Welcome to the Fabege's Q3 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speakers. Please go ahead.
To our presentation for the third quarter, 2024. The first slide you have seen before. It's about the focus we have on Stockholm, that we only have 100 properties. From Stureplan to Flemingsberg, we have a little bit more than 1 million sqm and a total value of SEK 78 billion. And, as you know, I've seen in a report the valuation this quarter was positive. During the quarter, we had the pleasure of officially welcoming, doing some positive happenings. We have developments. We have welcomed the Royal Swedish Opera and the Royal Dramatic Theatre to Flemingsberg. We have opened a restaurant in Regulatorn and in Flemingsberg. We have started the tenants to move in to Ackordet in Haga Norra.
The garage in Haga Norra is finished, and so on, and so on. The list can be quite long. But with that said, there are also some challenges. Next slide, please. You see some of the figures for the third quarter. We have almost the same level of rental incomes, even after the divestments we made during 2023. For the first nine months, we have increasing rental incomes, and in the like for like, you can say the incomes increased about 5% for the first nine months. The surplus ratio is good, very good for the third quarter. It depends, of course, on the weather. For the first nine months, it's at the same level as before.
As I said, after seven quarters of negative value changes, we had a positive, small one, but a positive one in the third quarter. We will tell you more about the figures later here. I can also say for the third quarter, we saw, as a whole, lower interest rates. We had a stronger krona, Swedish krona, and that, of course, has been positive for the market, and we will start also to tell you, really go into, little bit deeper into the figures, so p lease.
Thank you, Stefan. Yes, rental income amounted to almost SEK 2.6 billion, which is slightly higher than the previous year. A decrease due to property divestments, as you mentioned, Stefan, last autumn, was offset by indexation increases and the taking of possession in previous property project properties. And since this summer, the Swedish Royal Opera and Theatre have also moved into Flemingsberg. In a like-for-like portfolio, income increased by 5%. Operating costs are in line with the previous year after a strong third quarter, with a surplus ratio of 77% in total. The surplus ratio for the entire period ended up at 75%, the same as the previous year. Birger Bostad's gross profit loss amounted to - SEK 17 million, with two projects completed during the period where the final recognition occurred.
Excluding administration costs, the profit came in at +SEK 3 million. And total central administration amounted to -SEK 80 million. With falling market interest rates, interest expenses decreased in the third quarter. Cumulatively, net interest expense was in line with the previous year. The average interest rate was 3.16% at the end of the quarter. Lower market interest rates are gradually having an impact in our active and our active work with interest rate derivatives have delivered good results. In addition, loans are now being refinanced at better and better margins. The result in associated companies amounted to -SEK 57 million, of which -SEK 71 million related to the capital contribution to Arenabolaget, and SEK 11 million related to a profit from the JV project in Haga Norra.
We therefore reported profit from property management of just over SEK 1 billion, approximately SEK 100 million lower than the previous year. Impairment of development properties relates to a change of value of residential building rights in Birger Bostad. Realized changes in value amounted to almost -SEK 1.2 billion , after we reported a positive change in value of SEK 224 million in the third quarter. I will come back to this very soon. We also reported a small realized profit of SEK 4 million, which related to a time lag from the transaction with Nrep last autumn. As a result of falling market interest rates, the surplus value in the derivatives portfolio continued to decrease in the third quarter. In total, the surplus value decreased by SEK 444 million during the nine-months period.
Finally, the tax expense, which related to the deferred tax only, was positive and amounted to +SEK 30 million. Next slide, please. Yield requirements leveled off and were essentially unchanged during the quarter, and even slightly lower for a few of the most central properties. However, the average yield requirement remained at 4.54%, same as last quarter. In the quarter, we have once again independently valued a large proportion of the portfolio, approximately 45%. The rest of the properties have, as usual, been valued internally. Since the values peaked in Q3 2024, we have written down the property value by approximately 15% in total. In Q2, we reported a small lagging impairment of -SEK 80 million, and now in Q3, there has been a turnaround, and we have revalued the properties upwards by SEK 224 million.
