Welcome to the conference call. 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 pound key five on their telephone keypad. Now, I will hand the conference over to the speakers. Please go ahead.
Thank you, and welcome to the presentation of Wihlborgs Q1 2024. The time when change continues, and even though we have now started our 100-year celebration, we have our total focus on the future. The positions we're taking during a weaker time make us feel well-equipped for acceleration, and we might see some light shining at the end of this turn. Regardless of what happens next, we intend to be ready, and we start with a summary of Q1. A new record for new letting in a quarter, SEK 177 million, and net letting positive for 36 quarters in a row. We also see continuous demand for high quality in good locations. Quarterly revenue above SEK 1 billion for the first time. Higher financing cost, but ICR at 2.5x , and we have also seen bond market recovering during the quarter.
The results for the first quarter, rental income increased by 7% to SEK 1,040 million, and we have just looked at rent. The increase was 10%, while service costs decreased. The operating surplus increased by 8% to SEK 780 million, and income from property management amounted to SEK 424 million, affected by higher financial costs. The result for the period amounts to SEK 403 million, corresponding to 1.13 SEK per share, and EPRA NRV is now 19.39 SEK per share. A comparison of the rental income Q1 2023 and Q1 2024. Acquisition and currency effect, +2 million and +1 million, respectively. Indexation, +48 million. One-offs in the early termination, 20 million. Supplementary billing and income from canteens decreased by 15 million.
Completed projects, new leases, and renegotiations, +SEK 13 million. We have signed new leases for the last quarter at a new record level, + SEK 177 million, and the positive net letting for the quarter is SEK 29 million. This is an extremely high activity, and I would say that this period of transformation continues, and we have continued good relations with and find new solutions for our tenants. Also good activity in early April. The new lease with Novo Nordisk in Høje Taastrup for 62,000 square meters is, of course, a great volume in new leases, as well as the termination from Danske Bank at the same property. But it's worth mentioning that our net letting would have been positive also without that deal.
As I usually point out, it continues to be the widespread of many tenants in many sectors that contribute to our long history of positive net letting. We see some figures of higher vacancy in reports from consultants, and I know that we have contributed with positive figures showing lower vacancy in at least some report. So of course, letting success depends on the product, the location, and maybe something else that the tenants ask for. Here are some of the new tenants that we have signed during Q4. Usually, it's a mix of different segments. Healthcare grows both in Denmark and Sweden. Swedencare and Rubin Medical have chosen our area, Medeon, in Malmö. Voyado continues their development with us in Lund, and Murrelektronik have been our tenant for a long time, and they have decided to move more production back to Sweden.
Here we have the net letting in a historical perspective, letting in light green, termination in light blue, and dark blue stacks are the net letting. Now, 36 positive quarters in a row, and this is the second quarter in a row when we actually must expand the scale to make room for the high volume, SEK 177 million in new leases and SEK 148 million in terminations. Only one quarter with a negative number for over 14 years. We will do everything we can to continue like this, but as I also always say, let's keep in mind that a quarter is quite a short time period. Matching 62,000 square meters in and out in the same quarter as we have done now in January is only possible with a very skilled organization.
Here is the list of our 10 largest tenants in alphabetic order. Novo is new on the list. All these tenants are strong customers, and they contribute with 20% of our rental income. Seven out of 10 are governmental tenants. The rental income from public tenants is in total 23%, and they contribute to long-term stability in our cash flow. The rental value, as of first of April, is SEK 4,458 million per year, and rental income, SEK 4,191 million, +6.4%. A good part of that is, of course, indexation. And let's remember that indexation in Denmark and Sweden have been quite different during 2023, approximately 1% in Denmark and 6.5% in Sweden. In Sweden, the indexation is made once a year with October CPI as a base.
But in Denmark, the indexation is made all year round, depending on when the lease was signed. So low inflation in Denmark affect these figures. Looking at like-for-like figures, comparing all the properties we owned a year ago with updated figures, we can see that rental value is up 5.6%, and rental income is up 5%. If we just look at offices in Sweden, rental value is up 6.7% in like-for-like. Let's look at changes in market value of our properties. We started the year with SEK 55,872 million in accordance with our external valuation. We have no acquisitions so far, but invested SEK 470 million.
