Welcome to the Wihlborgs Fastigheter Q3 2022 presentation. Afterwards, there'll be a question and answer session. Today, I'm pleased to present CEO Ulrika Hallengren and CFO Arvid Liepe. Please begin your meeting.
Thank you. Welcome to the presentation of Wihlborgs Q3 report 2022. In turbulent times, the strategy and the ability to have a long-term perspective on a number of parameters is tested. We continue to focus on our strong cash flow, building new and even stronger relations to our customers, and keeping our financial long-term strategy. Future development is always difficult to predict, but we see that our letting has never been as strong as now. When we summarize the net letting for the 12-month period, we reach a new record level of SEK 154 million, and that is our future earnings. Worth to keep that in mind. Let's go ahead straight to our report. A summary of Q3 2022. Strong letting also in Q3. Normally a quarter with lower activity, but we and our tenants have managed to keep up the tempo well.
Continued increased rent levels, as +6.1% higher rental value in like- for- like, and +7.4% in rental income like- for- like. Means also that vacancy continues down. Record high rental income for one quarter, SEK 848 million. Stable balance sheet and continued access to financing. The results for the first nine months of 2022. Rental income increased by 7% to SEK 2,447 million. Worth mentioning that we in 2021 had a one-off effect of SEK 64 million. Adjusted for that, the increase is 10%. The operating surplus increased by 4% to SEK 1,729 million, and income from property management increased by 4% to SEK 1,425 million.
The result for the period amounts to SEK 1,998 million, which corresponds to SEK 6.50 per share, and EPRA NAV increased to SEK 89.28 per share, which is +16% since Q3 2021, adjusted for paid dividend. A comparison of the rental income between first nine months of 2021 and the same period 2022. We had the one-off effect, SEK -64 million. Acquisition, SEK +42 million. Currency effect, SEK +20 million. Income from canteens in Denmark, SEK +13 million. Higher debit property tax, +SEK 10 million, and indexation, SEK +40 million, and other increase from new leases, higher rents, and lower vacancy, SEK +96 million. On the cost side, we continue to struggle to reach break even at our canteens in Denmark. Very good with more tenants at the office and therefore higher income, but costs are also up due to higher prices.
Energy costs are also up, and at year-end, we can compare the preliminary debit to our tenants with the total cost for the year and do the regulation as we always do once a year. We know for a fact that compared to 2022, preliminary debit will be higher for 2023. Overall, a good growth in rental income, and this is before the indexations coming up in October 2022, setting the new rent levels for 2023. We have signed leases, new leases for the quarter of SEK 40 million and SEK 202 million for the period. The positive net letting for the quarter is SEK 80 million and SEK 87 million for the period. The activity has been good also in Q3, as mentioned, almost better than a normal Q3, whatever normal is these days.
It's particularly satisfying that we see that same picture for all our four cities. As I always say, it's in the large number of many growing tenants from different sectors that build these figures. Here are some of our new tenants, that we have signed during Q3. A mix of different segments. Inpac at Tomaten in Lund, where we will build a new facility for them. Dogman in the city center of Malmö. Kjell & Company, a very small shop at Helsingborg Central Station, but with high turnover per square meter. Redarka in the med tech sector at Medeon in Malmö. Burströms, working with high-quality second-hand in Malmö. IO Interactive from the gaming industry. Good and interesting mix. Here we have the net letting in a historical perspective. Letting in light green and termination in blue, and dark blue stacks are the net letting.
We have 30 positive quarters in a row and only one quarter with a negative number for over 14 years. We keep up the good work, and together with our customers, we create new opportunities. One quarter is a quite short period to measure, and it does not give any good direction of trends. What happens if we look at a bit of a longer period? Here we have the net letting summarized for a rolling 12-month period, and here we can see that we have never had such a strong and high level of net letting before. SEK 154 million last 12 months. As I mentioned in the beginning of this presentation, this is our future income. A list of our ten largest tenants in alphabetic order. We have seen them before. They are very stable here.
They contribute with 20% of our rental income. As you all can see, eight out of 10 are governmental tenants. The rental income from public tenants continues to be high, 23%. This of course creates really a strong base for stability over time. Rental value is now SEK 3.757 billion per year, and rental income, SEK 3.451 billion, +15.4%. A good signal of growth, partly a result of our successful project portfolio, but also being close to the market, knowing the tenants, and being willing to make room for their growth and demands for upgrading their workplace. Sometimes we move around in several stages to make changes possible.
Looking at the like-for-like figures, we can see that rental value is up 6.1% and rental income up 7.4%. Again, beating our ambition to exceed index by at least a percentage point. This is before indexation from this year in ongoing leases in the Swedish market. Some of the leases in Denmark have been indexed. Vacancy will continue to improve as a result of positive net letting. A summary of our office portfolio. The market value is now SEK 44.294 billion, and overall, the occupancy rate is 93%. It's 95% in Malmö, 90% in Helsingborg, 93% in Lund, and 92% in Copenhagen. Remember that we also bought some vacancies since last report, but still improved numbers.
