Heimstaden AB (publ)

Welcome, everyone, and thank you for joining us for the presentation of Heinstaden Bostad's Q2 2026 results. I'm Christian Fleurland, co-CEO of Heinstaden, and I'm here today with Paul Spiener, CEO of Heinstaden. Before we get started, I'd like to mention that this presentation is intended for investors and other financial stakeholders. After the management presentation, we will welcome your questions either by phone or in writing via the webcast. The operator will provide instructions on how to submit questions over the phone. Please note that we will focus solely on questions related to Heinz van Bostad on this call. For any follow-up inquiries, particularly those concerning financial modeling, please contact our investor relations team who are available on Bloomberg. Turning to the highlights for the quarter. Operational performance continues to be strong with like-for-like rental growth standing at 4.1%, 0.1 percentage point down versus the prior quarter. This is continuing to be driven by the strong fundamentals in the residential markets with very limited supply coming and despite inflation continuing to trend down, we see rent perversion continuing to persist in our portfolio. Combined with the strong top line growth, we've also been able to set a new record high last four month NOI margin of 73.1%, 50 basis points up compared to the trailing 12 months NOI margin in the prior quarter. This is both driven by the top line growth, but also our ability to continue to drive OPEX efficiency and OPEX reductions on a unit by unit basis. Finally, we reaffirm our 2026 year end guidance, including narrowing the range on the items where we feel it appropriate now that we have better visibility on the outcome for the first half of the year. On that backdrop, I will hand over to Paul for further details.

Startinging with occupancy, our real economic occupancy improved to 98.8% from 98.5% a year ago. At this level, the portfolio is effectively full. This reflects, of course, strong local leasing execution, but supported by the structural shortage of housing across our markets. The quarterly improvement came mainly from continued stabilization of newer assets, particularly in the UK. Germany was slightly lower as recently completed value add units moved through their normal lease-up phase. We continue to expect occupancy to remain high and maintain our full-year guidance of 98.5 to 99% for the full year. Turning to rental growth, like-for-like rental income increased by 4.1% across a comparable portfolio, which now represents 99.7% of our total rental income. Of that 4.1%, 2.7% came from contractual indexation, 0.5% from value accretive tenant improvement investments, 0.4% from rent reversion upon re-letting, and 0.3% from improved occupancy. With weighted core inflation at 2.1%, rental growth remained around 200 basis points ahead of inflation. Looking at selected countries, performance was broad-based. Sweden delivered 3.3%, Germany 4%, and Czechia remained particularly strong at 6.5%. The UK figure reflects the continued lease up of our Edinburgh asset and should not be viewed as normalized growth rate going forward. At mid-year, we've narrowed our full year guidance to 4.0 to 4.5% from 4.0 to 5.0%. This remains fully within the previous range and reflects greater visibility on the likely outcome. Lower churn has delayed some of the growth from rent reversion and tenant improvement, but that opportunity, of course, remains embedded in the portfolio and will come through as units turnover, hence the tighter range towards the mid to low end of the full year guidance for 2026. That growth is translating into margin. Our last 12 months NOI margin reached a new record of 73.1%, driven by a strong quarterly result of 75.9%. The improvement was supported by both sides of the income statement. Rent income continued to grow well above inflation, while property expenses were 7.2% lower than the second quarter last year. Over that same period, the number of units declined by approximately 2.3%, which translates into property expenses being 5% lower per unit. This reflects our continued work to simplify, centralize processes, expand the use of digital solutions, and operate the platform more efficiently wherever possible. We maintain our year-end NOI margin guidance of 73.5 to 74.5. On privatizations, we generated 2.2 billion SEK of sales from 538 residential units. We did so at a gross premium to book value of 30.1%. Volumes were lower than in the previous quarter, but pricing remained strong, in particular across both the Netherlands and Denmark. which together account for about 75% of our total privatization sales. We continue to prioritize price and value and remain comfortably on track against our full year guidance of SEC eight to 12 billion. To bring the operating outlook together, our occupancy, NOI margin and privatization guidance for the full year of 2026 remain unchanged. As discussed, we've narrowed the like for like rental income growth to four to four and a half percent within the previous guidance range. At the halfway point, demand remains strong, rents continue to outpace inflation, and operating efficiency continues to improve, all trends that we also expect to continue to be true for the foreseeable future within our business and our portfolio. With that, I'll hand over to Christian to take you through fair value and our financial guidance.

