Hello and welcome to the Fabege AB Q4 Report 2020. P articipants will be in listen-mode only, and afterwards there'll be a question- and- answer session. Today I'm pleased to present CEO Stefan Dahlbo and CFO Åsa Bergström. Please go ahead with your meeting.
Thanks, Åsa. A little bit disappointing figure this last year was the net letting. It came in at minus SEK 45 million, but it looked poor. It is poor, but in reality it's a little bit better than it looks because large terminations last year were Telia, for example, Telia in Arenastaden and DLA in Bocken 39. Telia had an option in its agreement to vacate approximately 6,000 square meters, which they chose to exercise at the end of last year.
We already, during the beginning of this year, have signed a new agreement for approximately 2/3 of the area at better rates than before. The same applies in Bocken, where we last year, early last year, announced that DLA will move, and about two weeks ago we announced that we now have a new tenant. It's a tenant at better rates, and it will be good for the whole valuation of the property. Taking this together, this means that we will have a positive result on these two terminations as early as 2022, but it looks disappointing. What's also true is that we had said it before, but what happened last year is that it takes longer time in negotiations with new tenants. That's quite natural during a situation like that.
We still have a lot of, especially true when talking about the large projects and the large project lets. We have, as we said before, good discussions. There are no discussions that are closed, but they take longer time to get the final decision. In renegotiations last year, it ended up with approximately 20%+ , which was a bit higher than we expected at the start of the year. The number of renegotiations was a little bit lower due to the fact that several or some renegotiations were postponed. We're quite optimistic even for this year when talking about the renegotiations and the results. Even though it's impossible to say what will happen in 2021, I think we all can agree on that. As if how long will the pandemic last, how we will get the vaccines, and so on. We have started this year strong.
And so next slide, please. Slide number six.
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Quality, there seems to be quite a technical issue at the moment. So if you could please just give us a moment, we'll try and get back to you as quickly as possible.
The economic development was, of course, largely governed by the pandemic and its progress. But if we had, we said a year ago, very few of us had probably guessed that it would be, if we knew what would happen, could be so strong in the economy, as it has shown to be. Despite the year's different challenges, we managed to deliver good net operating income, a strong surplus ratio, value growth in the portfolio, and we continue to have a very strong financial position. Our projects are progressing, and a few acquisitions have been completed. I will hand over to Åsa, who will go through the result in more detail. Please go ahead, Åsa.
Thank you, Stefan. Yes, it has been an unusual year, but still, as you said, with strong figures coming from Fabege. Rental income came in at SEK 2.8 billion, slightly lower than the previous year. The divestments of Trängkåren and Pelaren resulted in decreased rental income during the period of SEK 188 million. In an identical portfolio, income increased by 5%. Discounts and provisions due to the pandemic meant a net decrease in rental income of SEK 46 million, but this was offset by completed projects, higher rental levels, and index adjustments, which all contributed positively. The warm winter, with very little snow in early 2020, meant that operating expenses were low during the first quarter. The low occupancy rate in offices, that is to say that many of our tenants, to a large extent, have worked from home, has also contributed to lower operating expenses.
The surplus ratio came in at 75%, something that I think we can be very satisfied with. Interest expenses were in line with last year in absolute terms. Seen over the full year, the average interest rate went up at first before falling back to 1.77% at year-end. Earnings in associated companies amounted to minus SEK 53 million and mainly related to capital contributions to Arenab olaget during the period. To summarize, we reported a profit from property management of just under SEK 1.5 billion. Before year-end, approximately 30% of the portfolio was externally valued. A large part of the property portfolio was externally valued several times during the year. The uncertainty that existed during the spring is gone, and the value-responsive view of the market trend meant that the portfolio has increased in value by SEK 2.7 billion in total, or 3.7% during the year.
The yield requirement fell by nine basis points during the year to an average of 3.88% at year-end. We estimate that the rental levels in the valuations are in line with entered into the rental agreements. The deficit value in the derivatives portfolio decreased again during the fourth quarter, but amounted to minus SEK 229 million for the full year. Finally, the tax expense amounted to minus SEK 850 million and mostly related to deferred tax. Please turn to slide key ratios. Reported equity increased by six crowns per share to 127 crowns per share, and the long-term net asset value, EPRA NRV, amounted to 155 crowns per share. The surplus ratio is in line with our long-term goal. We have a good margin when it comes to the interest coverage ratio. Only the debt ratio lies slightly over the target level of 13%.
