Welcome to the conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing *5 on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.
Hi, and welcome everyone to Catena's Q3 report 2025. My name is Jörgen Eriksson, and I'm the CEO of the company. Here is the agenda for today: a summary, a business overview, an update followed by sustainability, finance, and a short takeaway before ending up with a Q&A. Let's start with the summary of the Q3 2025 report, where we report a 25% increase in rental income, ended up at SEK 1,963,000,000, driven mostly by acquisitions, but also, of course, our CPI-linked contracts. Profit from property management increased by 32% in total, and per share, it was up to 18.7%. Our EPRA NRV came in at SEK 438 per share. The balance sheet remains very solid with an LTV at 39.2%, and we expect to generate strong cash flows in the coming quarters.
With that said, in combination with our robust balance sheet, we are in a favorable condition for more growth. The business overview, the market update, we have witnessed much more activity in the transaction market after the summer, and we have also heard that there is more to come, which means that there will arise opportunities for us to continue to grow. When there are properties that fit into our strategy, we will try to execute. E-commerce continues to develop in the right direction. In the second quarter of the year, it grew by 9% compared to last year. Some of our e-commercers performed very strong, such as Boozt with their brand boozt.com, Apotea within the pharmacy industry, and Nelly within the fashion. The top three growing segments are furniture and home furnishings, up to 20%; pharmacy, up 17%; and home electronics, up 10%.
We can, after the summer, sense some more activity regarding new projects, and we are involved in more dialogues as we speak compared to the first half-year 2025. It's still a little too low, but nevertheless, it's a positive sign. The Swedish logistics market has continued to see increased vacancy rates, currently at 9% or a bit more, even though. In Denmark, the number is around 5%. The rise in the vacancy rates is mainly driven by the extensive development on new logistics assets, of which a high proportion have been built speculative. Regarding our customer portfolio, Elgiganten has taken place in the top four after the latest acquisition, which we closed at the 1st of September. DSV is our biggest customer and has moved from 20%- 18% of our contractual value. Logistics and transport is our biggest segment, standing for almost 50% of the contract value.
We can also note that durable goods has risen to 18%, partly due to the acquisition we made on the 1st of September. The total value of our portfolio is close to SEK 44 billion. It is worth noting that in the report and in the presentation here, we break down the value not only by regions, but also now by investment properties, projects, building rights, and land values. The average lettable square meter has a value of SEK 12,761. Let's go over to a business update. As we said in the Q2 report, we announced the signed agreement to acquire Elgiganten's distribution and central warehouse in Jönköping. At the 1st of September, we closed the deal. With that said, we have one month of rental income from this property in this Q3 report. The property is located opposite our newly built facility that Elgiganten rents from us.
The investment was SEK 1,275,000,000 before deduction of deferred tax. We estimate the NOI to approximately SEK 80,000,000. Our ongoing projects portfolio totals to around SEK 1.2 billion, where SEK 272,000,000 is remaining investments. When all is completed, we will add another 91,000 sq m to the portfolio. Yield on cost on those projects is around 7%. Regarding the project Ramlösa, we expect to come with an update during Q4. Regarding our Lemberg, we have one update. The municipality of Ängelholm adopted a new zoning plan, Ecity Ängelholm, close to where Boozt is located today. This decision was at the end of September. This decision was unfortunately appealed. We have to wait for a verdict from the Land and Environment Court. The story is to be continued. Over to a leasing update.
Looking at the operations, our net leasing in terms of moving in and moving out came in with plus SEK 70,000,000 for the first nine months. For the third quarter, it was plus SEK 7,000,000. Our WALE is now 6.5 years, and the letting ratio is at 96.6%. Over to the sustainability. Now we have a 58% environmentally certified area. The scope three is decreasing on a 12-month rolling basis due to less projects. We continue to maintain a high level of EU taxonomy alignment. For example, our turnover came in at 76%. A total of four biodiversity projects were carried out in the south and the east regions in the third quarter. The projects included replacing mowed lawns with meadows planted with meadow flowers. Produced energy from solar cells reached around 36,500 megawatt-hours on a rolling 12-month basis.
Total installed output on our roofs is now above 71 megawatt power. Now over to Magnus for some financial update.
Thank you, Jörgen. This slide highlights the continued strength in our underlying earnings with solid year-on-year growth across all key metrics. Rental income is up 25%, mainly driven by acquisitions. Net operating surplus increased by 28%, and profit from property management rose by 32%, reflecting both scalability and cost control. During the quarter, retroactive property tax of approximately SEK 20 million was reinvoiced to our tenants as a result of new property tax assessments, which impacted the margin with 2.5 percentage points for the quarter. Further, we had SEK 2 million in OpEx related to insurance matters. However, compensation from the insurance company is recognized as other income in the income statement. Earnings per share from property management grew by 18.7% to SEK 19.91, underlining our ability to translate top-line growth into shareholder value.
