good clarification, but moving on, you said financial targets for the year 2030. How would you describe this and what do they assume?

So the assumption for what we disclosed is we're expecting around €86 million in revenue. We're expecting around €30 million in EBITDA. Those are the sort of rough figures that that that we can see based on our modeling. That's entirely based on what's been disclosed to the market so far, which is Seville, London, Vancouver. Um, Gibraltar is pretty much expected in those calculations to continue growing at a, um, a fair and prudent basis. It does not take into account a potential relocation and replacement of that because we don't know the exact timing of that. So once we were able to pinpoint the exact timing of that, then we will update those forecasts up accordingly. And so I think those are robust targets there based on current run rates current market situation as we know. Obviously if you're forecasting years ahead, many things can happen in this world as we've seen over the last few years. Um, so that's based on certain key assumptions on also on development, timing, finance, raising construction cycles and the market assumptions.

Yeah. But to be fair, you outlined pretty well what kind of core core variables you're assuming in these rough estimates.

Yeah. Correct.

Thank you so much for the interview and have a good summer.

Thank you. Thomas.