As you can see in the key ratios here, we have a strong balance sheet with a high equity asset ratio and low loan-to-value ratio. Now, please turn to slide financing. In relation to our banks, it's been calm and stable during the whole year. We have refinanced everything that we planned to refinance. In the capital market, the year was more characterized as a roller coaster ride. After the complete stop in the capital market in March, a gradual return to more normal conditions began early in the summer. After a dip late in the autumn, the capital market now in early 2021 is again back in earnest and at the levels we saw one year ago before the pandemic started. We see strong demand both for our commercial paper and for bonds.
Last week, we were out in the capital market with the transaction of SEK 700 million in total in two tranches of five and six years, respectively. In light of the interest that existed, we could have issued three times as much. During 2021, bonds matured of SEK 700 million in total, which we intend to refinance through new issues. On the bank side, we have no maturities before June 2022. During the fourth quarter, we completed the refinancing of bank loans, and we also finished the process of changing over the last non-green loans to green loans. Now, 100% of Fabege's financing is green, a real milestone which we are incredibly proud of. This is a development which was made possible by our sustainability work, which, among other things, means environmentally certified properties and close cooperation with our financiers. It is really great that we succeeded in achieving this target.
During the year, we repurchased almost 4.6 million shares in Fabege at good levels. We will keep these treasury shares until further notice. The past year has not upset Fabege's financial stability. We feel secure, and with our strong balance sheet and financial muscles, we can take advantage of opportunities and also manage more challenging times. Now, back to Stefan.
Thanks, Åsa. A little bit disappointing figure last year was the net letting. It came in at minus SEK 45 million. But it looks poor. It is poor, but in reality, it's a little bit better than it looks because large terminations last year were Telia, for example, Telia in Arenastaden and DLA in Bocken 39. Telia had an option in its agreement to vacate approximately 6,000 square meters, which they chose to exercise at the end of last year. We already, during the beginning of this year, already have signed a new agreement for approximately 2/3 of the area at better rates than before. The same applies in Bocken, where we last year, early last year, announced that DLA will move. About two weeks ago, we announced that we now have a new tenant. It's a tenant at better rates, and it will be a good valuation of property.
Taking this together, this means that we will have a positive result from these two terminations as of 2022, but it looks disappointing. We had said it before, but what's happened last year is that it takes longer time in negotiations with new tenants. That's quite natural during a situation like that. We still have a lot of, especially when talking about large projects and the large project lets. We have, as we said before, good discussions. There are no discussions that are closed, but they take longer time to get the final decision. In renegotiations last year, it ended up with approximately 20%+, which was a bit higher than we expected at the start of the year. The number of renegotiations was a little bit lower due to the fact that several or some renegotiations were postponed. But we're quite optimistic even this year.
Focus for 2021 will be to decrease the vacancy rate, and we have high internal targets both for the property management portfolio and for new lettings in new project portfolios, new projects. Next slide, please. This slide is one of the explanations of why we think that we stand so strong. Our 25 largest customers account for approximately 42% of our rentals. We were affected by very few bankruptcies among, I think it was three, small ones among our customers during 2020, despite the pandemic and all that followed from it. As you know, many of those customers are very stable, among the strongest and the largest Swedish companies. Next slide, please. Slide number nine. Nobody knows how the future, exactly how the future for offices will look. One thing we do know is that there is no standard solution that suits everyone.
Last year, we put extra focus on meeting and listening to our customers' needs. Our goal is always to be a good partner and to develop together with our customers. We believe that staff and people will be in more focus after this pandemic is over, hopefully. Staff will impose higher demands on the office of the future in relation to health, security, service, and accessibility. These are not really new trends, but with a lot of other things that have been strengthened by the situation. Our work away from work concept, or WAW, as we call it in Sweden, helps our customers' staff with accessibility to good offices. They can easily book a workspace with a mobile phone in any of our hubs in order to facilitate everyday life if they, for example, don't want to go back to Arenastaden after a meeting in the city.
In this case, they can instead just book a place in our hub in the city, easily and conveniently. Now, we're also planning a new hub in Flemingsberg, so that would be our fourth. We have connected up all of our properties in a network, which means that we can retrieve a lot of data about our properties. This means that we will be able to repair an elevator before it breaks down or adjust the heating or cooling depending on how the premises are used. The possibilities, in principle, are endless. This will be also in the future. It's one part of our digitization work that we will have focus on for the next years. Next slide, please. The activity in the transaction market has been very high during 2020, but mainly within logistics, residential, and so-called public use properties or social infrastructure.
