Fastighets AB Balder (publ)

Welcome to Balder Q4 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 I.R. Jonas Erickson. Please go ahead.

Morning everyone. Welcome to this call for Valder's Q4 and full year results 2025. With me in the room I have Erik Selin, CEO and Eva Vassberg, CFO. We will run through some slides as usual and then open up for questions.

hi eric celine here if we look at balder at the glance by year end we have a portfolio value of 229 billion and the composition is 54 percent resi and 46 percent commercial occupancy rate at 95 percent we have a good liquidity 24 billion Debt to assets 48.1% and NAV is 94 in this quarter. looking at the q4 numbers specifically we have rental income and noi up four percent and it's important to bear in mind that this is in swedish chroma that has been pretty strong lately profits from property management in earnings capacity goes down seven percent and that is connected or explained by our proposed distribution of norion share as a dividend to the shareholders and also important to just bear in mind that if we look at year-end figures the dividend is roughly 525 per balder share but nav will decrease four kroner per share And like for like rental growth is in the positive territory of 2.7%. And here we have the earnings capacity then updated in more detail. And there you can see Norion effect is on profit from associated companies that goes down. But that is totally explained by the Norion distribution that we will, Most likely due after the AGM. So now it's in the balance sheet booked as another asset that will be distributed. And that's why it will not be included in earnings from this year. So with that, we end up with 6 billion and 506 per share X Norion. The portfolio is 80% in larger city and capital, as always, and we have the usual one, Helsinki, Stockholm, Gothenburg, Copenhagen. And you can see the split also, residential 54, as I mentioned, and then you have office 15, retail 12, and logistics 7%. The longer-term trend is that we have been having quite a good increase over the long time period in profit from property management. This curve is only 10 years, but if we look back another 11 years, we have a long, good trend. The latest year has been sort of flattish, and that is, of course, interest rates moving from zero and upwards. And in our case, we more or less compensated higher income and we also had a lot of fixed interest rates so the effect came gradually. But then having said that if interest rates are flat then the long-term trend will be that this curve will start to go upwards again. And here you can also see development for property value and LTV and occupancy. So LTV 48.1 and occupancy now is 95. It's rough. It's almost always 96, but every now and then it happens with 95. And this is whole percentage point. behind that is actually some tents that move up or down and then we round it up to a percent. So we think this is a okay result and thanks to our organization for achieving this stable development year after year after year after year.

Looking at the financing, the current mix of funding is largely where we want to be, which is 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 we will also continue to have slightly higher liquidity during 26 due to higher concentration of maturities in the beginning of 27. The interest rate fixing and hedging ratio is stable, and the average interest rate is unchanged since last quarter at 2.9. Yes, so here you can see the long-term trend of the portfolio value in relation to the net debt to total assets. As you can see here, net debt to total assets continue to go down a little bit, and the current encumbrance level is at 23.4, which also is reasonable expectation for the future given our funding weeks. That is somewhere between 20 and 25. So over to the maturity structure. If we start with the bank loans, the maturity structure is a result of the Swedish bank financing. It's typically quite short, even though we have bank financing in other countries as well. So on the bank side, it has been business as usual, rolling maturities. If you look at the bond side, we have more maturities in 27, which is the reason for the higher liquidity position. The funding market is very strong, and in such a situation, we might maintain a slightly higher level of liquidity, as the cost of the additional liquidity is small relative to the security it provides. 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 to Evita. Even if the distribution of the Norian shares as a dividend will temporarily work in the opposite direction. Here's also an updated calculation on the convertible bond. Which when that is converting, assuming that we are above strike price, obviously will have very positive effect on the indebtedness number as well. And in terms of funding strategy, there is really no change compared to previous quarters. And that was actually all from us. And on that note, I will leave the floor and open up 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. Thank you. The next question comes from Stefan Anderson from Danske Bank AS, Denmark's Verizon filial. Please go ahead.

