Fabege AB (publ)

Welcome to the presentation of the Q4 and 2023. As usual, it's possible to call in to ask questions or send questions by email. To next, second slide, please. To summarize the Q4, it was a good quarter. Our operating activities performed well. We increased our profit from property management, and we have also a strong net lettings. But let's summarize 2023 first. And even here, as we said before, we had, for the whole year, very good operating activities, and we performed well there. We had increased profits from the property management. We had improved vacancy rate, and we had strong net netics as a whole. We also reached our goal for the whole year of a surplus ratio of 75%. we could make a long list of positive things. However, it also was a year with a lot of turbulence. There were concerns about geopolitical developments, concerns about the economic situation, and many were concerned about the development in their personal and household finances, mainly because of the development of the interest rates, of course. Because the EU was characterized by raising interest rates, volatile currencies, and continued high food and electricity prices. In addition to this, many countries were affected by different kinds of extreme weather, and we had the wars going on. Towards the end of the year, the Swedish krona strengthened slightly. Inflation expectations and interest rate came down and share prices went up. So we ended the year better than we started. But now I will hand over to our CFO Åsa Bergström, who will go through our results in more detail. Please go ahead, Åsa.

Thanks, Stefan. Please turn to page four. The year 2023 has been different in many ways with falling property values, higher market interest rates and a tougher situation in the capital market. Despite these challenges, we are exiting the year with a strong balance sheet and an improved profit from property management. It now feels that the outlook for 2024 is better in many ways than the same feeling a year ago. Rental income amounted to almost... 3.4 billion, corresponding to an increase of 11% in an identical portfolio. The increase in income was mainly due to the indexations that entered into effect at year end. Higher parking revenue and a positive net occupations during the period of which convendums move into Bakken 39 in Stockholm City was the largest. This was partly offset by a negative effect after the Swedish tax agency's relocation from Nötan 4 on March 31, 2022. Other income of 11 million refers to Fabergé's share of the electricity support that was paid out during the third quarter. Increased operating expenses were mainly due to acquired and completed properties which entered into operation and higher snow clearance costs. The surplus ratio came in at our target level of 75%. Birje Bostad's gross profit amounted to 4 million as seven projects were completed and where final recognition occurred during the year. The margins have also weakened for housing development and the result includes an impairment in relation to development rights of 6 million. Central administration costs ended up at minus 97 million. Interest expenses increased compared to the previous year, which was due to a slightly increased loan volume and higher average interest rates. The average interest rate increased from 2.39 at the start of 2023 to 3.13 at the year end, as higher market interest rates gradually had an impact. Our active work with interest rate derivatives have partly offset the effect of the higher market interest rates. The result in associated companies amounted to plus 34 million, of which minus 80 million related to capital contribution to the Arenabolaget company, plus 103 million related to income recognition from the JV project in Haga Norra, the residential housing project, and 9 million related to contributions from Birje Bostad's co-owned projects. And we therefore reported profit from property management of just over 1.4 billion compared to a little bit under 1.4 billion in the previous year. Improved net operating income and the result from associated companies have offset higher interest expenses. Unrealized changes in value amounted to minus 7.8 billion. And I will come back to this very soon. The surplus value in the derivatives portfolio decreased by exactly 1 billion. The tax expense or the tax income related to deferred tax and was positive and amounted to plus 1.9 billion. The amount includes the dissolution of deferred tax in connection with property divestments of 477 million. Please turn to page five. The increased market interest rates have continued to have an impact on yield requirements and valuations. There are still very few transactions in our markets. During the quarter, approximately 70% of our portfolio has been independently externally valued and the rest of the properties have been valued internally. The average yield requirement in our portfolio increased in the quarter by a further 18 basis points to 4.43%. Since the start of the year, the yield requirements has increased by 44 basis points. The inflation assumptions for 2024 and future years is now 2% per year. The average yield requirement is now back at a level equivalent to what we reported at year end 2017. And two total unrealized changes in value then amounted to minus 7.8 billion. The changes in value in Q4 were almost exclusively due to increased yield requirements. Please turn to page 6. This simulation shows that we can withstand further write-downs of just over 15% based on today's market valuation without breaching our internal targets. and the margin is even higher in relation to the covenants in our bank agreements. Next slide, please. Reported equity decreased during the quarter and amounted to 125 SEK per share at year end, and the long-term net asset value, or the EPRA NRV, amounted to SEK 150 per share. The financial key ratios were stable and came in at the same level as the previous quarter, The loan-to-value ratio amounted to 42% and the equity asset ratio was 47%. Both of these key performance measures confirm our strong balance sheet. The interest coverage ratio, as expected, has decreased in line with increased interest expenses and amounted to 2.5%, thus unchanged since Q3. Please turn to page 8. Financing is naturally still in focus, but the market situation today feels significantly more positive. There is a strong interest from investors in the capital market, and the margins have come down to levels that are increasingly in line with bank financing. The commercial paper market is functioning well, and the banks continue to show that they have more capital to lend to the sector and to FABGN. During the year, we have repaid bond maturities of 2.7 billion in total, including SFF. We have been active ourselves through issues of just over 1.8 billion in total, mainly during the autumn. The bank financing increased by 1.7 billion and a further 1.5 billion in unutilized financing, which means that we have maintained preparedness in the form of access to unutilized facilities. In October, we received the purchase price from the transaction with NREP, which means that we reduced the volume of outstanding commercial paper and also temporarily invested some surplus liquidity. And this week, we issued or refinanced bond maturities with SFF. a two-year bond at a price of 135 basis points, which is very low in comparison to what we have seen previously during 2023. With available facilities and improved conditions in the capital market, we feel secure in having the capacity to meet upcoming refinancings during 2024. Please turn to page 9. As you may know, we have worked for many years to spread our loan maturities. The slide here shows how the maturity profile looks. The strategy of long-term fixed rate periods is unchanged, and we aim for distribution of our loan stock among several funding sources. The short-term funding via commercial paper, the green bar chart, is fully covered by backup facilities. We have facilities in place to cover bond maturities in 2024 if required. However, the market conditions are now more attractive, of course, and it seems more likely that we will refinance our bond maturities with new bonds. And the bank facilities are continually refinanced through extensions. Next slide, please. 60% of the loan portfolio is fixed, mainly based on long-term maturities and mostly through straightforward interest rate swaps, supplemented by some fixed rate bonds. Just over 40% of the current loan portfolio is matched by fixed rate terms beyond 2025. During the spring and autumn, we have worked actively with callable interest rate swaps with the aim of reducing our interest expense. The longer-term plan is to replace maturities with new long-term fixed rate periods. The average fixed rate term amounts to 2.1 years. Adjusted for the estimated maturity of the callable swaps, the fixed rate term increases to 3.1 years. The high proportion of fixed rate terms today provides us with protection against rising market interest rates. In the short term, the higher market interest rates will thus have a more limited effect on our interest expenses. For a moving 12-month period ahead, an increase in the market interest rate of 1% will generate higher interest expenses of approximately 123 million crowns, all else unchanged. And now back to you, Stefan.

