Good morning. My name is Johan Dernmar. I'm the Chief Investor Relations Officer at Diös. The main speakers for today's call are Knut Rost, our CEO, and Rolf Larsson, our CFO. They will mainly discuss the significant progress we've made in the third quarter, focusing on the strategic shift towards accretive earnings and growth. They will also review our financial results, highlight major events, and provide an update on the current market situation. As always, we encourage your participation. Feel free to ask questions during the Q&A session following the presentation. Thank you all for being here. I will now leave the word to Knut.
Thank you, Johan. Our business activity is picking up, marked by both acquisitions and major new lettings. We have great confidence in the future development of the green transition, and our cities are perfectly positioned to capitalize on this progress. Later in this presentation, we will discuss what we see happening and how it impacts us in both the short and long term. Reflecting on our business progress, I'm proud to report that the performance has continued to be strong. Income are flat compared to the same quarter last year, which is strong, taking into account that we have sold properties for net SEK 1.6 billion and the rental income for approximately SEK 40 million. Our occupancy rate are at 91%.
Net letting continues to be positive and amount to SEK 8 million for the quarter and SEK 20 million for the period. Activity is highest in Umeå and Luleå, with good demand for attractive office space, and rents are continuing to come up. We have had a positive net letting for the last 21 quarters. The capital market improves, and financing margins has continuing to come down for both bonds and banks. We have been active in both issuing new bonds and buying back short-dated bonds. We have also restructured some derivatives during the quarter. We have shifted our focus from balance sheet management back to growth, marked by the SEK 94 million acquisition. We have bought three centrally located properties in Luleå and three in Gävle, both portfolios with great potential for rent reversion and value-creating investments.
To manage somewhat higher short-term leverage, we will continue to rotate our assets that not suit our long-term strategy. Recent news has mainly focused on the negative aspects on the green transition. However, we firmly believe that the long-term positive trend remains intact and that the ongoing investments and growth will continue. It is clear that our market is characterized by significant green investments and a positive outlook for the future. The fundamental conditions for the green transition in long term remain unchanged, and on top of this, we have the added benefits of NATO membership. Let us get deeper into the result outcome. Like-for-like rental growth is 6.5%, supported by indexation and rent reversion. Economic occupancy rate is at 91%, compared with 92 last year, which is good, taking into consideration that we have sold fully occupied, occupied residentials.
The operating surplus ratio for the quarter is up 3% to SEK 462 million. Like-for-like surplus ratio is up 8.2%. We are pleased to observe that our daily efforts to optimize property management are resulting in increased energy efficiency. As we continue to invest in our properties to be more proactive and future-proof, we gather more evidence that properties with higher sustainability scores, such as lower EPDs and environmental certifications, are experiencing greater demand, higher rents, and increased value. Property yield has been flat during the quarter, and we see that our transactions are done at book value, which supports our view that property values are at a fair value. Current tax is up as a non-recurring item due to transactions. With 31% of rental income from public sector tenants, we have a solid foundation for passing on CPI adjustments.
In line with our long-term strategy, we have increased the proportion of offices in our portfolio by primarily divesting residential properties. Like-for-like rental growth remains robust, largely driven by a 6.5% CPI indexation for commercial lease agreements in 2024. Notably, 97% of all commercial lease agreements include indexation clauses, with 94% specifically tied to CPI. Additionally, both CapEx investments and achieved rent reversions have further boosted rental growth. Despite a slower overall economic sentiment in Sweden, we see great potential in our rental growth, both when it comes to rent reversion, a continued increased occupancy rate, and modern new builds. We are seeing an increase in peak rent levels in our new leases, which in some cases approaches SEK 3,500 per square meter. In general, the gap in our existing portfolio between current rent and market rent is approximately 30%.
As the market leader with local management and a company with strong cash flow, we have a competitive advantage to many other real estate companies in our city. Net letting has been positive in 21 of the last 23 quarters, including SEK 8 million in the last quarter. We see increased activity after summer with Umeå and Luleå leading the way. With the economic outlook improving and interest rates decreasing, I anticipate increased activity. The underlying market remains strong, and there is a significant demand for the right premises in the prime locations. I will now hand over the word to Rolf.