Thank you. A couple of questions. Sorry, a couple of questions from me. Starting on Norion there, just I'm a little bit curious on the technique on that one. Earlier distributions we've seen, there's an, just before the distribution, there is an adjustment of the value to market value. So, you know, right up made when was distributed. Now, I guess, two questions in one here. I guess the valuation right now after the drop here is similar to what you have in the books on group level. But will you have such an adjustment of value before distributing, or are you going to net it out somehow? That's the first question. And the second question is when you say distributing 550 and another drop is four, is that based on the year-end valuations, or is that based on today's valuations?

Yeah, so there won't be any sort of value change before the distribution. So the distribution is sort of separated as of the year end, and now it's booked as an asset that will be available for distribution, and the NAV will be adjusted sort of accordingly. There's not going to be any value increase or realization gain booked through the P&L. And the numbers are per year end.

Thank you. Perfect. Then secondly, DSHAS, I'm a little bit curious if you could maybe mention a little bit about why are you thinking about issuing DSHAS? Is it something you need for the Norion distribution, or is it has to do with the hybrid, or is there anything else?

No, we don't need it for Norion or hybrid. It's just to have optionality going forward. So it's a practical way to be able to do it, and then we add it when we have the AGM instead of potentially, if we need it later, have an EGM.

Okay, good. Then I'm a little bit curious about your thinking about repurchasing your shares. I mean, with enough growth and the stock flat, you know, the discount is increasing further. I've seen that you made some acquisitions, and I guess you have to evaluate the capital allocation on that. So, you know, right now, do you see actually any good options or alternatives to the balance share, actually?

difficult to tell you know beforehand but i think we can do both as we said last quarter so it's possible that we buy some shares and do some investments at the same time but the split in those is a bit depending on you know share price and what possibilities comes around

On the co-ops, the apartments business there, with the loss that came through and has come through through the year, what is your thinking there? Have you started to discount stuff or is it more a volume issue that makes those unprofitable?

No, we have running costs and we took over some apartments in Karlatomnet that was slightly negative when we sold them. It's highly likely that that figure turn positive this year.

Okay. Good. And then I guess I won't get an answer, but I'll answer anyhow. I mean, I hear what you're saying with the liquidity that you've had now for a while on a relatively high level versus history, and even though you say it's cheap, but it's still costing you a little bit. Is that something that you use to have some maneuvering room to do some bigger transactions, or is it purely just a way to pay out in 2017?

The majority of it is because we have a lot of maturities in Q1 27. We have two Euro benchmark bonds maturing in the same quarter. So that in itself will lead to a liquidity position that is sort of five, six billion higher than usual up until we've had those maturities. And then I think you also have to look at how the pricing in the funding market is from time to time. If you see attractive pricing, if you have a lot of incoming interest from investors, you might issue a little bit more or you do it a quarter or two before you had planned. You know, if you issue a bond one or two quarters ahead of schedule, you can do that at attractive pricing. That might still make sense, even if you actually carry a little bit higher liquidity costs. We're trying to optimize and think sort of 24 months ahead in terms of maturities, liquidity needs, and how the market is currently and what we see on the horizon. And we try to optimize it from there.

Perfect. Thank you.

The next question comes from Jan Eerfelt from Kepler Shoebrew. Please go ahead.

Okay. Good morning. A couple questions from my side. I start off with rental agreements on here in Sweden. How have that developed, and are you able to give any guidance on maybe a possible range very quickly?

So most of them are finalized, so we landed at slightly below 3.5%, 3.2, 3.3, I think. Okay. Okay.

And my second question relates to Finland, has been a quite heavy oversupply in the market there for some years. We see some early signs of maybe lower vacancies, but could you give a short, I mean, put a little bit of flavor on that market just in terms of vacancies and rents?

I think there's no change to our outlook for the medium term. There's been quite a drop off in new supply de facto coming to the market and with that we know that occupancy should go up steadily and at some point there will be an increased pricing tension in the market as well. It's very difficult to time this I think on a quarterly basis. What we can see in the later part of 2025 is that it actually has slightly less impact on the occupancy compared to what we had expected. But that might also be temporary issues in terms of how migration flows move. So the official statistics in terms of people moving into the urban areas is still very strong actually. So we feel that the picture is very similar to what we've said all along, but it's difficult to time it from a quarterly perspective. But if you think about the big picture, I mean, we've had in the last seven or eight years hardly any rent increases. At the same time, disposable incomes are up by 25 plus percent. There's no issue with affordability. we know that new supply is falling off the cliff and we see that in some of the cities where that has already happened, you see pretty quick recoveries in occupancy actually. And at the same time you have an sort of unabated movement of people to the urban areas. So from a pure mathematical standpoint, something new needs to happen for this not to mean a recovery in the coming couple of years is our view. And let's see when and how and in which order things happen.

