Earnings Call: Q3 2025

Oct 23, 2025

Welcome to the presentation of Wihlborgs Fastigheter AB's Nine Month Report 2025. There's an old saying when you think you can see the light at the end of the tunnel, beware, it could be an oncoming train. We never know what will happen ahead and we try to be prepared for whatever we can think of. Let us be clear, we see some glimmer here and there. Maybe not the full ray of light yet, but nice glitters in the horizon. It's a very busy report week for all of you, so we'll try to be short and precise. That means standard procedure about the last results of our continued growth and some new records, but also some figures regarding loyalty among our customers, how we can calculate retention rates and not at least our view of future occupancy. We start with a summary of the quarter July to September: rental income up 6%, a new record at SEK 1,101,000,000; income from property management plus 11%; net letting positive at SEK 6 million; net EBIT to EBITDA at 10.3 times; good access to financing and as said many times before, this still stands. Demand remains for good quality in good location and we are proud to be able to continue with our project investment that gives continued good potential for growth. Looking at the whole period, first nine months rental income up to SEK 3,243,000,000 plus 4%, the operating surplus increased to SEK 2,334,000,000 and income from property management increased by 12% to SEK 1,482,000,000. The result for the period amounts to SEK 1,370,000,000 corresponding to SEK 4.46 per share and EPRA NRV has increased by 10% to SEK 96.23 per share adjusted for paid dividend. A comparison of the rental income first nine months 2024 and first nine months 2025: indexation gives plus SEK 30 million, acquisition plus SEK 90 million, currency effect minus SEK 21 million, additional charges plus SEK 21 million and completed projects, new leases and renegotiation plus SEK 8 million and here is also a new higher property tax of approximately SEK 15 million included so higher vacancy today than a year ago, but small improvements since last report and during 2026 the improvement from new leases will show and the streak of positive net letting continues plus SEK 6 million in the quarter plus SEK 65 million for the period and in total new leases at a yearly value of SEK 300 million signed in the period for a third quarter. The volume of new leases of SEK 66 million is good and maybe I expected the net letting to be a bit better than SEK 6 million, but we got a late termination of SEK 16 million from a tenant who I'm not sure if they really want to move or just renegotiate. Discussions are ongoing, but the total termination is registered. A possible upside ahead: 42 quarters in a row with positive net letting. Here are some of the tenants that we have signed during Q3, a combination of expanding tenants and new tenants from many industries. Healthcare, insurance, building materials, and a company that manufactures equipment for land-based fish farms as examples. Here we have the net letting in a historical perspective. Lettings in green, termination in light blue, and dark blue stacks are the net letting. As mentioned, quite high volume of new leases for being a third quarter, and the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants, and the public sector contributes with 23% of total rental income. Rental value as of October 1 is SEK 4,889,000,000 per year, up 7.2%, and rental income SEK 4,379,000,000, up 4.6%, effects from acquisition, indexation, and higher willingness to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects, compared with updated figures, we can see that rental value is up 2.4% and rental income is down 0.8%. The growth in the rental market is supported by indexation of 1.6% in Sweden and approximately 1% in Denmark last year. Indexation ahead in Denmark expects to be a bit higher, and that will be reflected in the rental levels for 2026. I think the September number was 2.3% or something. Lower rental income in like-for-like is an effect of higher vacancy than a year ago, and at least it's encouraging to see that vacancy appears to have bottomed out in several areas. More on that topic later. Changes in the market value of our properties: we started the year with SEK 59,168,000,000. In accordance with the external valuation of 100% of the portfolio, we have made acquisition, which adds on SEK 2,552,000,000, investment SEK 1,911,000,000, divestment minus SEK 114,000,000, changes in valuation plus SEK 450,000,000, and together with currency translations of minus SEK 500,000,000, that summarizes to a value of SEK 63,457,000,000. The valuation this quarter had no changes in valuation yields, indexation, or other underlying parameters. Expectation ahead is more likely to be positive. If I may guess these figures, the running yield shows how we actually perform in relation to the valuation, so not the valuation yield. For the whole portfolio, the occupancy rate is 90% excluding project and land, and with an operating surplus of SEK 3,326,000,000, that gives a running yield of 5.6%. Fully let, the portfolio would give a running yield of 6.4%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation. Also ahead, occupancy is slightly up looking at the decimals since the last quarter, and at least that is in the right direction. In the office portfolio, the market value is SEK 50,394,000,000 with an occupancy rate of 91%. 92% in Malmö, improved to 90% in Helsingborg, 90% in Lund, and 92% in Copenhagen. The improvement has started and will be clearer during 2026. Operating surplus from offices summarized to SEK 2,755,000,000 and running yield of 5.5%, 6.2% for fully let. The demand for logistics and production continues to be good in Malmö with an occupancy of 93%. Lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio, and 96% in Copenhagen. 