Wallenstam Stock

Welcome to the conference call for the fourth quarter and a summary of 2025 for Wallenstam.

During December, we vacated the entire Sergel's scraper, which we took over in February this year. The only remaining tenants are now on the ground floor since the middle of December and below street level, where the Space Arena is located. You can see this on the picture. Various types of events have been held here during the year by, for example, Spotify, annual general meetings and the Gates Foundation. And it is operated by the Stureplans Group. This is also where we recorded our year-end film for the fourth quarter this year, Me and Hans.

To summarize some of the key activities we have carried out as a company during 2025. We have invested a total of SEK 2.2 billion in new construction and development. We have started 394 apartments and completed 686 apartments. So now we currently have just over 1,000 apartments under construction. The demand for our rental apartments remains strong, which can be seen in the 77,000 new applicants who joined our own housing queue during the year, bringing the total to 330,000 people in our own queue.

It has also been an intensive year in terms of transactions, both acquisitions and divestments, with a total volume of SEK 5.4 billion. Part of the money has been used to repurchase our discounted share. In total, we have repurchased 17 million shares during the year 2025. So now we have 22 million shares.

So what has happened during this fourth and last quarter of the year? We divested our newly produced property, Nacka Grace, on the 31st of October to the Folksam Group and KPA Pension. And as I mentioned, we continued to repurchase our own shares also during the last quarter. In the fourth quarter, we repurchased 3 million shares which are trading at a discount of approximately 30%. We repurchased shares at an average price, including broker fees, of SEK 45.67 per share. And our net asset value as of the last December amounts to SEK 62.1.

Here, as usual, is an overview showing our company in summarized key figures. We have 210 investment properties with a value of SEK 64 billion. And including ongoing and future projects and land, the total property value amounts to SEK 70 billion. As before, half our rental income comes from residential properties and the other half from commercial properties, where offices account for the largest share.

We continue to have a strong economic occupancy rate of 97% with residential units at 100% and 90% for our total commercial space, where Gothenburg is the largest market at 94% occupancy rate. This reflects a stable demand for our properties. In other words, we continue to see solid and consistent demand for our space or premises.

In 2025, we developed a climate road map that outlines the prioritized actions across all 3 emission scopes. This is our 3 climate goals: Scope 1, 2 and 3. So what have we done with the scopes?

The first one, we have a minus of 39% for the Scope 1. And our key initiatives focused on replacing refrigerants with lower impact alternatives combined with regular inspections and installation of leak detection systems. During the year, we experienced fewer leakages, which has had a substantial positive effect on our Scope 1 emissions, which you can see.

Regarding Scope 2, we have minus 45%. And the goal is 50%. The reduction in Scope 2 emissions is driven by continuous operational optimization and the results of larger efficiency projects underway. In addition, district heating providers have lowered their emission factors, which further strengthens our Scope 2 performance.

And Scope 3, where you find our new construction, we have a minus of 36%. And there has been several drivers contributed to the reduction. Our ambition to reduce climate impacts is now firmly embedded from the earlier stages of our development projects. Material selection plays an important role. We have increased evaluating and selecting products, enabling more informed and lower-emission choices.

Concrete is also a key component. This year, we have used only Swedish-produced concrete, resulting in shorter transport distances and thereby reduced emissions. We also prioritized concrete produced with a lower carbon footprint.

And as I mentioned on the previous slide, we continue to work actively to reduce the energy consumption across our portfolio. Today, 67% of our properties measured by rental value are classified in energy classes A to C, up from 62% last year. And we keep on trying to get even more A to C.

We also report our EU Taxonomy alignment voluntarily. Looking at the share of our revenue that meets the taxonomy criteria. 100% of our wind power revenue is aligned and 51% of the revenue from our properties is aligned. So in total, this results in 53% taxonomy-aligned revenues, an improvement of 5 percentage points year-on-year.

So let's move on to the income statement and start with our net operating income, which increased by 5% to SEK 2.3 billion. This is a surplus ratio of 76%, which is in line with the previous year.

So now let's turn to the next slide to look at more details. As mentioned, our net operating income increased by approximately 5%, totaling SEK 112 million. Looking at the drivers behind this development. The new construction and large projects contributed SEK 51 million. As noted earlier, we completed around 686 apartments during the year.