Okay. If I interpret you right, that the lower vacancies happened impact the rent levels to any extent or?

No, I mean, there's also always some seasonality in the Finnish market. So we can't see any sort of trend shift yet. That's a little bit too early, I think.

Okay. Emma, that question regards your key ratio net debt to EBITDA, which is currently at 12. You have a target of 11. And my question is really how eager are you to –

bring it down to 11 for 2026 we said that's a long-term target and obviously the norian distribution will uh will deteriorate that number slightly so we set us back a little bit um so i think you need to look at it i think we said for a few quarters now that we care more about the direction and the pace of change in the current market conditions We also know that we have in 2028 the convertible, presumably converting into shares, which will obviously support that number slightly as well. So I think you should see it as a directional statement and in terms of where we want to end up. But it's not the 2026 target.

Okay. Thanks very much for taking my question.

Thank you. The next question comes from John Bong from Van Lanchet Kempen. Please go ahead.

Hi. Good morning. Thank you for taking my questions. On the Class D shares, so hypothetically, if you were to issue those today, what would you do with the proceeds?

I mean, there are no such plans. I think it becomes very speculative. We haven't sort of made a disclosure because we have any plans of doing a new issue of these shares. We want to get it into the docs so that we have the opportunity and possibility to do so. So there are no plans currently at all. So you shouldn't see this as a preparation for raising more capital.

Okay. That's clear. And then If you, given that you're looking into this flexibility, how do you think about different distributions on class A and B shares?

I think we have had a capital allocation that has been very flexible for a very long time, and I think that we will be eager to remain flexible on that. If we, hypothetically speaking, should have these shares outstanding, we obviously need to change the dividend policy to accommodate that. But I wouldn't expect that you shouldn't draw the conclusion that that also means that we will become a regular dividend distributor on the B shares. We will pretty much in that case do what is required to cover the coupon or the dividend for the G shares and then the rest will be capital allocation decision as per usual. where we really will always prioritize investing in the business and or doing share buybacks as a means of employing capital. Then if we sort of really find no attractive ways of employing capital in a creative way, then obviously at some point the distribution of a dividend becomes the remaining choice. But that principle will still stand in regards to the B shares. And there might always be a little, very small dividend because, you know, from a rounding error perspective, because you can't pay exactly the amount of the B shares only. But it's not going to be any material numbers as a default.

Okay. That's very clear. Thank you. Thanks.

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

Well, good morning. A couple of questions on the earnings capacity. Now focusing on the property management line. It was 6.6 in the Q3 report, and obviously you're now excluding Norion. What would the number have been in the Q3 report excluding Norion? We see the change in the associated company line from 700 lower. Would it have been 5.9? Is that the way to interpret it?

I don't actually have the exact numbers we have in the model. I mean, there was... Even though we give rounded numbers to equal or sort of rounded 100 million sec, I don't want to say which side of that we would end up if we hadn't had Norion in Q3. But mind you, also, there's quite a lot of FX movement that has taken place in the last couple of quarters. And that's obviously impacted the total profit management side as well. So I think that that's worth keeping in mind. You've had some weakening, especially year over year, you've had some pretty noticeable weakening over the NOC, which impacts the associate line in France around the turn. And you also have, obviously, the Euro, which will impact everything we have in Denmark and Finland. So that's part of the development that you need to factor in as well. But I think if you just look at the way things are accounted for, normally it's accounted for as a proportion of the precise contribution for last year.

Okay.