Thank you also. As also said, we have to continue to value a lot of the problems externally. And one of the reasons is also the transaction volumes for offices in Stockholm has remained quite low during the year. So we think it has been a good idea to get the external view on where do we find the market today. Because the values are not only taking into account the deals that have been done, they're also taking into account the transactions that hasn't been done. that they know about. So I think now it was, I think, 70% external value and rest internal. I think that's a strength right now. One of the reasons why the transaction volumes for offices in Stockholm has been relatively low during the year is that it's partly due to the fact that Stockholm has a large and long-term institutional ownership, and we're not Definitely not seeing any distressed sellers in the markets that we are having properties in. We, as you know, we divested two office properties. outside of our prioritized districts during the year for a total book value of 3.4 billion. And on top of that, we also divested some land for just over 400 million. So in total, we almost divested almost 4 billion this year. And I'm not ruling out the possibility that we can do more investments during the next years and also to use it for future projects. The Latin market is more challenging in general, you can say, and the decision-making takes longer time. And that has been a mantra for us during the year. At the end of the year, we saw a little bit more decision-making, you can say, and that's normal. And in the beginning of this year, we also can see that some discussions that have been going on for quite a long time are ending up in new contracts. Our customers, of course, are also naturally affected by the new market situation and the EU political turbulence. So that's also why it's even more important in this time to be close or even closer than normal to your customers. For the first time, as you can see here, in many years, we have also seen that the number of office workers in Stockholm has decreased slightly, and that's over several quarters. This trend is offset to a certain extent by the fact that the supply of new offices is very low, both in 2024 and 2025. I think that the market as a whole will be in balance. Our main belief is that there will continue to be good demand for flexible offices in central locations and in areas with good communications, and that the rents will also be stable at good levels. However, it can be tougher in certain submarkets where communications are poorer and for properties with less flexibility. The difference between A and B location in terms of vacancies and rental development will probably increase even going forward. Next slide, please, talking about office trends. Together with our friends and industry peers, we have carried out a major AI study on the offices and their importance. The data consists of 10,800 social media posts from private individuals and Sweden's 50 largest companies, and approximately more than 2.1 million Google searches during the period from October 21 to September 23. There are some conclusions in the report. You can find the report on our homepage. But the conclusions are that the office needs to be more To meet four basic needs, you have the collaboration, socializing, concentration, that you have to concentrate, which maybe not can be not the case at your home, and recovery. A correctly managed office can be one of the employer's strongest competitive advantages and a recruitment tool. Companies highlight the office primarily as a place for creative collaboration and socializing. They fail to mention other important roles of the office, such as a place for concentrated work or recovery, which seems to be important for many employees who prefer a hybrid way of working. Employees also expect increased autonomy and the opportunity for hybrid work. So maybe this is not a surprise, but I think it's very important for us to discuss this internally and also with our existing and potential customers. There we can add values and also can show them the best example of how to work for the future. Next slide, please. Part of finding the new ways of working and also to be able to be a good partner for our customers, we have these different flexible solutions we have been talking about before. Coworking is part, but it's not only where we do it ourselves or handle the service ourselves. It's also when we collaborate with other partners. uh companies specialized and co-working we had the work away from work you know about the other concepts and this week we also opened up the first broker in in in Hammarby but then we will probably hear more about that it is in in in the future next slide please For the whole year, we had a good net letting of 165 million. Of course, mainly because thanks to the contract with Saab and in the project Nöten. 