Thank you very much. Let me start with emphasizing SBB's strength in social sustainability field. Today, as largest owner of social infrastructure, SBB is one of Europe's most socially sustainable company. That has been underlined during third quarter where we offered 134 young persons summer jobs. We do have as a target to offer 100 jobs every year. However, this year we did extra investments in that in order to tackle or support young people through pandemics. However, if we go to the slide two and look at our financial performance, this is showing why SBB is Europe's most resilient assets, no matter if it's pandemic or if it's economic crisis or whatever it is. We are probably the only company in Europe that have had 99.8% rent collection last two quarters.
If you do look at the numbers for the period, you will see that we deliver strong interim profit of SEK 4.5 per share, which is related to our assets that still have a large potential. You should look at our profit per share that is SEK 4.15 per share. Also at the same time, look that we have a yield of 4.5%, which is among the highest yield in Nordic real estate, despite the lowest risk in the assets. We deliver EPRA NAV or long-term net asset value of SEK 30.9 billion, which is SEK 24.36 per share. Across the line, no matter if you look at rental income, if you look on NOI or if you look at our profit from property development that is delivering amazing this year. As you know, we have as a target SEK 500 million-SEK 700 million.
Already after three quarters, we have a profit of SEK 852 million that is largely affected our value changes and contributing to the strong profit. If we go to the next slide, showing our 12 months rolling, you will see that we do have a rental income of SEK 4.8 billion. After all costs, including financing costs, we do have adjusted operating profit of SEK 2.9 billion, which is SEK 2.29 per share. On top of this, you could add that we already have improved those numbers with additional SEK 130 billion through acquisitions. When I said SEK 130 million, then I talk of fully financed numbers. Operating profit given the announced acquisition is already today higher and passing SEK 3 billion on 12 months rolling. After dividends, and I used to say you should observe that those dividends are not indexed.
Those are B-shares and other equity-like instruments that have fixed coupon. You will see that we are landing at including our extra income streams from property development as I mentioned before, from refurbishments and from transactions at the total profit on 10 months rolling of SEK 2.86 per share plus these SEK 130 million that I mentioned in the introduction. This is of course supported with strong profit after tax that was delivered for the first nine months this year of SEK 5.7 billion. One important ingredient here is that we are continuing to decrease our financing cost. In the quarter, we decreased financing cost with 20 basis points and which, of course, affect cash flow. Cash flow for the first nine months, adjusted for non-recurring costs, amounted to SEK 1.8 billion. Next slide, please. Slide four.
As I mentioned before, we deliver strong operating profit for SEK 4.15 per share. At the same time, an important message for the quarter is, how to say, emphasis on even more low risk for the assets, because we prolong our WAULT from seven years to nine years, which is really strong. You can also see that despite the prolongation of the WAULT, despite very strong operating profit, we still do have a net yield of 4.5%. For our international listeners, this is important message, net yield of 4.5%, which is among the strongest yields in the Nordic real estate market. That also mean and you can find some examples in the report, given demand for our assets and given our low-risk assets, that we will still have large upside potential on our valuations. Next slide, please. Slide five.
This is just to summarize pillars of our strategy. We have a unique and difficult-to-replicate long-term relationship with municipalities, and this is of course helping us now when everyone wants to have this kind of assets as a consequence of pandemics, and when everyone wants to move to safety by buying community service properties. Our relationships and our platform in terms of our team are a great advantage. We have properties for SEK 81.2 billion and are still fastest, despite the size, still fastest-growing low-risk Nordic social infrastructure property portfolio. In this quarter, we also showed that we already have a credit metrics for BBB+, and we demonstrate strong financial position. The numbers are talking by themselves. We have been delivering very strong NAV growth almost since inception. You can see NAV growth of 64% CAGR. At the same time growing portfolio by 51% CAGR.