Second question on the earnings capacity. What type of impact and to what extent have CPI indexation on the commercial side from the 1st of January, and for that matter, new rents, particularly in the Swedish recipe portfolio, how much has that affected rental income in the earnings capacity since it's unchanged compared to Q3? Yes.

We always factor in all negotiations with the housing industry and all the indexations that we know of when we cross the year end. That is being factored in. I would say the unchanged part is more of a FX movement.

It's currency who lower down the number, actually. So in constant currency it would be higher, of course.

Okay, thank you.

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

Thank you. Morning, all. I just have one follow-up. On the occupancy rate, specifically for the industrial and logistic segment it looks to be down three percentage points q on q um in the same time rental income is up so i'm trying to sort of understand the sequential move is it is it bad acquiring a vacant properties in this segment, or is there something else happening here between Q3 and Q4?

Thanks. I actually need to dig into that number a little bit further. I don't quite recognize it, but I know we've done some acquisitions that has impacted the number, as you say, but I can't say whether that is the full explanation. Can I get back to you, Fredrik, on that?

Yes, absolutely.

Yes, thank you.

The next question comes from Pranava Boyadapu from Barclays. Please go ahead.

Good morning, and thank you for taking my question. You mentioned that Norian Bank is no longer included in the profit, so it's not in the P&L numbers. Does it mean that it's also not in EBITDA, and hence the net debt to EBITDA 12X leverage is already excluding Norian? So upon distribution, it shouldn't change on that basis?

No, sorry for being unclear there. So it is included in the reported numbers for Q4 and the full year of 2025. But in our report, we have something called the earnings capacity, which is more of a snapshot as of the 31st of December. It's a proxy for annualized earnings given the portfolio we have at the 31st of December. And in there we have excluded Norion. So if you want to look at that as some kind of forward-looking earnings capacity, there Norion is already excluded. But the 12 times NetEther BTA still includes Norion shares. So that will be impacted by 0.89, something like that negatively.

Thank you. You're doing your share buyback as presumably, but also you talk about the convertible in 2028. Would you say that taken together, the impact on leverage should be broadly neutral?

I think the major impacting factors between now and, you know, if you take a two, three year perspective, it's obviously that we have an underlying growth in our earnings in ABTA. We have a cash flow annually that improves the balance sheet position as well. So I mean, those are sort of... probably more impacting in that time horizon compared to the buybacks that we've done so far at least and compared to the conversion of the convertible. So the convertible would be corresponding to roughly one year's free cash flow for the company. So it more depends on how we sort of steer the balance sheet from here in terms of growth opportunities and potential buybacks, depending on where we find the most value, really.

Sure, that makes sense. And then just one final thing from me. There is a small amount left on your hybrid, who has a first goal in 2026. I was wondering, is that included in your ball maturities as 2026?

no so that's uh that's recorded at the formal maturity which is longer so we we tend to have a sort of couple of billion sec to three billion sec outstanding uh remaining of that um but it's it's uh not recorded in the 26 maturity and that's it thank you very much thanks the next question comes from andre's tomb from green street please go ahead

Hi, good morning. A couple of questions from my side. Firstly, just maybe on Finland residential, I was just wondering what are the sort of implications you're seeing in the market from the housing allowance rolling off and then sort of stricter rules also in permanent residency coming in in January? Is that sort of impactful for the rental market as you see it?

It's difficult to know exactly what is doing exactly what. It should have some effect. But for us it's impossible to quantify it. But I mean it happens. So from now on it's already there.

Right. And then I guess the housing allowances, they already were coming up. So is there, I guess, some sort of a demand impact you're seeing maybe on smaller apartments?

Because I guess students would have used them quite a lot as well in the past. Most likely, but I mean, it's impossible to know exactly, right? I mean, but most likely that have been the effect. Most likely. It must have some effect if you take away subsidies, but...

for us it's impossible to quantify it you know but could explain something some of the weakness absolutely there is a tendency in 2025 that the population growth does not fully correspond to the occupancy increase there's a slight dispersion between the two so that that suggests that there on average should be slightly a higher number of people living in each apartment compared to the previous year. That might be one such impact. But I think the important thing from our perspective when we both sat around the business and when we think about it strategically is that as i said before you've had a number of years with too high supply into the market there's a you know one of the best affordability situations that we've ever seen and we all know that the finnish economy has been pretty weak in the last few years but it doesn't take away the fact that there is a large need for housing in the urban areas we have that available we feel pretty pretty good about the medium term perspective in that sense, then you might always have some of these more technical factors impacting the quarterly development from time to time. But I wouldn't say it changes our view on a couple of years horizon.

