Conference. Welcome to the Wihlborgs Fastigheter Q1 2023 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 star five on their telephone keypad. Now I will hand the conference over to the speakers. CEO Ulrika Hallengren, CFO Arvid Liepe, please go ahead.
Welcome to the presentation of Wihlborgs Q1 2023. You all know that we love stability, that we will do everything we can to avoid drama. We know that we, in these times, must work even harder in our core business to offset higher financial costs. It's a privilege to work hard in a company that continues to deliver new records for earnings and constantly continues to develop the business bit by bit, day after day. We work hard, we love our cash flow. Let's go to our report. A summary of Q1. We have record high rental income, plus 22%. Operating surplus, plus 20%. Positive net letting. Increased occupancy rate. Higher financial costs. We continue with a stable balance sheet, access to liquid funds, by that, we can also continue to invest for the future. The results for the Q1.
Rental income increased, as mentioned, by 22% to SEK 971 million. The operating surplus increased by 20% to SEK 667 million. Income from property management decreased by 2% to SEK 457 million. The result for the period amounts to SEK 255 million, which corresponds to SEK 0.83 per share. EPRA NRV increased to SEK 92.08 per share, +7% adjusted for paid dividend. A comparison of the rental income between Q1 2022 and Q1 2023. We have acquisition contributed +SEK 47 million. Currency effects, +SEK 12 million. Indexation, +SEK 76 million. Supplementary billing increased by SEK 29 million. Other increase from complemented projects, new leases, and renegotiations, SEK +12 million. The canteens in Denmark were outsourced from the 1st of March.
That will lower our income, but also our costs. We have signed new leases for the last quarter of SEK 77 million, and the positive net letting for the quarter is SEK 6 million. Rather a high activity than the opposite, which is a good thing. We see examples of new leases with BTJ and Klaravik in Lund, and also companies that have decided to be more efficient, like Ericsson, also in Lund, where we now have a longer lease for the largest area and a termination of 1,000 square meters. Good for us all to know what applies going forward, and really good that they will stay with us for several years to come. We also know that a number of terminations are from customers just that want to make some changes, and I'm sure that some of them will sign new leases with us again.
If I see any kind of trend in demands, so it's for more high quality, a bit of efficiency, and no trend that clients are leaving us. Here is some of our new tenants that we have signed during Q1. As usual, it's a mix of different segments. The largest leases is with governmental tenants, but important also with Renta and Rollco in Helsingborg, where we will build new premises for them. 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 32 positive quarters in a row, and only one quarter with a negative number for over 40 years. We will do everything we can to continue like this, but let's keep in mind that a quarter is quite a short period.
Here is the net letting summarized for a rolling 12-month period. Let's keep in mind that all of the positive net letting does not yet show in our performance. This is our future income. A list of our 10 largest tenants in alphabetical order. Trygg-Hansa 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, and the rental income from public tenants in total is 24%, and they contribute to long-term stability in our cash flow. Rental value as of first of April is SEK 4 billion, 191 million per year, and the rental income is SEK 3 billion, 860 million, 21.8%.
A good part is of course indexation, but the rest of it is a good signal of growth. Partly a result of our successful project portfolio, but also being close to the market, knowing our tenants, and also willing to make room for their growth and demands for upgrading their workspace. Looking for like for like figures, we can see that rental value is up +10.9% and rental income is up 12.9%. Rental income again beats our ambition to exceed index by at least a percentage point. A part in the strong figure for rental income like for like is higher occupancy by 1.87%, 1.7%. Also a very good number.
The value of the portfolio has developed, as you can see on this slide, since 2005, without raising any new capital and lately not with any help from lower yields. Look at the change in market value of our properties. We started the year with SEK 55,179 million in accordance with our external valuation, which once a year values 100% of the stock at the same time. That was in Q4. As every year, we have acquisitions of SEK 20 million, invested SEK 391 million, valuation amounts to minus SEK 28 million, and together we count through translation of SEK 139 million that summarize to SEK 55,701 million. No larger changes in market factors that affect the valuation.
We started to raise the valuation yield in Q2 last year and continued in Q3 and Q4. We have had some project gains and of course, a positive impact from new leases. If we take a look into our portfolio, we can see some figures about ongoing business right now. The occupancy rate is up to 94%, excluding projects and land, and with an operating surplus of SEK 2,968 million, that gives a running yield of 5.6%. Total value of the portfolio is SEK 55,701 million, as mentioned before. We will keep pointing out that this 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 models for future vacancies.