It is a strong growth story with value creation. Next slide, please. At the next slide, we are giving you some more flavor on the numbers that we follow and that we focus on. The first, as I mentioned before, strong increase in earnings per share. Earnings per share for the nine months, SEK 4.15 per share. During last almost four years, 46% CAGR, which is probably without competition, not only in Europe but worldwide. This has been combining with messaging from the board for the next general meeting that they are aiming to propose dividend of SEK 1 per A and B shares. That means that we will have almost 78% CAGR last four years. The same line is if you look at EPS, earnings per share, it is almost the same development across the line.
This is, as I mentioned in my CEO letter, this is combined with BBB+ credit metrics. Next slide, please. When talking about BBB+, we have been asked among many investors to provide the numbers. Now we are providing detailed numbers concerning our LTV, where you can follow line to line how we are counting that we will have or that we already have at 12 months forward-looking net adjusted LTV below 50%, which is SBB pro forma net debt, and which should give us BBB+, given that we still on top of that also have stronger assets than our peers. That is important. In this way, pandemic, despite being a tragedy, it has also given an opportunity to people to see where you can find safe assets.
We not only deliver on low net adjusted LTV below 50%, but we deliver across the line. We had, at the end of the period, ICR of 3.3x . I think presentation it is 3.3%. It is 3.3x , and it is expected to end up at 3.7x for the full- year to then pass 4x early next year. On top of that, we are more than SEK 60 billion in unencumbered assets. We do have a cash of SEK 6 billion plus liquidity from sold properties and financial assets totaling SEK 9.6 billion. On top of that, SEK 9.1 billion in available credit commitments. Our target to achieve a BBB- is now visible and we are expecting to move to BBB+ after we have fulfilled the key figures and given those being backed by probably Europe's most safe assets. Next slide, please.
Why are those assets Europe's most safe? That you can see at page eight. You can see that of our income of SEK 4.8 billion or we have added extra elderly care homes after that, probably our income right now passing SEK 5 billion. You can see that of SEK 5 billion in rental income, 98%, almost 99% is coming from social infrastructure, is backing by Nordic welfare states and tax finance income in Swedish rent-regulated residentials. Those assets are also the assets that are highly affecting development goals and highly affecting social development in the Nordic countries. We are the most important private delivery team on infrastructure in the Nordics.
Safety in the assets and safety in having almost 98% government-backed income at the end of the day is what is giving us this kind of very high rent collection that we have been able to deliver through two pandemics. Next slide, please. Presenting our portfolio, slightly more assets in Norway after acquisition of Læringsverkstedet, a transaction that we are very happy for. We are very happy to be the largest provider of properties for preschools in the Nordics. We like preschools. Those are probably one of the most important impact on gender equality and also affecting poverty at the end of the day. We are happy to deliver to these important welfare services. We are also today the largest owner of elderly care homes and LSS in the Nordics.
After the quarter ended, we did a large transaction in Finland, followed by long lease with municipality of Trelleborg. Next slide, please. To summarize, as you know, I used to say that SBB is not only real estate business, SBB is a platform with Nordic's most experienced property development and M&A team, and based on sound efficient property management that is today managing passing rent of, as I mentioned before, of SEK 5 billion and with almost 100% rent collection. On top of these strong passing rents, we are delivering profits from property development. We are targeting SEK 500 million-SEK 700 million. We should probably need to increase that target because we already, for the first nine months, are delivering SEK 852 million in profits from property development.
We do have strong renovation and investment teams that are delivering according to plan, SEK 600 million in refurbishment, and the large potential with 75% of the rent-regulated residential portfolio not been refurbished yet. Finally, M&A. Last three years, we have done deals for SEK 90 billion, the year is not ended yet. SEK 400 million is very conservative, but just as a placeholder to remind investor base about the experience and executive strength in M&A team. Next slide, please. Slide 11. I mentioned before property development. In the quarter, we have got decision from the municipal council in Nyköping for one of the most urban development in the Nordics, rebuilding a quarter of central city districts with own entrance to central station, delivering 165,000 sq m in residential properties and community service properties. Very strong position. In total, 2.2 million square meters building rights, approximately 39,000 apartments.