And then maybe on Denmark residential as well, I guess there was quite a lot of noise in Copenhagen with municipal elections around rent controls and things of that nature. But I guess what are your views around that in the sense that could this become sort of a national debate and could it be the case that buildings built after 1992 could become sort of strictly regulated as well?

There's already a regulation in place in Denmark which basically stipulates that when you first move into an apartment and there's a market-run setting, from there on the property owner can only index by CPI. That's a fair model that is transparent and easy to sort of understand for all parties. Definitely protects the tenant and in some cases you obviously have buildings where tenants have been staying for a very long time. But let's see what happens. It's impossible, I think, for us to speculate on potential regulatory changes. But there's even been discussions by some of the political parties in Sweden to adopt the Danish model into the Swedish system because it is pretty balanced between having on one hand the market economy and at the same time protecting tenants.

um but let's see i don't have any so great insights into what might happen to the danish regulation about it and then final question just on capital allocation um i just wonder where do you see sort of best opportunities right now if you look across sort of your own portfolio where would you um like to add exposure you know also um being cognizant of what's what's available on the market, and I guess, adjacent to that, for hotels, you have some exposure and there's this large portfolio from Pandocs on the market. Is that something of interest, perhaps?

I don't think we will be buying from Pandocs, if I'm guessing. I don't think so. Otherwise, we're very happy with the hotels, and it's been a good year in, especially Copenhagen, if you look at Revpar and Occupancy and stuff. Otherwise, we do as always. We look at basically in the Nordic market and try to see what makes sense to add to the portfolio to increase the shareholder value over time. We don't decide before what's good or bad. You know, it's all about pricing.

Got it. Thank you.

The next question comes from Othman El Araki from Fidelity International. Please go ahead.

Hi, guys. Good morning, and thanks for taking my question. Just a follow-up on the question on the hybrid. Just taking your latest thinking, are you still thinking that, you know, that you don't need the instrument in your infrastructure and that we call this DCR?

We haven't announced that we will call it. We will make an announcement before we call it. In the past we would always call it first correlate. We felt, and we've said this before as well, we felt the hybrid instrument was a bit complex in our case. very attractive, high cost of equity in good times. Less good times in the credit market, it becomes a bit more cumbersome to roll the outstanding forward. And you also have an optionality in there that isn't bad that you pay for, but in practice you can't really utilize. So far we've come to the conclusion that we are not looking to share any new hybrid at this point. And obviously things might look different one to nine years from now. Who knows?

But that's what I'm curious to see. Okay, thank you very much. And my next question is on the Orion distribution. Have you been in touch with S&P and you know, are they fully involved in the impact?

Yes, I mean, we've been, this has been announced quite a long time ago, and they were obviously informed even before it was announced as well. So this is already sort of part of the plan, and should be part of their modelling for the future since, well, six months back, basically.

Okay, so you don't expect a negative reaction from S&P?

No, that would be immensely surprising. Okay.

Okay. And my last question is, you know, given where the bond markets are at the moment, pretty hot, to say the least, how does that compare to your bank funding at the moment?

A little bit depends on how you look at it. It's always difficult to compare side by side because, you know, one is secured, the other is unsecured. You might have a bunch of different tenor structures, et cetera. But I would say currently we are roughly on par between bond financing and bank financing, a little bit depending on The next question comes from Pierre-Emmanuel Kluwerd from Jefferies.

Please go ahead.

Yes, good morning. Just coming back on the class D share that you may want to issue. Just to understand how you are seeing it. So you said that you want to streamline and simplify Belda with the Norium disposal, which is a fast response in my view. But you want to add a new class action that would, in my view, further complexify the structure. So just to understand, how do you view this item, is it equity or perpetual debt for you first? And if that's equity, would you keep your current internal metrics unchanged as like net debt to total assets of 65%?