Changes in valuation amount to -SEK 59 million, and together with currency translation of SEK 467 million, that summarizes to SEK 56.75 billion. The value of the portfolio has developed, as you can see on this slide, since 2005, without raising any new equity. With investments, new leases, and a few transactions we have in 2023 and start of 2024, we've been able to increase the value somewhat, despite higher yield requirements for seven out of the eight last quarters. Now, it's possible that the yields will be flat for a period. Most of all, it's interesting to measure how well we actually perform in relation to these values, and we see this on the following slides. This is the running yield, showing how we perform in relation to the valuation, so not the valuation yield.
For the whole portfolio, the occupancy rate is 93%, excluding project and land, and with an operating surplus of SEK 3.1 billion, that gives a running yield of 5.8%. Fully let, the portfolio would give a running yield of 6.3%. Good earnings capacity in relation to the value of the portfolio. In the office portfolio, the market value is now SEK 46.482 billion, and overall, the occupancy rate is 94%. 96% in Malmö, 92% in Helsingborg, 90% in Lund, and 94% in Copenhagen. Improved numbers compared to a year ago, except from Lund, where we have added two new projects, Raffinaderiet 3 and Kunskapen 1, which are not fully occupied yet. But let's also mention Nya Vattentornet 4 in Lund.
It was approximately 50% vacant when we bought it, and now later this year, it will be fully let. 96% occupancy rate in Malmö is a very high level. The operating surplus from offices summarized to SEK 2,622 million, and the running yield, 5.6%. 6.1% fully let. This also brings stability and resilience. The demand for logistics and production continues to be good. Occupancy, 94% in Malmö, 87% in Helsingborg, 98% in Lund, and 97% in Copenhagen. 90% occupancy rate as a whole, with a running yield of 6.6% and 7.6% fully let. A total value of SEK 7,191 million. A bit lower occupancy in some properties, mostly as effect of projects and changes we do together with tenants.
But we also see that tenants ask for higher flexibility and need changes at a faster pace in this segment. Development of our total portfolio's running yield, 5.8%, is back at the same level as 2015. But we have improved our portfolio significantly since then, so we have a higher quality today. A quick increase of the running yield during the last two years. A catalog of our value and properties in our four cities, 40% of the value is in Malmö, 22% in Helsingborg, 16% in Lund, and 22% in Copenhagen. The massive ongoing infrastructure investments in Denmark continue, and the construction of the Fehmarnbelt Tunnel is one major element. The first part of the tunnel at Rødbyhavn is now actually underwater, and the southern parts of Sweden will benefit from all these investments in the future.
Actually, this investment turned things around a bit. 2.5 hours to Hamburg with train will change things. Also, Letbanen around Copenhagen plans to be open in 2025, and yesterday, the Danish Energistyrelsen announced a large opportunity of 6 gigawatts-10 gigawatts of offshore wind power. All these things will affect Sweden in a good way, and I think that we are becoming more and more aware that we also need to accelerate the infrastructure investments in Sweden. And time for financials. Over to you, Arvid.
Thank you very much, Ulrika. Looking at the income statement, Ulrika, you've already touched upon many of the figures, but to give a little bit more flavor, the rental income at SEK 1,040 million is up 7%. We've had a positive effect on this number of SEK 20 million for early termination fees. During a normal quarter, those early termination fees would be maybe a couple of million or something. But this quarter is actually a significantly higher number at SEK 20 million, so we wanted to highlight that as an explanation to the change in rental income. Operating surplus amounted to SEK 718 million, up 8%.
You could also bear in mind that that's operating costs for snow clearance in Q1 was SEK 5 million-SEK 6 million higher in the quarter than the same quarter last year. So, an operating surplus ratio of 69% for the quarter. Income from property management was SEK 424 million, and as Ulrika mentioned, that is obviously affected by higher financial costs than the corresponding quarter during 2023. We had small negative value changes in properties, SEK -59 million. Positive value changes in our derivatives portfolio, SEK +103 million. And all in all, a profit for the period of SEK 348 million. On the next slide, you see the balance sheet.