As you can see at the next slide 12, you can see proportions. This give us position as one of the largest property developers in the Nordic region. It's only Norwegian cooperation OBOS that have higher number of apartments, and I should say that is right now. Strong delivery from property development team, and you can see also proportion to some smaller Swedish and Nordic players. Next slide, please. I mentioned before our M&A team, we deliver across the line long leases 35 years with Læringsverkstedet. Next year, Q2, it's time for the most sustainable building in Europe to be presented in Skellefteå, 26,000, 28,000 sq m, completely built in the wood for cultural center. We are the largest delivery organization to police in the Nordics. We own a police station in all three Nordic countries.
Last few months we have announced, or in the quarter we have announced five or six different deals, both in Finland and in Sweden. Finally, this continue to strengthen our position in elderly care space by signing new 25 years lease with Österåker municipalities. Also after the quarter ended, we have started new contracts, 15 years contracts for two or three additional LSS properties. Those are built as very environmentally friendly buildings, zero energy consumption house. Next slide, please. To summarize, as I mentioned in introduction, strong quarter and profit after tax per ordinary share of C lass A and B increased to SEK 4.15 per share for the first nine months. Even more important, continuing increase in 12 months rolling earnings capacity that is summing to SEK 2.8 billion, and given what I said before probably passing SEK 3 billion in this quarter.
This has been underlined by new leases that are helping to prolong our average lease duration for community service properties from seven to nine years. It is de facto much longer than that. We also show strong potential from organic growth and continue to have high NOI margins, adjusted NOI margins, adjusted, as I mentioned last quarter, are at 71%. Like-for-like NOI increase 3.4%, which is very strong given that our contracts are indexed by inflation. Number two, profit before tax amounted to SEK 6.1 billion, and after tax SEK 5.7 billion. Paid tax was about SEK 90 million. Adjusted for non-recurring cost and after deduction for all dividends for the B shares and hybrids profit for the period amounted to SEK 4.39 per A and B ordinary shares. We continue to deliver strong cash flow from operations.
At the end of first nine months, we landed at SEK 1.8 billion adjusted for non-recurring, or I should say for some non-recurring costs. Given the large amount of transactions, we have non-recurring costs that are both affecting central administration and affecting NOI, but we don't spend time to qualify those because we do have a strong profit without spending time on that, and that is also tax-efficient. Number four, property development. I'm really happy to see the delivery from the team, delivering almost 70% or 60% over target. That is SEK 500 million- SEK 700 million, and they are delivering SEK 852 million for the period, and very strong in a quarter, SEK 594 million, and continuing to have a high or large potential from 2.2 million square meters building rights for social infrastructure. I should just repeat that because this is very important number.
2.2 million square meter for social infrastructure, mainly in Stockholm and Gothenburg regions, 29,000 apartments. Please spend a few minutes to look at the appendix three in the report that is, how to say, illustrating the potential from that. Our renovation and refurbishment continues, and despite the pandemic, continues to deliver according to plan. Finally, one of the things that I'm most proud of is that with three pandemics have been staying up for our communities, have been helping both in our communities, have been trying also to support UNHCR, but also offering 134 young people summer jobs, which is one of the best investments in our common future. Number five, as I mentioned in the introduction, we already have the credit metrics in place to achieving a BBB+ rating, and we are not going to stay there.
We do see that SBB, with its safe assets, should have A- rating. However, we are happy to show, as you can see in the last paragraph six, that we already, before having high rating, have interest rate costs that are continuing to decrease very fast. Our average interest rate ended up at 1.4%, which is 35 basis points lower than 12 months ago, 20 basis points lower than three months ago. We do see that we have high potential to high rating. We also succeeded, despite that we lowered our interest rate cost to increase average fixed interest rate duration to 4.9 years and average debt maturity to 4.7 years. Those 4.9 years average fixed interest rate duration means that we don't have any exposure to variable interest rates, and we have probably the longest fixed interest rate in the Nordics.
Finally, given how we are performing, given the nature of our assets, we are looking also to continue to invest more in sustainability, a part of that is that we are planning to launch a framework for social sustainable bonds. As I said before, sustainability is basic of our business, that is giving us a strong position to continue to deliver strong profit to our shareholders. Thank you.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. That is zero one to register for a question. We have a question from Fredric Cyon from Carnegie. Please go ahead. Your line is open.