We work with our properties so that vacancy should stay down. When our vacancy increase in the property stock, it's usually because we have bought something with vacancy or emptied a property to create vacancy for development. This is a way to grow. If we go to the office portfolio, the market value is now SEK 46 billion 455 million, and overall, the occupancy rate is 94%. It's 95% in Malmö, 91% in Helsingborg, 94% in Lund, and 95% in Copenhagen. Improved numbers. Improved occupancy rate is always a joy, we don't hesitate to create or buy vacancy when we think that is the right thing to do. The operating surplus from offices summarize to SEK 2 billion 520 million and a running yield of 5.4%.
Bring stability and resilience when interest rates go up. The demand for logistics and production continues to be good, but not at record levels. Occupancy 92% in Malmö, 89% in Helsingborg, 98% in Lund, and 95% in Copenhagen. 91% occupancy rate as a whole with a running yield at 6.7% and a total value of SEK 6.685 billion. A slide of the running yield in the portfolio since 2013. The yield has gone down for several years, bit by bit, and up +0.6% quite quickly in 2022. This shows the effect of our increased earnings capacity in relation to the value set by external appraisers. 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. Copenhagen has the largest area with 702,000 square meters, Malmö have a higher value. The value in Copenhagen is also affected by the weaker Swedish krona. The labor market in our region continues to be strong. The level of unemployment continues down, domestic immigration to our region is positive. The commute between Denmark and Sweden can improve further, I'm looking forward to that day when we can have a reviewed governmental agreement between the countries. If we can make it even easier to live in one country and work in the other, that will give the labor market several advantages. Acquisitions, not the widest at the moment. For the quarter, just a piece of land.
That's Tomaten 1 in Lund, 7,000 square meters land where we already are active with our first project at this property for impact. The picture shown is the next possible project. Over to you, Arvid, for financials. Rapid changes and higher cost, but I think we can manage well also in these times.
Thank you, Ulrika. Looking at the next slide, income statement for the quarter is basically a repetition of what you have already said, Ulrika. Rental income up 22% to SEK 971. Operating surplus up to 20% to SEK 667 million. Income from property management down 2% to SEK 457 million on the back of rising financial costs. In a few slides, we'll dig a bit deeper into that topic. Ulrika also elaborated on the changes in values, SEK -28 million during the quarter. We also had, excuse me, negative value changes in our derivatives portfolio, SEK -99 million. Bear in mind there that this STIBOR development and the interest rate swap development, it actually differs during the quarter.
Changed market rates explains the change in value of the derivatives. All in all, profit for the period of SEK 255 million. Look at balance sheet. You could see that versus 12 months previously, the investment properties have increased in value by SEK 5.1 billion. And at the same time, equity has increased by almost SEK 1 billion or SEK 0.9 billion. Our borrowings have increased by SEK 3.9 billion in a 12-month perspective. That translates to key numbers on the next slide, where the equity assets ratio now stands at 41.1%, and our LTV is 48.5% as of end March. The interest cover ratio is 3.4 x and that's measured in the quarter individually, so to speak.
On a 12-month rolling basis, the interest cover ratio is 4.5 x. EPRA NRV stands at SEK 92.08, which is up 7% adjusted for dividend versus 12 months previously. On the next slide, we see the historic development of EPRA NRV. So it continues up in the quarter. And since 2009, the average annual growth has been 16% adjusted for dividends. Looking at the historical or the five-year development of financial ratios, the equity assets ratio on the right-hand side has strengthened gradually over a five-year period to 41.1. The LTV has gradually gone down to 48.5.
As you can see on the left-hand side, the interest cover ratio with increasing interest rates over the past year has gradually come down. We'll elaborate a little bit more on the interest rate in a couple of slides. Important to look at our net debt in relation to EBITDA. Despite the uncertain or especially in these uncertain times on the financial markets, it's good that we also in this quarter actually can see a strengthened ratio. This ratio net debt to EBITDA is 10.8 times as of end March. Slightly stronger than at the end of 2022. Our sources of financing look as you can see on this slide, we are now down to 9% of our financing from the bond market, just a touch lower than a quarter previously.
Half of our financing basically comes from bilateral bank agreements with Nordic banks. Just over 40% of our financing comes from the Danish mortgage loan system. Looking at the structure of the loan portfolio, you can see the details on this slide. Average interest rate has increased quite a lot during the quarter. It's now 3.21%, excluding cost for credit agreements, 3.26%, including such costs. On the loan maturities, the SEK 820 million, which mature in 2023, are all bond loans maturing in Q3 and Q4, respectively. The average fixed interest period has gone up slightly versus year-end 2022, and now stands at 2.3 years, and the average loan maturity is 6.2 years.
