Good morning everyone, Susann Linde here to present the Third Q uarter of 2017. I will go on to next page two, and talk about some important events from the third quarter. First of all, I would like to say that the most important event or thing about Wallenstam is that this third quarter looks like the second quarter and the first quarter, and that is that we are keep on going to create value. That's a lot because of our new construction coming into management. It's more efficient compared to the older properties that we have sold out, and now we can see that in all our figures. That's the most important thing about our quarter three report.
Some other important events during this third quarter is that, as you know, we have all of our commercial properties in the city center of Gothenburg, and we took possession of another property here on Kungsgatan 20 during this third quarter. At the AGM result, we canceled SEK 10 million of shares we are holder of. On closing day, we hold SEK 3.8 million shares. We are also very proud of the awards that we have received during this third quarter. One of them is to be the Listed Company of the Year, and that's a proof of our IR communication, that we are very transparent and give the right information to your interest. One thing that is important for us is that we don't give any information that can be a threat to our business operation.
We also received another award, that's for the Västsveriges smartaste fastighet. It's for the property Kopparhusen here on the avenue. We are self-sufficient there in renewable energy for the whole block. We have thermal heating there, we won this prize because of the minimal energy consumption in this block and the unique stores. Now I go on to page three. We completed one property during this quarter, I will talk more about that on the next page four. It's in Uppsala. It's the property Fjärilen of 145 rental apartments. We started to occupy this property already in February, as most of our properties in new construction, we occupy the properties gradually during a lot of quarters. Now in this third quarter, it's fully occupied and completed.
Last quarter, I told you that we started open our office in Uppsala, and during this third quarter, we also made an agreement with Heimstaden to buy this property where the office is. We will not take over the property until the property is completely refurbished and the property regulation is completed. Now turning to next page. We have also started new construction during this third quarter of total 339 apartments, and it's both in Gothenburg and Stockholm. Now turning to next page six, and start with Gothenburg or, to be correct, it's in Mölndal, Stallbacken. Maybe you recognize the name Stallbacken because this is the fifth project here in this area, and it's the last project here. In total, we will build 590 apartments here.
The first projects are completed, they moved in. It has been a really nice area here. This project is 109 rental apartments, the average size of the apartments are 55 sq m per apartment. They will be completed during 2019. Let's move on to page seven. We are still in Mölndal. It's a project called Rödklövern. It's 89 rental apartments in modular housing concept, which will be completed at the end of this year. The apartments are very small, an average size of 30 sq m per apartment, and it's 1 - 2 rooms per apartment. Now, go to slide eight. We go north to Uppsala, to the project Tre Vänner, which we have started this quarter.
It's 141 rental apartments, and also those apartments are quite small. They have an average size of 40 square meters per apartment. This is close to Fjärilen that I said before that we completed during this third quarter. It's in the Rosendal area, and this project will also be completed during 2019. Now go on to page 9. With all this together, we have just over 120,000 square meters under construction. It's 2,350 apartments, and mostly of them we will keep in our own management, and 50% is co-ops, and 10% is in Helsingborg. As you know, all our properties in Helsingborg will sell to Willhem when they are completed. We will manage them during 1 quarter.
The next two for Willhem to take over is Stengläntan in Mariastaden. As you can see, the occupation has started. Now turning to page 10. Go on to our financial information for the third quarter. Like I said before, I'm very proud of the result. I read Twitter today, this morning, that it was an undramatic result, and that's exactly how it is because we follow our plan and we create value. We have a growing concern that have the right strategy. M aybe a year ago it's thought, many thought that it was quite boring to be such unrisky business, but nowadays it feels very safe and undramatic. Now turn to page 11. Start with the income from property management.
It has increased by 10% compared to last year. I will talk about the net operating income on next page and move on to the admin expenses here on this page 11. It looks like the admin expenses has increased a lot, but in total it has increased SEK 6 million compared to last year because we split the admin expenses on different lines. In the property management, it's SEK 11 million, but in total, we have also the energy management and also the transaction operation. Together, it's SEK 6 million increase, that's mainly because of that we are 16 employees more compared to last year. If you look at the financial expenses, it's around SEK 10 million lower financial expenses compared to last year.
That despite we have a higher interest-bearing liabilities, but with a lower interest rate. We have an average interest rate on closing day of 1.92%. Move on to page 12 and talk a little bit about our net operating income, which has increased by 7%, but like for like it's 10%. If we start with the rental income, you can see that our new construction has coming into management with SEK 49 million rental income. If we look down on the operating expenses, we have SEK 6 million in operating expenses for the new construction. This together gives a surplus ratio totally 89%. That's our strategy to switch those inefficient older properties into this new constructed cost-efficient properties instead.