While not shown here, our earnings capacity implies SEK 27.3 per share on a full-year basis, 12% above the level a year ago. The Catena model continues to deliver predictable, resilient earnings with operational leverage. This slide breaks down the key drivers behind our rental income growth for the last 12 months. As just mentioned, total rental income increased by 25% year over year. The largest contributor to that was acquisitions, accounting for 19.7 percentage points of the growth. Our completed development projects added 4.4 percentage points, consisting mainly of new facilities in Jönköping and in the Gothenburg region, all leads to well-known tenants in retail and food service. Like-for-like rental income rose by 3.4%, where 2 percentage points reflect CPI-linked indexation and 1.4 percentage points refers to an increase in property tax assessments, which is reinvoiced to our tenants.
All in all, this underlines our ability to grow through multiple channels: strategic acquisitions, value-adding development, and strong day-to-day operations. Let's turn to our capital structure. Over the course of the year, we've seen a pickup in real estate transactions and increased activity in the credit markets, a momentum that has continued during Q3. That said, global long-term structural uncertainties remain, and it's important that we keep being prepared in case of renewed volatility. At the end of the third quarter, our equity ratio stood at 51%, a balanced level that supports strategic flexibility. EPRA NRV per share increased to SEK 438, excluding dividends, an increase of 5.2% compared to a year ago. This shows our ability to create shareholder value over time, even as shareholder returns are being realized. Let's move to our financial position. We continue to demonstrate strong financial control with all key metrics within policy levels.
In October, the credit rating agency Fitch Ratings affirmed Catena's investment-grade rating BBB with a stable outlook in its annual credit rating update. Net debt to EBITDA came in at 7.8 times, interest coverage at 3.9 times, and loan-to-value at 39.2%. These figures reflect both a solid capital structure and strong underlying cash flows that contribute to giving us headroom to our financial covenants, as well as the ability to act on new investments without compromising financial resilience. Let's have a look at our debt and liquidity management. We remain focused on maintaining and securing funding on competitive terms. During the quarter, we have refinanced SEK 950 million at margins that are improving our cost of debt. We continue to see a growing appetite from the banks that we work with in regards to upcoming refinancings and also in exploring new deals.
In early July, as we communicated in connection with the Q2 report, we also completed a SEK 1 billion senior unsecured bond transaction, split across three and five-year maturities. Our average debt maturity remains solid at 4.6 years. Liquidity is strong with SEK 3.4 billion in available liquidity and a liquidity ratio above one. Let's move on to our interest rate management. We enter Q4 with a view that the Swedish Riksbank has reached the end of its rate-cutting cycle, and the market anticipates that the policy rate to remain unchanged for the coming year or so. As of the balance date, 59% of the outstanding debt carries fixed interest, and our current average interest cost at 3.2% reflects a stable level with some room for improvement. Back to you, Jörgen.
Thank you, Magnus. Our capital deployment is for the period divided into acquisitions at SEK 1,629,000,000 and development SEK 769,000,000. We have, at the same time, divested properties for SEK 98,000,000. Let's look into the property valuations. Property values stayed stable and ended up the period with a positive value change of SEK 297,000,000, which correlates to 0.7% of the total portfolio before adjustments. The average weighted valuation yield, the so-called exit yield for the portfolio, is at 5.9% by the end of the period, and the EPRA net initial yield came in to 5.6%. The value change for the quarter ended up at plus SEK 123,000,000. Let's go over to takeaways for today and the report. First, Catena closes the third quarter with very solid numbers and increased earnings. Second, we are positive for the coming periods in terms of a lot of upcoming opportunities in the transaction market.
With that said, we hereby will open up for Q&A.
If you wish to ask a question, please dial *5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial *5 again on your telephone keypad. The next question comes from Oscar Lindquist from ABG Sundal Collier. Please go ahead.
Hi, good morning. Can you hear me?
Good morning, Oscar.
Morning. On the project interest, you state that you've seen or increased interest after the summer. Could you provide some more color on this?
I mean, before summer, it was quite, quite, quite, so to speak. Now we hear from the business developer team that there are more ongoing discussions. We also have our network within the existing customers. We used to say that it's always easier to do more business with the existing customers. It's a total analyze from the intelligence we have in the market within our customers and what they are thinking and planning for the future. Yeah, a bit more positive than compared to the first six months this year.
Is there any sort of geographical difference in these discussions?
We cannot communicate more than it's in Sweden, and that perhaps goes without saying because it's also where we have a land bank and so on. That's what we can disclose at the moment.
Okay. On transactions, where do you find sort of the most interesting acquisition targets now?
We consider to acquire both in Denmark and Sweden. We have seen portfolios who are out now for sale, and we have also heard that there will be more to come. There is a lot of players to think it's a good moment to try to dispose. On the other hand, there is a lot of players that want to grow. We realize that there is competition out there. Based on our history and our track record, we think that we can be successful in some of the transactions.
Okay. In terms of LTV, you're around 40% now. How far would you be comfortable to push this metric?
As I said, we are at 39.2% for the quarter. It's, of course, a discussion with the board and our owners, but we have a policy that allows us to go up to 50%. That's the guidance we give on that, I would say.
Okay. Thank you. That's all from me.
The next question comes from Jan Urfold from Kepler Cheuvreux. Please go ahead.