Property transactions also had a positive net impact of SEK 4 million compared with last year. This includes our newly constructed property, Nacka Grace, which was gradually completed towards the end of last year, and therefore, contributes positively in 2025.

In the comparable holdings, net operating income increased by approximately SEK 20 million. The 2025 rent negotiations resulted in an average increase of around 4% for the residential rents and 1.6% for commercial base rents, adding a net SEK 43 million in higher rental income in the comparable holdings. In total, rental income increased by 5% year-on-year.

Operating expenses in the comparable portfolio increased by SEK 24 million, driven mainly by higher repair and maintenance expenses compared with last year as well as continued tariff increases in areas such as district heating and water. This is a key reason why our energy efficiency efforts are important both for the environment and for our financial performance.

Our energy-saving initiatives together with lower electricity prices reduced our electricity costs by approximately SEK 15 million. However, the lower electricity price doesn't impact the group's net result as it is offset by a corresponding decrease in revenue within other operating income from the wind turbines.

As communicated in previous quarters, we also recognized SEK 38 million in net one-time compensations related to early lease terminations. So all in all, we improved our net operating income by 5% compared with the previous year.

As mentioned, we completed a total of 686 apartments during the year, all of which contributed positively to our net operating income. In the fourth quarter alone, we completed 64 apartments. So this is in Adellovet, in Farsta in Stockholm, where we completed 64 apartments this quarter. It's located by the lake Drevviken. So now we have 42 apartments remaining to be completed in 2026. It's a beautiful place.

Looking at the commercial leasing market in Gothenburg, which contributes to our result in a good way. Our view is that it remains stable and has strengthened further towards the end of the year. Our commercial occupancy rate in Gothenburg is 94% and we see a high level of tenant loyalty. Around 90% of our tenants choose to stay with us. This means that fewer than 1 in 10 tenants with the option to terminate actually choose to do so. So we have a surrender rate of 90%.

This clearly demonstrates strong willingness among tenants to remain with Wallenstam and that they are satisfied with their premises. It also means that we have a good visibility into upcoming leasing needs as we closely monitor tenant intentions well before any potential terminations, which is strategically important moving forward.

Turning to the income from property management. We delivered an improvement of approximately 11%, reaching SEK 1.3 billion, an increase of SEK 127 million year-on-year. Administrative expenses increased by SEK 43 million. This increase is mainly driven, as in the previous quarter, by the implementation of new IT systems which are now expensed directly as well as higher personnel costs and additional security-related expenses, for example, background controls of our entrepreneurs.

Net financial items improved by 8% despite the average debt level being SEK 3 billion higher than in the same period last year. The average interest rate during the period was 2.49%, which is roughly 60 basis points lower year-on-year. At year-end, our average interest rate stood at 2.39% with continued active management of our interest hedging strategy throughout the year.

We have made some adjustments on our interest rate derivatives, which now amounts to SEK 22.1 billion, and we have also extended the duration slightly. Our average interest fixing period now stands at 3.5 years, equivalent to 42 months. And 62% of the loan portfolio is hedged. Our interest coverage ratio for the year amounts to 2.6x.

Moving on to the value changes, starting with our properties. We report a positive value change of SEK 1.7 billion. This is primarily driven by higher net operating income, the completion of new constructions and divestments. We haven't made any adjustments of our direct yield requirements.

The value change in our financial instruments amounted to a total cost of SEK 148 million, mainly due to time value effects on the interest rate derivatives rather than an increase in long-term interest rates.

In total, we report a profit after tax of SEK 2.6 billion compared with SEK 774 million in the previous year. So I think it's a good result for this year 2025.

So turning to the balance sheet. Our total property value amounts to just over SEK 70 billion. Income-generating properties account for approximately SEK 64 billion, while the value of ongoing construction projects and future construction is recognized at around SEK 7 billion.

As mentioned earlier, we haven't adjusted our direct yield requirements. The average effective yield amounts to 4.5% for our commercial portfolio and 3.7% for our residential portfolio. 57% of our total market value consists of residential properties with the remaining share in commercial assets. Property transactions have had a positive net impact on property values of SEK 1 billion.

