Heba Fastighets AB (publ)

Hello and welcome to us at HEBA. We have released our report for the third quarter and will present the results here today. With us we have Patrik Emanuelsson, CEO at HEBA, Hanna Fransén, CFO and I am the Communications Manager, Eva Fawcett. Patrik, can you start by summarizing the results?

Yes, it's a bit boring, but I usually say that it's a strong administrative result. We are very proud of that result. You have to remember that we sold out of rent last year with 93 million SEK. And also, if you look at Our colleagues' development was that we contributed a very good result even last year. And many of our colleagues lost their management results. So that makes it extra strong, I think, that we actually continue to push upwards in a positive way. So we feel very pleased.

So stable.

Very stable.

But if we look a little bit at what is current now and a little forward.

Yes, what is particularly relevant is that we have put quite a long time behind us now to create new goals that connect both sustainability and new financial goals. And we will present this during the day, so we look forward to that very much. It is a very large and extensive change for us to make these new sustainability goals.

And if we stay a little longer with sustainability, if we look a little more concretely, what are we doing?

Well, one part of this change is that we need to achieve a documented control of our properties in real time. That means a fairly extensive transformation to be able to show the environment and the market that we have it. And the other part is very much about how we affect the environment, i.e. environmental pollution. And there we have two big offensive things. One is how we are going to reduce our energy use and reduce emissions there. And the other part is how we are going to reduce emissions in the new production. And that is the big challenge that we all real estate companies are facing.

With that said, I think we will start the presentation. Yes, I think so. We will come back to this. We will come back to this. Please.

Yes, if we sum up the activities that have taken place throughout this year, it is just as Patrik said, that the administrative results are increasing. And then we choose to present exclusive BRF revenues from JV companies, which mainly came in last year. So in order not to compare the apples and the pears, we have chosen to clean them up. And then we see an improvement of 3% for these first three quarters. The total result is still negative, not so much, and a very big difference from the previous Q3 last year, but still a minus, and it is strongly driven by negative value changes. We have acquired three older residents during the year, two in Tyresö in March and one in Tebby Park now in September. We have also sold two housing properties in Midsommarkransen that had upcoming renovation needs. And we have issued new green obligations of 350 million under September. It's been a while since we were out and issued a new one, so it feels extra fun to be able to do it now and also under the new green framework. And then we have also started building 128 rental apartments in Källberga. There was a spade here recently. So it's a project we've had for a while, but now it's really fun that it's started. The figures, as I said, we came out negative at the end of the row with minus 8 million, but as you can see, one year ago we had over minus 650 million. The administrative result is 3% better and this is still very strong, just as Patrik alluded to. Even if the rental income decreases by 4% and also the operating budget, we will still come out even stronger. We have sold 19 properties during last year, so of course that gives an effect on the total figures. But it's great that it still comes out plus 3%.

And you can also see that if you compare our leaseable area from what we had six or seven years ago to today, we have doubled the administrative results. So we have made a very big change to make the company's economy more efficient. Yes, really.