The total change in value for the entire period amounted to -SEK 1.2 billion, and we are now reporting a property value of SEK 78.2 billion. In addition, there is a property value of the development property portfolio in Birger Bostad of SEK 0.7 billion. Next slide, please. Reported equity was unchanged from the previous quarter and amounted to SEK 121 per share, and the long-term EPRA NRV amounted to SEK 147 per share. The equity/assets ratio amounted to 46%, and the loan-to-value ratio was 43%. Both of these key performance indicators confirm our continued strong balance sheet. The interest coverage ratio strengthened slightly and amounted to 2.5, which is in line with year ends. Please turn to slide financing.
The access to and pricing of financing has continued to improve. This applies both to the capital market and banks, even though the biggest improvement has taken place in the capital market with significantly lower margins. The commercial paper market is continuing to function well. We have lowered the margin in a couple of steps and are now issuing three months commercial papers at 440 basis points, compared with 70 basis points at year-end. As stated, the bond market is functioning well. We have been active through several issues, both before the summer and in the autumn. Since year-end, the outstanding bond volume has increased by SEK 2 billion, and the margins have continued to improve. Examples are, a two-year bond at the margin of 82 basis points and a three-year bond at margins, just under 100 basis points.
Undrawn, revolving credit facilities and unpaid, term loans amounted at the end of the quarter to SEK 8.5 billion, of which about SEK 2.4 billion was used for repayment of other loans after the end of the quarter. Overall, we continue to have a good preparedness for upcoming financing needs and refinancings. We have facilities in place to cover the upcoming loan maturities. In total, we have bond maturities of SEK 2.7 billion in 2025, of which SEK 2.1 billion matures during the second half of the year. We intend to refinance bond maturities with new bonds, whereas the bank facilities are continually refinanced through extensions. Next slide, please. Of the loan portfolio, 54% is fixed, mainly based on long-term maturities and mostly through straightforward interest rate swaps, supplemented by some fixed rate bonds.
During the autumn, we have replaced maturities with several new long, straightforward interest rate swaps with maturities of five to seven years. Approximately 45% of the current loan portfolio is matched by fixed rate terms beyond 2025. In addition, there are callable interest rate derivatives of SEK 7 billion in total that now looks set to continue running. Straightforward interest rate derivatives run with a fixed interest rate between 0.11% and 2.18%, and the callable interest rate derivatives run with an interest rate between 1.82% and 2.5%. The average fixed term amounts to 1.8 years, and adjusted for the estimated maturity of the callable swaps, the fixed rate term increases to 3.1 years. Our interest rate strategy provides predictability.
Fixed rate terms provide protection against rising market interest rates. Now, however, we believe more in falling market interest rates. The levels that we have been able to fix at now, both for straightforward interest rate swaps and callable swaps, are levels that we think work for us, even in the long term. For a moving 12 month period ahead, an increase in the market interest rate of one percentage point will generate a higher interest expense of approximately SEK 148 million, all else unchanged, and a corresponding reduction of the market interest rate of one percentage point will generate a lower interest expense of SEK 91 million. The average interest rate was 3.16% at the end of the quarter, and it has subsequently fallen slightly after that, and now back to you, Stefan.
Thank you, Åsa. So please go to the next slide. A year ago, a lot of the questions were about the financial market, and as Åsa said, that's we feel that is very stable now. And there were also a lot of questions about the transaction market. During the whole period, the transactions that has been made in our market has been made on very good levels, and are supporting also the valuation we have had and with that we have. The last quarter, we have seen some transactions within our markets. For example, in Solna, both in Solna, in the city, and also in the CBD. But and last week, there were really one of the largest ones announced.
It was at Wallenstam, acquired from AMF, the pension fund, the fifth tower, Hötorget tower, the Hötorget, in the real CBD, mid of the CBD in Sweden, in Stockholm. They acquired it for SEK 2.8 billion. It is 16,000 sqm of space, area, and it's, but they had also to renovate it in the future. So I think that transaction is equating to many, in many ways. But as we said, the transaction has been made in the, in the Stockholm market has supported more than well our valuations. If we look at the office market in Stockholm. Next slide, please. Here you can see that the total market of office space hasn't been growing that much over the last almost 15 years.