In total, we invested SEK 2.2 billion in our redevelopment and new construction activities during the year, which is slightly higher than in the previous year. This figure also includes investments in our existing portfolio, where we have carried out energy efficiency projects as well as other upgrades in our existing properties.

We now have a total of 1,013 apartments under construction. During the year, we have started almost 400 new apartments.

On the equity and liability side. Our interest-bearing debt has increased by approximately SEK 3 billion compared with the previous year, amounting to a total of SEK 33.3 billion. We continue to maintain a solid financial position, reporting an equity ratio of 44% and a loan-to-value ratio of 47% despite ongoing investments and share buybacks.

Our net asset value at year-end amounts to SEK 62.1 per share, an increase of 8% year-on-year. And the Board proposes a higher dividend of SEK 0.55 per share, an increase of 10%. The dividend will be in two payments, one in May and the other in November. But first, the AGM has to decide it.

So as developments within our industry are typically gradual from quarter-to-quarter, we have evaluated our communication format. For that reason, we will test a new approach and not hold a conference call every quarter. There will therefore not be a call for the first quarter 2026, and we will return with more information about our plans going forward.

We will, however, continue to produce our quarterly results videos. And I'm, of course, available for any questions you may have regarding the report. We will evaluate this new way of communication during the year.

So like I said, if you have any questions, you are more than welcome to contact me and I will answer them all. Thank you very much for listening, and have a very good day.

Hi, and welcome to the conference call of the third quarter 2025 for Wallenstam. My name is Susann Linde. I'm CFO here at Wallenstam. Here on the picture, you see our 200-year old property in Central Gothenburg, the Kochska Building, where we have completely renovated it and are now nominated for the award in the category Facade of the Year 2024 Renovation.

So what has happened during this third quarter? We have taken possession of land in Forsåker in Mölndal, a part of the Forsåker urban development project. Within the block, the construction of approximately 240 rental apartments is planned. On July 3, we signed an agreement for the sale of our new production, Nacka Grace. You can see here on the picture. We agreed our property value of SEK 1,822 million. The Folksam Group and KPA Pension will take possession of the property on the last of October this year.

We have also made a lot of buybacks of our own shares this year. During the third quarter, we repurchased 5 million shares. We have done this of the capital we received from our sale. We used that capital to repurchase our shares, which are at just over 20% discount. We have repurchased shares for an average price of approximately SEK 46 per share, and our net asset value is SEK 59.7 as of this quarter.

Speaking of net asset value, we revised our business plan for 2030 during this quarter. We have adjusted it from SEK 100 in net asset value per share to SEK 80 per share. The decision is a consequence of the changed external conditions that have taken place since the goal was set in 2022. We think it's important to have a strong balance sheet, which is why we will also increase the financial framework. This means that the equity/assets ratio should be at least around 40% instead of the previous 35%.

As before, half of our rental value is from residential and the other half from commercial, where the majority is offices. We continue to have a good occupancy rate of 96%, with residential units accounting for 100% and 90% for the commercial spaces. So we see a stable demand for our products. This is thanks to our locations where we have our properties and the quality we have of our products. We now have over 300,000 people standing in our own housing queue.

We are self-sufficient in renewable energy through our wind turbines, but we also work continuously to reduce energy use in our houses. Not much has happened since last quarter. We are focusing on improving our energy classes, and 65% of the rental value has energy classes A to C and is slightly lower towards the end of the year due to the fact that we have vacated properties during the year and that Sergelskrapan has entered the portfolio. And there, we will take energy saving measures when we renovate that property.

We have also started an energy saving project of our properties in Råcksta, which consists of approximately 900 apartments, which will also lead to us improving Scope 2, which is also one of our climate goals.

So let's start with the income statement. Our stable occupancy rate shows that our business is running very well, which we also see in the figures. The net operating income for the three quarters increases by 6%, and we achieved a surplus ratio of 77% as the same level -- as the same period last year. But as usual, we go over to the next page and check in more detail.