The operating surplus from offices summarized to SEK 2,207 million, and a running yield of 5%. Worth mentioning again, running yield is not the same as valuation yield. Maybe you can say that we actually perform better in our portfolio than our appraisers' expectations. In the valuation method, there are, for example, calculation method models for future vacancies. We work with our properties so that vacancy should decrease rather than increase. When our vacancies increase in the property stock, it's usually because we have bought something with vacancy or emptied a property and created vacancy for development. That's a way to grow. The demand for logistics and production continues also to be good. Occupancy 94% in Malmö, 91% in Helsingborg, and 94% also in Lund and Copenhagen. 92% as a whole.
With a running yield at 6.2% and a total value of SEK 6.791 billion. For the entire property stock, the occupancy rate is 93%, excluding project and land, and an operating surplus of SEK 2.625 billion, which gives us a running yield of 5.1%. Total value of the portfolio, SEK 54.488 billion. Changes in market value of our properties. We started the year with SEK 50.033 billion in accordance with our external valuation, which once a year values 100% of the stock at the same time. We have acquisitions of SEK 2.369 billion. We invested SEK 996 million. Divested a small piece of land in Helsingborg for SEK 1 million, and changes in valuation amounts to SEK 412 million.
The increase in value comes mainly from new leases. Expectations of inflation during 2022 and 2023 have gone up, and we have increased the yields requirements somewhat. These two changes basically offset each other in the valuation. Same take as in Q2 and in line with discussions we have had with our appraisers. Together with currency translation of SEK 679 million, that summarizes a property value of SEK 54,488 million . The value of the portfolio has developed, as you can see on this slide, since 2005 without raising any new capital. A bit flat 2020 due to the large divestment in the North Harbor of Malmö, but now back on track and not with any help from lower yields. A catalog of our value and properties in our four cities.
40% of the value is in Malmö, 23% in Helsingborg, 16% in Lund, and now after the last transaction, 21% in Copenhagen. We really like the mix of these main cities in the Öresund region. Here, people have the possibility to live and work under good circumstances. The differences between the cities are large enough for them to have their own character, but at the same time, so close that people can commute between them efficiently. The labor market between Denmark and Sweden can improve further. A sort of storytelling example is that one of the terminations we had in Denmark last quarter was a job placement office. There are jobs to apply for, but no applicants. No space needed. In Sweden, there are still people to hire, and a better match between these needs can improve the market further. What about acquisitions?
We have during Q3 acquired Pilbågen six and Snårskogen one in Helsingborg, 25,000 sq m for a property value of SEK 333 million. The transaction was made July 1st. Good location and more to be done for the tenants, which will improve the operating result for the properties over time. July 1st was also transaction day for Lersø Parkallé 107 in the northern part of Copenhagen. Small piece, 3,600 sq m with an operating cash flow of some SEK 3 million. The plan is to invest a bit, make it more energy efficient, and add some extra modern touch. By that, we can calculate to get a higher operating surplus. Not the largest deal, but a good example of how we can add value.
The largest acquisition is the Hedegaardsvej 188, and Amager Strandvej 390. It's in total 53,000 sq m in South Copenhagen. A new area for us, closer to the city center and just beside two metro stations, and we can offer good parking as well. The location is also very close to Copenhagen Airport and the Öresund Bridge, a good spot to be. Modern and refurbished premises, but 25% vacancy where we can contribute. Further investments are planned in the area which will further strengthen the activity here over time. In that, the date of transfer was first of September, and we fully financed this acquisition via the Danish mortgage system. The operating surplus and the vacancy that we have bought here impact the result for one month in Q3.
A few leases have been signed since we agreed on the transaction, and we now also have offers and discussions for almost all of the remaining area. Our belief is strong that we can improve results here. Over to you, Arvid, for finances.
Thank you very much, Ulrika, and good morning, everyone. Looking at the Q3 income statement, isolated, I'd like to start to highlight that comparing with Q3 2021 is kind of a tough comparison, considering that that was the quarter when we got the early termination payment from Danske Bank of SEK 64 million. Nevertheless, we increased our rental income in the quarter to SEK 848 million, +4%. The operating surplus amounted to SEK 594 million. That is down 3%. Adjusted for the early termination, Q3 2021, it was actually up 8%. We have slightly higher costs, where I'd like to highlight a couple of items. We have a higher property tax in Q3. Versus Q3 2021, it has increased by SEK 18 million.
