Welcome to the Presentation Of Our Year-end Report 2021. Today, besides our CFO, Åsa Bergström, as you know very well since before, we also have our Head of Sustainability, Mia Häggström here. Welcome. Before we will summarize the strong full year of 2021, I want to say a few brief words about the fourth quarter. It was a quarter with a good level of activity in both the rental market but also in good transaction markets. There were many inquiries, and it was many viewings. We see that the positive trend also is continuing into the Q1 and to the whole for 2022. Net lettings came in for the fourth quarter at SEK 32 million, and it was a good result. We will tell you more about that later.
The most important event was maybe our strategic acquisition of SHH. Also, we mentioned that already in the Q3 presentation. Please change slide. Despite the pandemic, the COVID-19 situation, 2021 was a very good year, both for us at Fabege but also for many of our customers. Net lettings was at a record level, almost a record level, SEK 162 million for the whole year. It's one of the best years ever. Considering what unusual year 2021 was with the restrictions back to normal, new restriction at the end of the year, and all that, I think 2021 is a strange year, but it was a really excellent performance by our organization.
The year was also characterized by rising share prices, record low interest rates, capital and capital almost hysterically seeking returns. All that you know about. That also was, of course, seen in the transaction market, both in the foreign for all property real estates in Sweden and other countries too, of course. We see also how the property real estate companies are being valued by the stock market and some of the companies have been valued significantly over the net asset value, which is not a normal situation. For us, it's also therefore extra important to have full focus on our transactions and what we can influence over.
The most important maybe is to have focus and not forget about the daily operation. We have the basis of our business lies in the management of our properties, worth today is a combined value of around SEK 83 billion. Every day, we have to take care of and further develop our portfolio. It's a daily grind with many small and larger details, but it's also what generates long-term results and growth. Please, Åsa, tell us a little bit more about the figures and the results.
Thank you, Stefan. Please turn to page five. It was, as Stefan just mentioned, a strong close to the year as expected. Higher income, improved net operating income, and profit from property management. For the first time, a quarter from SHH is also included. SHH is mainly reported on separate lines in the income statement and as its own segment in our segment reporting. Rental income came in at almost SEK 3 billion, slightly higher than the previous year. In an identical portfolio, income increased by 2%. Vacations ahead of projects and granted discounts were offset by occupations in completed project properties. Increased operating expenses were due to a more normal winter in terms of cost for heating and snow clearance, but the surplus ratio still improved to 76%.
SHH's gross profit amounted to SEK -9 million, of which SEK 19 million related to central administration costs. Income recognition takes place in connection with the completion of the projects, and we estimate that the costs are a little front-loaded. Now, approaching 2022, we will review the methodology for distributing the costs in the ongoing projects. Central administration includes non-recurring costs of approximately SEK 11 million relating to the move and furnishing of our new headquarters in Solna. Interest expenses increased slightly compared to the previous year, which is due to an increased loan volume. The average interest rate fell slightly during the year to 1.75% from 1.77% last year. The result in associated companies amounted to SEK +2 million.
The year's contribution to Arenabolaget of SEK -35 million was offset by a positive final recognition of SEK 25 million relating to our joint venture project Selfoss in Kista, and also, SEK 12 million relating to final recognition of housing development projects in SHH. We therefore reported a profit from property management of just over SEK 1.5 billion. The strong property market is reflected in continued falling yield requirements and positive value changes. In total, the year's unrealized changes in value amounted to SEK 4.6 billion, of which SEK 2.2 billion were recognized in Q4. The yield requirements fell by 12 points during the year to 3.76% at the year-end. The deficit value in the derivatives portfolio decreased further during the quarter, and by SEK 532 million in total during the year.
Finally, the tax expense amounted to SEK -1.3 billion and related to deferred tax only. Please turn to page six. Reported equity increased by SEK 14 per share to SEK 141 per share, and the long-term net asset value, the EPRA NRV, amounted to SEK 171 per share. The only key ratio that does not currently meet our target level is the debt ratio, which amounted to 14.7%. Otherwise, the key ratios are in line with our goals and expectations. Our balance sheet is still very strong with a high quality asset ratio and a low loan-to-value ratio. Please turn to page eight. On the financing side, we do not have so much to report. The strategy of long capital maturity and a high proportion of fixed interest terms remains unchanged.