Good morning. A couple of questions from my side. Starting off with the value changes of SEK 3.5 billion in the third quarter, can you break that down into various components? How much is related to projects, how much is yield, and et cetera?
I should say that more than 70% of that is related to new leases by prolonging new leases and that is the biggest effect. The second biggest is profit from property development, and that is building rights. Concerning yields, we still do have relatively high yields and if you look at 4.5%, that is in the same space as commercial real estate, despite that those are very safe government-backed assets. The main explanation behind value increases are longer leases and profits from property development.
Thank you. You're specifying in the report how to calculate the rating or at least the net debt to EBIT, how the rating institutes will look at it. Based on that table, I would assume that a rating upgrade is just around the corner. What's your gut feeling on when that might occur?
You never know, particularly because the rating agency, they tend to be, how to say, more conservative when the markets are shaky. We do think that this should lead to higher rating in the near future. In this way, we are also giving investors opportunities to do the math by themselves. We do think that we have a rating matrix for BBB+, and we are expecting to be upgraded in the first step, at least to BBB+.
Moving over to the balance sheet, you had cash of about SEK 6 billion by the end of the quarter. I acknowledge the deals that you have announced since then, but still, that leaves you with a large cash position. Should we expect that that cash will be mainly used to buy back bonds or to make further acquisitions?
We do like cash. We are in the first line focusing on achieving a higher rating, but we will always do the deals. I should say that in first line, we are focusing on higher ratings.
Two more questions. Number one, since the end of the quarter, in the report, one can read that you did an external revaluation post a quarter, which should lead to SEK 624 million in write-ups. How much should we expect that to take place already in the fourth quarter?
We did put in those numbers only if they will be effective in the next three to four quarters. We do not specify more than that. As you could see, we did the same in Q2 and have a large part of that that was announced in Q2 already in Q3. We are trying to put in the numbers and the values that are important for investors right now.
My final question on the earnings capacity. Since the end of the quarter, as I mentioned earlier, you've both sold and acquired assets. If those have not yet been taken over possession, they have not been accounted for in the earnings capacity, i.e., one has to adjust for the transaction post-quarter, right?
Yeah, absolutely. As I said, easy way to adjust is to round up our earnings capacity of SEK 2.8 billion, SEK 2.9 billion- SEK 3 billion adjusted operating profit. I think the net including financing is SEK 130 million for the transactions that will be in the balance sheet given all the in P&L, given how it looks right now.
Okay. Yeah, sorry, Ilija.
Yeah, SEK 130+ millions on operating profits after quarter end.
Okay, thanks for clarifying.
Our next question comes from the line of Simen Mortensen from DNB Markets. Please go ahead. Your line is open.
Yes. Hi, I have a few questions on my part as well. Just to understand also my first question was on the cutoff on the homes that are included in the earnings guidance capacity. I understand that the Læringsverkstedet portfolio is included but the portfolio in Finland is not included. The cutoff date is October 1st. In terms of that guidance. Is that correct?
Yeah. Cutoff is 30th of September, and we take in position Læringsverkstedet by last of August, and the Finland transaction has been signed after 30th of September.
Okay. Also in terms of the convertible bond, I see there is SEK 2.1 billion in accounts, roughly SEK 2.148 billion as equity, which as far as I understand, is supposed to be roughly 70 million- 87 million shares issued in 2023. My question is, how are that equity treated in the current NAV, which is reported that SEK 2.1 billion? Because based on what I see on page 40, it seems not to be adjusted, that is going to be an increase in the share count. I am correct in that observation?
Yeah. You are correct in that. In the same way, we are not even adjusted that we are already taking through the balance sheet all dividends despite that they are not paid out. There are opportunities to do adjustment on both sides.
Yeah. That's a debt, but in the equity you have SEK 2.1 billion.
No, that is not issue on debt. That is issue of equity because we decrease our equity with the dividends that are planned for the quarters that are going forward up to next annual meeting.
