Welcome to Neobo Q4 report 2022. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to CEO Ylva Sarby Westman. Please go ahead.
Thank you very much. Welcome everyone to Neobo's full year report presentation. My name is Ylva Sarby Westman, and I'm the CEO of the company since November last year. Neobo was created at the end of last year. At the starting point, we had a property portfolio from former Amasten with a property value of SEK 16.3 billion. Ahead of the spin-off from SBB, 89 properties with a value of SEK 5.2 billion were added, and 88 properties with a value of SEK 5.8 billion were divested from the entity. When Neobo was distributed to the shareholders in SBB at the end of December, we had 268 properties with a value of SEK 15.8 billion.
closing of those transactions took place on the last of December, which means that the full year result for 2022 is attributable to a somewhat different property portfolio than the one that we have today, with approximately two-thirds in the comparable portfolio of properties that we owned both in the beginning and at the end of last year. Having said that, I now would like to present the result for 2022. Rental income increased with 21% during the year, explained by a larger property portfolio, upgraded apartments, and rental increase. In the comparable portfolio of properties, rental income increased with 3.6%. Net operating income increased during the year to SEK 423 million, and in the comparable property portfolio, the NOI increased with 5.2% during the year.
Profit from property management increased by 10% to SEK 172 million, mainly explained by a larger property portfolio with higher NOI and also reduced central costs. Value changes in properties amounted minus SEK 2.2 billion, of which approximately half was unrealized value changes and the other half realized value changes. The unrealized value changes of minus SEK 1.2 billion refers to properties that are still in Neobo. This figure is not affected of the separation, while the realized value changes are attributable to both external divestments and the internal transactions in connection with the separation from SBB. In the Q4 valuation of the property portfolio, the values decreased with 2.9% to SEK 15.3 billion. The valuations are based on external valuation with an average yield requirement of 4.1%. For the full year, the value of the property portfolio decreased with 3.3%.
As you all know, there have been few transactions in the market at the end of the year, but yields have been affected by rising interest rates and credit margins. This is the major explanation to the decrease in the values. Neobo is the largest listed purely residential-focused company in Sweden with almost 8,400 apartments and 268 properties. Our property portfolio is diversified in 40 municipalities from Luleå in the north to Malmö in the south. Residential properties amounts for 95% of the total property value, and the remaining value mainly consists of community service properties. The annual rental value amounts to SEK 924 million, of which residential constitutes 76% and commercial contracts 22%. The rental value has increased mainly as a result of indexation of rents for commercial properties.
We have a total commercial rental value of SEK 200 million, and one of our tenants, Amasten Continental Apartments, also a subsidiary of Neobo, leases four long-stay residential hotels in Sundsvall, Sollentuna, Helsingborg, and Knivsta. This is also part of the commercial contracts since Continental Apartments is a commercial tenant, but it's still residential long-stay apartments. The rent negotiations attributable to residentials are ongoing, and so far, approximately 12% of the total rental value for residentials are completed with agreed rent increases between 3.5% and 5%. The economic occupancy rate amounted 92% in the end of the year. As you maybe have read in the report, we have a vacancy rate in the residential portfolio of 6.6%, and in the commercial premises, 11.3%.
Here we have a lot of good potential to work with going forward. The vacancies in commercial premises are mainly explained by a few larger vacant premises. The residential vacancy is partly explained by low occupancy rate in a recently completed property. Neobo has a strong financial position with 100% of the financing from banks, which feels very good in this market situation that we have. We have a low LTV of 48% and a long average debt duration of 4.2 years. As you can see to the right, we have almost no maturities during the coming 2 years, which also feels very, very good for us.
The average interest rate has increased from 2.5% to 2.7% as a result of increased interest rates in the beginning of the year and also due to some restructuring in our swap portfolio. Sorry, I forgot to mention that this is the KPIs from February. Since we, before the listing, communicated the financial situation of the company in February, we would like to give you this update now. This is the February figures. In connection with the completed refinancing of our debt portfolio, we have structured interest rate swaps for SEK 2.6 billion, and the average fixed interest term remains at 1.8 years.
