Profit from property management rose 50% year-over-year, driven by higher rental income and cost efficiencies, with a record surplus ratio and stable property values. Net profit was impacted by financial instrument revaluations, while the company maintains a strong financial position.
Executive summary
– Profit from property management increased by 50% year-over-year to SEK 102 million, driven by higher rental income and cost efficiencies, despite divesting 7 properties last year.
– Like-for-like rental income rose 4% to SEK 466 million and net operating income improved by 12% to SEK 260 million.
– Residential properties account for 95% of the SEK 13.8 billion portfolio, comprising 8,300 apartments and a lettable area of 700,000 sq.m.
– Surplus ratio reached 65% for the quarter, the highest since establishment.
– Divestment of a building right in Sollentuna at SEK 19.5 million, slightly above external valuation.
Financial highlights
– Positive unrealized value changes in the property portfolio of SEK 11 million due to stabilized yields and investments.
– Total property management costs decreased by SEK 18 million year-over-year, driven by cost savings and a milder winter.
– Net financial items improved by SEK 7 million due to lower policy rate and refinancing.
– Average interest rate on debt is 3.4%, with an average fixed rate period of 2.7 years and average debt duration of 2.4 years.
– Interest coverage ratio (ICR) was 2.2x for the quarter, the highest since inception.
Outlook and guidance
– Rent negotiations for 2025 completed with an average increase of 4.8% in the residential portfolio.
– Expectation to renovate around 100 apartments during the year.
– Optimism about vacancy trends as renovated apartments are in areas with good occupancy.
– Management signals a positive outlook, supported by continued strong results and stabilized property values.
– The company is prepared to increase transaction activity as the market recovers, aiming to reinvest capital from recent divestments.
Segment performance
– Residential properties comprise 95% of the portfolio, with 8,300 apartments and a lettable area of 700,000 sq.m.
– Total rental value is SEK 1,038 million, with residential making up 77%, commercial 16%, community service 4%, and other 3%.
– Economic occupancy rate for residential properties was 94.5% in Q2 2025.
– Commercial occupancy declined to 86.1% but is expected to improve with new contracts.
– Revenue-enhancing investments increased rental value by SEK 2 million, offset by slightly higher vacancy.
Key financial ratios and metrics
– Loan-to-value ratio: 50.7%.
– Interest coverage ratio: 2.2x.
– Surplus ratio: 65%.
– Net initial yield: 3.9%.
– Average interest rate: 3.4%.
Risk factors and uncertainties
– Turbulent global environment and ongoing macroeconomic uncertainty, including inflation and interest rate volatility, continue to pose external risks.
– Vacancy rates and market transaction volumes are closely monitored.
– Main risks relate to property values, tax, and financing; active risk management is in place.
Significant events and developments
– SEK 109 million invested in value-creating property improvements and safety since the start of the year.
– Launch of a water recycling pilot project in Nynashamn and other sustainability initiatives, including microplastics filtration and hybrid solar panels.
– CEO elected to EPRA Advisory Board in June.
– Transaction market volumes up 27% year-over-year, indicating improved market conditions.
– Agreement signed to divest a building right for student apartment development.
Capital allocation and financing
– Property values stabilized with unchanged yield requirements for five consecutive quarters.
– Hedge ratio at 83% with SEK 5.9 billion in active interest rate swaps; interest rate derivatives used to manage risk.
– Interest-bearing liabilities totaled SEK 7,109 million, with an average debt maturity of 2.4 years.
– No new loans raised in Q2; cash and cash equivalents at period end were SEK 84 million.
– Refinancing activities contributed to lower average interest rate and improved net financial items.
Market and industry conditions
– Transaction market shows signs of recovery, with increased volumes compared to last year and residential share of total transactions rising.
– Swedish Central Bank cut policy rate by 0.25 percentage points in June; further cuts anticipated.
– Rent increases secured for 2025, supporting future revenue growth.
– Residential vacancy increased slightly, but demand remains strong in key areas.
Notes to the financial statements
– Unrealized change in value of properties was SEK 11 million for the period, reflecting stabilized yield requirements and increased net operating income.
– Sensitivity analysis shows a 0.5 percentage point change in yield requirement could impact property values by SEK -1,204 million to +1,499 million.
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