The value of our property portfolio has gone up by approximately SEK 1 billion versus 12 months previously, and now stands at SEK 56.75 billion. During the same period, the equity has decreased by approximately SEK 900 million, stands at SEK 22.8 billion. And equity has, of course, in the 12-month perspective, has been affected by paid dividends, and also of course, the negative value changes in the property portfolio, which we recorded in the second half of 2023. The loan portfolio is now SEK 28.7 billion, SEK 1.6 billion higher than 12 months previously. Moving to the next slide and looking at some key figures. The equity assets ratio now stands at 38.8%.
Our LTV is at 50.5%, and the interest cover ratio for the quarter is at 2.5x . On a rolling twelve-month basis, it's at 2.6. EPRA NRV stands at 90.39 SEK per share, which adjusted for dividend, is +2% versus twelve months previously. On the next slide, you can see the historic development of EPRA NRV. And the development over the past couple of years has been rather flat. But you should, of course, remember that the dividends have been paid, and also during 2023, that we had some negative value changes in the property portfolio. Since 2009, we've had an average increase in EPRA NRV of 15% per year, adjusted for dividends.
Looking at the financial metrics in a historical perspective, you can see on this slide that the interest cover ratio on the bottom left-hand side of the slide has come down to 2.6 on a rolling per month basis, as I said. Still, on quite decent levels, compared to the threshold we've set for ourselves, or the goal not to be under 2.0x . And the equity assets ratio is just below 40%, which in the longer historical perspective is a good level for us. And LTV at 50% is also in the longer historical perspective quite a good level. We like also to mention the metric on the next slide, net debt in relation to EBITDA.
We continue to strengthen this ratio slightly versus the last quarter. So this ratio now stands at 10.2x . And we think this is relevant to reflect our cash flow generation capacity to the absolute amount of debt that we have. Looking at our sources of financing, we still have some half of the financing from bilateral bank agreements with Nordic banks. Approximately 40% of the financing from the Danish real mortgage system, and bond financing via our own MTN program and via Svensk Fastighetsfinansiering, totaling approximately 8% of our loans as of end March. I think it's worthwhile mentioning that the bond market has improved considerably over the past few months.
I think it's good for us, and it's good for the Swedish property sector as such, that the bond market is working in a more efficient way than it was a year ago. We have done a few bond issues over the past few months. And the bond issues we've made, having volume basically corresponded to the bond maturities that we've had during Q1 2024. And the latest bond issue in our own MTN program that we made was in March, when we issued a three-year bond at 170 basis points margin. And I would expect that pricing to be, or that the spread should be slightly lower if we did a similar issuance today.
Looking at the next slide, you can see the structure of our loan portfolio split by year and split by interest maturity and loan maturity. The average interest rate, excluding costs for credit agreements, stands at 3.95%, virtually unchanged, versus year-end 2023. We have an average fixed interest period of 2.6 years and an average loan maturity of 5.9 years. Very small changes over the quarter. You can, of course, reflect a bit on the fact that, although the interest rate expectations have changed quite a lot over the past few months, the underlying STIBOR rate has actually not come down a lot.
Just over the past few days, it's come down a bit, but in a 3-month-4-month perspective, the decrease has not been substantial. On the next slide, you can see a description of our interest rate sensitivity, what would happen to our average interest rate, given an immediate change in the underlying market rate, that is STIBOR or CIBOR. And worth noting that looking at how our loan portfolio looks, as of the end of March, an immediate increase of the underlying interest rate of 2.5 percentage points would still give us an interest cover ratio of 2.0x , which is the set target that we've set for ourselves. So we feel that we have a good resilience in that metric.
On the next slide, you can see the historic developments of the fixed interest period and the loan maturity. Loan maturity is being very stable over the past 5-year period. And the fixed interest period at 2.6x is in line with our financial risk management policy. And lastly, on the final slide, important to look at available funds. Unutilized credit facilities, plus liquid funds as of the end of March, stands at approximately SEK 3.4 billion. And in a historical perspective, that is on quite decent levels for Wihlborgs. And with that, I hand the word back to you, Ulrika.