Yeah.
That is just a flavor how the adjustments can be done on different ways. This is how it's done according to IFRS.
Yeah. Those shares will come in 2023, and it will be roughly on the same amount of equity adjusted for that dividend, if I'm correct.
Yeah. Absolutely.
My second question comes to the guidance also earnings capacity. Based on that, you have an NOI margin of roughly 72.3%, which is extremely good. When I look at the Q3, you have 70.8% roughly to 210 basis points lower, and you look at rolling 12 months, you're at 68%, NOI margin. It's quite well below. The question I'm asking is, in the guidance, it seems is a very high level compared to what we have seen in the reported figures. This quarter you have also reported below what consensus had expected. Could you please give us some flavoring on terms of the NOI margins and the guidance or in the earnings capacity versus the reported figures on that figure?
Absolutely. I can give you more flavor on that. If you look a year ago, then we were at 63%. You can frame it in different ways. As I said, our NOI margin is in the delivery margin is in line with our earnings capacity. I said in Q2 we had these SEK 40 million that we spend time because we are tracking in detail the different heating and electricity and that kind of numbers and that is why we announced those extra costs. We don't care to announce the extra cost. Those are relatively small numbers for the numbers that we deliver and it should be understood that if we have a large number of transactions, that we probably should have some cost for those.
I used to talk more about this two years ago because I don't know if you have bought property any time, but it's not only buying the property, you have the other people that have to push the numbers in the system, and you have to have the lawyers, and you have to do a lot of other things that are affecting. In short, our earnings capacity is in line with what we are delivering. That is our view.
Yeah. Consensus might be too high then. In terms of your admin cost. Yeah. On your admin cost, you have SEK 150 million again, but a few times been over, you touched upon this, because of tax reason and doing a lot of transactions et cetera. How representative do you feel that SEK 150 million are based on that you have been well above this level for four quarters in a row now of central admin cost?
SEK 150 million is our normalized central admin cost that if we are doing like average Nordic real estate. That is given the people that we have on salary, given that we pay for our leases, and given all costs, that is the normalized number. We have done prospectus. I don't know if you have been in that space sometimes, but I can tell you that lawyers are making money, and we are doing a prospectus almost every quarter. The latest prospectus was in August this year. We don't complain about that. That is what is explaining the difference.
Yeah, fair enough. In terms of your payable tax, I see that's not part of your operating profit to your ordinary shareholders in terms of, y ou talk about the guiding that you make SEK 160 million per A and B shares on page 41 in the report, but I can't see payable tax anywhere in this report. In the P&L, I see you have had SEK 92 million in payable tax year-to-date. If I analyze that's 6% of that figure. Can you please elaborate a bit on your payable tax ratios and talk about those year-to-date figures in payable tax?
Yeah. We like to pay tax. That is good for the welfare systems. We have paid SEK 92 million up to now, we have said before that our payable tax should be between 8%-10%, we have not changed that.
Okay. Also, in terms of CapEx, I just look here that you aim for a dividend of SEK 1 per share. Your earnings capacity guidance is SEK 160 million. You're going to have a 61% payout ratio, which means roughly SEK 760 million left for CapEx and investment. How do you look at that for both doing the CapEx level, which is, based on my estimate, 0.9% of your asset values, and combine that with doing so much investment as you're doing?
Just remember, Simen, we do not have any CapEx. That is a very easy one. We do not have any CapEx. That means that we can tomorrow stop refurbishments, and no one will complain. Rather, some people will probably be happy because they will have lower rents. We do not have any penny of CapEx outside of that you can see in our report that we do take all of the maintenance costs, which are included in this SEK 1.3 billion in property cost before accounting or profit. On top of that, we don't have any penny of CapEx.
No CapEx, no refurbishment project whatsoever.