SEK 12 million out of those relate to new taxation values, which have been established during 2022, and which have been charged, all of them in Q3. The SEK 12 million relate to Q1 to Q3, or for three quarters, that is. In addition to that, in Q3, we've had higher energy costs, compared to last year. The increase in energy cost has been approximately SEK 22 million, depending on higher presence in the offices, warm weather leading to higher consumption, and also, of course, higher prices, as we are all aware. The income from property management amounted to SEK 475 million, after a financial net of SEK 98 million during the quarter. With change of value in properties SEK +40 million in the quarter.
As Ulrika touched upon already in Q2, we increased the assumptions and the valuation models regarding the index, and also increased valuation yields somewhat. We have in Q3 continued to increase the index slightly more than in Q2. We've also pushed up valuation yields a few basis points with a roughly a net zero effect of those assumption adjustments. With a change in value of derivatives of SEK +59 million due to continued rising interest rates, as you are all aware. All in all, a profit for the period of SEK 449 million. Moving to the balance sheet.
I'd just like to highlight that during the past 12-month period, the value of our investment properties has increased by SEK 6.7 billion. In the same time perspective, equity has gone up by SEK 2.8 billion, and our borrowings have increased by SEK 3.8 billion. Using the balance sheet numbers to compute some key figures on the next slide, we have an equity ratio which now stands at 41%. We have an LTV of 49.2% and an interest cover ratio of 6.6x. The EPRA NRV now stands at SEK 89.28 , up 16% versus 12 months previously, adjusted for dividends.
On the next slide, you can see the long-term development of EPRA NRV, and since 2009, we've had an average annual growth adjusted for dividend of 17%. Looking at the financial ratios, where we've set targets for ourselves and which we obviously monitor on a quarterly basis, the interest cover ratio, as I said, at 6.6x has gone down somewhat, but from, of course, very strong levels of just over 7x . Our equity ratio, over the past five-year period, as you can see in the graph, has gradually gone up, although it has gone down slightly over the past couple of quarters, to 41%.
Our LTV in the same way has, in a five-year perspective, gradually gone down from around 55% to well below 50%, and we're still below 50% at 49.2%. On the next slide, you'll see our net debt to EBITDA, which we feel is a better metric to look at financial stability versus looking at the LTV. Our net debt to EBITDA as of end Q3 2022 stands at 11.0x. Further, looking at our sources of financing, that has changed slightly during this quarter. We have, during the quarter repaid bonds which have matured to a value of SEK 846 million. After that, the proportion of bond financing in our loan portfolio is 10%.
As we have over the past many years, we rely on bilateral bank agreements, now accounting for 50% of our financing and the Danish mortgage system, which now accounts for 40% of our financing. We're all aware that the bond market is not functioning in a very good way at the moment. The bilateral bank market continues to function and in particular, I'd like to highlight that the Danish mortgage system functions as normal, so to speak, with basically no change in access to capital and basically no change in margins either. That's worth keeping in mind.
Looking at our loan portfolio, you'll see that the average interest rate in the portfolio is now 1.7%, 1.72% if you include costs for undrawn facilities. We have approximately SEK 1.2 billion in unutilized facilities. The average fixed interest period is at two point two years, and the average loan maturity at six point one years. On the next slide, you can see a graph showing basically our interest rate sensitivity, as our loan portfolio and our interest rate swap portfolio look like at the end of Q3. The graph to the left shows that if STIBOR momentarily increases by 2 percentage points, our average interest rate would increase by 1.1 percentage point.
That shows you the sensitivity in our average interest rate. In the right-hand graph, you can see a simulation of the interest cover ratio given a change in STIBOR. Our goal for the interest cover ratio is not to be below 2x , and we can actually cope with a 5 percentage point increase in STIBOR before the interest cover ratio goes down to 2.0x. The fixed interest period and the loan maturities, in a five-year historical perspective, you can see on these two graphs.
The fixed interest period is gradually going down, but we continue to work with the financial risk management policy that we established a few years back. Which basically stipulates that a certain proportion of interest maturities shall be hedged during zero to one years, one to two years, two to three years, et cetera. On the next slide, which I believe is my last slide, you can see the available funds, that is our unutilized credit facilities plus liquid funds, as of end Q3. It now stands at SEK 1.5 billion. It has decreased, as you can see from last quarter, due to bond repayments of SEK 846, as I mentioned previously, but also that we've made, particularly the acquisition of Amager Strandvej and Hedegaardsvej in Denmark, which has affected available funds as well.
We're confident with the cash flow generation capacity that we have that this decrease does not in any way jeopardize our ability to finance ongoing expansion. Thank you very much, and over to you again, Ulrika.
Thank you. Even if that was your last slide, I know that you will come back on the question part.
Hope so.
Yes. I'll give you a short update on sustainability. Of course, strong financing is a very important part of that, but we also have some extra information, of course. First, we continue with our work to classify our office portfolio in Sweden according to Miljöbyggnad iDrift. These are some of the properties that we have succeeded with this year. We will not reach the 80% goal of the total office portfolio this year, but we will keep up that high tempo we have now and reach that goal in 2023. After that, we will just continue in the same speed. The lowest climate impact will always be to use buildings that are already built. Another important action is to continue with energy-saving projects.
