Good morning, and welcome to Fabege's Year-End Report 2025. My name is Bent Oustad. I'm the CEO of Fabege, and I'm lucky to have with me the experienced CFO, Åsa Bergström, here today.
We run through the report, quite well-known structure on the report today. Just to start with Fabege in brief, we have a modern portfolio. We focus on Stockholm. We own, we develop, and we manage the other properties. We focus on attractive working places and good living in superb locations in Stockholm. As you all know, Sweden is the capital or growth region in the Nordics. If you distribute the rental value of SEK 4.3 billion to different segments, office stands for 84% of the portfolio. That's office in the broader definition, including also educations. Industry, logistic, 4%; retail, 4%; hotel, 4%; and other segments, 4%. If you allocate the square meters into the same segments, office is 72%, and industry and logistic up to 9%.
The other is more or less the same. The market value of the portfolio, SEK 78.5 billion, 37% to the inner city, and that also explains the differences from the rental value and the square meters, because a lot of the properties are in central locations in Stockholm, and there, the rents per square meter are quite substantially higher than the rest of the city. Solna stands for 48%, Hammarby Sjöstad 10%, and Flemingsberg 4%. If you try to summarize the fourth quarter 2025
rental income came in at SEK 899 million, up 4.4% from last year. Profit from property management ended at SEK 371 million, up 11%, and the surplus ratio was 75% for the quarter. And as we have commented on the report, quite lucky with the weather, at least at the end of the year, so that's why we had a quite good, surplus ratio. Profit from residential development came out at SEK 35 million in the quarter, a 23% margin. Shouldn't expect that high margin going forward, but, close to 20% is something you can count on. Value changes, net value changes of SEK 711 million downwards, and earnings before tax then, came in at SEK 293 million.
Net lettings for the quarter was SEK 33 million, ending the total year at +SEK 36 million. We see increased activity in the leasing market. I will get a bit back to that later on. Large projects entered the management portfolio during the quarter, also coming back to that, and large refurbishments are ongoing. That's how we try to secure also future value creation for the total portfolio. The quarter has proven our quality, our capability to capitalize on Birger Bostad's business model. We are then converting our residential land bank into shareholder return, and we will, we will have more reporting on that also going forward. The last point, not on the summary slide, is, the board has requested or has proposed, dividend per share of SEK 2.20 per share. To that, I hand over to you, Åsa.
Thank you, Bent. Yes, I'll go through the income statement. Rental income, as you can see here, amounted to almost SEK 3.5 billion, a little uptick from last year. We had a negative impact in the identical portfolio of -3.2%, mainly due to the negative net lettings of the previous year. We also sold one property that impacted on the negative side, but on the other hand, we have several projects that have been finalized during the year then, and that are now producing income for us. Property expenses, a little bit higher than last year.
We have an uptick in property tax, but as Bent also said, there were lower winter-related costs, very good both beginning of the year and end of the year, and thus we had a surplus ratio in property management of 74%. This year, we also had a positive impact from Birger Bostad's residential development. They have finalized just over 100 apartments during the year and produced an income of SEK 280 million, and a result of +SEK 55 million, which is included in the gross profit, as you can see here. Net interest expense was slightly lower than last year.
We have borrowed roughly the same amount during the year, but the average interest rate has come down from 2.98% to 2.82% during the year. The share in profits in associated companies increased. The majority of this or all of it, roughly is related to our share in Arenabolaget. There was a one-off included in this figure of SEK 63 million, where we have taken down the value of the shares that we have in Arenabolaget. So that's SEK 63 million of the SEK 130 million is more a one item, one-off item. So all in all, profit from property management increased by roughly 5.5% to SEK 1.4 billion. The impairment development properties relates to Birger Bostad future project, future potential projects.
The realized changes in value is related to the sale of Ynglingen 10 in the first quarter, so that's the same figure as in the first quarter. Unrealized values came at SEK 1.7 billion for the full year. I will come back to that a little. And then changes in the derivatives were positive in the fourth quarter, but all in all, over the year, a little negative number. And so we have a result before tax of minus SEK 508 million, and then a positive tax impact, SEK 160 million, of which SEK 128 million relates to the sale of Ynglingen 10 in the first quarter. We have externally valued roughly 50% of the portfolio this quarter, and the property value came at SEK 78.5 billion, as you can see here.