Go up to rental income again and see on the successful letting of SEK 45 million, because it's not just the new construction that we focus on, it's also our existing properties. Now we have a very good and strong letting market. Our residentials is fully let, and in the commercial properties we have a vacancy rate of 4%, and we have higher or increased rents for every quarter. In total, we have an increase of SEK 60 million of rental income. Let's go down to the operating expenses, and you can see that we have SEK 3 million because of warmer climate. We also have some water damages, which is the main reason for a property maintenance. You can say that the climate has been a zero-sum game.
In total, we have SEK 2 million lower operating expenses despite that we have an increased property holding. We have a more efficient property holding. In total, the net operating income is SEK 62 million better compared to last year, the op surplus ratio is 76% for this 9 months, and it was 74 last year. We think this is very good result and follow our plan. Now turning to page 13. Start to talk about energy. You can see that the energy management is SEK 90 million better compared to last year for the, those 9 first month. As I always say, if you look at the cash flow from the wind turbine, it's a plus result of SEK 38 million because in this income from natural energy operation, we also include depreciations of SEK 74 million.
We make our depreciation with the investment cost as a base, so it's not the written-down value. We have a lot of depreciation. As I said last quarter, our synthetic option scheme expired and I talked about that, and that's SEK 54 million. Regarding co-ops and development property sales, we have for this first this third quarter, we just had a few takeover apartments. It was the last two in N17 in Helsingborg and some other small co-op apartments. We have not realized any property this third quarter. The only property that we have realized this year is building at Helsingborg. Now turning to page 14. The unrealized changes in our investment properties are on the same level as last year.
The completed new construction during this year has a surface value of around 40%. If you look at just July to September, we have almost the same value changes in our new construction. What differ is the one from our existing properties. That's what we think about the future is that the existing properties has coming to maybe not the top, but we are close to the top. We think that where we will have our value changes is from our new construction, and that's why we have this strategy. We have also the impairment of the Sydvind wind turbines, like I said, last quarter of SEK 300 million, and the main reason is the decreased energy certificate prices. In total, the profit before tax is 8% better compared to last year.
Now turning to page 15. Our main asset is our investment properties, and we have properties at the value of SEK 41.1 billion, and it's a growth of SEK 3 billion compared to year-end 2016. We have almost SEK 4.6 as non-cash flow assets because of our ongoing projects, and I will talk about more about those on next page. We have invested just around SEK 1.8 million billion in this first 9 months in our new construction. What's important with this is that we have an unrisky balance sheet. We don't have any expensive building rights which we can't afford to start. This, we feel safe with our portfolio, and I will come back to this later on. Now turning to page 16.
Regarding the SEK 4.6 billion that we have under production, this slide shows how much in each. We have land for future new production of 14% of those SEK 4.6 billion, the main part is for our own management properties for our own management of around SEK 3 billion. Our development properties that we will sell to Willhem and future co-op apartments are 18% of those ongoing projects. Turning to page 17. Equity, total equity is SEK 3 billion higher compared to the third quarter 2016, that correspond SEK 10 per share. As I said, our liabilities have increased compared to last year with SEK 1.6 billion in total. To keep on looking at our financial strength, we can go on to next page 18.
We have a very strong financial position. Like I always say, we have an equity ratio of 45% and a loan-to-value of 43%. Like I said, we have an average interest rate of 1.92%. We secure our interest rate by interest swaps, and it's half of the liabilities, SEK 8.6 billion in interest swaps, which means that we have an interest maturity on average 34 months. You can see there under financing that we are mainly financed through bank loans, 76% of the total liabilities. We have bonds of 5%. One of our bonds expired in May this year of SEK 600 million. Now we have just SEK 900 million in bonds. It's a green bond. We have also commercial papers of 19%.
We work all the time to get the most efficient financing and unrisky financing. Now turning to page 19. Our business plan, it's 1 year left, and I will emphasize that we have 1 goal, and the goal is to create a net asset value growth of on average 10% per year. For this last 12, rolling 12 months, it's 21.44%, and it's a value of around SEK 4.2 billion. It looks very good for the future, and we are very proud what we have created in value during this almost 4 years. Now turning to page 20. I think that no one of you have missed that our press release the 9th of October. It was quite a media storm out there after this.
I would just say for balance some sake, this was not such a big deal for us because we have rentals. It's our core business. Co-ops is just a small part of our operation. We have a unique position on the market here because we don't sell. I said this before, but we don't sell any apartments or properties for co-ops until it's completed. We don't have any agreements with any buyers, so we don't need to pay any damages or something like this, that. We have the organization there to have the management of the property. We also do a backup calculation. For every co-op that we start, we have a backup to handle a rental instead.