It has been changed since then. Many of you have been visiting Stockholm and seen at Brunkebergstorg, for example, that we have office space that have been today are the hotels. We have some other transformation has been done, but the new building has been mainly, but main house, for example, in Solna, new, modern office space. If you look at the next slide, please. We have some more figures on how the market has been developing. You can see that we know that the rents has been improving or up to very good levels, or at record levels.
We had the number of employees that during the same period have been growing, but the last quarters, we have seen it stabilizing or even at some small coming down a little bit. The vacancy rates have been stable, but have been coming up the last year. But as we said, very few new space are coming to the market. So what this means that the current square meters per employee has been decreasing. And I think that also the trend, we will continue to see, that we are using the office more efficient. We have seen during the period, some companies continue to downsize, mainly also because of the economy. If you look at the next slide, please. We have our largest tenants.
We know that both Ikano has been making more efficient or working with the operations to make it more efficient. And last week, or this week, last Friday, actually, we got a message that Convendum are filing for Chapter 11. What does this mean for us? We can say we feel very confident that we have the best areas that are for the coworking that they had. It's Drottninggatan and Kungsgatan. We have discussions with them going on right now. We will inform you more when we have something to tell you. But Convendum have a very good operation, but has been taking on a little bit too much risk, in my view, at the same time.
That's also why they're now having those discussions about Chapter 11. Both Kungsgatan and the Drottninggatan space, Opera, are doing well, as we know, we know what we know about, but this we have to follow up, of course, later on. Next slide. Net letting. That's a disappointing figure. It was said, I said that last quarter, and I will say it this quarter, too. Unfortunately, we have a minus even this quarter of about SEK 11 million. We have for the first nine months, SEK 85 million. The last quarter is mainly very few, two small new contracts signed. We have also a net effect of the work we're doing now with the Danderyds Center, which we have to vacate for, for example, among other things, replacement of the façade.
In this quarter, this is an effect of. I think it's about -SEK 7 million . But we have too few new contracts signed. Everything takes time. We have a lot of sales, as we said it before, a lot of good discussions. We have a lot of good showings and interest in the market, but everything takes time. And unfortunately, also part of the game right now. But we probably get some questions about that later on, too. Talk about the renegotiations on the next slide. As we said before, many of the contracts we just extend on unchanged terms. We are satisfied with the levels we have on the terms of the contracts.
The ones we're negotiating this, so far this year, SEK 60 million, we have about -2% , or decrease the contract with 2%. But, many of the contracts also has been very already been renegotiated. So, we think most of the contracts are at market levels. Some, of course, over, still we have a potential in, but also some of them, as we said before, are overrented. The occupancy rates are negatively impacted by the negative net letting we have had for the even, some years ago, and we haven't seen the positive effect still, yet on the projects coming up.
But we still have the goal of coming up to 95%, but it will take longer time than I hoped. Today, we're right, a little bit lower than 90%, and this potential, as we said before, about SEK 150 million in incomes, SEK 150 million-SEK 200 million in incomes, we are really focusing on now to take that advantage. This next slide, you have seen this before. We try to show you how the rental development will be on the existing lease portfolio for the next four quarters, and this taking into account both the what we know about the people moving out, of companies moving out, and also the people moving in.
This is the best way so far. I can say Q4 2025 , we will have an effect also among, I think, Alfa Laval, for example, especially beginning of 2026 , but we will show you that next quarter. Investments coming down, we'll still have some of the large ones going on, but especially for 2025 , we're seeing this investment in the portfolio and for new projects coming down. On the next slide, you see the projects, Ackordet, Påsen, Regulatorn, Separatorn, and Nöten are the ones we have ongoing right now. Some of them, Ackordet, are the company or tenants moving in right now. Påsen, the same.
We have given handover of the key to some of the first tenants, but it will still be in the beginning of next year. Separatorn, it's only a little bit more than six months to Alfa Laval will move in, and a year to Saab will move into Nöten. So it's moving, and it's moving on. I think also it maybe could be interesting on this to see that when those projects are finalized, we will have another six million with the way we generate the cash flow from. That's as of today, not cash flow positive, although we are still under projects. Next slide, please. Birger Bostad. We have the residential project in Haga Norra. It's ongoing. It's in total 288 apartments, of which 78 rental apartments.