165 million is actually the third strongest number ever for us. I think the Saab letting is also the second biggest letting ever in terms of both square meters and rent. Next slide, please. As you know, we show this every time, but I think it's important to show you that we have a very stable customer base. The average lease of those largest tenants are long. Next slide, please. When talking about renegotiations, leases of in total 151 million were renegotiated with an average decrease in rental value of about 3%. This is not a big surprise since we have been able to increase the rents with almost 18% thanks to the index, indexation clauses over the last, since the 1st of January of 2023. So, of course, there can be some contracts that are over-rented today. But what's also important to realize is that 340 million We have just extended on unchanged terms. So we will have contracts in the future, both with under-rented, but also that can be a little bit too high. So after two years of the high indexation of rents, I don't see any big potential in the renegations during 2024, but we can expect maybe plus minus zero in the But we will also continue to extend most of these agreements on unchanged terms. On the next slide, we're talking about the occupancy rate. Despite the turbulent external environment and the weak economy in both Sweden and globally, we increased our occupancy rate to 91%, which is good. The goal in the long term is still to get an opportunity rate of 95%. And the goal for net letting for this year is, as you saw on the slide, is 80 million. It's, of course, a tough target, but it's not impossible if we offer the right product with the right flexibility and the right location. Next slide, please. Rental development in the existing lease portfolio. This slide is to help you to see the future rental development in the next four quarters. It's important to remember that the graph does not represent a forecast, but it's only a snapshot of what we know at the year end. And as you know, for Q4 2023, we divested Oyen and Gladion. And now we have the indexation that helps us. We're coming up again. And we have also at the end of the year, Oprah and Martin moving into the new facilities in Flemingsburg. So next slide, please. For last year, the total investments ended up with 3.1 billion, and we expect it to be a little bit below 3 billion for this year. Last year, if we look at the next slide, you can see more in details how the projects are running. And I think maybe the most important figure on this slide is the off-campus rate in the project portfolio have increased to – almost 86%, I think, 85-86%, from 35% at the start of the year. So we have been able to find new tenants for both Akkoret, Påsen, Regulatorn and Nöten, of course. So it looks much... It also shows that the... The projects are in good locations and attractive projects for the long term. Unfortunately, the costs, we have seen the construction costs continue to increase. We have hoped that we should be able to fall, but we haven't seen that. They are still... high, which means that we, like the entire industry, will be cautious about starting new products. It would take a lot for us to start a new office project in the near future without a large part of being pre-let. On the other hand, we had the ambition in 2024 to continue working with the planning processes in our preferred areas. At the end of the year, we can also say that we decided to continue the development of Haga Nora, the Haga Nora area in the Arena Staden district and we will start the construction of 285 new apartments, which 75 will be rental apartments. We are right now starting that development. The apartments are expected to be ready to move in during 2025, end of 2025. And we will work cost-efficiently. And we think it's a very attractive market. We estimate that underlying demand for apartments is soar now. It's still good. And supply of new homes will be low in 2025. We can also say that we sold the last apartments in the joint venture with Bravo, also at Haga Nora. Now all 480 apartments are sold, and most of them have moved in too. And that's also why we feel comfortable to start this development. Next slide, please. Here we have a summary of our company. And it's nothing new news for you. But I think it can be always good to show this. And also to see what are characterising our areas with a good public transport and that we are close to the commuter train or to the metro. But I also like to say that during the year, the commuter trains in Stockholm, we have been affected by large-scale disruptions, delays and other problems. And this has been a negative impact not only for us, of course, but for the passengers and a significant problem for the entire region. And we are active on putting pressure on both the government, local government and the that companies that operate the transportation tube, to make sure that the quality will be better, because this is important for the continued development of Stockholm. And that's also why we have an interest of being active in this discussion. Next slide, please. So, Åsa.