Thank you, and I'll give you an update on sustainability. We continue with our certification program since Q1 2023. The approved certifications for offices in Sweden have increased from 59%- 78%, and these are the properties that have been approved the last quarter. Our goal is that 90% of Swedish offices will be certified by 2025, and now we have also started in a better way in Denmark. Zero carbon dioxide certifications continue to be the best way for reducing climate impact from Scope 3, and we aim for that certification in all new office buildings. Logistic and production takes a bit longer until the certification programs are ready, but we continue with our climate calculations, learn from that, and we have also upgraded our model for climate calculations for all projects over SEK 1 million. Not fully implemented yet, however.
We cannot afford to invest in anything but the best, which means the lowest impact, so that is what creates the highest value tomorrow. We also continue with energy-saving programs and solar power systems. And of course, we cannot help our customers with advice on how to create a good workspace if we don't live up to that on our own. Last week, Great Place to Work announced the best workplaces in Sweden and Denmark, and we were awarded place 15, both in Sweden and Denmark. It's all about my experienced and knowledgeable colleagues. Everybody likes to work with them. Let's go to our investment in progress and a quick overview of our largest projects. During Q1, we have invested SEK 470 million, and it remains SEK 2,711 million to invest in approved projects.
Construction cost continues to improve, and soon, so do market rents. I'll give you an update also on yield on cost in some of the ongoing projects. The largest ongoing project is Bläckhornet 1 in Hyllie, and it follows the schedule well. First completion of the mobility hub in Q4 this year, and for the offices will start in Q4 2025. An update on yield on cost gives 6.2%. In Malmö, we have started the refurbishment of our iconic Börshuset, 6,000 square meters offices, restaurant, and coworking, and absolute top rents in Malmö perspective, which means above SEK 4,400 per square meter as best areas, approximately 60% pre-let and completion in Q4 2025. Posthornet 1, phase two, a new build office at 10,100 square meters, right beside the Central Station in Lund.
Investment of SEK 448 million, including the value of the land, and it's SEK 347 million excluding land. Completion is planned to Q1 2026, and an updated figure on yield on cost after new procurement, levels of rents in ongoing discussions, and some additional areas gives 6.5% or even a bit above. Groundbreaking ceremony is planned to June this year. In Hørsholm, Copenhagen, we invest in a new school for NGG. 25-year lease, 11,600 square meters, and investment SEK 390 million. The building process has started, and completion is expected to end 2025. At Tomaten 1, we are about to complete a facility for Inpac, 6,400 square meters in the first phase, and we invest SEK 137 million, including buying the land from the municipality.
Updated yield on cost, 6.6%, and completion now in Q2 2024. The facility for Nederman, with 20-year lease at Rausgård 21 in Helsingborg, will be completed in Q3 this year. Investment, SEK 420 million, or SEK 370 million, excluding cost for land. And in this project, that also includes a new shelter and considerable amount of environmental decontamination. And we continue with our project for Rollco at Snårskogen 5 in Helsingborg, with a yield on cost of 7.1%. At Sunnanå 12:54, we're about to start the production of 17,000 square meter logistic. 100% pre-let in a 15-year lease, with completion in Q3 2025. Design phase is still ongoing, but building permission is in place.
One of the factors that affects the, the time schedule is access to power supply. Large volumes are necessary for electrical charging of trucks. Yield on cost calculated to 6.4%. Our latest project start is Bilrutan 5 in Landskrona. We include this in our Helsingborg portfolio. Here we will complete a facility for Dachser late this year, a very efficient time schedule, with a 15-year lease and yield on cost, including value of the land, is 6.7%. The profit from projects have been a bit lower during this period of rapid increase in yield requirements, but I think we have been able to adjust quite fast, and the project portfolio today indicates decent levels of profits, also includes some projects with high content on maintenance.