Last report I mentioned our special designed compressor and reversed heat pump, where we can exchange needs of cooling and heating in a building at a very high levels. We continue with that model and have now installed that in two additional buildings, Neptun six and Sankt Jörgen 21, saving over 50% energy. These buildings were good ones already before. This extra reduction of 50% makes them very good, I would claim. Energy cost has been very high lately, and there is a large correlation between high consumption and high price. What we have seen is a preparedness, both from individuals and companies, to take real action to save energy. Some of them because they have to, and some of them as a way of contributing to lower cost for the neighbor.
If we can cut the highest peaks, the price per unit will go down. We can install different maximum power equipment and also allow lower temperatures in collaboration with tenants to reduce their cost for energy. Of course, we also invest in several new solar cells projects. Sometimes work also pays off in official data. This week, we got the announcement that we have been classified as a global sector leader in Listed Diversified Property Companies by GRESB, an improvement from 72 to 91 points in three years. It's an important step that we are able also to explain some of the things we are doing, and of course, we are happy to get some credit for that. Most of all, I'm extremely proud to get the opportunity to work with all the people at Wihlborgs that take these steps to improve what we do every day.
That's true joy. Another important sustainability measure is our customer satisfaction index. The result from some weeks ago shows a clear improvement from 75 to 78, and now we get a third place in the category Big Companies in Sweden. Did I mention that I was proud to work with my colleagues? Our customers like them too. The last one on this theme, this is also news of the day for the Wihlborgs staff. We are once again certified as a Great Place to Work, both in Sweden and Denmark, and we improve our results to 86% as a total trust index. The employees at Wihlborgs also seems to be being proud of being a part of Wihlborgs.
I'm fully convinced that these factors are connected, and I also know that when we are proud to do our work and help our colleagues, we can also transfer that knowledge and help our customers to also create their best workplace. That builds productivity and better results, also for them. Another important part of our growth is, of course, our investments. Let's go to them. We have in progress. We have so far during 2022 invested SEK 996 million in ongoing projects, and it remains SEK 2.385 billion to invest in approved projects. In total, over SEK 3.5 billion in ongoing projects. Overall, the projects in production generally meet both schedule and budget forecasts, with the same exception as in Q2, Raffinaderiet in Lund. Otherwise, despite the troubled world, we are actually quite protected from effects of that in our projects.
We have also, during this time, with risk of high cost, worked very closely with our contractors and tenants, finding solutions to stay in line with budget and time schedule. We expected to see a stop of the increase of cost in the building industry later this year, but I was a bit surprised that we got these calls already in August from contractors offering to do their math again. A quick review of our largest projects. The largest one is in production, is Pulpeten five in Hyllie, named Kvartetten, as a connection to the building's four different facades. SEK 804 million, including VAT for the part where Trygg-Hansa is our tenant. Return on investment 6%, and the project includes 16,000 sq m lettable of floor area, and the highest certification standard with Miljöbyggnad Gold, WELL, and zero carbon dioxide.
85% pre-let, and completion will start in Q2 2023. The rest of the tenants will move in during 2023. Also in Hyllie, Blackholmen one, the project we call Vista. This building will be the new entrance from Copenhagen to Malmö, a large mobility hub with 400 parking spaces, and on top of that, there will be 16,600 sq m offices and restaurants. With no other vacancy in the area and Kvartetten almost filled up, the timing is good to start this project also, since there will be a long construction period. Procurement is still ongoing, and at the moment, it's a good time to meet the timing in the market also when it comes to building costs. Estimated completion in Q1 2025, but the mobility hub will be ready earlier. In total, at least 5.7% yield on cost.
Raffinaderiet three in Lund will also be state-of-the-art offices right beside the central station, but a delay and higher cost is expected. First tenants can move in in Q1 2023, and then will the project continue at least six months. Conversion projects in old industrial buildings can come with surprises in several ways, but the result will be very good. We see also that we've signed leases at high rent levels. As said before, 5,800 sq m offices at best location might be worth some extra patience. Also in Lund at Science Village, right between the research facilities MAX IV and ESS, we are in full action with our project space, where Oatly will be the main tenant with a research and development team, and we have more building rights just beside this one.
We invest SEK 244 million, and the building will be completed in Q3 2023. Continues to follow the plan very well. This will probably be our second zero- carbon dioxide certified building. Posthornet one, phase two, new build office of 9,90 sq m right beside Rausgård in the central station in Lund. Investment SEK 448 million, and completion is planned to Q4 2024. Procurement is ongoing, and we will see good results from that. An industrial project in Lund, which is not the most common, but at Tomaten one, we will build a facility for Inpac, 6,400 sq in the first phase, and we invest SEK 137 million, including buying the land from the municipality. Yield on cost approximately 6.5%.
