Welcome to our presentation of the third quarter. The quarter can be summed up as a strong quarter in many respects. We had strong net lettings and positive changes in value. The three main pieces of the news were that after almost 600 days, we reopened the society, which we all have longed for. We also completed our second major letting in Flemingsberg with Alfa Laval of 17,000 sq m. After the quarter, in October, we presented our strategic acquisition of SHH in order to take advantage of the value in our residential development rights. Now I will hand over to Åsa, who will present the results in more detail.
Thank you, Stefan. We have now seen a quarter with high activity and improved numbers. Rental income came in at SEK 2.1 billion, slightly higher than the previous year. In an identical portfolio, income increased by 1%. Vacations ahead of projects and granted rebates were offset by occupations in completed project properties. Increased operating expenses were due to a more normal winter this year in terms of cost for heating and snow clearance. The surplus ratio, like the previous year, still came in at 75%. Central administration includes non-recurring costs of approximately SEK 11 million relating to the move and furnishing of our new headquarters here in Solna. We are so happy to be back in our fantastic new office. Interest expenses increased slightly compared to the previous year, which was due to an increased loan volume.
The average interest rate fell slightly during the period to 1.75% at the end of the quarter. Earnings in associated companies amounted to minus SEK 20 million and mainly related to capital contributions to Arenabolaget during this period. We therefore reported profits from property management of SEK 1.1 billion. We saw continued value growth.
Total changes in value amounted to SEK 2.4 billion, of which SEK 722 million related to ongoing projects and upward revaluation of development rights. The changes in value in the investment portfolio were related approximately equally to cash flows and slightly lower yield requirements. The yield requirements fell by another 2 points during the quarter to 3.84%, 3.88% at year-end. The deficit value in the derivatives portfolio decreased further during the quarter, in total SEK 392 million during the first nine months. Finally, the tax expense amounted to minus SEK 847 million and related to deferred tax only.
Please turn to next page. Reported equity increased by SEK 7 per share to SEK 134 per share, and the long-term net asset value or the EPRA NRV amounted to SEK 164 per share. Equity has been reduced by the second dividend of the year, SEK 580 million, which was paid out in early October. The only key ratio that does not currently meet our target level is the debt ratio, which amounted to 14%. Otherwise, the key ratios are in line with our goals and expectations. Our balance sheet is still very strong with high quality assets ratio and low loan-to-value ratio. Please turn to slide Financing. Both the capital markets and banks have been there for us during the period. We have continued to be active in the capital market through several bond issues and refinancing of commercial paper. We have also refinanced bank loans according to plan.
We have taken the opportunity to fix the interest rate through new long-term interest rate swaps. The longest swap is for 11 years at an interest rate of just under 72 basis points. Now 78% of the loan portfolio is fixed. No further buybacks were carried out during the quarter. In total, we hold almost 8.8 million treasury shares. The shares have been repurchased at an average price of SEK 120.26. We will retain these treasury shares until further notice. Back to Stefan again.
Thank you, Åsa, and please go to slide five. We had strong net lettings for the entire period of approximately SEK 130 million, where the two major contracts are with Alfa Laval and Convendum, and they contributed for approximately over SEK 100 million. If we exclude our large project lettings, we also have reported positive net lettings in the investment property portfolio of slightly more than SEK 20 million. It's very nice to see that the lettings in the investment property portfolio, not least in the city, have gained momentum again. We had strong demand at viewings, and there was great interest in the market. The positive trend has also continued early in the fourth quarter. We do not see any downward price pressure, but the leases we are signing are at very good levels.
We don't see any new record rents, but the average rents in our portfolio are increasing. After the second quarter, I was optimistic about the third quarter for the net lettings for the third quarter. We met my expectations with net lettings of more than SEK 74 million in the quarter. When talking about the renegotiations, we came in at about 12%, and that's a little bit better than our expectations, which are approximately 10%. Please go to slide six. In the quarter, we completed our largest, and even the largest in Sweden office letting so far in 2021, when Alfa Laval opted to sign a 22-year lease contract in Flemingsberg for approximately 17,000 sq m.
I'm very satisfied with an annual rent of SEK 45 million and hopeful that rent in the area will increase in line with the development that we have saw in Arenastaden where we signed the contract with Vattenfall almost 15 years ago. The letting also includes Alfa Laval's innovation center, which will have many international visitors. That also will generate a positive impact for the future hotels and the service industry in the area. Please go to slide seven. When talking about the occupancy rate, I'm not that pleased. We have a rate coming in at 10%. I think it's a little bit too high, but it's also something we will focus on in the coming quarters. We have some opportunities there. One reason for the increased vacancy rate or vacancy level is that Telia decided to prematurely leave three floors in Arenastaden Nationalarenan 8.