That was some of the ongoing portfolio, and just mention something about future investment. We continue with Amphitrite in Malmö, where we have signed an agreement with Malmö University. After a public procurement act, we will create this project together. We have an architectural competition ongoing together with the municipality to create the best possible solutions for the zoning plan. Time schedule indicates project completion in Q2 2027, approximately 15,000 square meters. And four possible projects in Lund and Helsingborg. Here we can develop some 70,000 square meters in the future. Zoning plans are approved for the first three projects. And some of the office possibilities in Malmö, in the area of Nyhamnen and Dockan, continues to have high attention from us. And the summary again of Q1: new record in new letting again, and net letting positive.
Demand continues for high quality in good locations. Quarterly revenue above SEK 1 billion for the first time. Higher financing costs, but ICR at 2.5x , and bond market recovering. With that, we are open for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Erik Granström from Carnegie. Please go ahead.
Good morning, Ulrika and Arvid. I have three questions, and I think I'll start with you, Ulrika, and the rental market. You mentioned that activity has been very high here in Q1, as well as was the fact in Q4, and we can clearly see that in the report as well. Could you describe a little bit what this transformation is doing and really what tenants are moving for? And could you also say something about the new leases you are doing? Do you feel that those are leases that you're getting from older assets that you don't own? Or is it just that you're retaining your tenants from the terminations that you are getting elsewhere?
Yes, of course, high activity, as you mentioned. I think this transformation that we have been into for a quite long period, that continues. There's a lot of focus on creating the best workplace. The answer how to do that depends on different factors, and of course, different companies come to different conclusions. But if you have the right product with modern offices in good locations, that is an attractive product. That continues. We see different signals from different companies. Some companies, of course, want to decrease areas but with higher quality. We have talked about this before. And we also see a lot of tenants that actually are growing, but high focus continues on the workplace as such. So a different kind of qualities is important.
Yes, we see a movement from older, not so modern, and not so flexible areas. And I think it's likely that that continues for a time. But of course, that segment will also be affected a bit by maybe they can't raise the rents in the same level as the market rent for better locations. So that product might be of interest for other companies that need and are interested in a bit lower cost per square meter. So overall, it's a transformation, and you have to be a part of that very active in this puzzle of moving tenants to what's best for them at the moment, and we have been able to be in that area, and I think that continues.
Okay, and what does that mean for vacancy? Do you think going forward it's fairly stable here at, I believe 7%, excluding projects?
I think if you look at the Malmö market, for example, if we have seen an effect that we now for a period have been a bit more spend a bit more time on actually trying to be really efficient on our areas, that will be met by not so many products, new products going out in the market. So I don't expect that the vacancy will increase in for good products. But of course, for single assets that are not so attractive, that might measure in the total portfolio. But it's still different products and different markets.
So I think as long as we have companies that actually spend time on focusing on good quality in the work areas, if you can provide the market with those products, then, of course, there's an interest for that.
Okay, and moving on to valuation effects here in Q1. You mentioned in the report that pretty much most of your inputs were stable, such as yield requirements and so on. Projects then have a positive effect, naturally. But you also mentioned on sort of the negative side, maintenance costs, and also risk of future terminations. Could you explain, are these related to sort of single assets, or is this something that you've noticed throughout the portfolio?
No, it's single assets, so we have very small adjustments in this quarter. Stable parameters. A few assets in Denmark that we have adjusted a few parameters, but only small adjustments.
Okay, thank you. Then finally, my question is regarding investments. It seems like your pace is pretty much the same as when you started off last year. Do you think that investments in projects and your portfolio will sort of be at the same level as last year, or should we expect something completely different?
No, we should not expect something completely different. I think that we can—we are very happy that we can continue with our projects, and also good that we have increased the year-long cost in a good way. We try to continue with that, of course. And as long as we can continue with our projects, that's a good thing for the future for us.
Okay, thank you. Those were my questions.
Thank you.
The next question comes from John Vuong from Van Lanschot Kempen. Please go ahead.
Hi, good morning. Thank you for taking my questions. Looking at the numbers, your efforts in leasing are partially offset by another quarter of more terminations. Beyond the Danske Bank termination, were these all expected, or are there any bankruptcies in these numbers?