This project also gives us an opportunity to continue our development in Västerbro in Lund. Good combination. For Nederman, with a 20-year lease, we have started a project of 25,000 sq m at Rausgård 21 in Helsingborg. Investment SEK 420 million, and completion in Q1 2024. A really long-term investment that also gives a good boost to the surroundings of this building. In Helsingborg, we also built a multi-tenant logistics project at Hökärna 13, 65% pre-let, and both phases have now started. Completion starts in Q2 2023. At Snårskogen five, also in Helsingborg, we build a facility for Doka, 2,200 sq m. Investment SEK 60 million, and completion in Q1 2023. A large ongoing portfolio, but let's also mention something about future investment. Here are four possible projects in our three Swedish cities.
Vetskapen one, just beside Kunskapen one at the Science Village area. At Ideontorget, we can build approximately 16,000 sq m just beside the tram station. Kulissen seven, offices in the city center of Helsingborg. At Nårboland three, we can offer 8,000 sq m gross floor area in the Tången area. Zoning plans are approved for all these projects, and we can start when we have the right customer. A few other possibilities from the industrial and logistics segment. Plåtförädlingen 15 and 18 in Helsingborg. Bilrutan five in Landskrona. We also have more land in Landskrona, close to Bilrutan, where we can continue with further industrial and logistic project at Örja Pedalen, for example. In Sunnanå in Malmö, where we have built for Region Skåne and VHB, we can add on 17,000 sq m logistic or production.
If I would take a guess, I think that we will see one or maybe two projects from this slide on the next ongoing phase. The planning of Nyhamnen continues, but the municipality still struggles with overall infrastructure planning. However, we can continue with our design and planning for projects in line with ongoing zoning plans. For example, Smörkajen, a design for 13,000 sq m. Kranen 15, you have seen this before, just at the entrance of the Dockan area. Patience is an important ingredient in zone planning, but we will get there. Together with JM and Peab, we also continue our joint venture for new zoning plans in the Dockan area. There will be both workspaces, school, and housing in a good mixture. Västerbro in Lund, as I mentioned, where Impact is leaving for Tomaten.
The work with the zoning plans continues, and we can develop approximately 70,000 sq m in this area. We continue to find and create new opportunities. Here is an image of possible development at Slakthuset. We own the land and have planning permission for housing, but we think the area needs a higher density and will work for that. Offices at best location, of course. The headline of this report was that workplaces continue to deliver results. We of course, practice that conviction in every step we take. Let's summarize Q3 once again. The strong letting continues, as well as increased rent levels. Record high rental income for one quarter and stable balance sheet and continued access to financing.
Even if we look a bit blurry at this picture, we are now open for questions and promise to answer as clearly as possible.
Thank you. If you wish to ask a question, please press zero one on your telephone keypad. Our first question comes from Markus Henriksson at ABG. Your line is open.
Unfortunately, we cannot hear anything.
Can you hear me now?
Yes. Loud and clear.
Perfect. Sorry. That was so wrong on my end. First off, you never mentioned the valuation yields what you have increased here. For CPI assumptions, could you give us the figure for Q2, Q3, and 2023?
In Q2, we raised the CPI assumption to 6%. We've increased it another 1.5% approximately, relating to income in 2023. We've changed that upwards slightly. Valuation yield, we brought it up 15-20 basis points in Q2. In Q3, the change has been roughly 10 basis points.
Thank you for that. I didn't clearly get for 2023, what CPI assumption do you have in the valuations? Do you have 2% or 3% or?
I think it's 3.3%.
Yeah.
On energy cost, you highlighted increased around SEK 30 million, excluding acquisitions. Could you give us how much you are able to transfer to tenants?
Yes. I'll try to explain how that works. I mean, the comparison versus last year is of course relevant and part of the truth. We charge our tenants on a preliminary basis a certain amount for the supplements that they are supposed to pay, for example, for energy, but also for potentially other things. That preliminary charge is basically set before the year, and it is evenly spread over the quarters. After the year end, we check what the actual consumption has been, what the actual price has been, and we make an adjustment to reality of the preliminary charges. That is how we've always worked and how we continue to work.
Depending on what happens in Q4 with prices for energy, with volumes for energy, et cetera, I mean, we don't know what the annual adjustments will be. Which means that we have not taken that into account in the income in Q3. To relate to full- year figures for 2021, just to put things a little bit into perspective, looking at that full- year figure. Approximately 90% of all our energy costs were passed on to tenants.
Thank you for that. Do you see any hindrance why it would be much more below that 90% figure, when you are doing your final calculations for what the tenants should pay?
I mean, the system will work with this the same.
Very clear. Then a bit on the share of leases with index clauses. Could you highlight any differences between Denmark and Sweden, and also highlight the share in rental income that is not affected by index, for example, service income that you split up in the report?