Thank you, Paul. Over the quarter, we saw a 0.2% increase in fair values, corresponding to $772 million. During the quarter, we also invested 1 billion SEK in our investment properties. The vast majority of this related to investment in standing assets, and the residual of 70 million SEK was in investment properties under construction, our forward funding development projects. We had privatization sales of 1.6 billion SEK departing from the investment property classification, which is obviously the book value, so it doesn't take into account the premium, which is accounted for separately. Over the quarter, we saw the SEC depreciate compared to our other currencies, in particular the Euro, resulting in an FX gain of 3.3 billion SEC, whereby we ended the quarter with 331 billion SEC of investment properties. The quarter was marked by the volatility that we have seen from the geopolitical situation in the Middle East, and that has its toll on, in particular, the interest rate markets, where interest rate curves continue to trend upwards, and we saw a steepening of the interest rate curve. During such an environment, it should be no surprise that investors are continuously evaluating how they should price the stabilized yield requirements of real estate investments. And that in particular had an impact on the lower yielding investment markets, such as Germany. In the UK, we also saw that the sterling yield market was in particular volatile and we saw a yield expansion there, also causing a slight decrease in valuation despite strong operational performance. In Norway, we had an owner-occupier market that continued to show very strong transaction activity, but we also saw that the supply of new stock trying to benefit from the strong market also put some bargaining power on the buyers, and we saw a moderate decline in that quarter. That is also reflected in our execution of privatizations where we reduce the sale pace in Norway in order to ensure that we don't cannibalize on pricing in a market where we feel that the supply-demand situation is more of a temporary nature and we believe that our pricing power will improve in that market when we look into the end of the year and going into 2027. In Finland, we also saw a marginal decrease reflecting their operational difficulties still prevailing in that market from the excess supply. As we went through on the like-for-like growth side, we've only saw a flat like-for-like growth of 0% year over year. And in a market where there's increased inflationary risk, there should be no surprise that that is also a market where you start to price in more in your yields if you cannot assume that you get the inflationary protection of your income. So that led to yield extension for that market as well. The two markets that really stood out as the strong performers was Czech Republic and Denmark. The Czech Republic continues to show very strong rental growth. maturely above inflation, so despite a stable year development quarter over quarter, we actually saw a 3% increase in values, purely driven by NOI growth. In Denmark, the ownership housing market has continued to be very strong, and we set new record price in Q2, and that is also fading into our valuation. On top of that, we also see investment properties bought with the purpose of long-term rental is also showing yield compression despite the interest rate volatility that we have seen. That comes on the backdrop of very strong rental evidence where rental growth is anticipated to continue to grow and investors are willing to factor in more long-term rental growth prospects into their yield requirements. Overall, we saw a six basis point increase in devaluation yield for the quarter. And in particular, we saw a large increase in the UK, which is not driven by increasing stabilized yields only. The waste majority of this increase reflects the continued stabilization of our heading. Looking to the financial guidance for 2026, we maintain our S&P defined ICR of 1.8 by the end of the year. We reached 1.8 in this quarter based on a rounded basis where we're just standing above 1.76 and we see that will continue to trend up. Looked at two decimals for the remainder of the year. Looking into 2027, we will continue to build a comfortable headroom to the 1.8 threshold, which is according to our financial policy. And we also see, given that this is a trailing metric, we also have very high visibility, both combined with the hedge ratio that we are maintaining about 80%, but also the deleveraging from the privatization, that we have very strong visibility on this will continue to increase irrespectively of the increased interest rate volatility that we have seen in the past six months. That also means that we maintain our assumed average interest costs for the year, which is set to stand between 3.1 to 3.3%. For the quarter, we were at 3.22%, well within this range, and we are comfortable that we will maintain this guidance range. On the S&P defined LTV, we were flat quarter over quarter at 53.2%, mainly driven by the fact that we had the reclassification of our LUMO holdings from associated companies to financial assets. For the remainder of the year, we continue to see that the deleveraging impact from privatizations, combined with moderate value growth, will get us within the guidance rate of 50 to 52%. The secured LTV, which is very much driven about how we plan our refinancing efforts, we have high visibility on that, given that we have very few maturities coming up here in the second half that has not already been addressed. and where we will enter this range will, to a large extent, depend on at which phase we would execute privatizations, where we are continuously retaining asset-backed funding as part of this program. That was it for the management review. Now we will open up for Q&A.