As I said, our NOI increased by 6%, SEK 102 million. Of that, the rental income increased by SEK 134 million, which is 6% up. In the comparable holdings, the residential growth on average 4% and the commercial by 1.6% and creates an increase of SEK 27 million. During these 9 months, we have a net of one-time compensation of SEK 38 million because of compensation for early relocation, the same as last quarter. The net of new construction and large projects adds another SEK 68 million.

The operating expenses are increasing by almost 6%, SEK 32 million, where SEK 9 million of the increase is because of the completed new construction. The increase of SEK 80 million in the comparable holding consists -- is mainly because of increased property management than last year but also because of tariff increases like earlier. Our energy saving projects that we have carried out are now having an effect and reduce our electricity costs by approximately SEK 6 million and also lower energy prices with the same amount, but we can't see it here because of the higher decrease of tariffs and other things in the comparable holdings. So in total, we recognized an NOI of plus SEK 102 million and amounts to SEK 1,788 million in total.

We completed 139 apartments in the third quarter, a total of 621 apartments in all three quarters. This quarter, we have completed Kallebäcks Terrasser Kvarter 6. It is the last 139 apartments here. And now the entire project of 299 apartments is completely finished. So now we have completed 1,500 apartments in this urban development project.

And as we -- if we look at the income from property management, we recognized an increase of almost 14% and to an amount of just above SEK 1 billion, which is a record for this period. It's up by SEK 122 million. The administrative expenses on the total level is up by SEK 35 million. The increase is because, like last quarter, new IT systems and increased personnel costs and also increased security costs. Here in the income from property management, it is also affected by the fact that last year, we had a rebooking of project costs as a one-time adjustment of SEK 7 million. The net financial items shows an improvement of 12% despite an increased average debt of SEK 2.9 billion than the same period last year.

The average interest rate during the period has been 2.52%, and it is almost 70 basis points lower than last year. During this third quarter, the 3-month STIBOR has gone down by almost 15 basis points. So the average interest rate on closing day is 2.44%. We have not done any new hedges during the quarter. We still have the volume of SEK 22 billion in interest rate derivatives and -- which means that 62% of the loan volume has fixed interest. The average fixed interest rate term is 41 months and the ICR during the quarter is 2.7x.

Then we go to the value changes and start with the value changes in investment properties. They are SEK 740 million and are mainly an effect of higher NOI. And we have also completed new construction and selling. We haven't adjusted any direct yield requirements. The value changes in financial instruments recognized an expense of SEK 207 million because of lower longer interest rates. But for the third quarter, the longer interest rate has gone up, so we recognized an income of SEK 159 million. This altogether gives us a total profit of SEK 1,240 million compared to last year, SEK 139 million.

Then we move to the balance sheet. The balance sheet is still stable and report an equity ratio of 43% and an LTV of 48%. The total value of the properties are SEK 70 billion. Investment properties in operation has a value of SEK 62 billion, and the value of projects in progress and land for future new construction have a value of SEK 7.5 billion.

As I said before, we have changed the direct yield requirements. The effective yield requirement is on average 4.5% for the commercial and 3.7% for the residential. It has changed by 0.1 percentage units since last quarter because of both higher NOI and completed new construction. It was 4.6% and 3.6% last quarter. Our property value consists of 57% of residential properties and 43% of commercials. During this 9 months, net of property acquisitions and sales has affected by SEK 1.9 billion, and we have also invested in our properties.

And here, you can see how much. We have invested a total of SEK 1.5 billion in new and reconstruction, which is a little lower than last year, the same period. We have started one project this quarter, and we can see that on next slide.

We have started 178 apartments this quarter. And it's in our urban development project in Älta, Nacka. There, we have started another project of 178 apartments, which means that we have started the properties that will contribute to the new square in Älta. So now we have a total of 1,077 apartments in ongoing new construction, and we have started almost 400 apartments so far this year.

If we end with the equity and liabilities, we have increased our interest-bearing liabilities by SEK 700 million since last quarter. They now summarize to SEK 33.6 billion. And we still have a stable balance sheet with an equity of 43% and an LTV of 48%. And our NAV increased to SEK 59.7 per share, which means we have SEK 20 left to our goal of SEK 80.

So this was everything for today. So if you have any questions, you are more than welcome to contact me, and I will answer them. Thank you very much for listening, and I hope you have a nice day. Thank you.