Fabege AB (publ)

Welcome to our presentation of Q1 2025. As usual, I have our CFO, Åsa Bergström, with me. And after our review, there will be, as usual, the opportunity to ask questions. So, first slide, please. Or next slide, please. As you know, we have a modern portfolio with focus on Stockholm. I don't have to repeat that too much, I think. But what's new on this slide is that we only have 99 properties. since we have been in England. But then the property value of almost 80 billion. But what's important here is that all the focus on the Stockholm area. So the sub areas. So next slide, please. With all this happening now in the world, with all the turbulence, from day to day, you don't know really what will happen. We said that we thought we're coming from a tough 2024, or we really have a tough start of the 2020s. We thought maybe it could be a brighter 2025. And we were quite optimistic until maybe a couple of weeks ago when we saw the turbulence. But we all know what's happening in the world right now. So what we're doing, we're really focusing on what we can impact. And we can impact our areas, we can impact or have close relations with our tenants. We can focus on nothing and the daily work. And we can focus on Stockholm. We really believe, and I like to say that, we continue to believe in Stockholm. Stockholm as a growth area of... Sweden, it is the engine of the Swedish economy. It's a more volatile when you have a struggling economy, but those Swedish and international companies have many of their main quarters or the Nordic headquarters here in Stockholm. So I'm convinced that Stockholm will continue to be Sweden's largest growth region for the foreseeable future. but like any all metropolitan areas are challenges and the potential for improvements but it's also there of course and we work with that next slide please we also continue to believe in the future of the office the trend is that the office occupancy is increasing companies increasingly perceive the value of having a dynamic workplace where employees can collaborate and develop It's becoming increasingly clear that the role of the office is a meeting place, more of a meeting place and a gathering point. And it's extremely important as that. If the economy cycle returns to more or less normal, or we can see as a normal state, we would have, we think, and I think, maybe two, three years of very favorable development ahead of us. But with that said, still, the world is challenging. We also continue to believe in the future of the office. The trend is that the office is even more important for the companies, not maybe only as a working place, but as a meeting place where you can meet, you can collaborate and you can develop. And we think this has been increasingly clear over the last years after the pandemic. Maybe you're working from home one day or two days a week, but the office is important. And if you see the economic cycle returns to a more or less normal state, I think there can be further development of offices ahead of us.

Thank you, Stefan. Rental income for the first quarter amounted to 865 million, just below the same period of last year. On a like-for-like basis, income decreased by 20 million, equivalent to minus 2.7%, which mainly related to relocations as a result of the previous year's negative net letting. Occupations in completed projects were partly offset by reduced income related to divested properties, but the net was plus 18.6 million. Property expenses includes a non-recurring item of 7 million. Other deviations mainly relate to somewhat higher maintenance costs and higher property tax. The surplus ratio thus amounted to 69%, adjusted for non-recurring items, it was 70%. As now projects were completed in Bydje Bostad, no turnover was reported. Bydje Bostad's gross profit amounted to minus 6 million, all related to administration cost. And central administration amounted to minus 33 million. This cost is front loaded as Q1 includes the annual bonus payment. Net interest income expense ended up in line with the previous year. Higher debt early in the year was offset by a slightly lower average interest expense. The result in associated companies amounted to minus 24 million and related to the period's capital contribution to Arena Bolaget. Shares of profits in other associated companies only amounted to minor amounts. This meant a profit from property management of 285 million compared to 329 million in the previous year. The changes in value turned negative again after two quarters with essentially unchanged valuations. Unrealized changes in the value amounted to minus 565 million. I will come back to this very soon. Realized changes in value of minus 37 million related to the sale of Yngvingen. The property was valued according to IFRS at the sales value of 960 million in the Q4 accounts. The negative result that was now recognized in connection with vacation of the property related to deductions for deferred tax and sales costs. The valuation of derivatives portfolio followed long-term interest rates, which varied during the quarter measured on the last of March, the surplus value increased by 27 