We maintain a reserve of unutilized facilities in the form of revolving credit facilities of just over SEK 3 billion. Unfortunately, the proportion of green loans slipped back to 99% after the acquisition of SHH, whose loans are not classified as green loans. However, this is something we intend to change during 2022. Both the capital market and banks have been there for us during the whole year. We have continued to be active in the capital market through several bond issues and regular issues and sales of commercial paper. We have also refinanced bank loans according to plan. We have also taken the opportunity to fix the interest rate through new long-term interest rate swaps. Of the loan portfolio, 76% is now fixed, mainly based on long-term maturities and mostly through straightforward interest rate swaps, supplemented by some fixed rate bonds.
Maturities are continually replaced by new long-term fixed rates. During the fourth quarter, we reactivated our share buyback program. In total, we repurchased 4.9 million shares during the year, and we currently hold almost 9.5 million treasury shares. The shares have been repurchased at an average price of SEK 122.05 per share, and we will retain these treasury shares until further notice. Please turn to page nine. We aim for an even distribution of our loan stock among several sources of financing, as you can see in the graph on the left. Other loans in the chart, apart from bank loans in the Nordic banks, also refer to loans from Brunswick and the European Investment Bank.
The proportion of assets free from collateral or mortgages or unencumbered assets, as they are called in rating agency terminology, has increased to 44%. By that, I leave over to Stefan again.
Slide number 11, please. As you know, we own only 94 properties, but it's a property value of more than SEK 83 billion. It's well-located, modern properties, and I think that will be even more attractive in the future. One effect of the pandemic will be that customers will continue to demand high quality, but they will also demand flexibility. That's something we all have been talking about since two years ago when the COVID-19 situation started. We have a totally modern portfolio. We have, as you said, very attractive locations and with very good communications. I'm sure this will benefit us. The value growth for 2021 was very good. We have today our average yield requirements of 3.76%.
However, in the transactions that has been done, as you know, we value the portfolio every quarter with external valuers of about 25%-30% every quarter as we also did the Q4. The transaction market has been very strong, even for commercials. There have been very few transactions in the office market in central, in the CBD in Stockholm. There were some transactions at the Q4, and they were at a low level of 3%. In the valuations, I think we saw a downturn, but I think there is still some time lag in the valuation in the market, or maybe we have seen the peak.
Next slide, please. Number 12. As you know, we have a very stable customer base.
We have long leases with some of Sweden's largest companies and most stable companies, SEB, ICA, Telia, Swedbank, Cregon, and so on. I think this is really a strength for us. The new lease agreement with Alfa Laval in Flemingsberg was a 20-year lease. I feel very comfortable, confident about our customer structure. We can see a small tendency that smaller companies are now a bit more inclined to prefer shorter lease terms than they did before COVID-19. For larger clients and customers, a long-term approach is important, and that's also what we see, continue to see. Alfa Laval is a very good example of that. Please go to the next slide.
We sometimes forget the portfolio we have, how large our portfolio in this Stockholm CBD or inner city is. We are the third largest property owner with 27 properties with a value of more than SEK 30 billion. With our Stockholm focus, of course, it's natural for us to own attractive properties in the Stockholm inner city. It's there the new trends are born, the rental levels are high, vacancies are few, and the cash flow is stable. It's also advantage to be able to offer premises both inside and outside of the city. For example, in Solna, Hammarby, and in future, Flemingsberg.
During the year, there has been an unusual opportunity for us to get in some area for new productions in the inner city. Thanks for the land to our land allocation at Sveaplan, we now have the opportunity to go for to build eight, maybe 8,000-9,000 sq m of offices at Sveaplan, close to Wenner-Gren Center, where we see here in the picture. But for it's a project that will take some years to start. Next slide about Hammarby Sjöstad. We are the biggest in the office market in Hammarby Sjöstad. We have 11 properties with a value of more than SEK 8 billion. Looking ahead, Hammarby is also only halfway in its development.
30, 40 years ago, this was an industrial land for old industrial companies. So it has been developing in a fantastic way during the last 40 years and will continue to increase attractiveness as the district is linking up in a natural way with the Stockholm inner city, but also the Globen area will continue to be developed. During the year, we have even here obtained some land allocations. We have in total development rights here for more than 70,000 sq m of offices. Next slide. Arenastaden. As you know, we are number one here. We have developed most of the area. We own the Friends Arena, as you can see, the one you see to the left.