And the value changes? We now see a slightly weak positive trend. We have still accumulated minus 0.3 percent this year compared to minus 6.4 percent last year. It is absolutely better. There is a small plus figure on the quarter alone, but still combined by minus 0.3. And then it will be 33 million kronor compared to over 1 billion that we had one year ago. And we have set the new long goals, but we still have these goals left, which were the shorter goals that we set for the period 2023-2025. So for this year, 2024, these are still the goals that matter. And then we have the new long goals that Patrik will tell you more about later. And here we have said that we will have an administrative result that exceeds SEK 200 million for housing rights revenues. And we now see that we will be able to handle that in 2024. We're not going to have a reward rate that exceeds 50%. We're closing the quarter at 44%. We're going to have a surplus rate of over 70%, and we're actually at 72.5% now, which is one of the higher ratings that HEPA has had. And we will increase the proportion of social housing networks. We have not had any percentage set in these short goals, but today we have 28%. And then the allocation will be at least 40% of the administrative results adjusted for tax. And that was also what we delivered when we did the allocation in May this year. And essential events under Q3 only, as we said, we add this community housing in Näsby Park, 54 apartments in an older housing. And we now have an essential share of the stock is community housing. 13 of 57 properties are community housing. And we subtract these two small smaller housing properties. The use of energy is again at a record low. I have said this a few times, but it is now 79 kilowatt hours per square meter. So it feels really good with the upcoming challenges we also have. The CSR&D work has taken some time. We have looked at the data points that we are responsible for reporting on and also this double essentialities analysis. So we have come a long way in this work. That also feels good. And actually, 100% of our essential suppliers have signed this code. This is something that we have also worked on for a while to achieve. As for the new production, we have had a start-up on the project in Källberga. And then in July, a little later, after the last report, we signed another contract for a project in Hägersten, which is 48 rental properties. And we have planned to complete that in 2026. So the same end of the year as the Källberga project. And the figures for Q3 alone, there we have a management result of 56 million compared to 60, which we had Q3 23. So it is a slight decline of 4 million, and that is strongly driven by the declines we made last year. Plus on part-year results, it feels good. Also a big difference from the negative amount we had last year at minus 265. And a positive value change. So even if it is 0.1% only, these 19 million, we see this weak trend now up. On the financial side, we have our real estate loans at around 4.1 billion SEK. And now green bonds at 1.450 billion SEK, compared to the 350 billion SEK we made in September. And we issued them at a margin of 1% plus Stivor III. And then we have the certificate at 315 billion SEK. So 5.9 billion SEK in debt and an average interest rate of 2.95%. The net reward rate has also dropped a little and the same as the reward rate from the latest report. And we have 44.2% in reward rate. The rating is unchanged since last, BBB, Stable Outlook. And in the diagram there you can see the change of our debt and average income. In terms of interest, if we look at movable loans and short-term deposits, movable obligations and certificates, and if we look at our entire Svartportfölj, we have 1.3 billion SEK in movable exposure, which means that we have insured 78% of the debt, 3.4 years of interest. And in the lower part of the picture you can see how this interest rate is distributed over the year. And we have worked hard, as we have also mentioned earlier, to have this even distribution, both in volume and over the year, for an effective management internally. In terms of capital, we have approximately SEK 650 million in bank loans, which will be distributed within one year. The majority, or roughly half, is in the spring, and then the rest will come at the end of next year. And then we have an obligation, 350 million in May, and a certificate. And we intend to refinance the entire sum to 1.3 billion. And if that were to be a problem, we would always have our loan agreement to fall back on, 1.9 billion. And the deposit of the property is still unchanged at 35%, so we also have room to loan them more if we want. 3.5 years is a good year for us and also a balanced distribution in this table below, which is also intentional and a stable control over it.

Yes, we have a pretty nice project portfolio, both in our own management and in our partnership and cooperation with Åke Sundvall. As Hanna has just told us, we are actually starting the first project and have signed an agreement to start project number two. in our own portfolio. And if you look at our collaborations, it is the Vårbergstoppen that is ongoing, where we have had influence in the first property and the second property will be in June next year, a total of 300 apartments, and that project is also sold. And then if you look at our really big joint project in Stora Sjöndal, I reckon that before the next report, we will have a approved detailed plan, which means that we can start planning the work and start that project as well. So a lot of focus on a very nice portfolio in good condition, which we will soon see necessary to actually keep the new production going with full force. Yes, so this is what it looked like. Four happy people who made spades in Källberga.

In Nynäshamn, actually.

Which is not in Hägersten, as far as I know. And it will be a fantastic, nice project where our 128 apartments will be entrées in the area, with very varied design and so on. So it will be a real gem in our stock.

Really.

Yes, then we thought we would go into our new sustainable goals. And you can summarize it with The first part has been that we have focused a lot on how we meet when things start to move. And then we have worked very actively to prepare ourselves for the sustainability requirements that will come. Nu kommer de ju i en väldigt hög hastighet här. Det är både de krav som ställs från EU i form av taxonomi, CSRD, men det är också science-based target och det är våra egna krav. Summan av allt det här och summan av att vi också måste rapportera på ett mer strukturerat sätt och faktiskt väldigt omfattande sätt, det har ställt väldigt stora krav på hur vi har tittat på hur vi ska möta de här nya behoven, nya kraven och samtidigt då To maintain everything that is very, very good. We have a very efficient administration, we have very nice key numbers, we have very pleased tenants. And the sum of this then we will boil down in our new goals where we will implement this, including the big green transition. So that is really what characterizes the content of this. And then you should not forget that if you are a company on the stock market, you should also have a certain growth. And that is what we have been working with now, because now it is still. We made the assessment that we are entering a new period, new stability from 2025, and we think that there is a lot that speaks for that we have a new stable platform, if not on a different level than we had before. So that's an important part. And then you can just summarize what we're going to show towards the end. To manage all this with sustainability and high efficiency is very much about taking digitization as help. To take this step that we in the real estate industry have not actually done, as many other industries or most other industries have done. Yes, shall we start by looking at the financial aspects?