Thank you, Knut. I will begin by looking at the market value of our properties, which amounted to SEK 30.5 billion . Investments during the quarter amounted to SEK 208 million , and we have acquired two properties and divested six. 89% of the property portfolio has been externally valued in Q3, which has resulted in slightly positive unrealized value changes of SEK 24 million . During the last quarters, we have seen an increase in investment activity. We also see that property yield and market values have stabilized, and our assessment is that yield adjustments have reached a peak. The average yield was 6.15%, which is one basis point lower since last quarter. With an interest rate of 4.4%, we still have a yield gap of 1.6, and thus a continued strong cash flow.
As I said earlier, we have invested 208 million in tenant improvements, property improvements, and new builds. During the quarter, we have completed two major projects: one in Borlänge with the University of Dalarna as a tenant, which will add another 38 million in annual rental income, and one office building in Gävle with an annual rental income of 15 million. We currently have around 26,000 square meters under construction, with a total investment volume of 800 million, where remaining investments amount to 260 million. All our ongoing projects are proceeding according to plan, both in terms of cost and time. There is low risk in our major projects, where pre-let is a requirement, and most of the rental income comes from tax-financed corporations. All new commercial projects are built according to BREEAM, at least level Very Good.
In addition, we have around 200,000 square meters of existing or possible building rights, where we see great potential for further value creation. This will be used for both our own development and disposal. 50% of the building rights refers to commercial premises, and the remaining 50% to residentials. As Knut mentioned earlier, we have slightly high financial cost in the quarter. The reason is that a derivative with a negative swap rate has expired and that we have redeemed bonds early and taken the redemption cost upfront. This has affected the quarter's financial cost with a total of SEK 5 million.
During the quarter and in the beginning of October, we have issued bonds corresponding to SEK 1.1 billion, and at the same time, redeemed bond maturities corresponding to SEK 570 million, of which SEK 470 million refers to maturities in the coming nine months. We also have a bank loan of SEK 566 million due at the end of December, but the agreement is ready and will be signed shortly. This means that in the next 12 months, we have additional loan maturities, excluding commercial paper, of SEK 1.4 billion, which corresponds to 9% of interest-bearing liabilities, and we're actively working for a more prudent maturity profile with longer debt maturities. Bank financing is and will be our most important source of financing, and we currently have 67% of our outstanding loan with banks.
During the last quarters, we have seen a highly active Swedish bond market with high volume and lower margins as a result. And as I said earlier, we have made a number of issues of unsecured bonds in the near term, where we see a marked change in pricing. Today, a three-year bond has a margin of one hundred and seventy-five to one hundred and eighty basis points, which is half the cost compared to a year ago. And this also puts pressure on the bank's lending margins. Today, the margin for a three-year bank loan is roughly thirty basis points lower compared to a year ago. Despite lower STIBOR fixing, our average interest rate is unchanged compared to the previous quarter. The reason is that a derivative with a negative swap rate has expired, which affects the average interest rate by ten basis points.
Our average cost of debt is now in line with the marginal cost of debt, meaning we have absorbed the increased interest rate. This will have a positive impact on our income from property management when rates are decreasing. In recent quarters, we have acted to secure ICR at acceptable levels by signing new derivatives. With the measures taken and a strong cash flow, we are convinced that ICR will continue to exceed two times. And we have divested low-yielding assets and used the liquidity to amortize debt, thereby lowering our financial cost and improving our loan-to-value, which amounted to 52.6%. And as we've said before, we are targeting an LTV of 50% over time. We have 67% of our financing in banks, SEK 2.1 billion in unused credit facilities, and a secured loan-to-value ratio of 38.6%.
We will also add additional borrowing capacity through completed projects. This, together with really good relationships with our banks, makes us feel comfortable about future refinancing. We still have a conservative balance sheet approach, which reflects our commitment to financial prudence and risk mitigation. We have reduced our financial risk over time, lowered our LTV, improved net debt to EBITDA, and extended our interest rate fixing and debt maturity. During the past year, we have improved our financial key figures through the investments and a more cautious strategy regarding new investments. This, together with a strong cash flow and available liquidity, means that we now see opportunities for growth, which includes both the start of new projects and acquisitions, and as Knut mentioned earlier, at the beginning of October, we acquired six centrally located office properties in Luleå and Gävle.