million. And finally the tax expense, which related to deferred tax only amounted to 141 million, or which plus 128 million related to a reversal of deferred tax in connection with the sale of Ynglingen. Next slide, please. In the quarter, we have once again independently valued a large proportion of the portfolio, just over 50%, and the rest of the portfolio has been internally valued. Yield requirements leveled off and have been essentially unchanged since the last quarter. The average yield increased by 0.01 percentage points to 4.55%. And as I mentioned earlier, the changes in value were negative in the quarter, minus 565 million. This was mainly related to the fact that values now expect longer vacancy periods and slightly lower rent levels, primarily in Solna where we have some vacancies. In addition, we anticipate longer implementation periods for future projects opportunities in Flemersberg, and we have thus written down the value of the older existing properties, including existing building rights. The total property value thus amounted to 77.8 billion. In addition, there is a property value of the development property portfolio in Birje Bostad of 860 million. And next slide, please. Reported equity amounted to 122 crowns per share, like at the year end of 2024. Long-term EFRA NRV amounted to 146 crowns per share. The equity asset ratio was unchanged at 46%, and the loan-to-value ratio was also unchanged at 43%. Both of these key performance indicators confirm our continued strong balance sheet. The interest coverage ratio amounted to 2.5 on the rolling 12-month basis, which is also in line with the previous year. Next slide, please. The access to and pricing of financing is still very good. This applies to both the capital market and banks. Both the commercial paper market and bond market are continuing to function well. In early March, the Ynglingen property was vacated and we received almost one billion in cash. In connection with this, we settled the bond maturity and we have also slightly reduced the outstanding volume of commercial paper. In March we issued a total of 400 million in new bonds and in connection with this almost 300 million of bonds that mature in the autumn of 2025 were repurchased. The new issues were made for two and three years respectively and at margins of 74 and 97 points. Falling market interest rates after the Riksbank cut in January and lower margins have meant that we are now reported an average interest rate of just 2.91% at the end of the quarter. And undrawn revolving credit facilities totaled 6 billion at the end of the quarter. Overall, we continue to have good preparedness for upcoming financing needs and refinancing. We have facilities in place to cover the upcoming loan maturities. In total, we have bond maturities now of 1.8 billion during the second half of 2025. We intend to refinance our bond maturities with new bonds, whereas the bank facilities are continually refinanced through extensions. Next slide, please. Of the loan portfolio, 52% is now fixed, mainly based on long-term maturities and mostly through straightforward interest rate swaps, supplemented by some fixed rate bonds. In addition, there are callable interest rate derivatives totaling 7 billion, which are still running. Straightforward interest rate derivatives run with fixed interest rates between 0.11 and 2.18% and the callable interest rate derivatives run with an interest rate between 1.82 and 2.5%. The average fixed term amounts to 1.7 years and adjusted for the estimated maturity of the callable swaps the fixed rate term increases to 2.5 years. Our interest rate strategy provides predictability with fixed rate terms that offer protection against rising market interest rates. At present, we see greater uncertainty about inflation and the economic cycle, and the Riksbank has paused its interest rate cuts, although the market is now expecting further rate cuts ahead. Long term interest rates have risen and we have held off on entering into new fixed rate terms. The levels that we have managed to fix that both for straightforward interest rate swaps and for the callable swaps are levels that we think work even in the longer term. For a moving 12 month period ahead, an increase in the market interest rate of one percentage point will generate a higher interest expense of approximately 146 million, all else unchanged. and a corresponding reduction in the market interest rate by 1% percentage points will result in a reduced interest expense of 72 million. During the quarter we have continued the sustainability work in line with our environmental and sustainability targets. The main targets are energy consumption, maximum 70 kilowatt hours per square meter, 100% renewable energy, 100% environmental certification of investment properties and new construction, 20% circularity index during conversions, and 35% lower CO2, scope 3 emissions during new construction for new projects. And also sustainability audit of suppliers. We have also initiated the work on upgrading our green framework, and like before, we will obtain a second party opinion from S&P. And with that, I leave back to Stefan.

