Welcome to Sveafastigheter Q1 Earnings Call 2026. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO Erik Hävermark. Please go ahead.
Good morning, everyone, and thank you for joining. My name is Erik Hävermark, and I am the CEO of Sveafastigheter. Today, I will present our results for the first quarter. Before we begin, I would like to mention that our CFO, Stina Carlson, is unfortunately unable to join today due to personal reasons. I will therefore take you through the full presentation. After the presentation, we will open the line for questions.
Let me start with the key highlights from the quarter, which are outlined on the next slide. We saw continued strong rental growth, with rental income increasing by 6% and by 4.9% in a like-for-like portfolio, demonstrating the underlying strength in our assets. Occupancy also improved during the quarter, increasing by 0.2 percentage points to 95.5%, reflecting both active asset management and stable demand.
We also realized development gains after the end of the quarter through the divestment of the Solhusen project in Nacka, which was communicated yesterday. The project is being completed in the second quarter and was agreed at a property value of SEK 438 million, compared to an estimated total investment of SEK 354 million. This is a clear example of the value creation in our development portfolio.
During the quarter, we also strengthened our financial position and flexibility by establishing an EMTN program and completing a refinancing, which extended both debt maturities and average interest maturity while increasing the share of bond financing in the capital structure. Finally, as part of our capital allocation and in light of the current NAV discount, we initiated share buybacks during the quarter. To date, we have repurchased 2.7 million shares, corresponding to 1.3% of the total number of shares outstanding.
Let me now turn to the financial performance in more detail. First, as of this quarter, we have adjusted our reporting by including property administration within property expenses and consequently within net operating income. This change provides a more accurate reflection on the performance of the property management business. As mentioned, rental income increased by 6% to SEK 398 million and by 4.9% in a like-for-like portfolio.
NOI grew by 5.3% to SEK 202 million and by 3.9% on a like-for-like basis. The quarter was characterized by colder and more snow-intensive winter conditions than normal, which led to temporarily higher property expenses. As a result, net operating income grew somewhat slower than rental income. Despite this, the NOI margin on a rolling 12 months basis improved by 3.2 percentage points year-over-year and now stands at 60%, supported by continued operational improvements. Profit from property management amounted to SEK 62 million.
The result was impacted by the weather-related cost increase, as well as temporary financial effects related to the timing between bond issuance and repayment and costs associated with early redemption of secured debt. I will return to this later in the presentation. In total, we estimate one-off effects of SEK 23 million, of which around SEK 10 million was weather-related and approximately SEK 30 million related to financial items.
During the quarter, we reported a positive change in property value of SEK 148 million. Of this, SEK -28 million relates to the portfolio divested to Klarabo, while the acquired portfolio contributed a positive unrealized value change of SEK 53 million, resulting in a net positive effect of SEK 25 million from the swap transaction. Overall, profit for the quarter amounted to SEK 277 million. With that, let me turn to how we are driving continued operational improvement.
Our focus remains firmly on improving operational performance and driving long-term value creation. Since establishing Sveafastigheter in its current structure, we have worked systematically to strengthen both efficiency and execution across the organization. The key area has been occupancy, where a more proactive and locally anchored property management approach continues to support lower vacancy levels.
At the same time, we have streamlined the organization to create a more scalable and efficient operating model, allowing us to operate at a lower cost level while better leveraging the size of our portfolio. Investment also remains a central part of our strategy. While new development accounts for the majority of capital deployed, we continue to see strong returns from targeted investments in the existing portfolio, particularly through apartment upgrades and energy efficiency measures.
I will come back to our investment activities shortly, but first let's take a closer look at occupancy and how administrative costs developed during the quarter. Looking at occupancy, the overall trend remains positive, with a clear improvement since the company was established in its current structure. At the end of the quarter, the occupancy stood at 95.5%, up 0.6 percentage points year-over-year, and 0.2 percentage points quarter-over-quarter.
We continue to see further potential to improve occupancy over time, although some quarterly volatility should be expected. As mentioned earlier from this quarter, we include property administration within property expenses, meaning that only central administration is reported outside of NOI. As shown in the chart on the right, we are now operating at a lower cost level compared to historical levels.