No CapEx, no refurbishment, no whatsoever if we don't want to do. It is the same like assuming that if we want to buy new properties, that all investments have to fight, how to say, in the same space. They have to fight for the money to be invested no matter. The money to be invested in our cases, we are saying that if we do have below 50% net debt to total capitalization, and if we do a profit of, here we have, as I said before, SEK 3.8 billion in profit, and if you assume at least value changes in accordance with our like-for-like growth, then you should land at a profit of around SEK 5 billion on a yearly basis. If we do SEK 5 billion on a yearly basis, that means that we can do SEK 8 million, SEK 9 million in new investments.
Those have to fight if they are organically or build on our building rights or if we will buy new properties.
Yeah. You understand, none of your assets have natural refurbishment needs. It's all taken through your P&L.
Everything is taken through P&L. That is very important. You can see in report now that we, for the first nine months of this year, have already put SEK 220 million in maintenance.
I'll try to wrap up soon. In terms of the currency impact in the report here, you wrote that the exchange rate differences of SEK 103 million were reported due to differences in the loans and what has been hedged in terms of euro debt. Could you please highlight a bit how does your hedging work? You talk about hedging, but in this quarterly report you write SEK 100 million.
Hello? Hello?
If you muted your line, please unmute it. Simen Mortensen from DNB Markets?
Yeah, I'm here. Do you hear me? Do you hear me now? Sorry, I had a bad headset. The currency impact in terms of the hedging. In the report you have SEK 103 million reported as the difference between what's been hedged and your assets is in the report. How do you do your hedging and how does it come through as a cost in your P&L? Here we see SEK 103 million, which is kind of hard because you haven't given us that much information on how you do your hedging, given that so much of your debt is in euro and your assets are in other currencies.
I don't have any more information about that than I have before. Our main focus on hedging is to have natural hedging and mainly through euro assets. In the next step we are hedging through FX forward in order to make sure that we always have the best outcome. As I said before, the reason why we do like to have loans in euro and why we are going to continue to have large euro positions is that as a large company, we do think that the Nordic is problematic in terms of the crisis. That has been shown in March, April last year when the Nordic bond market almost died. I have said before, those numbers may vary SEK 100 million, SEK 200 million up and down but usually they will be close to below SEK 100 million.
Yeah. My last question is, in terms of timelines, giving us a property list, more details on your sub-segments in terms of yield valuation, rental levels, et cetera, in your portfolio square meters, you've talked about that is on the way. Is there any timeline to when we're going to get some more visibility on that and also more perhaps details on your development rights?
Yeah. We are working already with focusing to give how to say, extra material in annual report because it is difficult to do it in the quarterly reports to have 10 pages on property development. For the annual report we are publishing all building rights and positions and a lot of information. That is the date.
Okay. Thank you. They were all my questions for now. Congratulations on the solid value uplift and NAV gain.
Our next question comes from the line of Tobias Kaj from ABG. Please go ahead. Your line is open.
Yes. Thank you. I have some few questions. First of all, how much do you expect to be able to acquire for next 12 months and still achieve a BBB+ rating?
It is around SEK 8 billion-SEK 9 billion.
Okay. Thank you. Both, if you look at your acquisition in Norway and in Finland, the yield on the acquisitions were clearly higher than the 4.5% valuation yield. Do you believe that you still can acquire at higher yield than the 4.5%? What kind of average yield do you expect to achieve on those SEK 8 billion-SEK 9 billion?
As we have said before in SBB we have M&A platform and some of those deals we have been working for much longer period than when they are announced. Of course we have been also sticking with the sellers through pandemics when no other guys were there. That is of course giving us extra advantages. 4.5% is not where the market is today. I should say our portfolio should be valued at 3.25%-3.50%. If we went to go out to the market today. However, some other companies like Kojamo, they just goes to one valuer and increase the asset value with 20%. We have seen that before with Hembla. We work with municipalities, and we are not going to do that kind of exercise, but we still do see that we have a large upside from our valuations.
Okay, a detailed question. You say that you have SEK 172 million in rental income from building rights for social infrastructure in the earnings capacity. That's 4% of the total income. Is that existing and contracted income, or is it a potential income after a development?
No, that is existing contracted income.
Okay. Thank you for taking my questions.
Yes.
