Fastighets AB Balder (publ)

Welcome to the Balder Q3 Report 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now I will hand the conference over to IR Jonas Erickson. Please go ahead.

Good morning, everyone, and welcome to the run through of Baldur's Q3 results for 2025. With me in the room, I have Erik Selin, CEO, and Eva Vassberg, CFO. I'll hand over to Erik and Eva to run through some slides, and then we'll open up for questions.

Thank you, Jonas. Looking at the big picture of Balder, this is kind of similar to how it looked last year. We have 54% RECI of the total portfolio value. That stands now, the portfolio value right now stands at 229 billion, rating SDPB flat from S&P, 95% occupancy and a very good liquidity position of 24 billion. Looking in more specifically to the Q3 numbers you can see a rental income increase as well as NOI increase of 7%. Profit from property management per share only 2% up but looking at earnings capacity it's 8% better than the same period last year. And net debt to asset is slightly down as 48.3. And like for like rental growth now is 2.9. And NAV per share is right now 93 kronor. Looking at the earnings capacity compared to last quarter, basically no changes. On the bottom line, exactly the same. We have a bit higher NOI and slightly higher financial costs. And that comes from some new financing, a lot of liquidity and also old fixed instruments that expired. The portfolio, as I mentioned many times before, very well diversified if you look at the geographies, property categories and so on. And you can see that the majority is capital and larger cities. And we have Helsinki, Stockholm, Gothenburg, Copenhagen dominating this. And on categories, as I mentioned in the beginning, resi 54% and then we have office, retail, other properties and logistics. Office is 15% of the total. and looking a bit longer back in time we had since the inception 20 years ago focused on cash earnings basically that over time increased earnings capacity and cash flow and with that follows nav increases over time also We have had now a couple of years with a flat earning and as you all know that is because of rising interest rates but hopefully we can see a bit better trend when interest rates now seem to be stabilizing at the current level. And also if you look at the longer term and look at property value, debt to asset or occupancy, you can see a very stable development in occupancy and debt to asset. Even if we look back 10 years and property portfolio value has been increasing gradually since we are normally investing the cash flow.

Yes, looking at the financing, the current mix of funding is largely where we want to be, which is a 50-50 split between bank and bond financing. The level of available liquidity is in line with last quarter, which is a little bit higher than usual. And this is in line with our planning for upcoming maturities, since we have some larger dual bond maturities during the beginning of 27. And if you look at the interest rate fixing and hedging ratio, it's stable. And the average interest rate is now 2.9 compared to 3.0 last quarter. And as you can see here, net debt to total asset is a little bit stronger than last quarter. And the encumbrance ratio is stable. It's a little bit down since last quarter since we have more unsecured financing. And we have said that we think it will be around this level over time based on our strategy of funding mix. So over to the maturity structure. And if we start with the bank loans, the maturity structure is a result of that the Swedish bank financing is typically quite short, even though we have bank financing in other countries as well. And if you look at the bond side, we have talked about smoothening the maturity structure. And we have one year left in 27 with clearly more maturities. And then on the other hand, we are trying to top up with new funding in the longer maturities, like we did this quarter with the issuance of that seven and a half year Euro bond. And ideally, we want to have one Euro bond benchmark outstanding out to seven, eight years. Going forward, we will also continue our path of issuance in the Swedish market. We updated our green and social financing framework recently. So the next longer maturity bond issue in Sweden will probably be under that framework. Yes, and here is more sort of a structural overview of the funding and capital side. As we have said before we will continue to have a balanced capital allocation until reaching our target of 11 times net debt EBITDA. Here you can also see an updated calculation on the convertible bond which when that is converting assuming that we're above strike price obviously will have a very positive effect on the indebtedness numbers as well. And in terms of the funding strategy there's really no change compared to previous quarters. And that was all from us. And on that note, we will leave the floor open for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Jan Irfelt from Kepler Shoebrew. Please go ahead.

Okay, thanks. Good morning. I have three questions. I kick off with the Lutash position here. It's coming up from $4 billion in the second quarter to $11 billion in this quarter. And you're talking about maturities here. Was that in the fourth quarter? So we could expect that the cash position could come down a little bit at the end of the year.