We have started during the quarter to sell them. Here we have start center. We have nine of the first 23 sold. We, no, I think it's with today, I can say this, we can add a couple of more sold, and at least we have a very good interest for the project. So I think I'm very positive to how this will continue to develop. Also, so a little bit about the sustainability and what we're doing there, and there was feedback we're getting from the both the market and some.
Yeah, all right. What's happening in sustainability? I think, the biggest news in the quarter was, our excellent ranking in, this year's GRESB sustainability benchmark. In our property management operations, we have taken several steps upwards and now achieved a rating of 95 out of 100 in total, and in our project development, we were unchanged with a rating of 98 out of 100. This is, a fantastic result, which we are very proud, of. We can turn to next slide, please. In this slide, you can see some of our main targets. An important aspect is the use of energy. Fabege has the sector's lowest energy consumption, with our, 2023 outcome of 71 KWh per square meter. We have a goal of reducing this further to 70 KWh per square meter.
So far this year, however, the energy consumption has increased by approximately 4%, which mainly related to the climate. More cold winter and a warm summer that required both more heating and more cooling. Another important aspect is the CO₂ target. Projects have the greatest impact, and we now set targets and measures CO₂ in all our projects, including new constructions as well as redevelopments and tenant adaptations. Last year, we introduced a circularity target, which means that at least 20% of the material used in projects must be reused material, and today we are at 15%. Next slide, please. This is where our recycling strategy and the recycle hub come in. Here you can see the recycle hub, which is a storage area for material from Fabege's properties that can be reused in another project.
Through systematics, inventorying, warehousing, and an internal marketplace for management of material that can be reused, we are leading the way. We have made a lot of progress in our strategic work with reuse, and this will be a prerequisite for reaching the long-term CO₂ targets. Next slide, please. Finally, I want to maybe again mention our social engagement. We want to be involved and make a difference for Stockholm in general, and more specifically in our areas. It is about creating secure districts and pleasant, inviting areas between the buildings in our districts. It's also about being a good corporate citizen. We will not take over the responsibility, but we should and can contribute through our engagement and presence. Some good examples that we are that we create summer jobs for young people in our areas.
We help fund Läxhjälpen Homework Club in Flemingsberg, and we are engaged in TalangAkademin, which gives people outside the labor market the opportunity of work experience and ultimately jobs. This is a commitment that usually, with quite small amounts of funds, contributes to society while creating pride within the Fabege organization. Now, back to you, Stefan.
Thank you. If you have summarized with also priority, we have had and have during 2024 to increase our occupancy rates. As I said before, it's a disappointing disappointment that we don't have a positive net letting. I don't think it will be positive this year, but I said before that we have a goal for SEK 80 million, + SEK 80 million . I hope it will. Said already last quarter, it will not be. They expect us to come up to that. I hope that we'll be positive. I don't think we will be positive this year. But as I said, we have a lot of good discussions. We have very good properties in prime locations, but it's a tough market. It's a challenging market with a lot of uncertainty.
So if it a year ago was a lot about the financing market and the transaction market, it's much more now about the rental market. And, so, but we have a good organization, and we have really focus on this. This everything is talk about the getting net letting up to good levels. That also means that we're working with the NBI future products. We, as you know, we have a lot of exciting future opportunities, future options with exciting products, both in Arenastaden, in Solna Business Park, in even at Sveaplan, and in longer term, in Flemingsberg. So we continue to work to see what we can do, and we also have some discussions about finding some tenants for those future products. And so, hopefully long term, I'm optimist, but short term, it has been challenging times.
Every day, we work with the cost control. I think we have a good culture of how to work with the costs. Also, has been talking about the refinancing and the situation there, and also how we trying to be in the forefront of the ESG in all everything we do in the whole operation. So I think we have a strong fundamental base. We have a strong results for the daily work in the daily operation. We have a financing situation is positive now, but the rental markets give us some challenging times right now. I think it will continue during 2024 with the, all the, uncertainty in the, in the world we have and in for the economy, but I'm looking forward to 2025 with a bit more optimistic view. So with that said, please, questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Nadir Rahman from UBS. Please go ahead.