87% occupancy rate as a whole with a running yield of 6.4%, 7.5% for fully let, and a total value of SEK 8,988,000,000. As mentioned before, we continue to see harder competition in the third-party logistics segment with very quick changes in needs. That also means that occupancy can improve quickly when the market changes. I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover that would take a number of years, but as mentioned before, still a decent running yield of 6.4%. Even with the high vacancy, the market as such continues to be interesting. The development of our total portfolio running yield, 5.6%, brings stability not least since the portfolio overall has a high quality and good location. As noticed before, a high increase of the running yield since 2021. Some sustainability highlights from Q3: we have been appointed as global sector leader by GRESB, completed a battery storage in Lund and actually one in Helsingborg as well. We have signed more sustainability-linked loans, also including scope 3 carbon dioxide performance, and we continue to reduce our energy consumption. As a new example, we have reduced the electricity used for heating and cooling by 50% at Ideon Gateway in Lund, including both offices and a hotel, new cooling technology, and of course the Yanr solution is the answer. Something about what our customers think about us. Our latest customer satisfaction index from now in September shows an index of 79 and a loyalty score of 82. Very high numbers. Tenants are especially happy with our personal service with 88% satisfaction, our competence scoring 86, and accessibility scored 85. Let me just say that I totally agree with our customers. I'm also very satisfied with my competent and service-minded colleagues. I give them 100 out of 100. A catalogue of our value and properties in our four cities in end Q3, 39% of the value in Malmö, 23% in Helsingborg, 17% in Lund, and 20% in Copenhagen. The region and especially these four cities continues to be of high interest for future growth both in population growth forecast, which will otherwise be a challenge in many places, and in number of new workplaces. Time for financials. Over to you Arvid. Thank you very much, Ulrika. Looking at the income statement for the third quarter isolated, are we on the right slide? There we are. Thanks. Rental income grew by 6% to SEK 1,101,000,000 and operating surplus increased by 4% to SEK 790,000,000. There are a couple of things to bear in mind looking at those two numbers. First of all, we've been through a new property taxation and we got the new taxation values this summer. Taxation values are higher, which means that the property tax also is higher. The new property tax is applicable from January 1, so we have, you could say, a catch up effect. The changes for all three quarters are accounted for in the third quarter numbers. That means that on the rental income line, as Ulrika mentioned, that has been affected with plus SEK 15 million from increased property tax. On the operating cost side, our operating surplus has been affected with minus SEK 20 million from the increased property tax for the first three quarters during this year. The ongoing or the future effect of the increased property tax will be smaller on a quarterly basis than you can see in the Q3 numbers. It's also important to bear in mind that on the rental income line we've had a negative effect from currencies of minus SEK 7 million and that same currency effect on the operating surplus line has been minus SEK 5 million. The income from property management amounted to SEK 495 million. We've had a small positive impact there from FX since we borrow a lot in Danish kroner as well. Income from property management up 11% versus the same quarter in 2024. We had positive value changes in the quarter of SEK 103 million and all in all, a profit for the period of SEK 487 million. Looking at the balance sheet, the value of our property portfolio is now SEK 63.5 billion, up SEK 5.6 billion versus 12 months previously. Equity stands at SEK 23.5 billion, up SEK 1.2 billion versus 12 months previously. During that time we have, as you know, also paid approximately SEK 1 billion in dividends to our shareholders. Our borrowings are SEK 33.2 billion, or SEK 3.5 billion higher than 12 months previously. Translating that into key numbers, our equity/assets ratio now stands at 36.2%. The LTV has gone down from the last quarter to 52.3%. The interest cover ratio for the period stands at 2.8 times. Looking at some per share numbers, I'd just like to highlight the NRV value at SEK 96.23 per share, which is up 10% adjusted for dividends versus 12 months previously. On the next slide you can see the historic development of EPRA NRV stable growth over many years and the average annual growth adjusted for dividend is actually 15%. Moving on to the historical development of our financial ratios. The equity/assets ratio at 36.2% as you can see is well above the 30% that we've set as the minimum level for ourselves and also on decent levels in a long-term historical perspective. The loan-to-value in the perspective of approximately 10 years has come down from around 60% now to 52.3%. The interest cover ratio as we've talked about before has been very, very variable, especially during the special period when we had almost zero interest rates, when we had an extremely strong interest cover ratio. The rate is now stabilized and 2.8 times is a quite decent level