Hi, Johan. No, the main maturities that we're planning for now are Q1 2027. So we have two Euro benchmarks maturing in the same quarter. So we would expect to have sort of around this 25 billion mark of available liquidity pretty much up until then. So it's going to be a bit of work to prepare for that. But once that's over, we move into sort of a very smooth maturity structure that we've now worked on for a couple of years to establish. So this is sort of the last more lumpy quarter in terms of maturities. And then it's going to be pretty smooth from there on. Okay.

My second question relates to the residential business in Sweden. There have been some negotiations already finished in Gothenburg, as I see. Do you have any comments on where you expect the outcome could be when it comes to rent uplifts in Sweden?

You mean for next year?

Yes.

No, I think it's a bit too early for us to know that right now.

What do you see on the market?

I mean, this is part of sort of the annual negotiation schedule. So I think it's a bit premature to have a good view on that today. What we have said, Johan, is You know, since 1970, pretty much we've had an average increase of Swedish rents, about CPI plus 1.6%. And the pattern that we typically see is that in high inflation years, rents lag a bit. And then in low inflation years, we catch up. And we're obviously in a catch up phase right now. So we would expect it to be sort of clearly above inflation for the coming two to three year period if it should follow the previous patterns. But to be more precise than that, I think is to sort of jump to conclusions. Yeah.

Okay. Fair enough. And the last question regards Finland, of course, the residentials. How has the vacancy situation on the market developed during the third quarter?

If you look for us, it's more or less the same. Jana's quarter before, I don't remember, maybe one tenth up or down, I don't remember.

95.8.

Yeah, 95.8. But if you look at the total vacancies, it's actually started to melt, especially in Espoo, also in Vanta and a little bit in Helsinki. And I think you will see that in Koyamo's number, because I think they had a peak on like 9% vacancy there. And even if I don't know, I think they will soon be down on 3.4. And then after that, hopefully the overall market gets even stronger. So there is actually positive signs finally, especially in ESPO.

Okay. Thanks. These were my questions.

Thanks.

The next question comes from Fredrik Stensvid from ABG Sundahl Collier. Please go ahead.

Thank you. Morning. I have two questions. First, on the large cash position, as you talked about earlier, what kind of interest rate do you get on that and how is that reflected in the earnings capacity?

So, I mean, you can say that our Sorry, you can say that our available liquidity is made up from both cash, financial investments and available credit lines from banks. So it obviously depends very much on how the mix is between the available liquidity and the asset side of the balance sheet. We specify in the report, you can see the split there when we have the run through of all the key ratios in the back of the report. But typically you could say that, you know, the funding cost is what the funding cost is. There you can just look at sort of market prices for bonds. And we've been pretty transparent about our bank funding cost as well. When we do invest the liquidity, I would say it's between 50 and 100 basis points net expense vis-a-vis our own funding cost, a little bit depending on what opportunities we can find. And the bank committed lines are anywhere between 20 and 40 basis points in commitment fee. So that's sort of the net expense for that part of the available liquidity. So depending on the mix of it, you can run those numbers and get to an estimate.

Yes, thanks. And that's also how you do it in the earnings capacity financial line item.

Yes, we try to look at roughly where we are, what kind of liquidity positions we hold and make an estimate from that.

Just one follow up on this. I think in the quarter you acquired financial assets for two and a half billion, give or take. Is that these kind of short term liquidity positions or is that something else?

No, that's absolutely right. commercial paper.

Okay. Yeah. Thanks. That was one, or that was several, but that's one topic. The other topic, buybacks, Erik, you alluded to buybacks or share buybacks being A good compliment in terms of capital allocation in the CEO letter. In terms of timing, and I appreciate this is forward-looking and so on and so on, but in terms of timing, how do you see the possibility to start with buybacks or when do you think you can start with buybacks?

We don't know exactly because we cannot decide what happens. This is more of a how we are thinking in general. And the first step is an Orion dividend, as you know. And then if you make the numbers, you can see that if we don't do anything special over time, we will be very overcapitalized. And then I think it's reasonable to inform how we are thinking, that we will compare investment, the leverage and share buybacks in the toolbox. But the exact timing, I think it's... I don't want to say that exactly, but it's more of the long-term thinking I'm talking about.