Yes, it feels really good that we have been able to achieve these goals now and be able to look forward. They partly remind us of the goals we have had, but also with a slightly different orientation. So if we start with the first one, the administrative result. On average, 5% is improved every year. And with that we mean that some years it could be a little under 5% and some years it could go over. It is somehow the case that we have put in the assumptions in these models, both income and cost, how it should and we are going to do acquisitions and we are going to complete our own projects. It is not possible to say exactly what date everything is done. So with that said, we want to have this span that it can be on average during these years improved by 5%.

Yes, and it is also important to be able to have the financial stability, that we do not have to hunt for annual things, but we can let it balance out over time, then we get a nicely controlled plan.

Yes, there are also parameters that we do not completely control, such as the interest rate and other things.

No, and some that we control over.

Yes, exactly. No, and in terms of reward, we say the same thing there actually, that on average not exceeding 45% and never over 50%. So it's the same there. It could be just under or just above some year. This is still controlled by half of the external valuers' assumptions of our market value, so it is not affectable and thus it could be a little above or below. We also want an excess rate of over 70%. And just recently I said that we had 72.5%. We have delivered many quarters over 70%. So you may wonder why you did that. But we are highly aware of this and we feel that we say 70% both in terms of the fact that there are assumptions, costs and other things that we do not fully control. And we know that we are facing challenges also within the energy area and we should make it more efficient. So we want this little span anyway. The market value of the properties will exceed SEK 20 billion. We have left the market value we have today. We plan to complete the projects we have in our own portfolio, even those that are not built, as Patrik talked about earlier. We also see that we will make acquisitions during this period, and of course we are thinking of positive value change. And we don't know what it will be today. We know that it was on average just under 7% annually before the market situation got tougher. Now it has been something else for two years and we have made the assumption a little careful of over 3% during this period. So we can't say exactly, but that's the assumption we've made. Then we say that at least 20% of the operating net should come from social housing. So we have not chosen to put a roof, but rather a floor. Today we have 28% and to put a roof would also be difficult, given that we have our own projects that we want to complete, and that is usually within the housing sector. Then we do not know which acquisitions we should do, so we think it is much more logical to talk about a floor and that at least 20% should come from social housing.

No, we don't want to end up in a situation where we have to give up a good deal just because we would miss the goal, so to speak, or that we would be chased after in this, but we want to have full control of this. That's why it becomes more natural to turn to this and have a floor.

I agree. And finally, the allocation, which during the period should be at least 50% of the administrative results adjusted for tax. And the goals that Heba previously had, if we look a little further back, have been 70%. And we have often had a division on that as well. Then in these short goals we had 40% and now we chose 50%. And there are actually two different reasons for that. One is that we see that the difference, if we had taken 70% to 50%, is that those money should be used for energy investments. We see a great need to do that in the future, and we think it's a good thing to use the money for. And then you shouldn't forget that we see an increase in the administrative results. It will increase, and it has increased in the past many years. So 50% tomorrow is a lot more in money than what 70% was a few years ago. So you can't forget that when you just stare blindly at this percentage. Do you remember everything? Exciting.