During the year 2021, we have completed two larger projects, both the hotel and the lower part of this picture, the Nationalarenan 3, and also where we have our new head office in the middle of the picture, where both were almost let up to 100%. We see a strong demand for new premises in Arenastaden. One example of this is when Telia exercised an option to lease some areas. It didn't take long before those areas were let to new customers at very good levels. In this quarter, Q1, the Two and One project will also be completed, and Tietoevry will move in in that building. Next slide, please.
Haga Norra, one of our development areas. The property value is about SEK 3 billion today. We are now entering into next phase II, for development. We will start building office space, the one you see in the middle here, for more than 30,000 sq m of offices, and also preparations and starting to construct more than 400 new apartments, and also garage and so on. I will come back a little bit later to this project. Next slide, please. In Solna Business Park, which we have been owning now for about 15 years, the next phase for development will start. In 2022, we will work to make the ground floors in the area more attractive.
When the area was built in the 1980s, it was adapted for heavy traffic with a lot of loading docks and loading, unloading, and unloading areas. Now, during 2021, we have worked to remove this, and now we're taking the next step to improve the area's attractiveness. We will also start new projects here. Since we are the largest property owner in the area, we have the possibility to work with the entire area in order to boost its attractiveness and its development. This is one of the many advantages of having a concentrated portfolio and being a large player in each market. The future development in Solna Business Park will also include a lot of residential. The next slide, please.
Flemingsberg. In the south of Stockholm, we took several large steps forward during 2021.
We have started our first project with the construction of the Kungliga Operan and Kungliga Dramatiska Teatern, where that building will be ready in 2024. We have obtained, even here, land allocations from the city of Huddinge, which will enable approximately 225,000 sq m of development rights, and that includes 30,000-40,000 sq m of residential, and the rest is commercial floor space. At the end of January, we also acquired a development property from Skanska, which includes another approximately 35,000 sq m of commercial floor space.
Now we have control of most of the development in the area, and I think that's another advantage to be really strong and to be able to work close to the city of Huddinge to develop this area. As you know, during 2021, we signed Sweden's largest new letting with Alfa Laval. They choose Flemingsberg for its future establishment. The lease is for 20,000 sq m, and it's for 22 years. There were also a lot of several initiatives to be part of the development in the whole area, a few social initiatives to strengthen Flemingsberg. I will tell you a little bit more about that later on in the presentation. Next slide, where we will go a little bit about the rental market. On slide 20, please.
The rental market in recent years has been, as you know, very strong, and you know how the rents has almost doubled since 10 years, during the last 10 years. We don't hear the rumors right now about new record levels. I'm sure we actually, during the year, we signed at new record levels some small space in the city for record levels for us, but it were only for 300 sq m but more than SEK 9,000 per sq m. It's a very stable market in general. We don't see any trend that rents are falling. It's a good demand, especially in the CBD, but also, as we said before, in Arenastaden.
I would say that they have more leveled off the rent level and at high levels in the inner city, whereas in our other areas we can see continued increase but a more moderate rate than before. Even if the rents have gone up, it's also important to remember that premises costs are generally just under one-tenth of the wage costs for the companies. That's normal. This means that many companies are focused on the office design so that they really can be an attractive place to be in. I think we have only been seeing the start of the new step for this. Next slide, please. As we said, we had very good net letting for the current year.
SEK 162 million is one of the strongest years ever in net letting for us. In the graph to the right, you can see the development of contract rental income, including new occupations, relocations, and renegotiations for the last years or for the last year. This is not a forecast for 2022. This is not a forecast, but aims to show that rental trend in the existing contract portfolio as of closing day, knowing what we know today. Here you can also see that we know that Skatteverket, for example, will leave some premises in during the beginning of this year, and that was announced already January 2019. Next slide, please. Renegotiations. Very strong year even here, up 11%.
It will be difficult, though, to achieve an equivalent increase in the renegotiation for the coming year and years. This is partly due to the fact that the leases we will negotiate in 2022 we will re-renegotiate in 2022 were previously renegotiated only three, four, five years ago and from high levels at that time. The rental levels are unchanged now, so the gap to the existing leases in the portfolio is getting smaller for the next years. What is good for us is also that the index adjustments for this year will be 2.8%. We can add another 2.8% to all our contracts.
Of course, that will have some impact on how to negotiate the renegotiations. The new property tax assessment will mean that the property tax will probably increase significantly, and this will have some impact on the negotiations. Some lower levels, but a very strong market in total. You can also say here maybe that the energy costs can have some short-term impact on the willingness from some companies. As we say, we're still optimistic. What we have to work with is on the next slide 23. We have to work with our vacancies . We have some opportunities.