There's been a shift upwards in the average yield from 4.55% in the first quarter to 4.59% in the fourth quarter. This next slide gives a little more, a bit more transparency to unrealized value changes over the year. We can say that during the first half year, the negative value changes were mainly related to increased yield and lower expected cash flows, longer vacancy periods expected from the external valuers, and also a write down of building rights, mainly in Flemingsberg. In the second half of the year, we saw increased yield requirements in suburb location, a little decrease, actually, in the most central CBD location.
We also took a write-down on the building rights in Flemingsberg, since the land allocation agreement with Huddinge has expired at year-end. But what you can also see in this slide is that actually the projects have contributed on the positive side in all the first three quarters. Key ratios, we landed at SEK 119 per share, and an EPRA NRV of SEK 145 per share. Total return of the properties after the write-downs amounted to +1.1%. The surplus ratio, as I mentioned before, 74%. Equity ratio and loan-to-value ratio remains on the strong side. And as you can see here, the debt ratio has actually improved as well as the interest coverage ratio. So we feel that we are still in a strong position going forward.
Financing has been on the positive side all over the year, maybe getting even more positive during the second half of the year. We see continued strong access to financing, both from banks and from the capital market. We have some ongoing refinancing with banks that will hopefully be finalized during the first quarter. We have done some refinancing for maturities in 2026 already. We did bond issues of SEK 850 million during January, short of three years, and as you can see here, on margins of 89 and 84 basis points. Those are maturing in November 2028. And we still have the undrawn facilities of SEK 6 billion, which provides safety and security going forward. There has not been any change in fixed rates.
As I said, the average interest rate cost has come down during the year. Approximately 47% of the portfolio is fixed, and with an interest rate fixation of 1.5 year, and if we include the callable swap, it decreases to 2.1 years. So we have some safety, for increasing rents, or increasing interest rates, should that happen. Although it seems that the opposite, now is more likely, at least in the near term. This is also a new slide, that we just wanted to show that, how a rental income and, results have developed over the last 10 years.
You can see that rental income and gross profit from property management has increased, while the profit from property management, including interest rate, interest cost, is more variable, depending on the level of the market interest rates. The surplus ratio is fairly stable. We still have the target to reach 75%. And what this figure shows most apparently is the occupancy rate, which has come down, and we will come back to that a little later. Also, finally from me, a few words on sustainability. We keep working very hard in order to reduce energy consumption. We're now very well below the target of maximum of 70 kWh per square meter, with the outcome, which was in 2025, only 65 kWh.
Also, of course, due to very mild winter conditions over the year, but nevertheless, a target and a result which we are very proud to present. A nd we also achieved the goal to reduce CO2 by 35% in comparison with 2018. And, finally, the Fabege share is again confirmed green by Nasdaq Stockholm, which I believe is also a good sign for all the work that we are doing on the sustainability side. So that's from me, and back to you, Bent.
Thank you. The work done in the sustainability department is very important for us, and it reduces our costs, so keep up the surplus ratio for the company. It's very well. If you look at the occupancy rate, it has fallen down to or increased up to 14%, as you said. That's driven by the two previous projects, Ackordet 1 and Påsen 1, that have now been transformed into the management portfolio, increasing the vacancy. And as the one of you that's really following us, you know that some tenants are moving into Ackordet this spring. For instance, Atea moving from Kista to our property. So it will start to increase again. We also have the improvement portfolio, not part of the occupancy rate.
There we have a total 156,000 sq m, of which 127,000 square meters is let. That's future potential projects for us and are on short-term lease contracts without any right to possession when it expires. If we go a little bit more into the net lettings and the renegotiations for the whole year, the net lettings came in at +SEK 36 million. It's new lettings of SEK 236 million, and terminations of SEK 200 million. That's, in our historical view, on the lower side for us. And it also shows that we have a year without any major new lease agreement signings, so that's a goal for 2026. The renegotiations in total SEK 618 million.
Decline in rents of 0.3%, with SEK 2 million down for the whole year as a whole. That also shows more stability in the leasing market. Bear in mind, SEK 316 million of maturities in 2026 and onwards has now already been renegotiated and are part of these figures. So the tenants are forward-looking. That's great news for us. If we dive a little bit deeper into the renegotiations, I said SEK 618 million. You can divide that into SEK 341 million extended on unchanged terms, and SEK 277 million, with a 0.7% decline, so total SEK 618 million. As said, they're dominated by several small and medium large tenants. We don't have any of the really large one this year.