Our next question comes from the line of Jan Ihrfelt from Kepler Cheuvreux. Please go ahead. Your line is open.
Questions-
Tobias Kaj from ABG. Please, can you repeat your question?
No, it was Jan, but we don't hear him.
In the meantime, our next question comes from the line of Chris Roberts from BNP Paribas. Please go ahead. Your line is open.
Oh, yeah. Good morning. Thanks very much for taking the question. A couple of things, and apologies that they may be just slightly fiddly. If I look at your working capital, you had a big swing in the second quarter, and you've had a big swing in the third quarter in terms of receivables. It would be very helpful if you could just explain what that is. The second question was, is there any guidance you can give us or any sort of parameters you can give us for any further disposal proceeds we should expect for the balance of the year in the fourth quarter? That's it from me. Thank you.
We don't care about working capital because that is not telling you anything in real estate business. You should probably not use your time for that. If you do that, the main explanation for this is first at the end of 2019, there was a handful of transactions, and in Q3 that was cash coming in that is booked at other receivables. That is why when we presented our Q2 report, we said that we have SEK 7 billion on cash booked within other receivables, and this cash has come in after end of the quarter.
Okay, fine.
That is cash from sold assets.
Thank you. Then any disposal proceeds we should be thinking about for the rest of the year?
We will always buy and sell. That is part of our business model. We do have now a portfolio that we want to have, and they may come guys that want to pay a lot, and then we would be happy to consider.
In essence, the repositioning is done, is what you're saying?
Our repositioning is done. If you look at the CEO letter, you can find all of the numbers for that.
Perfect. That's very clear. Thank you.
Thank you.
Our next question comes from the line of Jan Ihrfelt from Kepler Cheuvreux. Please go ahead.
Hope you can hear me now. I was cut off earlier. I actually have four questions. The two first one regards your property uplift. There was a question asked about the split of your property uplifts, and you mentioned that 70% were new leases and maybe 30% were property development. Does that mean that the effect from the yield shift was rather low in the quarter?
Yeah, as you can see, Jan, we are still reporting yields of 4.5%. We have been pending between 4.5% and 4.8% since start of the company. Those numbers, 70% and 30%, it's more my assessment. Just to give you an example, in this quarter, this is unprecedented, I should say. In this quarter, we have signed leases with rental value of SEK 462 million, with an average contract duration of just over 25 years.
Okay.
That is telling clear language where the main property uplift is coming. On top of that, we do in the quarter very strong profit from property development mainly related to new building rights and the two projects. In total almost SEK 600 million in profit from property development in Q3.
Could you just quantify the effect from the Nyköping project just to get a feeling for the effect from the planning process?
In Q3, we had profit from property development of SEK 594 million which is more than our-
How much of that was Nyköping or?
We do not want to give the numbers on specific properties because that can affect our, how to say, opportunities to get good pay when selling.
Okay. Just a third question relates to the investor market for community service properties. You mentioned your net yield is on 4.5% and probably your portfolio market value will be below 4%. When you do acquisitions going forward could you buy below 4% or do you think that is too expensive?
No, that is not expensive. We could go down to 3% because those assets with long leases and with safe income are still, w e have seen some deals that have been, w e do not follow at a deal that was done at 2.2% this month, but we were ready to follow down to 3%. If you compare this kind of safe Nordic government-backed cash flows with German offices then it is a joke that German offices are valued at 3% or German rent-regulated residentials net yield is 2.75%, which is, I mean, we put in this report some population growth and if you travel to Germany, no city is growing. I am, how to say, clearly disappointed by myself that I'm not succeeding to explain this for investors when comparing the market. My problem is not that yields in Sweden are going down.
It is rather that it is given how the cash is valued in our competing countries, like Germany is a direct competitor to us. There is work that we need to do to show the numbers, to show how development of our market is, and to show the safety of our assets.
Okay, thank you. My final question regards your split is right now about 80% community service properties, 16% residentials. In three years' time, will that change materially, or how would you look upon acquisitions? Are you more targeting the community service properties or just some few comments on that?