That's all for me.

Thank you. Let me just add on the financial side as well. So the fluctuations that you see in our net financing costs this quarter is not only because we built up the liquidity position. There are also a few other fluctuations that are more temporary in its nature. So just to be aware of that.

And are you able to quantify how much that is?

I would say a bit more than half of the differential between Q2 and Q3.

Very good. Thank you.

The next question comes from Lars Norby from SEB. Please go ahead.

Good morning. Good morning. Regarding your ownership in Entra in Norway, you are close to 40% and Kastellum around 37%. What's your view about that ownership situation? situation? Is there a sustainable long-term ownership or would you open to sort of find some kind of long-term solution on that one?

Yes, we are absolutely always open to good solutions of course and I think over time the situation will change but it's very difficult to know exactly when and how you know and Castellum recently changed CEO and the largest owner became very active so I think we also have to see a little bit what they want to do.

But over time... Have you had any discussions with them?

We'll come back to that if something interesting happens.

My second question regarding Norion, you're talking about it as a distribution to shareholders and that's the intention of the board. Is divestment still an alternative?

In theory, if somebody pays a very good price, we can sell. Absolutely. But when we made the dividend decision, the share price was, in our view, way too low. So then I didn't want to have the responsibility to sell it at the, as I saw, totally wrong price. But if there is a buyer that pays a lot, we can sell also. But it's a bank, so it's a bit more complicated for a buyer to buy all our shares because you have to buy the whole company. and then you become a financial holding company and you have to have permissions and stuff. So it's a bit more complicated than normal companies as you know.

I think if our stake would have been 5% of the bank, then it would have been an easier decision. But now being 44%, it's not a stake that you just place that easily. So you also have to consider that if we were to sell instead of distributing as a dividend, we would probably have to do that in several tranches. And then you would create a pretty, in time, sort of long overhang of the Nordian stock instead. So it's a solution where we found, I think, a balanced way of doing it. And then it's up to each shareholder to decide whether to keep the stock or not.

Okay. Thank you. There are some more questions.

Thanks.

The next question comes from Staffan Bulow from Nordia. Please go ahead.

good morning and thank you I have a couple of questions starting off with a follow-up on share buybacks so we have three questions on that what valuation level do you find attractive for considering share buybacks do you have a balance sheet level that you're comfortable with and finally in terms of volumes how much do you find reasonable to do is it

entire cash flow generations or just part of your cash flow generation so yeah some flavor on valuation balance sheet and share buyback volumes very smart questions that i will not answer specifically you know the share price that will depend on alternatives and how the situation is when that happens you know so i would not like to say a specific price but obviously if we have a discount and we think the values are okay and we don't find anything better we We will be very keen on buying back. And balance sheet, we have to sort of guard the S&P grid, mostly debt equity. And we want to have some headroom. So that number you can watch and you can also get specifics from Jonas, for example. So that will be a sort of a limitation not to risk the rating. And amounts will, I mean, if we don't find anything

to buy and the share is at the as we think a good price then we can buy back a lot obviously but we will see as we go along okay perfect thank you and another question in q3 you press release that you started a residential project in Gothenburg I'm just wondering was this

special situation or have conditions improved for residential project starts suggesting that we should expect more of that going forward conditions is a bit better it's not super good but it's a bit better so we think we can do some small activity in this case we already own the land and it's the area that we sort of want to complete so you have a couple of different dimensions and we have some similar cases and we also have some condominium cases, but you will not see any massive investments. That will not happen. But we've been almost at zero, you know. So maybe we start a couple per year or something like that. Okay, thank you.

And when it comes to transaction and the competitive landscape and transaction yields for property acquisitions, do you think that that has changed in the second half of 2025 compared to the first half of 2025 or is it the same situation?