Indexation works slightly differently in Denmark and Sweden. In Sweden, I think we're all well familiar with the October CPI figure is the most important figure. There are, of course, examples of a few contracts also on the Swedish market, which do not have full indexation. The vast majority of all our contracts have full indexation relating to October CPI taking effect from the following 1st of January. In Denmark, you also have a corresponding indexation, but the timing of the indexation relates to when the contract is entered into. Indexation can actually take place in different contracts at different points in time during the year. The largest proportion of Danish contracts' indexation will take effect in January.
We have, and of course, a number of contracts where indexation takes effect gradually during the year.
Very clear. Could you also highlight a bit if we look at the service income, where I assume that you won't be able to lift with CPI. Do we have any other income in top line where we should be a bit more cautious in our index assumptions?
Apart from the service income, no, not really.
Perfect. Those were my questions.
Thank you. Our next question comes from Erik Granström at Carnegie. Your line is open.
Thank you very much. Good morning, everyone. I would like to start off with passing on cost to tenants and then but moving on towards the property tax situation. You mentioned that you had a bigger impact in Q3 because of the fact that you actually paid for most of 2022 up until this point. How is that passed on to tenants? Has that already taken place, or is that something you do on a yearly basis as well?
No. That has taken place, and that has affected both income and costs.
Okay. Cool.
The SEK 12 million which the new property taxation, the effect of the new property tax values, the SEK 12 million have affected the costs in Q3, but basically also the income. I'm not quite sure. I believe the number on the income side was probably SEK 10 million or so.
SEK 10 million.
Because we can't pass on 100%.
Yes. SEK 10 million.
We have some vacancies. We have some, well, et cetera.
Yep. Clear enough. One way of looking at the energy cost situation was obviously that the NOI margin printed in Q3 was clearly lower than last year. On a yearly basis, if we look forward, do you see any reason why your NOI margin for next year should be significantly lower or anything different from the 72% that we saw in 2020 and 2021?
Big picture, no. I mean, when property tax increases, it basically erodes the surplus margin slightly. When income from our Danish canteens increase, it basically erodes the surplus margin slightly. I mean, of course, you have a few small effects. Big picture, no. We should be able to maintain the surplus margin.
At the same time, you're also completing projects also.
Correct.
Yeah. Okay. Speaking of sort of coming into the projects, you mentioned the Blackholmen in Malmö. You're doing the procurement now. I believe you mentioned a yield on cost on 5.7%. I assume that's based on the SEK 884 million investment you're expecting. How sure are you of sort of maintaining that cost level? Is this in conjunction with the discussion of the procurement already, or is it based on a sort of estimate of what your production cost will end up?
Of course, we make an estimate when we made the decision to start the project. Now we can see that the contractors gives us offers in line with that. Fully convinced that we will reach a good project there, and also with actually higher rents possible than we have calculated with.
Okay. Thank you. I have a question. You, Ulrika, mentioned the fact that you always aim for having a like-for-like that's at least a percentage point higher than inflation, and you're maintaining that at this point. Obviously, next year is gonna be a little trickier because inflation is, and CPI is gonna be higher. Do you still think it's possible to aim for a like-for-like of more than 1% above CPI?
No promises, but we will do everything we can, of course.
Okay. Thank you. My last question was regarding the unutilized facilities, Arvid, that you mentioned of SEK 1.2 billion. You also have about SEK 1.2 billion maturing next year. Could you tell us something about how you plan to handle your maturing debt for 2023 and perhaps also 2024? Is this to a vast extent bank maturities that you simply expect to push forward and renegotiate? Or how is your thinking in terms of maturity?
I mean, no. Regarding our bilateral bank agreements, we most often have yearly renegotiations and prolongments of those. The signals from the banks are basically positive in the way that they say that they are happy to not only continue the relation with us, but also happy to expand their relation with us if we so want. From that perspective, I think the situation is very stable. You should also remember that we continue to generate a cash flow, which is basically the foundation of our business.
Regarding the bond market, I believe we have SEK 166 million maturing in Q1, and we have the next maturities in Q3 2023 of SEK 400 million or something. If need be, we will repay those bonds as we have repaid bonds in Q3 this year. Hopefully, the bond market will start to function again. I mean, we've been active in the bond market since 2014, I believe. We've always had the aim to continue to have the bulk of our financing from bilateral bank agreements or the Danish mortgage system. But the bond market is a good complement as a source of financing.
Now we're down to 10% bond financing in our total loan portfolio. I think that's a reasonable level to be at. Hopefully, the bond market will function a bit better again so that we can continue to be active for a smaller portion of our financing in the bond market. If it doesn't, we're quite confident and comfortable with the bank relationships that we have.
Okay. Thank you very much. Those were my questions.
Our next question comes from Eleanor Frew at Barclays. Your line is open.