Hello, good morning. Can you hear me clearly?
Morning.
Yes, we can. Thank you.
Good morning. Thanks for the presentation. So my first question relates to vacancy, and you mentioned the Saab and the Alfa Laval tenants, and the positive effect on the vacancy. So what quantum change can we expect in the next eighteen months from these tenants moving into the properties? And the second question, as a follow-up on that, is that there have been talks, I guess, in the press of Ericsson potentially exploring options beyond their Kista current site for a larger plot. And do you think they're a potential candidate for one of your properties in Solna? Thank you.
It was a little bit unclear, but was your first question regarding how the vacancy rate will change?
Correct. Yes.
Yes.
From Saab and Alfa Laval into the properties in the next 18 months. So what quantum change can we expect from that?
Well, in the near future, we think that the occupancy rate will be actually a little bit reduced because we have Telia leaving some of the area which were announced in the net lettings last quarter. But then we also have projects being finalized and moved into. So for example, when Saab moves in in a year from now, that will have a positive impact on the occupancy rate. But I think it's fair to believe that in the near future the occupancy rate will be reduced somewhat, and then hopefully we will be able to increase it again going forward. And I think the second question from you was regarding Ericsson and the potential of them moving from Kista, correct?
Correct. Yes.
Yeah.
Yeah. We have all read the newspapers, and we will be more than happy to present some alternatives for that. We have good alternatives both in Arenastaden and in Solna Business Park. So, yeah, that's what we, so hopefully we can present, be able to present something, if they can move. Yep.
Yeah. And if I may ask a follow-up on a slightly different topic. So you mentioned in your presentation that the decline in space, needed by businesses, that you say is driven by the business cycle. But do you think this is a cyclical effect at this point in time, or do you think this is a more fundamental shift in preferences that may last for a longer period of time?
So, sorry, it's very difficult to hear, but, Åsa, did you?
No, it seems like someone else is talking behind you.
Oh, sorry, sorry, let me.
Okay. So please, can you repeat the question?
Is this better?
Yeah. Yes.
Yeah, much better. Thanks.
Apologies. Sorry. Sorry about that, sorry. So, so I should repeat that: So your, in your report, you mentioned a decline in space needed by businesses that's been driven by the business cycle. So do you find that this is a cyclical effect, on this occasion, or do you think this is a more fundamental shift in the markets, this time, and in preferences that will be longer term?
No, I think what we see right now with, for example, taking a longer time for getting a signing of a contract, so that's more of the business cycle right now and the economy and the uncertainty in the world. Longer term, it's more about how to use the offices. Offices that it's important for most companies we know, but we have a trend to less square meters per employee, and that continues. We have smaller desks, we have less area per employee. But that continues. But that also means that the location and the transportation opportunities and so it's much more important. So that's also why you're willing to pay a higher rent per square meter for the offices.
I think the trend is that offices, we have a lot of discussion, how important the office is, and also how. But right now it's the economy and the downturn in the economy that are the main reason why it's taken a little, the uncertainty because the uncertainty of the signing a new contract also.
Very clear. Thank you very much, and apologies for the unclear line.
No problem.
Thanks very much.
Thank you.
Any more questions? Okay.
The next question comes from Ventsi Iliev from Kempen. Please go ahead.
Hi, good morning. Can you hear me?
Yes.
Yes.
Okay, great. Thank you for the presentations and for taking my questions. First one would be on operations. Of course, you mentioned that the [audio distortion] challenging.
Oh, sorry, one sec. Åsa, we heard when you asked the first question of if we could hear you, but now it's something wrong with the line. So please, can you?
Okay. You mentioned a challenging office market and then one trend specifically is that occupiers are taking longer.
Yeah.
But that's not all, because rents are still under pressure and occupancy is moving up. So what, in your view, needs to change for operations to turn positive?
I think the main reason for taking this time for signing new contracts or for making decisions is quite it's uncertainty in the economy and the uncertainty in the world, on both political and the war scene, and so we have. So the uncertainty, I think, it's a little bit the main reason. Then on top of that, we have the issue of how they look to. How should their offices look like? How much space do we need? Maybe not less space, but how should we use it, where how much is desks, how much meeting rooms, how much, you know, the whole list of questions. But the main reason right now, in my view, is the business cycle.