We see a lot of transactions actually in the market that you could do if you want to. And I also have a very big demand for investments from many institutions that want to co-invest. There's a big appetite. My feeling is that there are no sellers really at the sale prices you know I cannot find anything super cheap so my guess overall is that deals are pretty much the same but then it's better because you have lower interest rates and hopefully a bit more positive outlook on the economy overall 26 and going forward and also you have a very strong financing market banks are very keen on protecting their balance sheet, meaning they want to have sort of increased loan books, if possible, and have a strong bond market. So if you combine all of these things, I would say the market is actually much better if you want to do transactions. But I would guess it's pretty much the same, but everything else is better. Okay, interesting.

Thank you. Those were my questions. Thanks. Thanks.

The next question comes from Andres Tum from Green Street. Please go ahead.

Hi, good morning. A couple of questions from my end. Firstly, what was the driving factor behind the year-over-year decline in profit from property management coming from the associated companies? Maybe you can give a bit more color around that because I also see that in the earnings capacity, that amount has not changed.

now we decreased the holdings in associated companies we dissolved one of the larger ones and two and we sold some small i think so so that's in general a smaller part of even if you look at the book value compared to the equity or whatever measure you take the part of the jvs are slowly getting smaller

Understood. Thanks. And then I guess on occupancy rate across your portfolio, that's been sort of very steady over the years at 96 and it dropped down to 95 last quarter and seems to be sort of sticking there now. How do you see the outlook for that? I do recall from the last call it was sort of mentioned as being like a rounding error, but um do you see any chance of calling back occupancy and which are the segments where you've actually seen occupancy come down and i guess is the outlook in certain aspects also more difficult when it comes to perhaps swedish offices or swedish residential at least in terms of the more regional

My guess is it's not so hard for us to have 96 again because it's, you know, we say in whole percentage, but it's actually tens of a percent. So I think it was 95.41 or something like that. And I think it was small fraction better than last quarter. So, I mean, you will, I guess that you will most often see 96 and occasionally it can be 95.

But if you look at the different segments, I mean, we are, as you know, we have a pretty diversified asset side. So you obviously have slightly different drivers. Sweden and Denmark, RSE, generally there are no vacancies. And that's been sort of very stable for quite some time. And so far we haven't seen anything that suggests that that would change. We are not really present in the parts of Sweden where you might have slightly higher vacancies in the residential market. If you look at the Finnish residential side there, as you know, if you've followed us for some time, I mean, there's been higher vacancy rates in the past in the market. As Erik mentioned before, we're seeing that slowly improve as the new construction of residential properties come down. And then obviously you have the commercial segments, which are more difficult to predict. There you've had a little bit of delta in the last couple of years. But again, we're very diversified. So say offices are less than 15% of our total portfolio, which means that we don't have the same kind of dramatic fluctuations on the commercial side as you might see someone more specialized in offices only, and especially in the big cities. So it's a very diverse portfolio and that's why it's also moving pretty slowly. If we do get a sort of better economic outlook for next year, then typically cyclicality goes for commercial premises as well.

But let's see. Maybe coming back to your last point about that fiscal boost coming next year and then also monetary policy becoming or already has become quite accommodative. Are you seeing any effects of that on the ground in terms of just business sentiment, things of that nature that would be leading indicators for perhaps better leasing next year?

You have a time lag, you know, so I guess you will see more of it. If I'm just guessing, I think you will see some signs there maybe in a quarter or two. You always have a time lag. When it gets better, it lags. When it gets worse, it lags as well. But I think everything points in that direction.

But you do see better consumer sentiment and consumer spending. And we're currently at the highest savings rate in Sweden in relation to disposable income that we've seen for, I think, 40 or 50 years. So consumers have been extremely cautious for many years now. And now we're starting to see a little bit better consumer spending and overall more optimistic views on the future. I think that's typically what triggers a more positive business sentiment eventually as well. But it's hard to predict the timing, obviously.

Yeah, makes sense. Thank you very much. That was it.

Thanks. The next question comes from John Vong from Van Lanchet Kempen. Please go ahead.

Hi, good morning. Just a couple of left on my side. So you're quite positive on the economic backdrop and the turnaround there. But at the same time, you said that you are not seeing too many cheap assets available. So it feels counterintuitive that you would be sitting still going into 2026. So what should we expect in terms of investment activity on your side?

impossible to to forecast because it's totally depending on if we find good investments we're interested in otherwise we will do nothing you know so it's absolutely impossible for me to forecast we just focus on capital allocation and increasing the long-term value of the share over time but but i feel optimistic that we can do good things next year if nothing new happens

And in terms of capital allocation, would you be considering changing your overall asset split or geographical split?