I don't see any structural vacancies in the portfolio, as I said before, but especially in Solna Business Park, we have some vacancy to work with. We have some smaller ones in the CBD where we have more. We have also strengthened the team working with lettings to be able to make use of this opportunity, especially maybe the challenge in Norrtörn or the opportunity in Norrtörn following Skatteverket leaving in Solna, which we have to work hard with for the next. There are some opportunities to cut or reduce the vacancy rate I see. A little bit more about the future projects on the next slides. Go please to slide 25.
Here you can see the vacancy rate and how the office stock in Stockholm for the last 15 years. The office stock has increased a little bit more than 10%, whereas the vacancy rate has decreased. It hasn't been the reason why the office stock hasn't grown more is also some office properties have been converted into housing and hotels. What we see in Stockholm now is it's difficult to find new and attractive land for office in good location, especially in the CBDs. Solna, we have some opportunities left in there. There are some continue to develop.
There are some more opportunities in Hagastaden, close to the inner city, and then of course our south office city, especially in Flemingsberg, as you know, we are fond of. Next slide. For the last 15 years, we have also seen a growing office employment, number of office workers in Stockholm. We think this will continue. There is a good demand for this to continue to grow. That has grown faster than supply, but of course it also mean that we have to be more efficient in the offices. Next slide.
Our own properties, we should see in the light of what we said before. We have a huge project potential. Last year, we invested almost SEK 1.9 billion. I think we will end up 2022 more a little bit higher, maybe SEK 2.3 billion-SEK 2.4 billion in investments. That's what we're expecting for next year. Next slide, please. Here we have some details about our project portfolio. They're ongoing. As you know, we have about 59,000 sq m under production, and we have signed contracts of about 85% of this. Next slide. What about the future? On page, slide 31, we have some large development rights portfolio in, as you know.
This means that we have a great potential to start both commercial and housing development projects in the coming years. In total, it's almost 1.5 million sq m. Of course, it's a lot in Solna and a lot in Flemingsberg in both the residential and the commercial side. Some examples. Slide 32 please. In Haga Norra, the construction will, for next step, start in 2022. It will be an office block, a housing, and garage. The office block, the building number one, is planned to be ready for occupation in early 2024, and it's about a little bit more than 30,000 sq m of commercial area. We will start in 2022.
We have now signed contracts. We normally like to have an anchor tenant which take a large part of the area before we start a new project. Here we have started because we think it's we have strong demand for good offices, and it will be a multi-tenant house, and we are creating a high-quality office product in a very pleasant neighborhood. We started, and we'll work it, so I think this will be a very attractive building in a very attractive area. During 2022, we will also start, as you can see on the next slide, the development project of, as we say it in Swedish, Nöten 4. When Skatteverket leaves during the second quarter.
We will convert the property from a single-tenant building into a multi-tenant one. The goal is to have the first new customers here so they can move in during 2024. Next slide. SHH also have a lot of projects going on, and a lot of projects that they will start. In Tumba, south of Stockholm, south of Flemingsberg, but close to Flemingsberg, SHH will start its largest project to date. It's a joint venture with Balder. In total, it will be almost 1,000 apartments that will be produced over some years, and it will be a mix of rental apartments and tenant-owned apartments. SHH will also start projects in Flemingsberg of about 276 apartments, or even that will be a mix.
They have some other projects going on in south of Sweden and in the Stockholm area. They also will probably start a project with a school in south Stockholm, south of Stockholm. A lot of projects even going on there. We, as we know, you know, we have a lot of projects in total in the portfolio. They are now more integrated in the whole group. Slide 35. In Flemingsberg, we will now start during the year the construction of Alfa Laval complex, the building of more than 20,000 sq m in total. A total investment of more than SEK 700 million. We have very...
During the year, we will also have several exciting projects that will continue, as we said, in Solnabergsby and Renstaden, and we will return tell you more about this. During this year and the next presentations and other meetings we will have with you. With that, I will hand over to Mia to tell you about all the work we do in the sustainability side. Please, Mia.
Thank you, Stefan. It is great that sustainability is now also on the financial markets agenda. For us as a long-term actor and builder of communities, the 17 Sustainable Development Goals have been something natural for a long time. We committed to the Science Based Targets initiative in 2019, which means that our targets are now aligned with the Paris Agreement. Sustainability is a prioritized part of our business operation and is integrated into target plans across the entire group. Next slide, please. For us, it's important to think sustainability in everything we do. As you see in the slide, we have made good progress even if there is a lot left to do. We estimate and report both direct and indirect emissions.