Okay, thank you. And then on valuations, of course, you reported stable valuations, and then in Sweden, you typically talk about the yield requirement, which you reported 4.5%. But, let's say on the rest of the continent, corporates typically look at the NOI yield, which, if I calculate for you, I get to 3.8%. And first, do you have any comments on that? And second, why should your properties be appraised at such a yield when typically for the NOI yield, we see 4% or above?
Good question. I think we have to maybe we could be discussing that for a long time, long term, and I think also, since we are so transparent with all the figures, everyone can make the calculations you like to do. The values in Sweden have a system that has been used for many years, and also did you know that our main valuers are Cushman & Wakefield and Newsec, and they are also using the same system as they're using in different markets. So, I think I know better answer than that actually, but the transparency, I think, is very important that you can make, so you can always see which, at which levels it's value.
I think that's also important to say that the transactions we see in the market, in our part of the market, the different markets, is more than it's at the same levels or even better levels than we per square meter or yield or whatever, so that we have in the books. So, it's so. I think that's also important to say.
Okay, thank you. And then maybe one last question on Convendum. It is one of your tenants.
Yeah.
Could you just quote your total exposure to coworking? And then just in general, there was also an interview with the CEO of Convendum, and he was implying that Convendum cannot pass the inflation to their customers. So what's your view on the space in general?
In total, we as you know, Convendum is our second largest tenant. It's a little bit more than 3% of the rental incomes. They have very, I think they have very attractive units. They have two units, one is in with us, it's one at Drottninggatan, close to where we have the Royal Castle and the government. And then one at Kungsgatan, close to Stureplan. And I think both of them, what we know, we don't know exact figures, but what we know, they are doing okay, and they have attractive units. And I saw, we also saw his comments about the rents, and we think that those units are definitely not overrented.
They are at market rent or even below, and in my view, his problem is that he has been growing a little bit too fast. He took on too many units in at the same time, so the cash flow has been challenging, and especially when this business, I think he has attractive units with us, and so we will from out from that have the discussions with him when he now filed for Chapter Eleven.
Okay, very clear. Thank you very much.
I think we have, okay.
The next question comes from Alexander Totomanov from Green Street. Please go ahead.
Okay, we have.
We lose him. We have some questions by email. Maybe we should go on with those.
We can start. Hello?
Alexander Totomanov, Green Street, your line is now unmuted. Please go ahead.
Hi. Sorry about that. There were some technical difficulties. Good morning, and thank you for taking my questions. Two questions for me. This morning, you reported a 1.2% increase in vacancy driven by Solna, about a 2% increase, and judging by the commentary, that seems to be driven by Vasastan, and Hammarby about a 4% increase. Could you please comment on the new vacancies? Are they driven by a couple of large tenants? How is the relating discussion going? And do you expect, where do you see the occupancy landing by the end of the year? And one more question with regards to announced M&A. Yesterday, DNB announced it is purchasing Carnegie, which is your fifth most significant tenant. I know it's early innings, but given the 2027 expiry on the lease, are you already planning for this?
We start with second. We saw that yesterday, that as, as you said, DNB acquired Carnegie, and we think that's hopefully positive . They have very good locations for us, with us in Stockholm, and I hope on that with its long-term. It's even their long term, it's really the Carnegie Building in Stockholm, so, and they have been growing with us from, for now, I think, is it 10 years or something?
More than 10 years.
More, more than 10 years.
Mm.
It was in 2010 or 2011 I think. So they have been growing in the building and in the rest of that street and that block. So hopefully even in the future. When talking about the effect of what we see today in the vacancies figures is the effect of net leasing figures in last year or the leasing figures last year and the beginning of this year. We said earlier that we expect the vacancy rate to come up a little bit, maybe during Q4 before it's turning again in 2025 to the more positive side. So but that's what we have for the short-term expectations.
During 2025, we then have the finalizing of the projects, and especially second half of 2025 and beginning of 2026, where we have the incomes from, for example, rental income coming from Saab, for example, at the end of the. So, yeah. But the short term, it can be a little bit weaker.
Thank you very much.