Quite a few transactions were carried out in the office segment in Stockholm, but those that were completed were at very good levels. For example, AFA Fastigheter sold Fyrkanten 11 on Sveavägen, close to Hötorget and close to Bocken 39 for approximately SEK 130,000 per square metre. But there is a lot to do with the development on that property. SEB Trygg Liv sold another property, Guldfisken 31 at Nybrogatan in the city of Stockholm for approximately SEK 105,000 per square metre. Both those properties were also in principle vacant without any tenants and a lot, as we said, a lot to invest for the future. I can also say that we were in the discussion for both those properties, but I think they were a little bit too high. They were a little bit too good priced.
There are no very stressed sellers in the market, in the office market in Stockholm during the year. It would rather have been still rather a seller's market. Next slide, please. During 2020, we externally, as Åsa said, we externally valued our properties to a very large extent. We normally externally valued 25% of the portfolio per quarter in a rolling schedule. This year, we externally valued approximately 60% in Q2, 50% in Q3, and 30% or 25%, 30% in Q4. This means that we are very comfortable with the valuation that we have today. Next slide, please. Slide number 12. Investments during the year came in at approximately SEK 1.9 billion, which is under our long-term goal of approximately SEK 2.5 billion per year.
We will not reach SEK 2.5 billion in 2021 either, but as we said before, during a four-year period from now, I think we will reach SEK 10 billion. That's in the commercial market, the commercial portfolio. Next slide. Here you can see four of our projects, which we know will start in 2021, 2022, and it's a total investment of approximately SEK 1 billion. It's Bocken 39, which we talked about before. It's Glädjen 12. It's also a refurbishment project at Kungsholmen. We have also Electrolux Professional. We have one of the lower part of it. We have a parking house in Arenastaden. It's a new production. In Flemingsberg, we have the first project, which is the Royal Opera and the Royal Dramatic Theatre. It will start 2022.
If we look at our building rights portfolio, I think, as you know, we have approximately a little bit more than 1 million square meters. I think about 600,000 is commercial. If we look at the portfolio, I think it's important also to stress that we have about almost 500,000 square meters, as we said, of residential, and it's equal to approximately 8,000 apartments. Half of that is in Solna, and as you can see, half of that is in Flemingsberg. Over the next few years, we will devote more time and energy to also ensure the value creation of all those residential building rights that we have. The building rights have often been created in our urban development work, which also means that we have low input values. Next slide, please.
Our letting team is working right now with some very exciting projects, both in Flemingsberg and in Solna, especially in Flemingsberg and Solna. We have plenty of potential. Here you can see four of the potential projects in Solna, which we can start already in 2022. So they are working right now to find tenants for those projects. As you know, we don't like to start any large ones without speculation. But I think we have a very excellent and interesting building portfolio.
Thank you. If you wish to ask an audio question, you may press zero one on your keypad. If you wish to record your question, you may press zero two to cancel. Once again, please press zero one on your telephone keypad if you wish to ask an audio question. There will be a brief pause while we wait for questions to be registered.
Any questions? I think we have got one by mail, I think.
We have one question here. In which sub-market have you observed the largest share of tenants breaking their lease? And could you provide any color on where those tenants are relocating?
We haven't had any breaking in advance, any leases. The ones that are moving when the contracts are ending is we have some in the cities, t hey're moving into maybe some other building in the city. We have some in Solna Business Park, where we have some vacancy rate going up a little bit. Some of them are reducing the area, the space. The one we're talking about when we talk about Telia is that they had an option with an expire for one of the houses that there were more for expansion for them when they will not use it. So they have to pay us according to the contract. Then we can find other tenants for that house. We also tell you about 2/3 of that house is already filled with new contracts. But no breaking in advance any contracts.
There's also a second question. Will you carry on selling the residential rights to developers, or do you have any intention to build and hold?
It depends on how we think we will add or build those values for our shareholders. In the past, we have been selling. We have right now three joint ventures, and we can also develop some of them ourselves. But we will take an active decision for each project and see how we can create value best in each situation.
And then we have a third question here. I was just wondering if you could comment on the lease maturity structure, please. You have 40% of your leases expiring in the next two years. What do you estimate the rent reversion to be on these leases? The expectation for 2021 is we have a target, at least 10% uplift on renegotiated contracts in 2021. The contracts that we are renegotiating during this year, they are normally for somewhere between three and five years back since we previously negotiated them. So we still see an opportunity to lift rental levels in renegotiations.
Just as a quick reminder, if you wish to ask an audio question, please press zero one on your telephone keypad. There appears to be no audio questions, so I will hand back to the speakers for any other remarks.
Thank you very much for joining us this afternoon. If you have any questions, please give us a call or send us a mail. We look forward to meeting you soon, hopefully also in real life during the year. Thanks for joining us, and be careful out there .
This now concludes. Thank you for attending with me now during the.