These floors are already let to new customers, and they are let on much better terms. For this quarter, they impacted the occupancy rate negatively. I am not worried that we will have any structural vacancies in Nöten or in any other of our properties. We have some to work with. We are often asked about how demand for offices will be affected in the post-pandemic era. The honest, unfortunately, boring answer is that we do not know, and we do not have a concrete answer today. What we have been even more convinced about, however, after dialogue with our customers, is that all companies will do things differently according to the conditions that best suit their business and corporate culture. There will not be any standard solutions or templates that everyone can proceed from.
So far, we have customers that have both opted to reduce and to increase their floor space. We have also had customers that revoke their terminations but are still in a wait-and-see attitude and a learning process for the majority of the customers. I'm also convinced that our good locations in modern offices will be an advantage and that offices will be needed in the future. Please go to slide number eight. We continue to have stable customers with very long lease agreements. We are now carrying out a new customer satisfaction index survey to take the pulse of our customers. We have been in very close contact with all of them during the last two years, especially during the COVID-19 situation. I think that's also one of our strengths, to be close to our tenants.
Our property management organization does a very good job here, maintaining and building relationships with the tenants. Please, the next slide. The project portfolio is progressing well according to plan. As we mentioned on a number of occasions, we will not reach our investment target of SEK 2.5 billion for 2021. As we also have said many times, we think that the average in longer term will be more about SEK 2.5 billion. For this year, we will end up around SEK 2 billion as it looks today. The project portfolio accounted for approximately 33% of 1/3 of our value growth, which shows the value of a large and good project portfolio for building net asset value. Next slide, please. Slide 10. Here are the two projects in Flemingsberg that we have signed so far.
I'm sure that these two projects will be a game changer for the area, just like, as I said before, Vattenfall was in Arenastaden. Although the rents are slightly low in Flemingsberg, our initial values are low, which makes the calculations very attractive. Then the one up in the top of the picture is Alfa Laval, and in the bottom of the picture is Operan and Dramaten, which we are now starting to construct in the beginning of next year. Next slide, please. This one you have seen before, that we have approximately almost 800,000 sq m of commercial development rights, and approximately 20% of them have gained legal force. We continue to have a great potential to create value in these projects in the next few years. In the interim report, you can find a more detailed table. Slide 12, please.
In Haga Norra, we are finalizing the first phase and have also begun demolition work in order to start a phase that will involve approximately 28,000 sq m of offices and 400 apartments. In the first phase, what you can see are block six and block seven. Most of them are sold, the interest for buying apartments here in the area is very good. For the next phase, I think they can be ready for occupation in the fourth quarter at the end of 2024. We will come back to this and tell you much more during the next quarters. Slide 13, please. Here is a picture. Here you can see how it will look when the entire project is finished. The entire area will be a natural growth together with Arenastaden. Block one and block two is the office and commercial areas.
And block five, four, and three is apartments. Please go to the next slide 14. When talking about residential, early in October, we carried out and presented a strategic acquisition of SHH Bostad. The acquisition will strengthen our position as an urban developer in Greater Stockholm. Thanks to the SHH, it's difficult to say in English, expertise is in residential and local authority properties, we can be involved in the value creation for longer and run several different types of projects under our own management, which is a natural next step in our urban development strategy. We have previously collaborated with our new partners in a joint venture with approximately 270 homes which were built in Kista under the name Selfoss and with very good results. Our overall strategy with Stockholm focus, Sweden focus, will also be the basis for the residential and local authority properties.
SHH will continue to operate as a subsidiary with its own staff and management. Slide 15, please. SHH was founded in 2010 and has since then completed more than 40 real estate projects, which is equivalent to approximately 2,100 homes. They have their own production of 574 homes spread across even 11 projects. In addition to these, there are 18 development properties with development rights equivalent to just over 2,300 homes, including an old people's home and a school. Approximately two-thirds of the future development rights are located in Greater Stockholm, and these are in good additions to our own extensive portfolio of residential development rights. A few years ago, the housing market in Stockholm wobbled due to an oversupply of expensive apartments directed towards a narrow target group. SHH works with affordable housing and thereby reaches a larger customer group, which means a lower risk exposure.
On the next slide 16, you can see our residential development rights excluding to SHH. They are, as you probably know, a little bit more than 500,000 sq m, equivalent to approximately 8,000 homes. Most of these rights will be utilized a little bit further in the future, which means that SHH complements us very well, even when talking about the timetable. slide 17, please. As I mentioned, SHH complements us very well. The majority of our residential development rights are slightly more longer-term, as I said, than SHH in terms of the intended production start. Our portfolios match each other well, both in relation to implementation time and geographically. About two-thirds of SHH's future development rights are located, as we said, in Greater Stockholm. Together, our development rights constitute approximately a little bit more than 700 sq m, equivalent to more than 10,000 homes.