For this, say for Orangeriet, it's a good property to get in our property management, which it will give us income from property management, and we don't need to write it down because that's how we work. We will see that we can handle it as a rental if the market turns down. We also get a question often if we will change every co-op that we will start into rentals, but we can't answer that now. We have to look how the market looks like at that moment, and then we decide what to do with that project. This is nothing odd for us, and we were prepared for this to happen. That's why we have this backup plan all the time.
Now it got real. We have just waited for that moment, we can say. Turn to page 21. A short summary of this first 9 months. Like I said before, we can see the effects of the efficient new construction coming into management and show proof of our strategies that this is how we have planned all the time, that our new construction is coming in, and they are more efficient compared to our older properties. We have also a successful letting, and we have the properties on the right places where the tenants, the commercial tenants want to be. They want to pay higher rents to have the possibility to sit and have their office there.
We have a strong financial position, that gives us opportunities in the future. We have an attractive project portfolio without any risky building rights in the balance sheet. We keep on continue to create value. We think bright about the future and now turn to page 22. I'm ready for some questions.
Thank you. Ladies and gentlemen, if you would like to register for a question, please press zero one on your telephone keypad now. If you want to cancel again, you can do so by pressing zero two to cancel. Once again, that's zero one on your telephone keypad to register for a question. We'll now have a brief pause while any questions are being registered. Once again, ladies and gentlemen, if there are any questions, please press zero one on your telephone keypad now. We have a question that is being registered here. It's coming from Philip Hallberg from ABG Sundal Collier. Please go ahead. Your line is now open.
Yes, good morning. I have a question regarding your new production. Do you think your ongoing total production volumes will come down due to the press release you mentioned on the 19th of October?
No. We keep on with our plan and focus on our starting, but we don't start project until we get the right yield. It's not goal to just start. The goal is to create value.
Okay. You don't see the apartments in ongoing production to decline going forward?
No.
Okay. Yes. Thank you.
Thank you.
The next question comes from the line of Simen Mortensen from DNB Markets. Please go ahead. Your line is now open.
T hank you. My first question was actually the same as the first one. I can also ask on the tax laws in Sweden, what is your take on any changes takes on them, or what are you seeing or hearing in the market in terms of transaction sizes? We see that the transaction volumes are falling, and we hear from different sources how, deferred tax are by resident developers now included, or they don't pay for it while commercial players still do. What's your take on that? Also on the interest rate cap, which most likely will come. It will look in my mind that it will benefit a lower LTV in terms of risk reward. Will you position your balance sheet accordingly, over the years to come based on that?
Yes. Good morning. About the first one, Wallenstam has another position compared to maybe others because we invest in our new construction and we are not on the transaction market that much. We don't think that this proposal is the worst. It's the interest deduction proposal. What we think about the first about packaging, the worst thing about that is if the land acquisitions would be an effect that could have an effect of the new construction. But for Wallenstam sake, we are not in the mood to sell now because we have the property holding that we want to own. Regarding interest deduction, we went to the government with a reply on the proposal.
Of course, we will count on how what's the best for us. It will be terrible for the whole Sweden if this will be true. I personally don't think that this proposal will go 100% to be true. How it will end, I don't know. Like I said before, we work with every risk, and this is a risk as well. We check what we can do to get the best result out of it.
Also just another question. How has your take on the historical correlation been between rental apartments in Sweden and tenant-owned apartments? There is, of course, a natural correlation between the, you can convert, right? But how do you think we'll continue to see if we see a continued weakening in the tenant-owned apartment prices, how might that impact your valuations? How much of the valuations you have are based on the conversion effect?
Yes, you mean the co-ops?
Yeah.
You can say that we don't have so many. Now we have 15% of the total volume in co-ops, and it's no big deal for us to switch into rentals. If this is what we saw in Stockholm, in the beginning of October, if this is permanent, we don't know. It can be just temporary because you are unsecure as a buyer, maybe in one month, maybe it can be the same market again.
Have you seen some higher demand in rental apartments giving that consumers are afraid of tenant-owned apartments or co-ops?
Yes, that's correct.
The last few months.
You understand how it works because that's how it is. If the demand goes down for the co-ops, the demand for the rentals goes up. It's already a huge demand. You have 590,000 in the queue in Stockholm, and our own queue in Stockholm is more than 30,000 unique. It's a huge demand. For our core business, yes, that's why we are not worried because we have such a demand for our product.
Thank you. That was all my questions.
Thank you.
As there appears to be no further questions registered, I'll hand back to the speaker for closing comments.
We have no questions on the email either. I thank you for listening and call me if you have any more questions. Thank you.