For the total 2025, we only have six tenants with a yearly base rent above SEK 10 million a year. Actually, two of these six were concluded in Q4, both with an unchanged rent level, and one in Nacka Strand and one in the city portfolio. So that shows also for us, even though there are a small number of renegotiations, that's-- It's a stabilizing in our view. If you distribute the new leases, about SEK 10 million, 45% are in the office, 35% in the education, and 20% in the hotel. And if you take all the renegotiations per area, 72% are in the inner city, 25% in Solna, 2% in Hammarby, and 1% in Flemingsberg, just to give you a little bit more flavor on the figures.
So rental development for the existing leases and existing contracts we have put in place, so it's definitely not a forecast, but that's what we have secured so far. And as you see, all numbers a little bit better than last quarter, and that's kind of really more or less reflected by the positive net lettings in the last quarter. I really like this heading, Stable customers. What we are talking about is high-quality customers with long lease contracts. And, just to remind you, we have in total around 700 customers in our portfolio. It's a lot, and it's important work for us. If you look on the right side, the 10 largest tenants, they stand for 30% of the total rent.
They, the 10 largest tenants, have a WAULT of 10, of 9.2 years. So it's very, very good as a base for the whole company. If we go further into it, the 25 largest customers have close to 50% of the total rent, meaning 670, more or less, customers stand for 50% of the rent. So that also takes down the big risk of many of those customers. They are more or less flexible customers, also when it comes to better market conditions and to adjust the portfolio to what the larger tenants also would like to rent of us. In total, the average lease contract length is 5.1 years. We're happy to welcome two new tenants on the top 10 board during 2025.
The SEB is the second largest one, and Alfa Laval are in place number nine there. That's very nice to see. Also, we've seen several quarters, some questions about the parking business. We have increased our parking business. We have specialized personnel taking care of that for us. In our company, we have total 12,501 parking spaces, approximately. Of which 2,700 have a separate charging station for electrical vehicles. And we see that as a key factor for some of the largest customers we have. It's important for them to have access to parking spots. We see increased demand for day-to-day permits instead of monthly agreements, and that also increased the flexibility in the portfolio for us as a company.
It's easier to book a spot up to 120%, maybe 130% when you have day-to-day permits instead of monthly reservations. So in total for 2025, approximately SEK 210 million in parking revenues. So if you look a little bit at the completed projects, I think they are well known for most of you, but in May, Alfa Laval took occupancy in their premises in Flemingsberg. Very nice property. And in September and November, Saab took occupancy in Nöten 4 in Solna Strand. Also a nice property, even though I'm not allowed to go into that property yet, so I haven't seen it from the inside, but it's nice.
As I said, Ackordet 1 and Påsen 1 tenants have gradually moved in during the last quarter as well, and some more tenants will move in during spring 2026, and that's also the reason why the vacancy in the management portfolio have increased slightly this last quarter. If you look at the ongoing projects, we have the Farao. We have also talked about that earlier. For me, Arenastaden as a whole is a sweet spot. This is the sweet spot in the sweet spot, 20 meters from the metro station. We have a board approval for investments up to SEK 613 million. We have dismantled the existing buildings, and we are doing ground and foundation work, and also preparation for construction works these days. And so why are we doing this right now?
This was more or less decided 10 years ago when we entered Arenastaden. So now Solna municipality are doing their last work on all the roads, the infrastructure in this area, and then to be cost efficient for us, we do this work on the plots at the same time. So being ready for that. It's an interesting spot for-- And we have a lot of interest in that spot, but as of today, we haven't concluded any leases on it so far. We also have Ormträsket 10, the Wenner-Gren Center. Investments approved for up to SEK 609 million. Rental value in this part will be approximately SEK 58 million, and it's pre-let 20%.
That's a little bit down from last quarter, and it's due to when they started the construction work there, or the refurbishment, we had to move out all the tenants to other buildings we have in the neighborhood. Some of them are very satisfied in the new locations. They have signed new leases there instead of going back to this one, and some of them have even found other, other premises in our portfolio, other places, in, in Stockholm. So right now, it's 20% let. We are starting the marketing toward end of second quarter 2026 on this building, and it will enter the market, one year from now or between first and second quarter 2026. Each floor plan is 400 square meters , so it's a little bit early for us to be in the, in the market, already.