Now we are aiming for climate-neutral management by 2030, Scope 1 and 2, and 50% reduction in indirect carbon emissions, Scope 3, by 2030. These are tough but not unreasonable targets. First and foremost, achieve a 50% reduction of Scope 3 requires courage, new thinking, and of course, curiosity. Turn to slide 38, please. Our sustainability building in Haga Norra is a great example of how we are not afraid to test new possibilities in order to achieve a 50% reduction in the indirect climate impact. Instead of throwing away all the usable demolition materials in Bilia's old facility, we will essentially construct a new building from the old one. We will learn more from this about what is possible in the recycling field. This is a really exciting project, not only for us, but for the entire industry.
Återhus, Rebuildings, constructing houses from houses will make heavy structural building parts available, especially load-bearing structures and facades for reuse in new construction and refurbishment. Please turn to page 39. During this year, we put extra focus on social sustainability and worked and planned to reduce inequality in the areas where we are operating with Flemingsberg in focus. We want to help ensure that children and young people get good schooling, meaningful leisure time, and by extension, of course, a pathway into the labor market. We believe that it contributes to creating pride for us as employers.
That it is an important question of responsibility for us as a property development. Of course, it creates value for us and the society as a whole. In Flemingsberg, among other things, we have initiated collaboration with the Läxhjälpen Foundation and with TalangAkademin, with the aim that more students should achieve upper secondary school competence and that more internships and jobs are created. Thank you.
Thank you, Mia. I think it's really. I'm really pleased that these questions are high up on the agenda, and the development over the last years has been that a lot of good steps have been taken in many companies, I think, and in the whole financial market when talking about sustainability. I think it's very important for us to have ambitious targets to continue to develop and be active in what we can have an impact on. I think it's very important for us to work with those social initiatives where we really can make a difference out in the different areas. We can really make a difference on a daily level for many people. That will be, of course, make values for the community, but also for us as shareholders.
I'm also happy to say that we in January was or have been ranked as one of the best companies when talking about gender equality. A lot has been done, a lot has to continue to be done, and we have to change to work with this together, all of us. With that, please, questions.
Thank you. If you would wish to ask a question, please press zero, and one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero and two to cancel. The first question we've received is from Jonathan Kownator, Goldman Sachs. Please go ahead. The line is now open.
Good afternoon. Thank you for taking my question. The first topic I wanted to come back to was occupancy. Obviously, you've highlighted in the presentation that you are expecting some leases to start, I think, particularly for Telia, if I understand. That should improve occupancy, but at the same time, you're losing income from Skatteverket. How do you expect occupancy to evolve in the next few months based off your slide 21, which shows the profile of income that you're expecting? I think that's my first question. The second question being on dividend, obviously, you've put a big increase there. That corresponds, I think now to 95% of your EPRA earnings, which is an increase effectively in payout ratio from the previous one.
How are you expecting that, particularly in the context of your future investments in the pipeline? Thanks.
Hi, Jonathan. I'm not sure if I really could hear the question. I think the first one about the occupancy rate when Telia, the Telia building is new contracts and tax authorities when they're leaving. The easy answer, it will be about flat. No big.
Okay.
The second one was it about the dividend and how it affect?
Yes, about dividend policy going forward, the big step increase in the payout.
We think that it's.
... now 95%.
The Board and our view is that we have a very strong balance sheet. We have a dividend as one tool for shareholder value, and we have the share buyback program, and we can have all the products going. We have a strong balance sheet, so that's why also we see this increase in the dividend.
Financing is not a n issue.
Yeah.
Capital is very available for us.
Should we effectively see that as a releveraging to effectively, say, distribute money to shareholders? What would be your target LTV then, from that perspective?
Well, the target LTV has not changed. We have always, or at least for many years now, communicated that LTV should not be above 50%, even in the worst of times. Of course, now we are in good times, and an LTV of 36% gives us good headroom to increase the dividend. There is no conflict with the LTV target.
No, no conflict with future products too. Neither. It's a sign of strength, you could say.
Okay. Fair enough. Very clear. Thank you.
At the moment, there are no further questions. So as a reminder to ask a question, please press zero and one on your telephone keypad.
If there are no further questions. It was quite a long presentation, so maybe that way. You also know that you're always welcome to give us a call or to mail us or to discuss or to make questions also.
Thank you for today.
Thanks for today. Have a nice evening.