Yes, so there's no change in our view on the financials or credit metrics at all. Class D shares, I'm sorry, we should probably have specified that in the report. So the class D share is an instrument that is pretty common. In the Swedish market, which is a fully ordinary common equity class of shares. The differential is between the B shares of the current outstanding shares is only in terms of the dividend distribution. So that's the difference. In the Swedish market, the custom is that you always pay a dividend, which is enough to cover the dividend coupon on the D shares. At least. So it's actually from a credit metric standpoint, capital standpoint, there's literally no change. There's no difference compared to ordinary shares in a liquidation situation. There's no difference from an S&P perspective. There's no difference from an accounting perspective. It's all part of the same common equity. the only thing is that you differentiate between two share classes in who gets a dividend first okay okay i'm asking the question because as you know as you may know some investors could classify the quality shares as a perpetual debt uh but you know it's open to debate uh my second question sorry i'm sorry to interrupt you i think there are instruments that might be open to debate i don't think class d shares is one of those that might be open for debate because there's no, in the past, there's been quite a lot of companies that used, ourselves included, actually, a number of years ago, they used prep shares of various kinds. Those had, in addition to the dividend, to the dividend preference, they also had a differentiation in a liquidation situation and they also had accumulation of unpaid coupons. So the difference here and the reason why S&P credits this as a fully 100% equity and why it's accounted for as equity is that there's no such thing. So if the company can afford to pay a dividend, these guys would in theory then get their dividend first. But there's nothing binding the company to, in a stressed situation, leaking cash flow. So this is actually not one of the instruments that is difficult to interpret in that sense.

Okay, I understand. And my second question is on your top line growth expectations. So can you guide us through the like for like rental growth for 2026 and what is your estimated indexation and occupancy changes for this year?

Now, we don't give any outlook in that sense. So in 2025, we had a like for like of 2.7% for the full group. This year, we will have, if you just look at the delta, this year we'll have slightly lower indexation for the Swedish RSI portfolio. Then I think in Denmark, there shouldn't be a large change. The Danish inflation and CPI indexation has been pretty low for some time now already. So that should be pretty similar to what we saw last year. There's not been any dramatic changes in the Swedish CPI numbers either. So on the commercial side, It will more be a matter of what pricing tension you will see in the market based on how occupancy moves. And then the Finnish resi market, as I alluded to before, we see that occupancy is going up and at some point we should have slightly better pricing tension in that market. It hasn't happened so far. Let's see when that starts happening. It's difficult, I think, to predict. given a precise prediction of that but the trend i think is is in our favor there um so i think that that's broadly what i can give you so uh should be fairly similar slightly lower probably due to the swedish resi on a pure life for life basis then obviously you will have the reported numbers being impacted by everything from transactions to fx movements etc

Okay, I see. And maybe a final question as a follow-up on Swedish Resi. Do you see a lot of opportunities currently on the market? And do you have any clue on the pricing?

Do you mean sort of primary transactions in the portfolio?

Yeah, on portfolios that could be on the market currently, actually.

If you look at the transactions that we have done in the last 12 to 18 months, and we tend to like doing transactions where we can get an accretion in terms of yield compared to what we already own. The first test is obviously that it needs to be in a location where we want to be and where we have our property management organisations in place. But other than that, we want to have an accretive impact on the full portfolio when we do incremental transactions. And we have been extremely tilted to the commercial side in the last 18 months in the transactions we've done on the Swedish side. Sato did an acquisition of a thousand apartments last summer in Finland. We've done one or two smaller Resty transactions in Sweden as well, in particular cases where we already have a decent footprint in some area and then another property comes out for sale. If we can get a decent deal on that, that might be worth doing. I think the pricing is actually fairly, both on centrally located commercial and on Resty in Sweden, It's not that easy, actually, to go out and buy things that are creative compared to our backlog yields. Okay. Thank you very much. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much, everyone, for listening in. You know where to find us if you have any follow-up questions during the day. Just feel free to reach out. Thank you.