Thank you also. If, as also I told us, the financial market, the financing market has been good over the quarter, and we have issued some bonds on very good margins. The transactions market has been, in our view, quite healthy. Not that many transactions in our market, but at good levels. Some of them you see here, some examples that have been, in Hagastaden, at Lidingö, for example, and in the old town of Stockholm. But I don't think we have . But the transaction that had been completed has confirmed our valuation score well. And as also said, the yield is moving sideways. So next slide, please. As we said, this is probably the last time you see this property in our slideshow, because it's Ynglingen at Östermalen, which we sold and we left during the quarter. We consider to see transactions as one of our adding value parts. It's part of our business model to sell off from time to time the property that we considered to be outside of our core areas and that we don't see that we see less potential for development. So next slide please. We also have during the quarter signed a letter of intent with the city of Solna to sell Solna, Hörnand, Hörnand 1 property um the plan is to to sell it from at latest 2028 uh as i said at latest you have we have told this before is that we will if their plan is to that this property will become the solar new city hall and telenor who has it as a swiss headquarter they have been there since 2018 and so our ambition is to find a new solution for them, so all three parties will be satisfied. And that can take some time. That's why we talk about 2028 as latest. And the property is located, as you know, between Arenasdalen and Svana Business Park, and we don't think it's out. It will be a fantastic city hall for Svana, so that's the main reason for selling it. Next slide, please. But when we talk about the rental markets, There are a little bit more question marks. The Stockholm office rental market has been weak for several quarters now. We have seen increasing vacancy rates in all the sub markets of Stockholm, and especially this is true in cheese stuff, where it continues to increase, but also in the CBD. In the CBD, we can see it coming up, but it's also an effect that we have had some, what you could call, hidden vacancies over the last year since some of the tech companies, they rented more space than they needed some years ago, they have contracts on that. But now we also see good demand in the CBD. So this figure, I think it will be, many companies see it as an opportunity to move into and find new locations in the CBD and in the city. The number of employees in the office intensive industries in Stockholm and the Stockholm region has been flat for the last years, and we can't see any rise in or any growth in that yet. I think it will need some more better economy. and a better macroeconomic situation before we see that. If you go to the next slide, please, you can see that the supply of offices in Stockholm is also flat since many years. And that is what we have. Very new projects have started. I think very few have started on speculation. There are some few in Skanska, Herzogland and Kumsholme, for example, but very, very few and more projects are finalized over the next right now. But they also have signed many cases, signed contracts. Next slide, please. Occupancy rate in the management portfolio. have been coming down even further to 87%. We have said that before, that it will come down before it will get better. This is an effect of what the net letting figures from 2023 and also 24, that's the effect we see right now. But also during this year, as you know, we will have the finalized some of the projects but I will come back to that later. Please, next slide. During the first three months of this year, 2025, we had a positive net letting of 6 million. We have also renegotiated almost 90 million and are extended on unshared exchange terms. We have 60 million that we have renegotiated minus five percent. We and also we have some contracts that are maturing between 25 and we already have been negotiating before and the current agreement expires. We can say that we have and we said that also before that some contracts are, thanks to the indexation over the last years, maybe a little bit over-rented. And that's where the effect we see now, but it's for the 60 million and 5% is very, some special contracts, especially one with, with a larger one with, with in sauna that we had building where we, we all said that we knew it was a little bit over-rented. So this is not a surprise for us, but I'm happy with that. The net letting is again, positive of the plus. So next slide, please. This, we used to show you the rental development in existing lease portfolio. This is based on what we know today. And the beginning of the year is impacted, as you said before, over the net leasing figures for 2023, 2024. And the third and fourth quarter this year, and especially the first quarter next year, is impacted by that. In Solna, we get Saab moving in, in Möten. And Alfa Laval are moving in during the summer in Flemingsburg. So that will have a positive impact. So we're coming closer to 900 million. the beginning per quarter in the beginning of next year so next slide please now uh this this um there will be no big surprise in this list uh it will be added with um with the during the year with some of our new tenants or in the new products when talking about conventions We can't say that much more than we said in the Q4 report or the presentation. We will know more in a couple of weeks time when the, if you call it chapter 11 phase, where the lower reconstruction phase are, where we'll be set up. We have said that we will have an agreement