Yes, thank you. Some new developments on the sustainability side from Fabriken. We are continuing to work intensively on improving the basis for sustainable Faberge and the impact that we have on our surroundings. And here are a few examples. One of the more important goals relate to our energy consumption. Our target is to reach an average energy consumption of a maximum of 70 kilowatt hours per square meter by 2025. An interim target along the way was to reduce our consumption from 73 to 72 during 2023. But in 2023, we already came in at 71 and we have therefore sharpened the goal to already reach a maximum of 70 in the present year, 2024. This result is an achievement that involves many of our employees and particularly our property management operations that monitor and initiate energy saving measures. I already, during the last quarter, referred to the Grespi result, but I think that it's worth mentioning again. With an index score of 93 points out of 100 in the investment property portfolio and a score of 98 points out of 100 in the project portfolio, we are in a leading position. A new development in the fourth quarter is that our share was approved as green by Nasdaq according to their Nasdaq green equity designation system. The criteria is that at least 50% of the turnover and at least 50% of the investment must be classified as green. We are also achieving a very good outcome in the reporting according to the EU taxonomy, which imposes even stricter requirements about what is green. A full 66% of our turnover is classified as green. And now back to you, Stefan.

So before I open up for Q&A, I'd just like to summarise the year and say that I think in total it was a year where everything we could impact. We worked a lot with and developed our internal processes. We increased our surplus ratio. As you know, we increased our profit from the property management. We had a lot of focus on the cost control and And we also had, as Rosa said, good results for the stability, for the grasp. We worked a lot with the energy saving. We had recycling projects. We also had a very improved and good result in the CSI survey in all our areas. We had a good, great place to work. Index and continue to improve that are now one of the more attractive employers in Sweden. The environment are challenging. We have all the geopolitical situation, we have the economy, But I must say I'm a little bit more optimistic today than I was maybe six, 12 months ago. But we also have to be humble and accept that we in Sweden, we are a small economy and also very dependent on the external factors. There can be some black swans flying out there. But what we know today... We have a strong balance sheet, so we're well prepared to take the challenges, take on and handle them, and also be able to use the opportunities that can be coming up. So in total, I think we are strong and have been working well, especially with the issues that we can impact. So with that said, please, questions. And before the questions, I'd also like to add that the board today suggested a dividend for for the annual meeting for 180, one krona 80 euro. It's a little bit below last year. It's a little bit below our dividend policy, but it's also what the board thinks was the right level with all the issues we have in the market. And it shows that we still have a strong balance sheet. We have a strong business, but we also have a handball for the circumstances in the market. So 180 will be the suggestion fund for the board, for the dividend. So please, 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 John Vong from Kempen. Please go ahead.

Hi, good afternoon. Thank you for taking the questions. Correct me if I'm wrong, but your surplus ratio for Q4 screens quite strong for a typical Q4. Could you highlight the drivers for this?