But we see good interests. We have also completed and hand some on-- and have some ongoing projects in Birger Bostad of a residential company. Haga Norra, the Block 5 up there, is progressing according to plan. It's in total 288 units. Completed in 2025, we had a BRF Alma, which is a cooperative apartments. 23 after 20 are sold, as we have two showroom apartments there, and they are not for sale yet. And we have one that's not sold for the time being. We also finalized 78 rental apartments in the Q4. That's what's reported in the numbers in Q4. To be completed in 2026, 50 owner-occupied apartments, of which 44 are sold when we wrote this yesterday, and today it's 45, actually.
So possession of this will be during Q1 this year. And we are coming with the BRF Matilda and Ingentingtorget also later on in 2026. In total, 137 apartments, of which 35 are sold, and on the marketing during last Sunday, and more than 17 interested parties showed up. So it's looking good for us. We also have the preparations on the way for projects to start in the next phase in the Haga Norra, so it's Block 4 and Block 3. Totally 132 cooperative apartments in the Block 4, and 260 rental apartments and senior housing plus a preschool, actually, in the Block 3.
When it comes to the senior housing, the preschool, and also a grocery store, we have signed LOIs on those units already, but they are not signed contracts or not part of the net lease at this time. Remaining investment in that one is SEK 860 million. Completion in 2028 and 2029. And with that, we complete the residential buildings in Haga Norra. If you look at our building rights, commercial building rights of 550 million square meters , approximately 60% legally binding of those, and it has a booked value of 7,000 per square meters . That's a little bit down from earlier quarters, and as also mentioned, we have not or it's been a termination of the land allocation in Flemingsberg.
We haven't agreed on the terms with the Huddinge kommun. But we have ongoing negotiations have a positive tone, so we will report to the market when things changes. And we have 500,000 square meters of residential building rights in addition in our portfolio. So the last land allocation that we received is the Sveaplan. It was legally binding in January 2026, so preliminary possession date around mid-April 2026, and the building rights are approximately 8,800 square meters gross floor area, also taking into account the floor plans underground.
Purchase price is SEK 208 million, should be index-linked and start to be close to SEK 230 million, and a planned move-in during 2029 of this property. That more or less completes our one of our core areas in Sveaplan going forward. We will have 55,000 square meters of gross leasable area in that area, having ground floor activities, including food and beverage, having high-class conference centers, parking, and other services. To be a center for our portfolio that can have some extra services going forward. Project opportunities in the near term, as I mentioned, Farao, with the commercial units coming in addition approximately 500 apartments. And in phase one, we have 185 apartments there.
We see apartments in this area is more or less bought or let by the larger tenants in this area, so it's very, very popular. And that's really give us give us a well-functioning urban urban area. So that's good for us. Haga Norra, as I said, already produced 519 units, in production 107, and decided to produce another 390 units already with LOIs on a lot of them. We have the Västra Kungsholmen. Tegelterrassen is a 36,000 square meter office. Partly demolition has started in January 2026. And we don't have any lease contract in place, but the interests and the pipeline is quite good, quite promising, so there's a big ambitions for 2026. And we have the Solna Business Park.
The Parkhuset is a land allocation for 22,000 square meters. That's in the purple, purple line on, on the screen here. And we have Yrket next to it, with 320,000 residential units and 2,200 square meter premises, more or less, ground floor activities there. The last one, we already own and have in our books 60% of the land plot, but, 40% is a land allocation from the municipality. So if you try to summarize and our main short-term priorities, we are working every day, every night, every second, to decrease vacancy in our portfolio. We have to continue to be the preferred partner for our customers.
It's so good for me as a new CEO to come into this company, meeting the, lot of the larger, larger tenants, and everyone talking good about the, the Fabege employees. That's very, very nice to hear. We have always to be available, accessible, and be solution-oriented. In my, my view, we are that, and that's what I hear, so it's very good. We have to secure value creation in ongoing projects. We have to analyze value creation in our land bank, and to be very, exact about that going forward, that both in the commercial and the residential land bank. We have to continue to be active in the financing markets, which started well already first day in January, so that looks good.
As a company, we always have to search for opportunities, and we are searching for opportunities to build a company and not to do a single transaction. With that, I conclude our presentation, and maybe you have some questions for us, Albin.
We switch.
Yeah. You were so shocked about the presentation, so everything.
Thank you very much for that, Bent. And also, my name is Albin Sandberg. I'm representing SB1 Markets as a sell-side analyst, and I will be moderating this Q&A, and all of you will have the opportunity to ask questions as well. So I wanted to start with you, Bent. I mean, obviously, you provided us and the market with an update a few weeks before Christmas about your first thinking and so on. And now you've been through a Q4, you know, results, and I just wonder if there's anything that has come across your mind that either better or worse with the company compared that you thought initially. I mean, you were obviously on the board before. And maybe also, you're Norwegian, and now you're coming to Sweden.