Okay, we have no more questions on the telephone conference, but I have one additional question from Goldman Sachs on email. Do you see interest and finance costs going down in the near future? Yes, actually, we do. I also said in the call that the average interest cost of 3.16% by the end of the quarter has been reduced to 3.08% by now. We don't expect it to be reduced very much further, but we expect the average interest rate to stay just above 3% going forward. We are renegotiating loan agreements with better margins today, and the market rates are going down.
On the other hand, we have some old interest rate swaps that were taken five, six years ago on really, really low levels that are maturing. But in all, we believe that the interest cost will be around 3%, and we will also see improved ICR going forward. We also had some other questions, but they have already been asked by from the telephone conference about Convendum and about the occupancy rate. So I think that's it.
And then, so thank you very much for listening. A lot of questions today have, of course, been about, even in the Swedish presentation, about Convendum. I hope you have got a lot of the net leasing of -SEK 11 million is, I think it's, as we said, it also included 8 of them were from the Wenner-Gren projects. So it's, and we're more optimistic for the future. We have future projects, and as a whole, we have a strong base, so, hopefully we can look forward with also that strong base. Yeah. Okay.
Oh, there's another one.
One more question. Thanks.
The next question comes from Paul Gorrie from CTI. Please go ahead.
Hi, guys. Can you hear me okay?
Yes.
Perfect. Yeah, I submitted a question on the chat, but it obviously didn't go through. I was looking for a little more detail on Convendum, and specifically, you know, on the two assets. You know, have conversations already started? I appreciate it's early in the process, but have conversations already started on whether, you know, the level of rent cuts that are expected, or, you know, whether we're expecting full closure, those assets? That's probably the first question.
As I said, of course, when he announced last Friday, we also got contacted. We have discussions, but as I said, I think he has good rents, good levels of the rents in our units he has with us, or the contracts we have with us, and I also think that it's attractive units. So, that's what I can say today. I don't think those units are his largest challenge, but he has to answer those questions himself.
Yeah, sure. I was just checking there were no conversations kind of in advance of this, and you kind of found out at the same time we did.
Yeah, he has good. Yeah, it's good, the rent, the rents level in our, in our units are at, definitely at market levels, and, so it's attractive levels, I think, for him.
Yeah, in terms of the assets themselves, if they're not co-working, do they need to be repositioned? So let's say, you know, it's a full, I'm not saying this is what will happen, but if there's a full bankruptcy and Convendum have to leave, you'll presumably have to reposition the assets, again. Is that right?
I think there is a lot of, w ith those addresses, we have at Kungsgatan and Drottninggatan a lot of opportunities, both for different options.
Oh, okay. Okay, and one of the options to take over from Convendum?
I can't really comment on that, right? I can't really comment on that. But, I think as I said, there is a different and lot of options for both those that, building, properties.
Okay. Sure. And then just on a separate topic, so just on ICA and Telia. We can see from your kind of largest customers, you know, the change quarter-on-quarter on the share and the rent roll. So can you just confirm and just remind me, effectively, are those from lease renegotiations, and therefore, the new level of rent is purely on individual leases where they've negotiated new terms, or is it a move-out effect? So there's a sort of vacancy.
It's a move-out effect. And I think with Telia we were because that was from last quarter and Telia was a combination of leaving some space but also Fabege increasing the rent per square meter on the remaining space. So that was a combination.
And prolonging the contract a little bit.
And prolonging the contract a little bit. And ICA, they had an option to leave some of the space, which they did, and both ICA and Telia also had to pay a penalty for that.
Okay. So they both paid the surrender premiums.
Yeah.
Did you disclose how much they were?
Uh, no. But it's included in the graph with the rental income going forward. Because the penalties will be distributed over the remaining time of the contracts.
Okay.
And also what we said when we announced the deal with Telia, it's also that we see a possibility to have higher rents for the next contracts than we had with Telia. So we see it as. So it's so but we are. That's for the future.
Yeah. Okay. Okay, understood. Thanks. That's everything for me.
Perfect. So once again, thank you very much for joining us. You're always welcome to give us a call, mail us, or even hopefully also visit us in Stockholm. So have a nice day. Thanks.