I want to be a part of this. Let's move on. Let's talk about how we are going to achieve this. As Hanna has also said, it is very much about growth and rejuvenation of your own stock. It is about working with your own portfolio, which becomes like a base plate in this growth. And then it is to look at acquisitions, it can be newly produced rental properties, it can be social assets. We also say that housing rights, if it has anything else to add, that we get something more value if we work with housing rights. We will continue to focus on profitable acquisitions and acquisitions where we feel that this will be good for the company, it will be an efficiency in the company, so we will be open to that. So it is quite stable with this little touch that we have created this floor around social density that makes it a little clearer. But as I said, a lot of it is about meeting the market, where the market is the most beneficial. That's where we will put our grain when it comes to it. Then you can say that the really, really big change that actually everyone who is dealing with rental housing and in some ways housing in general, it is actually that You will need significantly higher rental levels than what we have seen earlier to get around the rental calculation, i.e. the construction calculation. And it is based on two things. It is that we have production costs that are up 30% and we have increased interest rates. The sum of that makes it that we need rentals that are close to 2,700. 2700 kronor per kvadratmeter and upwards. This greatly limits where you can be to ensure that there is a purchasing power in this. And it's a bit sloppy to say that we go from 28 municipalities to 8 municipalities where we actually assess that we can work to get these rents out. But even in those 8 municipalities, we point out that it is A, B or A and C situation. So you have to be much more critical now during this period than we were in the previous period to get it all together. And there is also no investment support left. And this will have a dramatic impact on the whole country, not just for us, but also in these areas where we can still take out real rents. Then of course we will have the opportunity to work with insurances where we have our own stock and so on, because that can in turn strengthen the value of what we already have in this. And when it comes to elderly housing, the geography is not as sensitive because it is controlled by rents in a completely different way by an operator and so on. So it is mainly households that are affected by this. When it comes to our elderly housing or social housing, we can still have the geography that we have had before. Yes, and then we have even more clearly said that the role of the builder should also influence our work. This means that we can already from the beginning, in order to ensure a strong balance sheet, plan for that we should not keep certain properties, even those we build, or alternatively in our own property, to ensure that we always have a strong financial position. But that also means that when we are there, the market may have changed in a way that we do not need to sell to still have a strong financial position. But that we have this with us as a plan already when we start a project, it will also create a good, safe plan and stability to work on. So this is a lot of how we are going to achieve this 5% growth in the administrative result. And we have thought a lot about what goals we should have around this, but we have come to the conclusion that it is important, we think, to have clear goals and very transparent goals so that the market can follow how our development looks. And a little sustainability, perhaps, and not so little either for that part. We share our sustainability in three areas. It is the environment. which is mainly about how we load the environment and how we are going to achieve the goals. It is the social sustainability. It is actually very much about how we work to make society better. We will come back to that in a moment. And as I said, what is needed for us to achieve this is, I would say, a very competent organisation, the organisation area. But we will go a little deeper about these. This is our biggest challenge. If you look to the far left with reduced energy consumption, it is very much about the fact that heating today is responsible for a large part of the emissions in the administration. If new products do not emerge that reduce emissions in relation to heating, we must halve a very low energy consumption to reach levels so that we can be climate neutral by 2030. We have looked at this very closely and we have made a theoretical assessment that we should be able to come down. That is, halve the energy use from a very low level. As you can understand, it is an enormous challenge to do this. And that also means that we will of course try every project, every change, so that they should at least be defendable, even if not all of them will be fully profitable in the way we have done before, they still have to be defendable. But our assessment is that we will achieve this during this period and then we can do it. And then it is on our own machines, so to speak. We do not need to take in other products such as carbon dioxide capture and so on to get down to zero. Even if we believe and think that these products are important and will be a necessary complement for us all to reach these goals. Another requirement that we see ahead of us, but also that strengthens our own work, is that we want to have green properties, that is, all our financing should be green. And in order to do that, all our properties must be classified in energy class A to C. And today we have a number of properties that range from D to F. And within the framework to reduce this energy use, we will at the same time move our properties so that they come after 2030 from energy class A to C. And if you do that, then we manage to have 100% green financing, and we also manage to have a green share. So here we have a lot of goals that cooperate, maybe some of my colleagues would say counteract, but in our case they cooperate, which means that we get a fantastic margin if we do all these things together. But one should not forget that it is an enormous challenge to go from maybe industry's lowest energy consumption when it comes to housing, to halve it during a six-year period. And then, where we actually have our largest emissions today, and that is in our new production. With our own machine, we have made a decision that all projects that are started already in 2025 will have a halved load compared to the reference value of Boverket. This means that the projects that are delivered from 2027 and onwards will have a halved load. And here it is so that we should be down to zero with our entire business in 2045. It should all be. And we still assess that if we now start taking these initiatives to halve emissions, then our colleagues will soon have to come up with the same thing. And then we still assess that the market will adapt to products that actually have significantly lower emissions. The industry colleagues, we have to set these requirements together and when all colleagues set the requirements, the material and material suppliers will also adapt so that we will achieve the goals. So it is super important that we get started with this work and the more that comes along, the faster it will go. And then in the administration, many of these things, apart from the new production, is where everything is to be generated and ensured that we fill this out, not least to fill out CSRD's comprehensive report, which in the worst case is 1100 measurements. And what we will do to ensure that we always have control over our properties is that all of our properties should be certified according to our sustainability system and all properties should be climate risk-analysed. We have done this for three years now. All of our properties where we also have activities that make it possible to actually manage extreme weather, but maybe not what is defined as extreme weather, but also what is right below it. We should not get water emissions in our facilities or in our garages when heavy rain comes and so on. We should be able to handle it. So here we have an active work going on, actually. So this is one, we have to do this because the planet can't handle the pressure we put on it. Two, this puts great demands on us to actually work in a different way. Yes, I think I will continue. Yes, if we look at social sustainability then. A goal that remains, as we have had before, is that when we measure in the active housing system, our safety index should be over 80. The latest we measured was 87. This is an important safety and important for the tenants to have a feeling that you experience safety in your home, even though it can be messy around. We will work even more than what we have been doing so far, to work to maintain housing for structurally homeless people, with a focus on vulnerable women and children. We know that there is an enormous need out there that the municipalities themselves cannot solve. And then, when it comes to our suppliers' value chains, it is very much about us actually having control, that our suppliers behave as well as we do. And that is where we have started But from and with 2025 we will also examine all essential suppliers. It is not enough that they have written down our code of conduct, but we will actually examine that they actually live up to what they have said that they should do. And we will just continue to increase the speed in how many of our suppliers we have control of.