No, I think that will not change much because it takes such a big amount to change it, you know. So that will be, I think, roughly the same.

Okay, that's clear. And then just on your financial investments, it increased by 2.5 billion compared to Q2. Could you provide a bit more color on that? And also what's a more normalized level of these holdings?

We have very much liquidity because we are preparing for maturities that comes in 2027. So that's why we have a bit too much cash, you can say, that we primarily buy commercial papers or stuff like that. So this is preparation for 2027.

Okay, so it's mostly short data depth.

Yeah, absolutely. We have to get some, you know, interest on it. And so there's a mix of different commercial papers, basically, the most of it.

Okay, that's clear. Thank you.

The next question comes from Stefan Andersson from Danske Bank AS, Denmark's Varage filial. Please go ahead.

Thank you. a couple of questions from me, starting with this target you have. I'm trying to understand the direction here because I get different signals from you in a way. I mean, you're talking about reaching the net debt CBGA of 11, and we've heard that before. I guess you could have more or less been there now if you were really eager to get there, but you've had quite a pace on the investment side. again here now. And you're talking about repurchasing of shares and the pump with Norio. So just trying, and you have a high liquidity issue. Okay, some of it will go to quite a lot for the refinancing, but you still have a good question.

But what we've been trying to say is that we will actually, we can do a mix of this, we have no specific timeline, you know, on the 11 target. So that is We are flexible there. It's our own target. So we can always make a combination of strengthening the numbers, do some investments, do buybacks if you want to. So think more of a sort of a combination over time. But the long term trend is lower debt EBITDA, but not necessarily quarter by quarter or if you understand what I mean.

We've also said that in regards to the distribution of the Norion shares, we've also said pretty clearly that the leverage metric that we currently see as the most restrictive one is debt through debt plus equity, according to S&P's definitions. And there we're currently at about 56 and a half. S&P requires us to be below 60. And the Norion distribution would have about one percentage points impact, negative impact on that measure. So theoretically we could do Norion already today, but we've said that, okay, it's probably a good idea to build perhaps a couple of percent, a couple of tens of percent more before we do it. But I think we've also said that that's sort of the more restrictive one that we steer on more short term. I think view the, Net activity A target is something where you should watch for the trend rather than the absolute level in the short term.

Okay, perfect. So really just continuing as you have been continuing when it comes to activity, given that you find internet interesting targets then?

Absolutely. Exactly like that.

Okay. And then the second question, as you mentioned, is a new CEO at Stellum, talks to Paul. I get the impression that he is open for a solution. It's a stupid word, I guess, on the entire situation, but you could keep it as it is. I get the impression he is eager to clear that up one way or another. This is just hypothetical, but can you see any situation where you're buying that stake?

I think that is unlikely because it will be such a big expansion for us in Oslo office then. So I think it's very unlikely. But of course, everything is priced right. But I think it's very unlikely.

Perfect. Thank you. And then defining a question, we touched a little bit about it on the rest side. But if we go to the co-op owner apartment side, Karl-Artsonen and others, do you see any been a tough market. Do you see any signs there in any direction?

It's not getting worse, at least. But it's still slow, I would say. But I'm optimistic about next year, because if they have better consumer sentiment, that is what it takes, I think. So hopefully we have better 26, but you never know. But right now it's still slow. But prices are stable or maybe trending upwards anyway. So it's not bad, but it's a slow market.

I think it's important to remember that there's nothing wrong with the affordability. That's not where the issue lies. It's more on the sentiment and belief in the future on the consumer side. So affordability is good, but savings ratios are... I mean, we have a savings ratio in Sweden of 16% of disposable income at the moment. So there needs to be a bit more consumer confidence, I think, for that market to get going.

Correct. Thanks. That's all for me.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, thanks everyone for listening in. You know where to reach us if you have any follow-up questions. We'll obviously be available throughout the day. Thank you very much.