Any cultural differences that you have encountered so far?
Definitely some cultural differences it is, but it's on the good side. Yeah, you see Stockholm as a city is much more vibrant. It's much more happening here. You see all the-- also in the papers, you see on the stock exchange, things are happening. You are taking all the opportunities, and that's something we also have to grab in this market that we are right now. On the very, very positive side is to be around meeting all of our employees, see how they are burning for Fabege, really want Fabege to do well. That's important for us. They are the one that always meet the customers first. So that's a good sign.
On the negative side, we have some vacant space, and I've been around visiting most of the vacant spaces. I can't believe that we don't have tenants for them. So they're very nice, superb locations. So that's what we have to achieve going forward.
Yeah. Yeah. Now, obviously, the numbers that we're seeing that you're reporting today, on the one hand, positive net letting, on the other hand, a little bit higher vacancy, which I understand is a bit of a mix. And you're also saying that key focus is to reduce these kind of vacancies. But from a broader market perspective in this cycle where we are now, do you think that it the same as previous cycles? So once we get the economy running, demand should pick up, or is there anything else because of work from home habits, AI, and so forth, that would sort of impact this, let's say, potential recovery differently than what we've used in the past? What do you see?
I'm not sure if it's that much, actually, but now the vacancy in total in greater Stockholm is quite high, so that's why it will take a little bit longer time. But if you look at the pipeline, look at the leases being out there, the competition, I think the pipeline is growing in the two months I've been on board. So that's positive. What kind of tenants are growing? You see within the defense industry, you see within municipalities, tenant or linked tenant, they are growing. You see some tech investors are growing. More or less, I think you take some more opportunities in Sweden than I saw in my time in Norway at that time.
So I think more is happening here, and this is more or less the capital of Scandinavia. Someone is talking about talking about Copenhagen, but I think more will happen here. So I quite positive about that. When it comes to all the other things you are mentioning, and I hear that I hear that all the time. Yeah, yeah, all talents. I mean, if you need talent, you have to be in CBD. I don't think it's like that. I've been in my company now, in Fabege. Talented people all over, but maybe in my view, we are more or less in the center. It's very nearby. Nice locations, and I think what you are searching as a young employee today is you want to be where things happen.
You want to be in the office, that you can be creative, that you can meet your old, your older colleagues. You want to grow within the company. You want to be motivated, and that's up to us as landlords. Are the premises good enough? And if I hear someone: "No, no, I have to stay home to be efficient," okay, so then you really have to move because, yeah, that's a landlord's responsibility, to give you the right location, give you the right premises.
Yeah. And the positive net letting that you managed now in Q4, can you say anything about, were these negotiations that had been going on for a long time that finally made it, and also, you know, given that the high vacancy rate we're seeing in the Stockholm office market, do you need to offer extra rental rebates or something like that in order to sign these leases?
It's on both sides, actually. As I said, this time, it was no major leases, so they don't. The leases we took now are not being going on for so long time. But we had had ambitions of higher numbers, but someone came in early January instead of this. And but it can be both ways. So this time, it was not, that was not the reason. On the other side, the lease, the period to conclude the leases are getting longer and longer.
Mm-hmm.
This is much longer than I'm used to, but still, I see they are getting concluded. We listen about all possible leases in the media, two or two years before they are really concluded, on the larger ones. So, things happening in the market, quite positive, but as I said now during the presentation, the signs in the real numbers are there for real, but it's not a lot of them. It's only SEK 36 million in total in positive net lease. So if it really recovers, should be much higher. And definitely we don't have any new major new leases during the whole year, and that we have to step up the gas.
I know that in the past, you've referred to an annual net letting target. I don't know if that's still valid or if you have one, what would that be for 2026?
It's SEK 50 million in net lease. We need that, and we have some extras in new leases.
Okay.
In the management portfolio, it's +SEK 50 million.
Yeah. And you were referring to your tenant list, saying you were very happy with that, and still there are some that account for a little bit more. Are there any specific one that you are already now working with and so on in order to make sure that they stay or anything that we should watch out for here in the near term?
We are always working with our tenants. So, we try to keep all of them. We try to have them growth, and if they don't want to grow, or they may be, as Sweden have been down in a little downturn, in generally, they have to adapt, they have to adapt their business to the reality.