Presentation. Firstly, on your interest rate sensitivity, I recall previously a 2% rate rise was a 1% increase. Now it's 1.1%. I know that's minor, and of course correct me if I'm wrong. Has your fixed exposure decreased, or is that just a more accurate calculation?
No, the proportion of interest rate swaps has gone down slightly during the quarter, and time has also elapsed, so to speak.
Do you know the overall proportion of your debt floating now then?
Well, we have, is it SEK 10 point something billion of interest rate swaps? Hang on a sec. As specified in the report, we have interest rate swaps of SEK 10.327 billion. We have, in addition to that, some fixed- rate loans in Danish kroner as well. I don't have that number in my head, to be frank, but that has been taken into account in the interest rate sensitivity calculation.
Cool. Thank you. Next one. Yesterday, Castellum said they were downsizing their development pipeline, given increased costs on materials and funding. Am I right in saying you're less concerned than them, and what's making you more confident on developments in the future?
I didn't quite catch the question. Was it on our future development projects?
Yeah. What's given the increasing confidence over your development pipeline than Castellum yesterday, given they downsized yesterday?
Who was less confident regarding development?
Castellum.
Okay. Tricky to comment on their opinions.
I mean, they're probably getting the same questions than you guys now.
Well, let's say that we see opportunities in our market. We have the customers, and we know our market. We know when we think it's the right time to continue development, and I see no reason why we should stop with our investments. That's our view.
Cool. Thank you. Historically, I know you've had this level of bilateral bank debt with Swedes, but given that your peers are increasing their exposure, are you seeing any knock-on effects from your higher competition? Any impact on margins on the Swedish side?
I think the development over the past three to six months on margins of bilateral bank agreements in Swedish krona, we've seen a slight uptick. That has been like maybe 15 basis points or something, 15-20 basis points. The signals, as I said, from the banks to us is that they are happy with our relationship and happy to expand the relationship if we so care. I don't experience that has been affected by increased demand for bank financing from other players in the market.
Great. Thank you. Very clear. Finally, following on from the previous.
Let me just add on to the question about investments in projects. Of course, we really hard to be cautious also when we make our decisions and when we go to actions. We don't do all projects that we have in our portfolio at the same time. We keep up a good tempo, I would say. Of course, it's a balance to knowing the market and not doing everything at the same time.
Makes sense. Thank you. Very clear. Finally, following on from the previous question, so on your step-up, from recouping energy costs, are you expecting to see an increase in your NOI in Q4 to account for this, or will it kind of be smoothed out and go through in costs and in income?
Well, as I said, energy costs have of course, been a lot higher during this year than previously. The energy market is, you could say, in a sense, chaotic, which means that it's extremely difficult to predict the price levels. It's also unusually difficult to predict the volumes. I think most companies, as most private persons currently, are thinking a lot about how can I reduce my own consumption. Because it's a much more important question now than it has been for many years. From that perspective, predicting what the Q4 energy costs will be is. I don't care to do that because it's just gonna be guesswork.
We have seen actually numbers in our region that overall the consumption has been 5%-6% lower this year than last year, according to that people are ready to take action. Last month, I think we got figures that private persons in this area had saved 18% energy compared to last year, even though that. So it's hard to predict also when the consumption goes down, the price goes down. Of course it's tricky to predict.
Cool. Thanks very much.
Our next question comes from Albin Sandberg at Kepler Cheuvreux. Your line is open.
Hi, three hopefully quite quick questions from me. I don't know, but it seems to me like you are quite confident on your, let's say, underlying operations and development for this, regardless of this market worries about the financing situation. I just wonder also if you agree with my understanding of what you're saying. Looking at your Danish mortgages, how much more can you tap that market, given your current portfolio? Or is that based on you growing the Danish part of the portfolio further? That would be the first part of the question.
If I take the financing part of the question. Basically we use the Danish mortgage system. You could say that in our Danish operations, we can finance approximately 60% of the value in the portfolio in the Danish mortgage system, and that we do. In addition to that, we borrow in the Danish mortgage system in Danish krona to balance the assets in Danish krona with debts in Danish krone. Meaning that. So that is why the Danish mortgage system proportion of our financing is 40%, while the value of the portfolio is less, or a smaller proportion of the total portfolio.
It's possible to use the Danish mortgage system also in Swedish krona, but it's a bit trickier, it's a bit more expensive, it's a bit shorter tenors. It's of course also possible to use the Danish mortgage system with Swedish collateral as we do in Danish krona, and then swap it to Swedish krona if necessary at a certain additional cost. It is possible to tap that market additionally somewhat. Our principle so far has basically been to use that system to also create the currency hedge on the balance sheet so that we have assets and debts in Danish krona in the same order of magnitude.
Of course, when we have our stable finances as a base, then we can also continue with investments. I think that was maybe the first part of the question.