It was a strong quarter, but there are also some specific events during the quarter. We had also this question in the Swedish presentation. And so I would just like to give the guidance that the target for 2024 is... 74%, more in line. 74% is the budget, possibility of reaching 75%. But there was some one-off items in Q4 this year.

And also very good weather.

All right, very clear. On the lease renewals for this year, maybe I misunderstood it, but you said you were expecting plus minus 0% for 2024? Yes. Does that mean that you expect to keep the 6.5% indexation? Perhaps in other words, do you expect market rental growth to follow indexation here?

Yeah, the indexation is from the 1st of January, and that's included in the figures. But when talking from that level, the old rent plus 6.5% or 6.7%, from the new level, we prolong a lot of... The contracts, and we can't see really, of course there are some upside in some of the contracts, but some could also even be over-rented. But we see that we are now up at the market level for the rents. But it's, you're right, it includes the 6.7%, 6.7 or... 6.5%. 6.5%, sorry, is our increase from the 1st of January.

Okay, that's clear. So you're expecting that the portfolio is rec-rented after the 6.5% indexation?

Yes, after that we think it's... We have been helped a lot by the indexation the last 12 months or 24 months since we... Now the rents are up. I think it was 11.7 last year and then 6.5 this year, and that makes it 18% something in total for the last two years. And I think that has helped us a lot for getting the rents up. So it's positive.

Okay, clear. And does that mean that the decline that you saw in a couple of leases of 3.2%, that those were essentially one-offs?

It was a special situation. And that's not going to be seen in the office market. It was a special discussion, a negotiation.

Okay. And also on this topic, I think you mentioned that the office market is in balance. Looking at the slide with the chart on office employees, looking at step one, the number of office employees is stagnating. But the net new space for the coming three years is still positive. Wouldn't that imply that demand will be still weaker than supply going forward?

I think it's in the balance. And then we have to discuss different sub-markets, maybe. That could be... There's so much focus right now on good locations, in a good, flexible location, new, modern offices in good commuting locations. And I think we are well off that with CBD, the inner city, and sauna, for example. But... it's a lot of focus on the where where to find the locations some market can be much more difficult but but uh so it's difficult to talk generally but in in the big the big picture is relative imbalance on the whole okay thank you very much

The next question comes from Bart Geissens from Morgan Stanley. Please go ahead.

Yeah. Hi. Good afternoon. Bart Geissens from Morgan Stanley. I had two questions, if that's OK. The first one is on interest payable. You've cleared or net interest expense. You've been very successful in managing those costs. But can you please help us understand maybe a little bit more how you've done that? If you look at the fourth quarter net interest expense, it's about 11% below the third quarter net interest expense. How have you managed to reduce that expense to such an extent? Thank you.

Well, I would say there are two reasons for that. One is that we were paid the purchase price for the two properties sold to NREP in the middle of October, which means that debt was reduced. by almost 2.5 billion. And the other part is that we have been working with the derivative portfolio and been able to reduce interest costs by that.

And the increase in capitalized interest Does that have anything to do with it? Because I think it's gone up from 20 million to... No, I know.

We have actually had that question, so I will try to explain that. But since the figure in the Q3 report was not a nine-month figure, it happened to be just a figure for one quarter. So it's not been so clear. So the activated interest cost, which is 63 million... for the full year has increased a little quarter by quarter, but it's not the big increase that you saw from the reported figure in Q3 until Q4. So that was a mistake in the report in Q3.

Okay, thank you very much. And then my other question is on the dividend. I appreciate at the end of the call you referred or you provided a concise explanation as to why the dividend was reduced again. But I just wanted to reconcile the relatively constructive outlook for the market, where the management team clearly feels that things are getting better out there in the market, yet you cut the dividend again by 25% to now below your dividend policy. Can you help us understand a little bit the consistency of that thinking? Thank you.

It's very easy. You can say respect for the circumstances in the market. If you take everything into account with However, we came from last year with, we feel very comfortable with refinancing and so on. But we have respect for that. It can change. We also like to be prepared for different scenarios in the product portfolio and so on. So the board thought it was... It was this year balanced between how much to pay the dividend, our strong balance sheet, the opportunities and risks in the market. It was a discussion about the balance between all those issues.

Okay, thank you.

Okay, let's see the questions here from the media.

The next question comes from Jonathan Carnator from GS. Please go ahead.