And these are the essential suppliers?

In this case, these are the essential suppliers that we will be done with by 2025. And if you look at it then, which I actually feel extra proud of that we are now introducing, it is that we are changing the rental rules so that even more people have the opportunity to get a home in our stock. De nya kraven är det som kallas för Kronofogdens normalbelopp, där det finns ett normalbelopp där man minst ska ha kvar när man har betalt sin hyra. Det är ungefär 6000 kr om du är ensamhushåll, så är det 2000 kr, så är det 3000 kr till med barn osv. Så det här är en enormt viktig krav. our efforts in social sustainability to increase the opportunity for more people to have access to housing. And I hope that several of my comrades out there in the other private companies will follow suit. If we look at the organisation, it is about having a balanced organisation. It should be comparable to men and women. Of course, you can have plus or minus 10 percent, because that can be natural in terms of size. We are very close here today. We will have an employee index that is in proportion to the industry index. We have taken a decision to increase the number of training hours quite drastically. I think that achieving the new goals and doing it in a good and strong way, is education and knowledge the decisive factor. We have learned that during the five or six years we have worked with it. The more we can, the more we know, the more knowledge we have in these areas, the more natural and easier it becomes to make the right decision. So we will spend a lot of time now and in the future to be well trained in the organization about what is important. And then we generally have a recruitment strategy, so before each recruitment we look at what we need, what we need to strengthen in order to actually have as much diversity as possible within the company. Yes, my long explanation is starting to come together, but one can say that what became very natural when we finally worked out what we need to do and what we should do to achieve growth and this sustainable transition is that we need to work in a more structured and systematic way. to ensure, once again, that we have documented control of all our properties in real time. And in order to do this, we have to take digitization as a help. And digitization, when you have documented this, as I said, gives us a huge upside, where we can do analyses, from the desk, we can do analyzes with the help of business intelligence and we can do analyzes with the help of artificial intelligence. The sum of this is that our properties have been there for a hundred years. If you act the same way as them, they act the same way back. So one house is a system and all houses are a system. And the sum of this is to look for deviations and become more and more effective in a structured way. As I said, we have a good starting position, all of our keynotes look great, we have very good employees, but now we have to take a huge step further. And as we have said in the media report, from 2030 we will also be a role model in this area. Digitalization and how we have made the green transition. So, short and good.

It was a pretty massive move with the new goals and strategies. When HEBA does something, we do it properly.

Yes, we have been preparing for this for a long time. When we got this down in black and white, it was a pretty fantastic feeling that we had in the leadership when we got it down. Because it was complete consensus on what we need to do and how we should do it.

It's very exciting. We are thrilled. That's what we had for this time. As always, you are very welcome to hear from us if you have questions or thoughts about the business.