Yet again, I feel comfortable with our current financial position and action taken. Our strong cash flow with our operating expenses, committed CapEx, and further growth, and I will now, for the last time, leave the word back to Knut.
Thank you, Rolf. We are confident that the long-term positive trend remains strong. The ongoing investments and growth in our sector are set to continue, driven by a robust foundation and a clear vision for the future. The foundation for all these investments are incredibly robust and enduring, thanks to our natural resources, such as minerals and forests in northern Sweden. We have access to clean, green electricity through hydropower and wind power. We have a cold climate and a lot of available land for development. We also benefit from the strong and predictable governance in Sweden, characterized by a robust legal framework and a high degree of transparency. We remain confident that over the next twenty years, the region is expected to attract investments totaling of a hundred and fifty billion EUR, excluding NATO-related funding.
Experts forecast that this substantial influx of capital will generate approximately 100,000 new job opportunities. Furthermore, there will be a need for around 200,000 individuals to migrate to the region to support this economic growth. Overall, this paints a picture of a thriving market, and as the leading real estate owner in the area, we are at the heart of this dynamic transformation. Keeping the anticipated population growth in mind, along with the investments being made in our market, we can analyze the developments over the past few years. The focus has largely been on inflation, geopolitical challenges, interest rates, and a slowdown in economic growth, resulting in increased unemployment. However, in northern Sweden, we are witnessing a contrasting scenario. Economic activity is demonstrating resilience, and unemployment rates continue to improve and are the lowest in Sweden. This is according to the Swedish Public Employment Service.
When we translate this into the context of our business, it means that our tenants are better positioned than those in many other locations. The turnover in hotels and restaurants remains robust, and we are not seeing any increase in bankruptcies. The transaction market is picking up, and we have continued to be active. To go a bit deeper into the acquisition of the properties in Luleå and Gävle for SEK 940 million , I will state that these are perfect deals, properties, and the type we are targeting to acquire. They are in the city center, and they are thereby very close to existing assets that will expand our tenant offering. We will manage these properties with the existing team in each city. There are some vacancies, and we know the tax authorities in Luleå will leave their premises in Q1 next year.
We see this as a great potential when our current occupancy rate in Luleå is at 96%, and the rents on these vacancies are SEK 500-SEK 1,500 under market rent. We see continued good demand for high-quality offices, and we are targeting higher returns on investment today compared to two, three years ago, which is a sign that the market rents continue to rise for the right location. We announced at the beginning of October, not including in the net letting for Q3, the new letting to Pliktverket, the Swedish Defence Conscription and Assessment Agency, a government-related tenant that is now establishing their first site in the northern part of Sweden. The agency is expanding its operation so that more people can enlist and apply for both military service and police training.
It's a green lease contract for six years, comprising 4,000 sq m in the center of Umeå. With lower interest rates, the demand for acquiring building rights in our cities is definitely picking up. We have an attractive land bank from which we can build ourselves or divest. We work on producing new building rights as part of our value creation. We continue to invest in more resilient property portfolio with higher energy efficiency and lower CO2 emissions. It's encouraging to see what we are reducing energy use like for like by 1.5%. On a portfolio basis, we have a good starting point regarding the new requirements related to the Energy Performance Building Directive, with only 3%-4% at or below coming threshold levels. We have today a good financial position.
ICR is anchored about two times, and LTV is now around 52.6%. With the recent acquisition, LTV will come up somewhat short-term, but we are very comfortable increasing LTV to take advantage of great business opportunities that will increase the cash earnings per share. We are still targeting below 50% in LTV. The market is going from financial uncertainty to conditions that support growth and increased profitability. We are seeing stronger economic development, evidenced by significant acquisitions and numerous new lease agreements. The recession has bottomed out, and the interest in the U.S. properties is increasing. The result per share has improved and net letting remains strong. Lower interest rates and strong underlying growth in our market bode well for the future. Our market's long-term growth prospects are robust.