Mm.
If they can't increase the prices, they have to look on the cost side, and if it's possible, they, among other things, they also try to reduce some of the space. So we think we have high-quality tenants, and we're working with them every day, 24 hours a day, and that's our main priority as a landlord.
Yeah, out of these, let's say 14% of vacancy that you have now, what would you say is a normal level for vacancy in Fabege's portfolio, you know, and across the cycle level?
Across the cycle, it's always difficult to be 100%, but we should be high in the 90%s, actually.
Mm-hmm.
Mid-90%s, 95% maybe.
Yeah, yeah.
That's a goal, and it's absolutely reachable.
Yeah. Do you want to say any target year for that number?
I know in my head, it's only one year ahead, but, they have to be a little bit realistic. So, we need some time, and as I said, to conclude a lease takes some time.
Yeah.
For them to move in, it also takes time. So the larger tenants, they are planning five to 10 years ahead.
Mm-hmm.
So, I think. Bear that in mind.
Are you in a situation now where some of these vacancies are close to structural, you believe, that you're looking into alternative use for some of these assets that you have?
Not yet, but if you think we only have pure office, then there can be some alternative alternatives. But within the education sector, within the health sector, et cetera, things are growing.
Yeah. And I also wonder a little bit about, you know, your potential to start new projects. Obviously, you're very much focused on getting the vacancy numbers down. And you have your balance sheet, where I guess your LTV is well below target, but you still have a debt ratio that is a little bit high. So, how do you envision the development CapEx going forward here, 2026, specifically, maybe?
As we went through some of the projects, larger projects we have now, and I think the CapEx for 2026 would be around SEK 2 billion. But it's a little bit on the way to go down. But some of the CapEx are also for the residential, and that's more or less a sale, so that would end in a future sale. So w hen you see the result from the residential, the cash flow is much better, of course, when it comes to that. But going forward, to if you are a potential tenant, we always have space. We always have potential projects. We're talking about the portfolio of 150,000 square meters that now running on shorter leases. That's also potential projects going forward, but in the meantime, they run on shorter lease lengths, et cetera, so.
So a new potential commercial project start this year, 2026, that would require a tenant in place, would you say? Or could you imagine starting anything on speculative grounds?
We can start on speculative grounds. The balance sheet, we are not worried about that, but we like to have tenants in place before we start, any larger, at least.
Yeah, yeah.
Yeah.
Then, on the property valuation side, was negative in Q3, was negative now again in Q4. If you just could clarify a little bit what was happening, you know, in your own assumption and maybe in discussion with the valuers, anything that struck your mind, in one way or another, delta-wise? I'm just wondering what happened that needed you to take down values yet again in Q4.
Yeah, I-
A nd also before, if-- Are we reaching the real trough here now?
Uh, I-
Do you think we can see the numbers in red, sorry, in black for 2026?
I hope so. But, it also depends on what's happening on the market. And specifically in this quarter, the expected indexation or inflation for next year was taken down by the valuers from 2% to 1.5%, so that has a negative impact. We also saw increasing yields in the suburb locations. Still, you know, coming from the deal Vasakronan did, and there has not been any other deals in this kind of suburb location, so that has had maybe too much of an impact, I believe.
And then we have, because, the land allocation, the agreement with Huddinge, regarding the land allocation in Flemingsberg, was terminated, by the year-end, which made us take down the values for, you can say, overvalue, extra value that we had allocated to those, building rights, that we don't-- we are not at least sure that we will have them, anymore. But as Bent said, also, there are ongoing discussions with Huddinge, so that might change in the coming months. So I think no major changes, but, you know, small changes that had this impact.
Mm-hmm. And just to be clear, the 1.5% indexation, that's for 2026?
Correct.
Yeah, exactly.
Yes, and then onwards-
Yeah, yeah
... it's, it's still 2%.
Also, I mean, obviously, the financing market continues to be strong, is my feel. As a CFO, I guess you can confirm that. Your interest rate duration is a little bit at the low end, in my view, at least. Are you happy with it, or any plans to extend it? What would it mean for your average cost of funds?
I mean, yes, we are, as it is right now, we are quite happy with it. But of course, we are monitoring long-term interest rates and the levels of them in order to be ready to act when we find it more favorable than it is right now. We have some older swaps that will mature during this year, also next year, that will increase rents, increase interest rates costs going forward. But we also see when we are renegotiating both banks and refinancing bonds this year, margins are substantially lower today than they were when these were signed before, approximately, say, three to four years ago.