In Q1, we have very few bankruptcies. That number does not stick out versus previous quarters, basically at all. Obviously, we try to be very close to our tenants and looking at different risks. And I would say that among smaller tenants, we need to be a little bit more careful. There are a few more risks of companies not performing well financially. But size-wise, we're basically not very worried.
The change in Danske Bank was expected, so nothing dramatic about that.
Okay. No, that's fair. And based on negotiations, what are your expectations for the remainder of the year?
Is it... Sorry, didn't catch the question.
Looking at your negotiations that you have-
Yeah
... with your tenants, what are your expectations for net leasing or perhaps terminations for the remainder of the year?
I would say that every quarter it's a struggle and a fight and a lot of work to be able to continue to show a positive net letting. But I would still say that we have good chances of continuing to show net letting. There's no guarantee for each individual quarter, but given the type of projects that we have and given the type of properties that we have, I think we are well-positioned in the market to be able to offer tenants what tenants demand in the current circumstances.
I mentioned it shortly. April has started very well, so I'm positive ahead. But also we always have to be aware of things that might happen, but I think many things looks very positive.
Okay, that's clear. Moving to yields, you said that they could remain flat for the year. What are you seeing in the investment market here? Is the bid-ask spread between buyers and sellers closing here?
Yes, I think that we will see more terminations ahead of us, and that the market is getting closer to each other, definitely.
Okay, that's clear. That's it from my side.
The next question comes from Lars Norrby from SEB. Please go ahead.
Thank you. Good morning, Ulrika. Good morning, Arvid.
Morning.
I'm still stuck with this net letting chart here. Been a few questions about that. Let's see if we can have something more, because it's... Well, first of all, don't get me wrong, it's very impressive. You know, 36 quarters in a row, record high net leasing in the quarter, but it's also record high terminations, and it's also a high number in the previous quarter. I think you do touched upon this, but, and, and tried to address it, but looking forward, would you expect that high termination- terminations around these levels, if it's here to stay for the rest of the year? I'm talking about the re- remaining quarters of the year.
No, I don't. Of course, these numbers were affected by Høje Taastrup, the deal with Danske Bank and Novo, of course. So, and we also had some terminations in Q4 that was a bit larger. But otherwise, during the rest of the year, I don't see that we will be on these levels.
Okay, good. Thank you for that. And the second question was, you addressed this yourselves, but the one-off in rental income, which, of course, affects the other numbers as well. Can you say something more about the SEK 20 million? What contract or what contracts, what that maybe you mentioned, if I understood?
I think the largest one was in Denmark. It's more common that if you want to move, you also pay a fee for that. So I think that is a part of it. It's nothing special, but from time to time, we see that, of course.
This quarter, I mean, the number was a bit larger than it usually is. If you go back a number of years, you will find other examples of quarters where we've had even larger one-off termination fees. So, it's the concept is not strange. The size was a bit larger than usual this quarter, so we felt it was prudent to separate it.
Is there anything upcoming in the second quarter or later in the year that will affect the numbers in terms of one-offs that you're aware of at this stage, even though you may not know the amount?
No, no, no known, upcoming one-offs. No.
... Thank you. I'll stop there and leave the floor to somebody else. Thank you.
Thanks.
Thank you.
The next question comes from Markus Henriksson from ABG Sundal Collier. Please go ahead.
Thank you. Good morning, both. I usually ask you about the joint venture earnings, so I'll ask that again. SEK 1 million in Q1, it was SEK 7 million in Q4, and SEK 5 million in Q3. Any seasonal variation or something we should take into account here for 2024? I think what you should expect on an annual basis is probably a number around SEK 7 million-SEK 8 million. And then it can vary a bit between quarters, but that order of magnitude on an annual basis.
SEK 7 million-SEK 8 million? Okay. Then I might-
Yeah
... have misunderstood you last quarter where you said SEK 6 million per quarter, I thought, but maybe it was annually.
Yeah. That's a bit-
All right
... high, I would say. Yeah.