We do like Swedish rent-regulated residentials. We see those as a part of social infrastructure because Swedish rent-regulated residentials are actually affecting poverty and that is also a job that we need to explain outside of Sweden how this regulation work and what kind of rents are there. I think the split will be, w e will be much bigger company. We have already announced that we will have SEK 125 billion in five years, the split will be almost the same. We do have a lot of new buildings, new rent-regulated residential in Stockholm, we are looking to do more in Gothenburg. It will probably be more rent-regulated residentials in Stockholm and Gothenburg.
Okay. Thank you very much and congrats to a good report.
Thank you.
As a reminder, if you want to ask a question, please press zero one on your telephone keypad now. We have a question from Bertil Nilsson from Carlsquare. Please go ahead. Your line is open.
Yes, thank you. First, the follow-up on the value increases of SEK 3.5 billion. You mentioned there in your answer that something like 70% were due to the prolongation of leases and that landing is fixed, I assume, because announced SEK 2.2 billion?
It is not only. That is very important, Bertil, and 70% was my rough assumption. The real number that is important in this case is that we, in the quarter, as we are writing at page 12, we do sign long leases for SEK 462 million. That is more than majority of Swedish real estate have in yearly income, I should say, SEK 462 million in new contracts with 25 years average lease. That is the main explanation.
70%, does that totally correspond to those SEK 2.2 billion that you announced in Q2, or is it part of it just?
That is just part of it.
How much roughly?
We never commented detailed information in that way that can affect our opportunities to do business.
Okay. Second question, maybe brief. You started your new business area for public infrastructure and defense buildings. Have you set any target for this business area, these acquisitions? You have a total target of SEK 125 billion in some years, I recall.
Yeah. We are real estate people. We do not target like funds. We do the deals that are most beneficial for our shareholders. The government infrastructure is interesting space where the government needs help. We are already today the largest player in police space, owning 25 police station in Sweden, and additional police station in Norway and Finland. We do think that we can help there both with defense property used in peace and also for detention centers. You have always to be careful concerning sustainability issues and so on. That has to be managed in appropriate way. We do think that we, as the largest player in the Nordics, should help government to get efficient properties for those important services for peace and justice. That is ordinary business for us.
Okay. Thank you.
There are no further questions registered, so I hand back to the speakers.
Good morning. We have received two questions from Oliver Carruthers from Goldman Sachs. Please, can you comment on the size of your current acquisition on disposal pipeline? At what yields does SBB aim to acquire at?
We are always doing deals, and we are a growth company. However, it is difficult to us to split acquisitions and divestments. As I said before, given the credit metrics, we should be able to do SEK 8 billion-SEK 9 billion in net acquisitions on yearly basis going forward without taking any new capital.
At what yield does SBB aim to acquire at?
As I commented before, that is always depending how the market is and what kind of yield gap we can achieve. We never think in terms of yields. We think in terms of cash flow. We think in terms of residual value. We think in terms of location and so on. We should always be able to deliver strong yield gap and strong profit to our shareholders.
The second question. SBB recognized a SEK 3.5 billion valuation uplift in third quarter. How should we think about further portfolio revaluation gains by year-end and next year?
As I said before, we do see that our average yield of 4.5% is not accurate where the market is, and we see large upside potential for the next four to eight quarters going forward.
Thank you. I will now ask Ilija to finalize with a few concluding remarks.
Thank you very much all for listening. Our message is relatively simple. We are delivering a strong profit to our shareholders. We have the safest assets in Europe. I mean, this quarter we prolonged our WAULT with two years, which is fantastic for this large portfolio. As I said before, we are aiming to deliver the largest increase in NAV per share. We put that as a target already 2019. In 2019, we had 73% increase in NAV per share. In 2020, after the first nine months, we are up to 32%, which is the largest in Europe. At the same time, I do think at this time it is very important that companies are also responsible for their shareholders.
I do think that SBB Board of Directors is doing the right thing where they stated that they aim to propose to annual general meeting 2021 to increase dividend to SEK 1 per share, because SBB is like municipal bond with just higher dividend as cream on top. Thank you.