So there are ups and downs. I'm quite confident about more or less sideways development of the average interest rate this year.
Okay. Compared to this, outgoing rate as of Q4?
Yeah.
Yeah?
Yeah.
That's clear. And I think the discussion about the share buybacks is a topic for a lot of Swedish property companies trading at a discount to NAV. You have carried out buybacks in the past. And my understanding is that you have referred maybe a little bit to your underlying cash flow and the debt ratio in order not to continue buybacks. Is that correct understanding, and is that still valid, or are you considering buybacks maybe ahead of investment starts?
We are always considering everything, but when it comes to the capital structure, that's the main priority. We have also the dividend policy, more or less as a base for how the board is thinking these days.
Åsa and I, we are not deciding this, but it's a discussion in the board how should the capital structure be, and it's part of that discussion, actually.
Okay, yeah.
Mm.
You don't rule out share buybacks for 2026?
We never rule out anything, actually.
Oh.
But, as I said, the priority is the dividend policy we have in place, and after that, we look at the cash flow and the key metrics for the company.
Yeah. And then, I have one last question before I hand over to the telephone conference, and also questions on the web. But, now, Bent, you obviously have a bit of connection, I must say, with the main owner in Fabege. You used to be the head of, or CEO of Norwegian Property. Would a merger between Fabege and Norwegian Property make sense in your view?
Never say never. I'm not spending too much time on that, actually. But, in my view, at least the two of us, we are synergies. We don't need two CFOs or two CEOs. On the other side, we have a better financing here in Sweden, so that's also a synergy. But, beyond that, I'm not sure about the synergies.
No.
No.
Great. Thank you very much. Okay, and with that, we open up for the telephone conference, and you can also send questions via online, and we will see if we can take them here. But operator, please go ahead.
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 John Vuong from Van Lanschot Kempen. Please go ahead.
Hi. Good morning. Thank you for taking my questions. You mentioned that lettings in Q4 were skewed to SMEs. Looking at your leasing discussions, are they also skewed the same way, and do you expect new lettings to gain momentum over 2026?
It was a little bit difficult to hear, actually.
Yes.
Can you please repeat the question? The line was not good here, actually. Sorry.
Oh, yeah. Just, just on your leasing discussions, do you see the same skew towards small and medium-sized companies?
Going forward, I think that's more or less the bread and butter for us in Fabege. As I mentioned, we have 670 customers slash tenants in our portfolio. And we are always looking for smaller and larger tenants. That's part of our portfolio. We have some very large tenants. The top 10 stands for 30%, and they take more time, take longer time, but they are also in the market. There are companies growing. There are different different segments growing. So we have this mix. It's actually not a clear view what's happening forward. So if you just look at Solna, Solna Business Park, in that area, we had a large contract with Saab.
Our neighbor had a large contract with Svenska kraftnät, and the social government has also moved to this area. Large tenants. So large tenants are in the market, and unfortunately, we didn't have too much succeed in 2025, but that's top of the agenda going forward.
Okay, clear. And just how well is your current vacancy position to capture this demand? Do you still need to spend some CapEx to reposition these assets?
It's very different, but a lot of the vacancies are very, very nice. So more or less the CapEx will be maybe to do something at the entrance. Just if it's a single-tenant building converting to a multi-tenant, we have to look a little bit to the entrance for the whole building to be for a multi-tenant building. But we have the examples at Stjärntorget 1, where Telia is the main tenant. Approximately 8,000-300 square meters are now rented out to two new tenants in that building during 2025. So things are moving.
Okay, clear. Thank you. And so just on the near-term project opportunities, what returns do you see, and how does this stack up against your cost of capital?
Yeah, and the cost of capital are around 10% is the cost of capital. And as you see, we haven't really succeeded the last years, but, as I try to summarize, to really look into the value creation in the land bank and in the projects, it's a top priority.
Okay. Thank you.
The next question comes from Jan Ihrfelt, from Kepler Cheuvreux. Please go ahead.
Okay, thanks. I have a couple of questions here. The first one regards if you look at the central administration on a year basis, it's up 14%. Are there any extraordinary costs in that increase?
Sorry, Jan, it seems to be a very bad line here. I couldn't understand your question.
I think it's the central administration.
Central-
I'll try to repeat and maybe take it a little bit slower. Your, your, central administration costs are up 14% year-on-year for the full year.
Yeah.
Are there any costs that are there thought to be of extraordinary character?