With that, let's turn to our investments in the existing portfolio and how they continue to drive profitability. Investments in the existing portfolio continue to deliver strong returns and remain an important driver of value creation. Within apartment upgrades, our long-term ambition is to renovate 2,000 apartments by June 2029. During the quarter, we upgraded 138 apartments.
These projects continue to generate yields on costs well above 6%, confirming the attractive economics in this segment. We are primarily focusing on larger cities where demand for renovated apartments is strongest, and as communicated in connection to our Q4 report, we are targeting to upgrade 400 apartments in 2026. Energy efficiency investments represent another key component. By reducing energy consumption, we lower operating costs, particularly tariff-based expenses, which results in attractive returns. During the quarter, we invested SEK 30 million in these initiatives, achieving yield on costs above 10%.
In addition to strong financial returns, these investments also strengthen the portfolio from both an ESG and a regulatory perspective. In total, investments in the existing portfolio amount to SEK 96 million in the quarter, with the majority allocated to apartment upgrades and energy efficiency measures. The remaining investments were directed toward initiatives supporting NOI growth, such as tenant adaptations.
As previously mentioned, the majority of our investment volume is allocated to new developments, which I will cover on the next slide. Over the past 12 months, we have initiated construction of 208 apartments and completed 403. During the quarter, we did not start any new projects or complete any units, which reflects the timing of our development pipeline rather than any change in activity level. Looking ahead, we intend to initiate further project starts in the Stockholm region during the year.
Sveafastigheter has a high-quality development portfolio, with 88% of projects located in Stockholm County, primarily in attractive micro locations. Demand is particularly strong in well-connected areas, and around 90% of the portfolio is within a 40-minute commute to central Stockholm. This supports both letting, value development, and the potential to realize development gains.
Newly developed residential properties in the Stockholm region remain in strong demand in the transaction market, where we currently see a high level of activity. This creates opportunities for selective divestments and active capital allocation, allowing us to allocate capital to the most attractive opportunities. After the end of the quarter, we agreed to divest the Solhusen project in Nacka, which will be completed during the second quarter. The agreed property value amounts to SEK 438 million compared to an estimated total investment of SEK 354 million.
This represents a project gain of SEK 84 million, with a project margin of 24%. This transaction is a clear example of the value creation in our development portfolio. To support this development activity and maintain flexibility in our capital allocation, we have also continued to strengthen our financial structure. During the quarter, we strengthened our financial flexibility and long-term access to the capital markets by establishing an EMTN program with a framework of EUR 2 billion.
We subsequently issued EUR 300 million of unsecured bonds, while at the same time redeeming EUR 111 million of outstanding bonds and approximately SEK 2 billion of secured debt. The share of unsecured bonds now amounts to 45% of the debt portfolio. The timing difference between issuance and repayment, together with one-off costs related to early redemption of secured debt, resulted in temporarily higher financial expenses during the quarter.
As a result of the refinancing, the average debt maturity increased to 2.7 years and the average interest maturity to 2.8 years, while the average interest rate increased only marginally to 3.30%. Overall, this strengthened our financial resilience and supports continued growth. The capital structure remains prudent, with an LTV of 43%, and we maintain a strong liquidity position.
Total available liquidity amounted to approximately SEK 3.3 billion at the end of the quarter, including SEK 279 million in cash, SEK 1.8 billion in undrawn credit facilities, and SEK 1.2 billion in undrawn secured loans. With that, let's move to our earnings capacity on the next slide. From this quarter, our earnings capacity also includes net interest, leasing expenses, and profit from property management. Net interest has been calculated based on the average interest rate on net debt as of the balance sheet date, including arrangement fees. Capitalized interest has not been taken into account.
Ongoing construction includes only projects expected to be completed within the next 12 months and is annualized as if these projects were completed as 1st of April 2026. Rental value in earnings capacity increased by SEK 23 million compared to the previous quarter, primarily driven by the annual rent adjustments and apartment upgrades. The rent negotiations for 2026 have been finalized with an average increase of 3.4%.
When we entered into the swap transaction with Klarabo, we initially expected a negative impact on earnings capacity of around SEK 2 million, as the disposed portfolio was slightly larger. The transaction was completed in February, and we now see a slightly positive impact on earnings capacity. The line item on the income relates to the external property management assignment, where Sveafastigheter manages a portfolio of close to 4,000 apartments. The associated cost, amounting to approximately SEK 45 million, are reported under central administration.