to be at. On the next slide you see the net debt in relation to EBITDA. Also that in a long-term historical perspective, the ratio stands at 10.3 times. It varies with a couple of decimals up and down, but being at 10.3 times is a comfortable level for us. Looking at our sources of financing, we still have approximately half of our loans from bilateral bank agreements with Nordic banks, a third from the Danish real mortgage system, and 17% from the bond market. I would say that the banks are definitely more proactive in their lending efforts than they have been for many years actually. We do see bank margins gradually moving downwards. The bond market has also, as we noted already in the Q2 report, the bond market is a lot stronger than it was a year ago and we can issue unsecured bonds at quite attractive levels in this market. The structure of our interest rate portfolio you can see on this slide, the average interest rate is 3.29%, 3.33% if you include costs for unutilized credit facilities. We have both in the past quarter, but also if you look over the coming couple of years, we will have some effects of attractive interest rate swaps expiring. We also see an effect of the margins that we pay to banks and in the bond market coming down somewhat. Overall over the coming few quarters I would expect the average interest rate to be reasonably flat. Yes, we can move to the next slide and see the development of the fixed interest period which has gone up a touch in the quarter, is now 2.7 years, and the average loan maturity and loan portfolio is 4.8 years. Lastly from my side, looking at available funds, we have unutilized credit facilities plus liquid funds of SEK 2.9 billion at the end of the third quarter, which gives us in our view enough financial flexibility to manage operations and seize opportunities in a good way. With that, I hand the word back to you, Ulrika. Thank you. An update on our investment in progress and a quick overview of our largest project. During the period we have invested SEK 1,911,000,000 and it remains SEK 2,730,000,000 to invest in approved projects. Good volume in all our cities. A reasonable yield on cost with 6% or a bit above 6% for new build offices and 7% or a bit above that for industrial. A good mix of refurbishment and new build in the portfolio. Let's start in Copenhagen with our project at Ejby Industrivej 41. In the beginning planned as and decided for multi-tenant transformation, but with a 15-year lease with Peroslev, turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and yield on cost a bit above 6%. Completion is planned for February 2026. The large project at Dockan 31 in Malmö has started off really well. A bit about 20,000 square meters for Malmö University at a 10-year lease. We have started at site with deconstruction and during September we got the building permission from the municipality. Completion is planned for Q4 2027 and procurement will be completed shortly. In Malmö and Jyllie we continue with Bläckhornet 1 Västra, an SEK 884 million investment. The mobility hub has already been completed and the office will be completed in Q1 2026 and during 2026, yield on cost 6.2% and today approximately 40% pre-let. The best possible product and low competition from new build in the area. We still need more activity and more decisiveness from our customers before we are satisfied. An example of top-level refurbishment in Malmö is Posthusplatsen 1. This is an almost iconic building right beside the train station. 6,000 square meters, offices, restaurant and co-working and absolutely top rents in a Malmö perspective. Completion in Q1 2026 and moving in will continue during 2026, pre-let 95%. At Kranen 7 in Malmö we will invest approximately SEK 136 million in a preschool for the municipality. 2,900 square meter zoning plan approved and completion is expected for Q3 2027. Public Procurement Act starts now. At Sunnanå 12:54, 17,000 square meter logistics, 100% pre-let in a 15-year lease, will be completed 1st of December 2025. SEK 280 million investment and yield on cost close to 7%. In Lund we are building a new modern office right beside the central station, Posthornet phase two. 10,100 square meter, yield on cost 6.5% and completion Q2 2026, pre-let a bit above 40% today, but together with ongoing discussions I believe we can reach approximately 70% before year end. Keep our fingers crossed and very attractive product. At Werthat1, also in Lund, we continue with refurbishment and adding on areas for our new tenant, ARM, 5,700 square meters and a seven-year lease. Investment 145 million excluding value of the land and yield on cost a bit above 10% and over 6.6% yield on cost including ingoing property value. In the southern part of Lund, we continue to develop automata, this product for BPC, completion Q2 2026 and investment 79 million, 3,600 square meters and yield on cost 7%. Next to that, at former Storaruabe 32.22, now named as Surkowlen 1, we have been able to improve since the project started. Tenants will be both Note and Lund University. Well-used land area and long leases, in total 14,500 square meters, completion in Q2 for Note and Q4 2026 for Lund University. Investment 260 million and yield on cost 9.2%. In Hirshhorn, Copenhagen, we invest in a new school for NGD, 25-year lease, 11,600 square meters and investment 390 million SEK. Completion in Q1 2026 and at Jiro Straget in Heltostrup, the refurbishment for Nuovo continues, 62,000 square meters. Our investment is limited to 423 million and completion is expected in Q1 2026, but Nuovo also pays rent during the refurbishment period. That was some of the ongoing projects and just a touch on