Good afternoon. Thank you for taking my questions. Three questions, if I may. Just coming back to the occupational market, I think you're clearly saying things are quite okay. Obviously, you've signed a big lease contract with Saab, which is, I guess, the majority of your net lettings at this stage. How do you think the occupational market is going to evolve? Are you seeing a bit more interest for the assets? Or do you think like this quarter, this is the trend that we have to think about for the time being?

I think with a good interest, with a long periods for making decisions. We see also that people are cautious about what's happening in the world, for the economy and so on. So long decision making, interest, also how to use their offices. It's not a question if they should have an office. It's more how should it look like, where is it right location, and how to use the space. So a lot of discussions. And as I said, we also have some specialists now helping with those discussions. But mainly... long decision-making period. So it appears for decision-making, I think that continues. We see a little bit better in the beginning of the year. We announced this week a lease agreement in Hammarby, where the discussion has been going on for a long time. So there are some positive signs, but still we have respect for what's happening in the economy and the world.

Just to follow up, I think your retention rate was a bit lower this year than it was last year. Are you expecting an increase in releases or is that something temporary?

Sorry about the renegotiation, you said?

No, I'm saying just that this is new signing, obviously, but the dependence is departure. I think your retention rate was a bit lower this year than it was last year. So just asking whether you're seeing tenants leave at a faster pace, or that's just temporary, or maybe I didn't read it properly, actually.

I think it's, you can say it's difficult to say a trend. We had last year some larger ones that we had moved also internally. We are some not about. But I think we have. So I think it is difficult to say it's it's it's not a trend. No.

Okay. Very clear. The two following questions are perhaps slightly connected, but effectively the first one is is on the on the derivative portfolio again, maybe following a bit last question. But effectively, if I look at the P&L, there's 888 million, I think, of losses relative to the derivatives and financing. And I wanted to understand whether part of that was cash or whether it was all non-cash. And the question being behind it, was there a cash cost to the work on the derivative portfolio you were talking about?

It's not cash. It's only valuation.

Okay, very clear, thank you. And so we then come back to the next question, which is, obviously you're showing 6.2% growth in profit from property management, which is great, but there's a slight difference when we look at the cash flow before changing working capital, which is actually 12% decrease. That seems to be due to a higher interest paid, But I struggle to reconcile with the capitalized interest we were talking about of 60 million because the difference is, well, noticeably higher than this. So could you help us reconcile those differences, please?

I think from what you are trying to talk about now, it's very, very difficult to understand what kind of questions. Could you maybe please just email the question to me and I can look into it?

Yeah, I mean, I have the numbers in front of me.

Yeah, but I don't have all the numbers in front of me. And it's difficult to sit here during this call just to try to reconcile one figure with another one. So maybe it's easier to give a good answer.

Let me rephrase the question just to try to make it simple. The interest paid in the cash flow was substantially higher than the interest cost in your P&L. And this balance is higher than the 60 million capitalized interest by at least 100 million. So that's the question.

But the interest, according to the P&L, also is including other financial costs. So that's probably the difference.

And those were positive, I guess?

No, they are negative. I mean... Ah, okay, sorry. Yeah. And so what do they correspond to? They correspond to different kind of costs relating to taking up new loans that are activated over the time of the capital maturity of each loan. So there are different costs. Okay, that's clear actually.

I'll pull up in case there's more, but thank you very much. Thank you.

The next question comes from Paul May from Barclays. Please go ahead.

Hi, everyone. Apologies if you've answered a couple of these questions before. I was able to join late. Just wonder if you could highlight why the admin costs were down quite materially in Q4 relative to prior years. Is there anything that we should take into account there?

During the year we make provisions for bonuses and also for the profit sharing system that we have and in Q4 it was apparent that all the targets were not met so there was a reduction in the provision and that makes the largest part of the difference in Q4.

Perfect, thank you. Just on the year on year movement and It's slightly similar to Jonathan's question, but on the year-on-year movement in your profit from property management, how much is year-on-year growth due to the provision that was taken in the residential business last year? That's a negative because I think the year-on-year is broadly flat if you adjust for that.

Is that correct? Actually, there is a section in the report where we divide the result from associated companies into the different parts. And in 2023, 80 million was the cash sent out to Arenabolaget. this 80 million is more or less a recurring figure that will be more or less the same in 2024 then on the positive side we had a little bit more than 100 million coming from the jv project with brabo the residential project in in solna and that's more one-off so that will not occur again in in 2024 okay perfect um the

Rental income chart that you provided on page 13, which shows the quarterly rental income expected over the coming year, does that reflect the indexation or is that before indexation is applied? Because it says at the balance sheet date, which would assume that's before indexation is applied. I'm just trying to see whether indexation is in those numbers.