Even though that might be a question for the board, is that how you view Wihlborgs ability to pay dividends as well?
As you rightly state, that is a question for the board this spring as we're.
Okay
when we have.
As the CFO, what would you recommend to the board?
It's a slightly premature question.
Okay.
But, but obvious-
Okay. I'll try.
What we strive to do is, of course, to continue to generate a good cash flow and an increasing cash flow. If we can continue to increase our cash flow, it's of course a good foundation for also a continuously increasing dividends. As I said, it's a question for the board in the future.
Right. My final question. Ulrika, I think you made that point before about, you know, the difference between your, let's say, cash yield and the valuation exit yield or, so that you're performing a bit better. I mean, if your vacancies were to start increasing for some reason, would that then sort of already be reflected in your property valuation so that you wouldn't need to take that? Or would you still look on it on a, let's say, same apples-to-apples basis so it would actually impact the valuations? I didn't really get that whether you believe you have a cushion already in place or not.
I would say that what I meant was in the calculation methods for valuations, they are calculating with vacancies further on. We have proved that we can take care of vacancy further on by working with the properties, but that is not really into the calculation methods. We also see that of course now an important factor will be the indexation or and the market rents, where will they actually be. I think that we might be in a situation where good properties will have a good rental development, and in more poor areas there would be a larger difference between these areas.
It's depending on where the vacancy is, of course, if you're looking for the whole property market. I would claim that we have properties in very good locations, and we'll see a good improvement also in market rents in these areas. That is a very important part of the valuations methods. As said before, the vacancy that we can predict we work with them. Many of them are vacancy that we choose to put in. For example, if the properties we bought now will add on some vacancy, but that is a part of when we develop. That is, of course, a part also included in the valuations.
Okay. Great. Thank you very much.
Thank you.
Our next question comes from Alexander Totomanov at Green Street. Your line is open.
Good morning. Thank you for taking my question. You've made significant acquisitions over the past quarter. Are you actively looking at asset disposals as a means to de-lever given the interest rate environment?
No, we're not actively looking at assets, disposals. Over time, we've been a net acquirer most years with maybe one or two exceptions. Our ambition is to continue to develop our business and to grow our business. We don't feel that we're in a position where we, in any way, are forced to look at disposals from the balance sheet perspective.
Thank you very much.
Thank you. Our final question comes from John Uslon at Camden. Your line's open.
Hi, good morning. Thanks for taking questions. Just on market rental growth, I suppose you said your locations are good, but also looking at indexation for next year, it's probably going to be quite high. Do you think that market rents are able to keep up with this indexation?
I think that in good location, yes. I think in locations where you already see some vacancy and such today, maybe that will be harder for the market rent to keep up with the indexation. In good locations, definitely.
Okay. That's clear. Just follow up on the interest rate swaps. Your average interest maturity continues to come down. Is this a level you're comfortable with, and what's the ideal range in your view?
Yes. We're comfortable with the average interest rate maturity. I think you could say it's important to remember that our financial risk management policy does not target a certain interest rate maturity time. It targets a certain proportion of interest rate maturities falling due during different time periods. Zero to one years, one to two years, et cetera. Basically because the average interest maturity, it is just one number and in a sense you can manipulate it. If you do a 30-year swap, you can push it up, but you don't really create much cashflow security, so to speak. We're comfortable where it is.
Okay. No, that's clear. You're not per se looking to hedge more in current market circumstances given that swap rates are.
We, we-
Significantly higher than STIBOR
We'll continue to work with the existing risk management policy.
Okay. That's clear. Just last one on acquisitions. I suppose you are also, you're still one of the last more active players in the market and if I read commentary correctly in the Q3 management statement, I suppose you're still scanning the market. What makes you more comfortable in pulling the trigger while the rest of the market participants are a bit more in a wait and see mode?
I think it's important that we, of course, look into every possibility and choose the ones that we think is right for us in a long-term perspective. It should be the right property at the right place and at the right price. What we think is the right price for a long term. It's the same strategy as we have used before and I think where we can add on some value and create value in the property, that might be a good product for us. The timing for that could be now or later on, who knows?
Fair enough. Could we see more acquisitions in the short term if I'm hearing this?
One never knows.
Depending on possibilities. We
Okay.
As I mentioned, we wanna be picky and choose the right things.
Okay. That's clear. Just as a follow-up on that, if the right opportunity comes, how would you be looking at this in terms of funding? Would it just be, well, expanding on your debt on your banking relationships? Or could we see, for example, also some capital recycling on your end?
I think primarily. I mean, it depends on a number of different things like not least the size. But primarily we would look at bank or Danish mortgage financing.
Okay. That's very clear. Thank you.
Thank you. We have no further questions at this time, so I'll hand back to the speakers.
Okay. Thank you for this time together, and of course, you're always welcome to come back in other channels for further questions.
Thank you very much, everybody.