With that, let me conclude by summarizing our key priorities going forward. First, we will continue to improve operational profitability. Strengthening the NOI margin remains central through higher occupancy, disciplined cost control, and value-enhancing investments in the existing portfolio. Second, we will further strengthen our capital structure. We remain focused on maintaining low financial risk, optimizing our debt maturity profile, and improving our credit profile toward BBB flat.
Third, we will maintain a disciplined and value-focused capital allocation to create long-term shareholder value. In the current market environment, share buybacks are one of the capital allocation alternatives we consider attractive. We will continue to prioritize investments that deliver attractive returns while continuously evaluating alternatives, including selective divestments and potential share buybacks to ensure capital is deployed where it creates the strongest shareholder value.
Taken together, these priorities support our main objective to deliver long-term shareholder value while maintaining financial resilience. That concludes our prepared remarks. Operator, please open line for questions.
The next question comes from Keivan Shirvanpour from SEB. Please go ahead.
Yes, good morning. I have only two questions. The first is related to the divestment that you announced yesterday. First of all, will the divestment have any type of earnings impact in Q2? Maybe could you say something about potential divestments onwards? What are you looking at as potential divesting?
In earnings capacity, the project is included in ongoing construction that will be completed within the next 12 months, and naturally that will be removed when the transaction is completed, and we estimate to complete this transaction in the second quarter. You can find the figures from this project in the report, the project Solhusen.
Yeah. I was thinking about some type of realized value change in that regard.
In total, we have a project gain of SEK 84 million, and some of that gains has already been accounted for previously. You can in the report find how much we have at book value for this project or how much we have in remaining investment, and then compare that to the agreed value in this transaction.
Okay. My second question is related to the financial expenses. You mentioned you have SEK 7 million in one-offs, and then you mention also some temporary effects, in the quarter. Could you first of all maybe quantify these temporary effects? And are you expecting any additional one-offs in Q2 related to financing?
Now, further one-off costs in the second quarter, and we have an over liquidity due to the timing difference between issuance and redemption of outstanding secured debt. That over liquidity, we estimate to a net cost impact of around SEK 6 million. In total, SEK 30 million in one-off related costs to financial expenses.
Okay, SEK 13 million in total then?
SEK 13 million in total, yes.
Okay, thanks. Those were my questions.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Philip Hallberg from Nordea. Please go ahead.
Thank you, and good morning, Erik. Could you just remind us a bit how we should think about the interest maturities in 2027? You have some SEK 4.7 billion at an average interest rate of 1.7%, and I'm just wondering, are the maturities spread out over the year, or are they tilted towards a specific quarter or anything like that?
They are tilted to the third quarter next year.
Okay. Is it mainly fixed loans? It's not derivatives, right?
No. The majority is fixed interest loans.
Okay. Thank you very much. Also, just to follow up on the divestments, are you aiming to scale up your buybacks following the divestments, or are you mainly looking to start maybe new projects? Or what is your current thinking right now?
We initiated a buyback program of up to SEK 100 million in March. Under this program, we have repurchased shares of around SEK 88 million so far. We have some remaining capacity, and we will revert on whether we intend to continue buybacks once this mandate has been fully utilized. As I mentioned in the presentation, we continue to view share buybacks as a highly attractive form of capital allocation at present.
Sounds good. Just to get your flavor, there seems to be a very strong demand right now for newly produced rental apartments, especially in the Stockholm region. Could you be interested in selling on forward funding going forward, or what is your view there?
We are always interested to strike deals that are the most attractive for us. Whether it is to dispose completed projects or by forward funding is a matter of where we create the most value. We are interested to have dialogue in all kinds of transaction that creates value for Sveafastigheter.
Sounds good. Just to get your sense, how do you view the demand for older properties right now compared to new properties in terms of divesting? Is there a demand for older properties?
We see an increased activity in the transaction market for older assets as well. Still, the strongest activity is for new builds in the Stockholm region. We are also seeing some indication of increased activity for older assets.
Okay, super. Those were my questions. Thank you.
Thank you so much.
There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
If you have any follow-up questions, we are of course available throughout the day. Thank you all for listening, and have a pleasant day. Bye-bye