No, these different bars, they include the indexation for 2024, which is known, and which is also, I mean, regarding Q1, it's already been paid by the tenants. So that's included.

Okay. And so the year-on-year sort of flat is just simply due to the disposals. Is that right?

Yes.

Cool. Very final one, which just as a sort of slight housekeeping. On the developments, the rental values that you highlight, is that gross or do we need to net anything off that in turn? Or is it net income, the £384 million?

Sorry, can you take your question again? Was it in the project table?

Yeah, in the projects, the 384 million of rental value, is that a gross number or is that after the surplus ratio?

No, that's the gross number. That's the rental value.

Cool. And just following on from that on notion four, Obviously, highlighting you've got an additional rent that's come through from Saab, but I appreciate you mentioned this in October, but a quite material increase in the cost. If I work it through, it's costing you 400 something, 480 odd million of additional cost for 250 million of additional rent. Is that correct?

Yeah, I mean, yes, yes. The previous numbers that were given regarding Nöten 4, they were based on a multi-tenant building and from the best knowledge. And after we signed the contract with Saab, all these figures have been updated to what they actually will be. So this is how it's going to look.

We also said it's 10 years plus.

contract yes okay and are you able to give some color on what that additional cost is or or or is that commercially sensitive just one just wondering what because it's quite a big increase in the cost it's a big increase but there are it Saab is a very special tenant with a lot of security because it's in the defense industry so there are specific adjustments for Saab to be invested And Saab will also invest a lot of money in the building. So as you said, the rental contract is more than 10 years. Actually, it's a 20-year contract. They will be there for a long time, but they have an option to leave part of the area after 10 years.

It's theirs and everything, like some other investment to make it. So it's a long list of different investments.

That sounds perfect. Good to know the longer lease is there. And a very final one. You mentioned, I think, in the report, apologies, one last one. You mentioned in the report property value is down, I think, 13% and yields back to 2017 levels on a valuation basis. I mean, if we look at where cost of financing is, we're still kind of back to 2009-12 levels. And at that point, your property yield was in the high fives, I think 5.8 if you look at an average over those years. What sort of gives you the confidence? Because I appreciate you highlight there's been some transactions, but there's not been many transactions. What kind of gives you the confidence or the comfort that you're at the right level now Because at the end of the day, I mean, I appreciate you've had things externally valued, but that's a best guess as well.

You're answering the question yourself. That's one of the reasons why we also choose to value so much external today. And as we said, they take into account the deals that have been done and the deals that haven't been done. also so so they they are the best we we can and then also maybe in our in our areas now we have as you said um reduced the values by 13 from the top The yields are up, but also the cash flow in the portfolio is better according to the rental development. But I think the transaction was seen in the market. are good indications for all the values. And we are using Cushman Wakefield and USEC, and we also had a third from some making a third opinion for some of the properties and that's Savills. So we have been doing as much as we can to assure that we have the best that we can have today for for for what expected values are perfect thank you very much the next question comes from alexander toto manoff from green street please go ahead

Thank you for taking the question. You mentioned that in the Q1, we've already received index rent with a 6.5% indexation as of October last year. Have you had any pushback from existing tenants? And if so, is there a theme like other specific industries that potentially you're having contact from in specific sub-markets that you find more worrisome?

No discussions. Thank you. I think we have some questions by mail, Peter.

Yes, we do. What's your expectation for cash requirements and cash earnings from the sharing profits of associated companies for the next few years?

Yeah, I think I partly answered that question before, but the capital contributions to Arenabolaget will continue in line with what we have seen in recent years. In 2023, that was minus 80 million, and that will continue. And the rest of... The cash earnings on the positive side in 2023 was from the JV residential project in Haga Norra, and that is a one-off, so that will not occur again. So going future, it will be only the capital contributions to Arenabolaget.

Okay, any further questions? If we don't have any more questions, thank you for joining us. Thank you for listening to us. And thank you for your questions. And you're always welcome to give us a call or to even meet us here in Stockholm or another meeting. So have a nice day. Thank you.