Yes, fair enough. Fair enough. Then we got some question about the investments. I'll try to ask it in another way. It's record high, both the decided investments and investments left, and you're also having record high when we look at kind of small investments. It's around SEK 500 million in total, if we exclude the major projects, and you usually help us a bit with yield on cost in the major ones. So I'll ask, what kind of yield on cost do you have for these smaller investments, and what type of investments is it, and why have they increased in recent years? And of course, your portfolio is larger today, so but there must be some other factors.
I would say that in—if you look at the, there is no regular project, but of course, we aim to combine both maintenance and refurbishment for tenants, so that we can put that into the same project. And our goal is to have a good yield on cost also for maintenance by that. But the result for that is depending on the circumstances, of course. So I would say that I see everything between up to 15% yield on cost and as low as 0.0, if it's only maintenance, of course. But I think we have been able to have a good outcome from projects when we can combine them. So but it's hard to give you a number of...
But if I look at the total portfolio, I feel quite. I think we have been able to. We are not at the same level as we were on project profits, but at decent levels in total, definitely.
I think you-- if you look at our project investments in relation to the market value of our portfolio, I think if you look over the past 3-years-4-years as some sort of average, and you compare that with the 3-years-4-years average ten years ago, we're actually at a lower investment level as percent of the market value than we were.
Yes. Thank you. I think the follow-up there is, I totally understand the reasoning there, Arvid, but I guess the follow-up is: have you seen increased maintenance investment, and is that based on changed tenant behavior? Or is it driven by, say, sustainability investments that you were not doing to the same extent before? And of course, yield on cost could be zero, it can be 15%. But just to get a sense of is this a normal level? It's been increasing. Will it be accretive, or is it more to sustain your occupancy, if I phrase it this way?
Ah! I would say that I think we have improved our skill in both the how we calculate projects and really aim for a good profit with combining things. We are better at also planning maintenance and do it at a... Therefore, we get a lower cost if we do it in a more regular basis, and planned plan ahead. Some projects are, of course, connected to energy efficiency, and we are also improved numbers there when we can do that together with the tenants, so that we both can benefit from the higher energy efficiency. Of course, it's you need to maintenance your portfolio, but I wouldn't say...
I would rather say that we are more efficient, in that, and well aware that if we do things in early stage, it will cost us less... and the tenants will be more happy, also during the contract lease length, so.
Thank you for that. Then, I'm a bit curious about project margins. I don't expect you to give us a number there, but if you start a new construction project today, what type of margin or return is your absolute minimum for an office project or a logistic project? And how hard is it to start those two separate segments? Any help you can give us there?
I mean, of course, it depends on a lot of circumstances. But we of course would like to have at least 20% profit from the project, but it could still be a good choice for us if it's a bit below or more, of course. There was a time where it was easier to get higher profits from the project volume. But we can get things together also today. So if we can start an office project in good location with a yield on cost, of course, I'd like it to be a bit above 6%, but then I think it's a really good project.
Very good. Thank you. Then there was a question about the market. Just thinking about bankruptcies, and we've seen peers affected in the recent quarters. And just looking at your different cities and your portfolio, I would expect Copenhagen to be the one more at risk. And do you see any kind of big difference between Sweden and Denmark, adjusted for Novo Nordisk?
When it comes to credit losses or the market in general?
More the risk going forward of bankruptcies affecting your portfolio.
I mean, so far, we don't see any difference between the four different cities when it comes to credit risks or risk for bankruptcies.
Okay. Last question about the Fehmarnbelt investment. I've noted that Sweden is a bit more passive relative to the other affected countries in these investments. Is that starting to change? So we see that, for example, the southern municipalities are a bit more forward-leaning, and what type of opportunities could that lead to you, or is it kind of status quo?
I think we in Sweden are more aware, and that we talk more about infrastructure investments in Sweden as a whole. It's important for Sweden as a country that we have a functional railway, for example, both for transporting people and materials. And that's not only a question for the southern parts of Sweden. We will benefit from Fehmarnbelt, but it's important that the whole Sweden can benefit from that. And I think I hear more positive and more awareness today, so I hope that we find good solutions for that.
All right. Thank you. Those were my questions.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you for today.
You know where to reach us if you have follow-up questions. Thank you very much.
Thank you.
Bye!