Okay. Thanks for taking my question. Good morning. I kick off with the investment in the property management portfolio. It was SEK 0.8 billion this time, the first nine months, and compared to SEK 2.0 billion last year. What could we expect for 2026 on this line?
Good morning, Jan. Thank you for the question. We don't use to guide. We cannot give you any numbers. It depends on lots of different factors. The thing we can say, as we always say, is that in the longer run, we will definitely grow. When we find the opportunities that fit in our strategy, etc., we will go for it. It could be, yeah, as Magnus said before, there is a lot of headroom. We'll see. We cannot guide to a specific number.
Okay. Fair enough. Next question in regards to the average interest rates.
If I were to interpret you right, that you maybe see some headroom for a little bit lower average interest rates going forward. Could you elaborate on that?
Yeah. The average interest rate, of course, also is affected by the base rate, which has come down during the quarter. We see from the refinancings we do and also from the bond issuance that we did in July that currently, for the refinancings we do, we see some improvements compared to the current level. Of course, depending on tenor and so on as well. Like for like, some improvements.
Okay. Thanks for that. My final question regards your project portfolio. The No Waste Logistics project in Helsingborg seems to be a little bit delayed, according to the table here on page 10. Could you explain the reasons behind it and also the investment level, if that has changed also?
Yeah. Good question. As you pointed out, the forecast now is that we will end up the project at Q4 2026. We start the construction work on the last building as we speak. As I said before in this call, we expect to come out with an update around the total project during Q4. Please wait for that.
Okay. Thanks. Thanks for taking my question.
Thank you, Jan.
The next question comes from John Vong from Van Lanschot Kempen. Please go ahead.
Hi. Good morning. You're talking about both increased momentum in the transaction market as well as in your leasing discussions. Just to understand, how do you see the balance between acquisitions and developments in the next 12 months? Also, how do you look at the returns between these two?
Good morning, John. Good question. I mean, we used to say that, first of all, if we have to choose and we have on the table for decision one project and one acquisition, it's fair to assume that we will go for that project because it's more profitable. As the situation is today, we can probably do both because of our balance sheet and our headroom. Generally speaking, the projects are more profitable 12 months going forward. With the headroom we see in our balance sheet, it's fair to assume that it will be more acquisitions than projects. You never know.
Okay. Thank you. On your ESG targets, you delayed your net zero target to 2040. Could you maybe explain what the rationale behind that is? Perhaps, have there been any projects that you had to turn down because of this initial target at 2030?
That is the reason why this target is amended. That's aligned a lot of what the market is and what, for example, Sweden as a country has as a target to be neutral to 2040. We saw that the 2030 was a bit too aggressive. We try to, of course, have a part goal to 2030, but the long-term goal is amended to 2040. If I interpret your question right, we haven't turned down any projects because of this.
Okay. That's clear. Thank you.
Thank you, John.
The next question comes from Kayvan Shirvipoor from SEB. Please go ahead.
Yes. Good morning. I have a couple of questions. The first is on the like-for-like growth. You mentioned here for the first nine months, you have a like-for-like rental growth of 3.4%, but property expenses are up 13.6%. There are insurance cases that impact that. Could you maybe elaborate what the like-for-like NOI growth was in Q3?
Not isolated. We have not disclosed that number. As Magnus said before, and as you heard, the property tax impact is positive by about 1.4% and the residual of it, then the 2% or CPI-linked contracts and some amendments in the rents level.
Okay. Even if you adjust for that, I would assume that the like-for-like NOI growth is below the rental growth or to some extent.
Yeah, to some extent.
Okay. Good. I also have a question on projects. Since you notice better activity in your discussions, are you at all open to maybe use the best parts of your land bank to build speculative projects?
No, definitely not. As you know, we are a long-term player. We want to have the long relationship with our customers. When we plan a new project, we really want to do it as a build-to-suit, so they really get what they want. We are also convinced that they will stay in the long run. There could be some small part of a bigger project that can, by some reason, be speculative, but that's just some handful % of the total project.
Okay. Also, another question on the projects. These dialogues that you have, is it for existing premises or is it for completely new developments?
I mean, we have discussions around our vacancies as well as for completely new projects. That's our separate dialogues. The players who are looking to our vacated areas, it's not the same as those who look for totally new projects.
Okay. Just a final question on the net letting. You mentioned SEK 70 million plus for the first nine months and then SEK 7 million in Q3. Since you have quite low project volumes, I would assume that the net letting contribution from projects is quite limited. Could you maybe elaborate where the remainder of the net letting is coming from if you were to break it down?
I mean, the SEK 7 million we have in this quarter, I cannot on top of my head, I'm not sure. I think it's some thousand square meters on various regions. I cannot give any more details on that. Yeah, it hasn't been driven by projects. Yeah, that's correct.
Okay. Thank you. Those were my questions.
Thank you, Kayvan. We cannot see any more questions in the queue. Hereby, we close the Q&A.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you, everyone, for listening to this earnings call. From Helsingborg, we wish you all a very nice weekend when it comes. Thank you and goodbye.