I'm really looking forward with confidence to develop these homes in our new structure. Now I will hand over to Åsa, who will briefly review our sustainability work. Please go ahead, Åsa.
Thank you again, Stefan. Please turn to next page. Sustainability is an ever more important factor. External interest in sustainability issues and Fabege's sustainability strategy is increasing. Not least, the new EU taxonomy will impose additional reporting requirements and will hopefully encourage further improvements of processes too. New in this slide is this year's result in GRESB, the international benchmark, where, like the previous year, we ended up with 93 points out of 100. A result that we are proud of. Many Swedish companies are in the top tier. We are encouraged to continue working for improvements. Please turn to next slide. In 2019, we set a goal that our property management should be climate neutral, net zero carbon emissions by 2030. That is Scope 1 and Scope 2. That carbon footprint in Scope 3, which is project operations, shall be halved.
Since 2020, we are measuring and following up with the ambition to gradually reduce our carbon footprint through various measures and innovations in our projects. It is an educational journey towards a very tough goal. Please turn page. We also have an ambition to contribute to the community around our city districts through various measures. This work has become even more important by the virtue of our investments in Flemingsberg. A number of engagements in Huddinge are therefore shown on the list here. For example, Läxhjälpen, where we sponsor preparation of homework for pupils in Annerstaskolan in Flemingsberg, with the aim that everyone should be eligible for high school. Another initiative is Talangakademin, which aims to provide internship and work experience to people who are far removed from the labor market. I think that's it.
Yeah.
We are open for questions.
Yes, please.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find your question has been answered before it is your turn to speak, you can dial zero two to cancel. Once again, that is zero one to ask a question or zero two if you need to cancel. There will be a brief pause now while we register your questions. Currently we have one question come forward. That is from the line of Jonathan Kownator at Goldman Sachs. Please go ahead. Your line is open.
Good morning. Thank you very much for taking my question. I just wanted to come back to the vacancy point and exactly understand. You're saying no structural vacancy, so what do you think will be the path of the recovery of that metric if it is at a depressed point in time currently? Thank you.
Thanks. First of all, I think, as I said, that we have already signed some contracts that will move in during the next years. We don't see the long-term structural vacancies there. We also have Bocken 39, for example, the big contract we signed with Convendum beginning of this year at Kungsgatan. That's also part of the vacancy rates, vacancies today, and they will move in during the next years. On the other hand, as we said, when we try to tell today that Nöten is coming up when Skatteverket is moving out next year. It was announced early 2019, but I think it's good to remember that that will be in the figures.
Yeah.
There are no long-term, especially in the city, when we have vacancies, we see good demand and good activity. They're a little bit more challenging in the business park, but that's no structural vacancies.
Is it fair to assume that over the next 18 months or so, vacancy should hover in the 90%, 92% or something along these lines? You're expecting a much faster recovery than this, given also the releases that you'll have as well?
What I'm saying is that the vacant spaces will change. We know now that some of them we will fill up next year, and some will, Nöten, for example, will come.
Can I perhaps just to clarify a bit, already you're obviously highlighting contracts that are signed and releases that are known already. If you take those into account, what would be the corresponding vacancy? Not assuming anything else happening, just what you know and what has already been announced on a pro forma basis.
Couldn't catch. Did you hear also?
I think the easiest way for you to get grip of it is to look at the graph that is published on page 12 in the report where we are not forecasting but where we are presenting rental income over the next four quarters.
Okay.
I think as Stefan said, we will have tenants moving in that will contribute to this, but we will also have tenants moving out. There is a dip in Q2 in 2022.
Yeah.
When the tax authorities are moving out.
Okay.
Yeah. I think that will probably help.
Okay. Effectively, if I read correctly that chart, that should improve it in Q4, you have this dip in Q2, which brings it actually back to a level comparable to Q1.
That's right. Yeah.
A level below Q3, and you can extrapolate that to the trends in terms of occupancy.
Yeah.
In general, obviously not taking into account further leasing.
That's right.
That you would do.
Yeah.
Okay. Cool.
Okay.
Very helpful. Thanks so much.
Thank you.
Bye.
We also had another question coming in by email relating to occupancy drop. Because there was a drop in Q3 from Q2 of 1% in the calculation, and it was mainly referring to that Telia actually vacated some of the areas in a property here in Arenastaden. That made the difference of 1% in the calculation.
We said in the Swedish presentation that Telia, when we signed the new contract, it was up about 50% from the rent levels.
Any further questions?
None so far. Once again, if there are any further questions on the phones, please dial zero on your telephone keypads now. No, there seems to be no further questions from the phones at this time.
Thank you very much for joining us this morning. If you have any question, please call us. Looking forward to see you.