future possibilities. As a repetition, four possible projects in Lund and Helsingborg where we can develop some 70,000 square meters in the future. Zoning plans are approved for the first three projects and ongoing at Westerbruw in Lund and some of the office possibilities in Malmö in the area of Nyhamne and Dokka. High interest for the future of course. If you should ask me which project of these will be the next one, my best guess today is that will be none of these. The EDN site in Lund is developing very well and we have building rights there that might be of high interest for the growing defense and tech industries. Early volume studies have started, but nothing I can show yet. The summary of Q3 again. Rental income up 6%, income from property management plus 11%, net letting positive, net debt to EBITDA at 10.3 times and good access to financing. We will continue with a focus on cash earnings and future growth. We have been able to grow every year during different economic environments since 2005. We know how to adapt, find new ways and will continue with this knowledge and ambition. Growth and cash flow is our passion, and the compound interest effect of stable growth is hard to beat. From 7 to SEK 63.5 billion. Without any new equity from our shareholders, we have been able to grow thanks to continued investments. They contribute to upgraded attractiveness and new demands. What comes first? Higher rents or investments have no answer, but these factors have a relation. Here is a graph showing the market rents for prime offices in Malmö and our quarterly investments during the same period from 2010 to present. The green bars represent our investment, and the green line represents rent levels. Finally, our market outlook. Employment growth in our region continues. Office rents show long-term growth. Wihlborgs' project investment increases over time. Tenants on average stay in the premises for 14 years, which supports the strong customer satisfaction score. If we just take the largest leases we have signed, we have a volume of some SEK 320 million moving in from now till end 2027. During the same period, terminations of some SEK 190 million. A good gap. Possibilities for growth is in sight. With that, we are open for questions. If you wish to ask a question, please dial on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad. The next question comes from Oscar Lindquist from ABG Sundal Collier. Please go ahead. Good morning. Good morning. Yes, fine. Morning. Firstly, on projects, the two projects completed in the quarter, Galopinen and Kronan, how much did they contribute in the quarter, and how much should we expect into Q4? They didn't contribute in the quarter, but will contribute for the full Q4. Okay, perfect. On the soon and or project, from when should we expect contribution from that project? Also from 1st of October, no, 1st of December. Sorry, 1st of December. Okay. The bushes project was moved to Q1. What's the reasoning? The tenant will start moving in there. There's no delay in the project, but it's a difference between when the building is completed and when tenants moving in. I think we will have so many there in February, but the rent will be started to pay in Q1 earlier. However, everybody does not move in in Q1 of the signed leases. Correct. We have a moving in during the whole 2026. Yep. If we move over to net letting, you mention a late termination of $16 million in the quarter. When. Do you think you will know if they terminate or extend their contract? We have calculated as terminated and discussions are ongoing. I guess now during Q4 there will be decision if they stay or. If they terminate, the impact would be in nine to 12 months or what's fair to expect here? Just a minute. 2027 from 1st of January 2027. Okay, good. If we adjust for that determination, net letting was positive, $22 million. What's the mix here between projects and existing properties? I don't have that figure right away, but I think actually that the existing portfolio had contributed very well this year and also in the quarter. Also, good contribution from all our cities, at least for the nine month period. I would say that we see positive signals in all our four cities. Okay, if we. It's in the quarter. I would say, without, I don't have the exact figure either, but I would say that more existing properties than projects during this quarter in the net lettings. Okay, perfect. If we look at the Kronan project and the Galopinen project, how are discussions going there? You improved the occupancy slightly in Galopinen now in the quarter. What's your sort of ambitions closing in on completion? Our ambition is to improve, of course. It's a very good product, but the volume is quite large, so something tends to take longer time when you can choose of good things in many levels, so to speak. I can't give a figure when I think it's. I think we will continue with the work for letting also during 2026. That's reasonable to think that. Let me also mention that we see a good. We have signed new leases in Beuvre in the same area. Also, actually, the portfolio we bought 1st of April, there was some vacancy at Cayutan, for example, and that is now, I think, 20-30% vacancy and that is now fully let. There is definitely activity out there. Would you say the outlook or discussions with the tenants has improved in the quarter and going into Q4? Yeah, I think so, but it depends. One day you think it's slow and one day you think it's very active. Overall, I would say that there's more positivism out there. Yeah. On occupancy, it's essentially flat Q on Q. You've sort of alluded or guided to improving occupancy in the second