Despite recent negative news about the green transition in northern Sweden, we believe the long-term positive trend remains intact, and large investments and NATO membership support this outlook. The office plays a crucial role in a vibrant and growing city, particularly in fifty-minute cities. We do not have commuting issues, not an underlying market that has been significantly weaker, and we see a great potential in raising market rents. This is why we are increasingly focusing on this segment. We see significant potential for rent reversion as growth is driven by the green transition in northern Sweden. With our excellent mix of offices and urban services in city center locations, we can create synergies for all our tenants across different segments, benefiting both our cities and our business. This is my forty-third and last interim report as CEO for the years.
It has been an incredibly fun and exciting journey from when I took over in early two thousand and fourteen until today. The company has grown from SEK 12 billion in property value to over SEK 30 billion, and rental income has increased from SEK 1.3 billion to SEK 2.5 billion per year. We have placed Diös on the map as the market-leading real estate company in our cities, as well in international context among shareholders. I would like to extend my deepest thanks to all of you listening, to all colleagues, to the board, and shareholders for excellent cooperation over these years. I look forward to following Diös continued growth journey, but now from the sideline. This takes us to the end of this presentation. Thank you all for listening. We are now ready for questions.
your question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two to remove your request to speak. And when preparing to ask your question, please ensure your line is unmuted locally. And as a reminder, that is star followed by one if you do wish to ask any questions. We will pause here briefly while questions are registered. We currently have no audio questions, but as a reminder, that is star followed by one if you do wish to ask a question today. We have a question on the phone lines from Vincy Iles with Kempen. You may proceed.
Hi, good morning. Thank you for the presentation, and thank you for taking my questions. First one on Stockholm and Gothenburg versus the northern cities. So if you look at Stockholm and Gothenburg, they're quite weak in terms of operations and are also perhaps under pressure, and then the performance you show contrasts that quite extremely. So where do you think lies the difference?
Hello, Matthew. Thank you for your question. That's a very good one. Since the overall market that impacts this business is approximately the same concerning banking and so forth, we think that our market is not that affected when we talk about working from home and so forth. We see that in our cities, we don't have the commuting problem, for instance, and we see that people, office people, they work from the office, and they want to work from the office. So we don't see that, we don't see that problem in our cities, so to speak. Of course, we have it too, but not in the way that we see in the bigger cities. That's one thing.
And another thing is, of course, that we often in our cities, we have one city center, and it's people that work in office wants to have this service around their working place in the office. And one thing you have to mention is that the employment in our cities, in our regions are much lower, the lowest in Sweden for many years. So, of course, people are at work, of course. And we also see that the growth in the businesses, the industrial businesses in the green transition and so forth, are very strong. There are more cities in Sweden that have a strong impact and a strong growth from the green transition, but we see it a lot.
So I think that is the four answers to your question.
Okay, thank you very much. And then I, this quarter, compared to the previous quarter, your operating metrics even improved, so the like-for-like rental is increasing, but also the like-for-like NOI growth. Is it... Do you think it's gonna get better from here, or how do you see it?
Hi, Matthew, it's Rolf here. It's a good question. When we look into next year, we have some challenges also in our cities, regarding some termination of leases that will affect us in the short term. If we look in the longer term, two to three years, we see the market is very strong, but next year we have some challenges, and we'll also have slightly higher cost for electricity and heating that we know will come in next year. We have a positive view on the coming years, but some challenges for twenty twenty-five.
Okay. Thank you very much, and then, I think we will see each other soon. That's it from my side.
Thank you, Vincy.
Thank you. As a reminder, if you'd like to ask any further questions, please press star followed by one on your telephone keypads now.
Okay. Thank you. Mm-hmm. Okay. Any more questions?
I can confirm we currently have no further questions, so I'd like to hand it back to Johan and the management team for some final remarks.
Thank you very much. I was too quick there. And thank you, all. This is my last call. Next time you have a call with us is together with Johan, Rolf, and David Carlsson, who is my successor, and I think that will be really good. I thank you all for this time, nearly 11 years, 43 in the interim reports, and I hope you follow us in the future as well. With this, I will thank you all for this time, and I will. I wish you a great weekend when it comes. Bye-bye, everyone.
Thank you all for joining today's call. I can confirm it has now concluded. Please enjoy the rest of your day, and you may now disconnect.