We have a hedge ratio of 74% today and an ICR of two times in December. We are present in growing regions across Sweden. To the right, you can see that the average annual population growth since 2010 in the counties that we are present in have outperformed the population growth in other counties in Sweden. The housing market in Sweden displays very strong demand. To the left, you can see that in 2021, 73% of all municipalities in Sweden reported housing shortages. In the graph in the middle, you can see that in Sweden, only 0.8% of all rental apartments in Sweden were vacant. A very, very low vacancy rate.
To the right, you can see in the graph in the middle, you can see that even in the smallest municipalities, it's still a very low market vacancy. To the right, you can see that historically, the annual rent growth has surpassed inflation. Even if we have a very high inflation right now that we will not be compensated for fully this year, we are convinced that we will be able to be compensated during the coming years. The earnings capacity is not a prognosis and does not include any assessments for future trends. Rental income is up 2% compared to the earnings capacity in the third quarter due to indexation, as I mentioned, in the commercial contracts. Vacancy has increased to SEK 74 million.
Property costs consists of budgeted cost for a normal year, and our assessment now is that they will be about SEK 20 million higher than we communicated in the Q3 report. Central administration has been calculated based on Neobo's organization as an independent unit, and no one-off cost attributable to the separation or the listing are included. Financial net is based on existing credit agreements and STIBOR on the last of December. Our financial targets, is that we will deliver return on equity over time, over 10%. A Loan to Value shall not exceed 65%. The equity ratio must exceed 30%, and the Interest Coverage Ratio must exceed 1.5 times.
Regarding the dividend, we have a policy that the company will distribute 50% of profit from property management after tax. For this year, the board of directors has decided to propose to the AGM that no dividend will be paid for the financial year 2022, since this year is the first year of operation as an independent company for Neobo. Our strategy, simple. We have a long-term perspective. We will work hard with developing the portfolio and create value. We think that we are in attractive markets with a strong underlying demand for residentials. We will focus very hard on sustainability going forward.
We are working right now to form the sustainability strategy, and of course, very important, both the environmental and the economic aspect of that. We have a local present property management organization working close with the properties and the tenants taking care of them in order to be able to create value. Regarding sustainability, we have a lot of ongoing energy efficiency projects in the portfolio. 31 completed and 35 ongoing right now. As I mentioned, this will be ever even stronger focus for us ongoing. As you know, Neobo's shares have been distributed in December to SBB's Class A and B shareholders.
Here you can see the ownership structure in SBB on the last of December. Neobo, we were listed on First North Premier Growth Market on the 10th of February. We are very, very glad that we have now succeeded with both the separation from SBB and also the listing of the company. I also would like to take the opportunity to show you some examples from our property portfolio. This is the summary of the full year 2022, and the description of where we are today. Ongoing, our focus will be on the properties and our tenants, and we will work hard to increase the NOI.
We are in the middle of ongoing rent negotiations that we will complete probably during the first quarter. We will work very hard with the vacancies in the portfolio, both on the residential side and also on the commercial side. As I mentioned, very interesting ongoing work with establishing and decide upon a sustainability strategy for the company. With that, I would like to open up for questions.
If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. There are no more questions at this time. I hand the conference back to the you, Ylva.
Thank you very much. Do we have any written questions?
Yes, we do. We have one question. They would like to your opinion on the market valuation of Neobo stock at First North.
Yeah. The question was, what I think about the valuation in the stock right now. Of course, I think it's a very big discount in the share price right now. I mean, I know that we have an attractive property portfolio in growing markets in Sweden with a strong demand and a lot of potential. Hopefully we will be able to deliver results and lower the discount to have a more valuation in the share that I can feel comfort with.
Thank you. May I also have another question? If you may elaborate a little bit about the vacancy and your plans of reducing them?
Yeah
... during this year?
Yes. A question regarding the vacancies. As I said, we will work and we are working right now very, very hard with the vacancy rates. It's absolutely too high. As we have seen, the market vacancy is much lower, and I think that we have the good possibilities to work with that. We have right now, at this point, identified all the vacancies, the worst, the worst cases, so to say, the properties where we need to really put an extra effort in the work. We have also set targets for the organization that we are focusing on right now.
I think that we, by putting the focus on this question, we'll be able to improve the figures.
Okay. Thank you, Ylva. We have no further questions from the webcast.
No further questions? I would like to thank you very much for participating today. Please don't hesitate to contact us if you have any further questions. Thank you very much.