Sorry, last year, in 2024, we didn't make any provision for the profit-sharing foundation in Fabege. And this year there is a provision for that, and that pretty much explains the whole difference.
Okay. And then the question on the NOI margin, you have a target of 75%. How comfortable are you of reaching that already in 2026?
It's definitely a goal to reach it in 2026. I think if we are a little bit more successful in the letting business, adding more rental income to the P&L, we will soon be there. So it's more related to income side than cost side, actually.
Okay. And then maybe if you could comment or make any kind of guidance for your associated companies, i.e., the Arenabolaget for 2026. Do you have any figure there?
Except for the write-down of SEK 63 million that we took in 2025, this is in line with what we have communicated before, and as it looks now, it will be the same for 2026. So roughly around -SEK 70 million.
Okay. Then a question on, maybe, clarification. Your net letting target for this year, was it SEK 50 million in the management portfolio?
For 2026, Yes.
Yes. Okay. And then a final question from my side is, if you look at the chart with the rental income coming quarters, and if you zoom in to the first quarter, that figure has increased SEK 10 million from the Q3 report. Is that the indexation effect of the SEK 10 million?
In indexation is very low. It's an impact from a positive net lettings that has that.
Okay, so hardly any increase from the, from the indexation?
I think indexation is roughly in total SEK 25 million over 2026, the full year. So of course it has a little impact.
Okay. What did you say? SEK 25 million?
Yes.
Okay. Thanks for taking my questions.
The next question comes from Lars Norrby, from SEB. Please go again.
Okay, thank you. Hope you hear my line better. First, a simple question. The headline of the CEO statement is the same as in the Q3 report, I note. Does this mean that your view on the market is very much the same, or is it looking slightly better now, or the opposite?
I haven't concentrated about the former CEO's view there. This is my view, and it's the view as of today, and I'm quite positive, actually. But, you know, it's better to try to show you some results before we are too, too optimistic. But, it looks better and better in my view.
Then my second and final question. You did not do many transactions during 2025, if I remember correctly, just one centrally located property. If you would sell something in 2026, would you focus on selling something centrally located or rather in Solna, Arenastaden? And for that matter, are you looking at divesting residential building rights?
Yeah, we are always looking at opportunities, but in my view, with the balance sheet we have, we do transactions when the market are favorable for us. I don't see the markets very favorable to sell assets these days, but that can change quite fast. And we also see the transaction market in the CBD being better, even though it's a low volume. So, but we are looking into that. When it comes to residentials, we will try to develop the residentials, at least in our core areas ourselves. We still own some residential land banks outside Stockholm, and that could be possible sales going forward, but nothing is concluded as of today.
And we-
Thank you.
Just to complement, we did some. We sold some building rights for SEK 200 million on the western part of Stockholm City, Västra Kungsholmen. And those will be vacated probably in April or May, in 2026. So the agreement was signed. They still remain in our balance, but they will be vacated in the spring.
Okay, thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from James Cattell from Green Street. Please go ahead.
Good morning. When it comes to your land rights and the decision to sell or develop your land rights, what's the required rate of return that you would need to develop a piece of land rather than selling it?
That, that's also a little bit different. If it's in the core area, then we are more—we don't have that high development margin. But it, it's above other. But we try to achieve 15%. It's difficult these days, to be very honest. And when it comes to residentials, as I mentioned, they are a little bit higher.
That figure 15%, is that a levered or unlevered return?
Leveraged return. Equity return.
Okay, thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Yeah. So we have a few questions left. I think we can make it within the eleven. From Fredrik Stensved, ABG, one question is: "Are the two remaining floors in Haga Norra leased now, even though tenants have not yet moved in? If so, when are tenants moving in?
There is one tenant moving in April this year, and there is still some remaining space to be let.
Yeah. And the other question refers to the JV, Fredrik, unless you got the question before, answer before, please reach out to management, but I think you guide it for SEK 70 million for this year. And then from Mihail Tonchev, from Kempen Investment Management: "Would you consider rationalizing your location and perhaps tightening the portfolio segments via capital recycling, or are you fully convinced of all your location for the longer term?
We are always looking into all kind of opportunities, but for the time being, nothing is decided with that. And, I've been on board for two months, feels a little bit early to conclude on all those kind of questions, really.
I think the final questions has been answered, so I think we're good there.
Okay. Then we close the call, and thank you for participating. We look forward to the next quarter, and see you back in three months.
Thank you.