with them, hopefully. I think we will be positive for both. to during the first year seven discount from us to be able to to take the business into positive figures and then uh prolong the contract a little bit and then but of existing terms so but more about this next later later this quarter Ongoing projects. We invested a little bit less than 500 million this quarter, 447 million. We continue with the development of Forsen in Hammarby Bostock, Accordity in Hagenora, Fossab in Jansnetten and Alta Laval in Flemmingsburg. All those projects will be finalized this year. And it's a fantastic project, I must say. You're so welcome to visit them. a residential development portfolio and we are moving on to continue with the project at Haganora which is here down in the in the or in the middle of the of the fiction at the end at the back you have the the the quarters but it's a fantastic Haganora will be a fantastic area we are continuing with the investments in the residentials In the first phase, the 23 apartments of which 19 are sold. They are actually moving in right now. You see it down to the right, it's a red corner. It's a fantastic product. In the owner apartments, we have now sold 39 and they will get signed contracts, I should say, and they will get access in end of this year. Rental apartments are being completed for occupancy during the autumn. And then the next phase for starting, we will sell more of the next phases after the summer. So it's closer to moving in. But I think this is a really great project by the idea to start. Next slide, please. We, as you know, we have a little more than 700, about 700,000 square meters of building rights. We're a 40, for the commercial, where of about approximately 45% are legal binding. Talking about the residential building rights, more than half a million square meters, where of 37% are legal binding. As we said before, we will not start any of these speculations, but this is a potential potential for the future and for the development of our existing areas where we're active. Next slide please. What has been important during the quarter is that we have started in Arenastaden with the road infrastructure in Kairu. We will invest about 200 million for preparing for future projects. The opportunities in the future are to build about 70,000 square meters of office and a couple of hundred apartments. We will not start the commercial, the product before I have signed contracts. So we are, that's what we also working with to try to find the potential tenants for that fantastic project. In Haganora, we can continue to develop the residential, but we also have a potential commercial project in Håganåla to continue to develop that area. Next slide. Some other project opportunities for the future are, for example, Kungsholmen, where we got the legal binding plan for Tegelterrassen, or Far Iset, and it's a little bit more than 30 5,000 square meters of offices or commercial area. And it's also some residentials. We're right now discussing how to take that to the next step. In Sona Business Park, Irket got a legal binding plan. It's more than 20,000 square meters of office and also 20,000 square meters of residential for us. But maybe even more important is that NCC now can start to construct or to build the house for Svenska Kraftnät. And I think that will be really important for the development of Svalbard Business Park. And as you know, we own most of the other properties in that area. We had some vacancies there. Saab will move in close to this area. So I think it's really what's happening in the next years will be very positive and also an opportunity for us to fill up the vacancies we have in Sona. So next slide, please. To the right, you see what we expect to Sona Business Park in five years' time and where we are today in the middle. It will, as I said before, the Svenska Kraftnet or the NCC building is in the middle. potential projects are close to that. And I think this really could be a great development for this area, which is the second best commuting area or center in Stockholm. You have the trains, you have the subway, you have very good infrastructure. So I think the potential in this area is really exciting. In a tough world, in a turbulent world, in a challenging world, we believe in our markets long term. Of course, we are not vaccinated by a poor economy and turbulent times. But we see that with the strong market share positions we have in Stockholm, in Solna, and with modern portfolio in good commuting locations. I see that also the long-term opportunities are there. What we will have focus on now is of course to fill up the 16 buildings. We have the target to increase the occupancy rates to 95%. I don't expect it to go fast. I think it will take a couple of years and we said, we said it would be at late 2030. We will complete existing projects. And as you said before, the larger ones are and it will add a couple of hundred millions of new rental income over the next year. We will continue to not start new products, but be able to, when we find the timing right, to start new, to take the opportunity to build a new portfolio. We will continue to do value creating transactions. And of course, we always have focus on the cost. This, the targets, of course, the cash flow, the growth of management profit per share and to be the total return, the best property portfolio. We are looking at the total return in Sweden. So thanks for listening and questions.

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thank you very much and thank you for listening and you as always you're welcome to give us a call and ask questions or have a dialogue so please give us a call and i hope to see you soon bye have a nice day