half. Could you quantify what you expect in or what we could expect in Q4? I especially guided on occupancy in offices in Helsingborg, and that has improved 2% during the year. Otherwise, I think that we will continue to have some improvements, but not quick improvements since we also have, I mean, for example, Saab will move out the 1st of January 2026, and that will take some time before we have entering new tenants there. A very good example of that is that we have already signed new leases for that building with new tenant moving in in a year. Only nine months for refurbishment. For part of the building? Yeah, for part of the building. They take one part of the building, and we also have good discussions for more areas there, which might also end up in moving in October next year or so. Quite a quick period between moving out and new tenants moving in, and not for the total volume but a good part of it. Okay, thank you. That's all from me. Thank you. Thank you. The next question comes from Eleanor Frue from Barclays. Please go ahead. Morning team. Thanks for the presentation. Just one question from me. On rental growth, your chart clearly shows as prime rental growth, but can. You comment on the more secondary assets? What's the rental growth you're seeing there, and is there any negative re-leasing on those poorer quality assets? I mean of course when you look into the absolutely best location and top rent levels, that is one area. If you just take a small step from that and still good location and good quality, the rent levels continue to develop. If you go to more poorer area, we have not a large amount of equity there. I can't really give a good guidance. Of course it's harder to find higher levels of rents in poorer area. There will be larger difference there in the market as it is today. Thank you. The next question comes from Lars Norrby from SEB. Please go ahead. Okay. Good morning. I'm a bit late into the call, so you know, cut me off if I ask a question that somebody else has already asked. I have a follow up on a question I heard and that was about the occupancy rate once again flat in the quarter. Just to be clear on them, you have some six projects or so being completed in 1Q26 and then you talked about that sod moving out. Based on what you know today, has the occupancy rate bottomed out and at what point in time do you expect it to improve? At what stage? In 2016? I would say that for the whole portfolio I think the vacancy has bottomed out. We can see for a shorter time or period higher vacancy in some areas, for example, when Saab moves out and before we have new tenants in place. We meet that well with new rental agreements. Yes, I think we have bottomed out and will improve. The improvement isn't a quick shift. It will take some time, especially during 2026 and end of 2026, as mentioned before, we have a quite large volume coming in. Also, now in Q4 we have good volumes coming in from Galopinen and Kronan, for example. So. Of course we want the occupancy to be even higher, but still it's good to see that we have flattened out and are on the upgoing way on the occupancy again. Okay. Second and final question. 2025 has been a year where you're growing through projects, but also through a quite substantial acquisition. Looking ahead 2026, 2027, is it very much all about projects, or are you considering adding additional size of any magnitude through acquisition as well? I expect that we will see a combination. It's good with the project volume because you can manage that and plan for that. Acquisition is harder to plan for. We continue to be active and trying to find the best premises for us. Of course, it's an interesting period where we're in. Just a quick follow-up on that. In what geographic area? Are we talking primarily about Copenhagen then, or is it more likely to be in Sweden? I think there are interesting things going on both in Sweden and Denmark. We try to be active in both places, both countries. As mentioned, you can't plan for a transaction if you want them to be the best things for you. Of course, you can be aggressive and try to buy whatever, but we will continue to be picky on what we want to go into, of course. Sounds good. I hope you don't buy whatever. Thank you. No, we will not. The next question comes from Oscar Lindquist from ABG Sundal Collier. Please go ahead. Yes, I just had a follow-up question on the property tax. You mentioned the weighing on the NOI margin. The effect in this quarter was SEK 5 million as I understand it. Is that correct? On the operating surplus line? Yes. Yeah. A negative effect of SEK 5 million. Yes. Going forward, will you be able to sort of pass on the full increase in property tax to tenants? Not 100%, but the very largest part. Okay, I mean, we do have some vacancies, for example, and we have a very small proportion, but still a few inclusive contracts, so to speak. Significantly lower than the $5 million we saw this quarter. Yes. Yes. Okay, perfect. Thanks. As a reminder, if you wish to ask a question, please dial 5 on your telephone keypad. There are no more phone questions at this time. I hand the conference back to the speakers for any written questions and closing comments. Perfect, thank you. Have we got any written questions? You can double check? Not that I can find. No. No. Of course, you're welcome to come back to us whenever with whatever, ask questions. Thank you for this. Maybe we shall conclude with that. This may actually have been a record quick presentation. Definitely 42 minutes. It's our quickest version, I think. We try to be precise and quick, but that was part of it. Thank you everyone for listening in. Thank you.