The change in the average interest rate in our portfolio must be seen in the perspective of the STIBOR and CIBOR development. Here you see two graphs of that. On the left-hand side, the development of STIBOR and CIBOR since the beginning of 2022. On the right-hand side, the development during Q1 2023. We have our STIBOR fixings for our loans at a number of different points in time during a quarter. When looking at the effect on our average interest rate, it's important to note that STIBOR during Q1 2023, while the average STIBOR was 86 basis points higher than the average STIBOR during Q4 2022. That has, of course, driven the very largest part of the increase in our average interest rate during the quarter.
In addition to that, we've had this effect of expiring swaps at attractive levels. We've entered some new swaps at obviously higher levels than previously. We've also taken up some new bank debt at slightly higher margins than previously. In addition, those different effects have contributed to the increase in the average interest rate during the quarter. On the next slide, we see the graphs of our interest rate sensitivity. I think it's worthwhile noting on the right-hand graph, the effect of further increase in market rates on our interest cover ratio.
Taking the starting points, end March, and where STIBOR was at that point in time, given our loan portfolio and our interest rate swap portfolio, we can actually cope with a 3.5 percentage point increase in the underlying market rate before our interest cover ratio goes down to 2.0 x, which is our stated objective not to go under. I think we still have a good stability to cope with the financing costs. Looking at the fixed interest periods and loan maturities, in a historic perspective, loan maturities on the right-hand side have remained very stable in a five-year perspective around 6 years.
The fixed interest period has gone down somewhat, but in the quarter increased again as we've entered into some new swap agreements in line with our financial risk management policy. My final slide is the available funds. The graph shows unutilized credit facilities plus liquid funds. That combined is SEK 3.3 billion as of end March. We think that is a good level and gives us good financial stability. Of course, unutilized credit facilities also come at a cost. That, of course, also to some extent affects our financial net. With that, I hand back the word to you, Ulrika.
Thank you. I'll give you an update on sustainability. We continue with our certification program. 17 properties certified during Q1. Two of them are certifications, and 15 are new. Our goal is that 95% of the Swedish offices will be certified in 2025, and we are on a good way there. Level Gold is the normal standard in new build. Silver is okay for the elder stock. Once in a while, we can accept Bronze. In this case, it fits the property name, Bronsdolken, but that's not the reason here. It's the tenant who have some specific demands, and that's why we have to accept Bronze in that case. We also continue with energy savings. Sometimes we invest to improve, and sometimes we just use our skill.
We bought Österport in Malmö, and thanks to our skilled operational organization, we have saved 35% district heating and 17% electricity compared to last year. Without investments, let's point out that. Let's go to investments in progress. First, a quick look into my schedule for times this spring spent with a helmet on my head. Four groundbreaking ceremonies, two in Helsingborg with our tenants Nederman and Springhill, one in Lund with Impact, and one in Malmö at Bläckhornet. Even if digging isn't my specialty, this digging have definitely nothing to do with the real effect of the project, but it has some kind of effect to gather and have a ceremony showing that we will together make this happen, and that we together also are really committed to achieve what we have promised.
The municipality, we as landlord, our tenant, and our contractors. In Q1, we have invested SEK 391 million. It remains SEK 2,556 billion to invest in approved projects. Construction cost continues to stabilize. We even down somewhat. Important for future growth is that we can continue with our investment in projects, that we are able to do adjustments for customers, not at least to keep up property maintenance. This will create our value ahead. A quick review of our largest projects. In Hyllie, Bläckhornet 1, the project we call Vista, has just started at site. This building will be the new entrance from Copenhagen to Malmö, a large mobility hub with 400 parking spaces. On top of that, there will be 16,600 square meters office and restaurants.
We have a possibility to call off the project in two phases. Really good attention for offices, I must say. Mobility is of great importance. Trains, buses, and bicycles are really good things. If you can park your electric car in the same building and just take the elevator up to your office, that has some extra potential. Estimated completion for mobility hub in Q4 2024, and the office is in Q4 2025. In total, at least 5.7% yield on cost. 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 first tenant with a research and development team. We invest SEK 244 million, and completion starts in Q4 2023.
Continues to follow the plan, this will probably be our second zero carbon dioxide certified building. We had a possible tenant visiting this project just a few weeks ago, and they told us that this was the most beautiful building they have ever seen. I will really believe them when they have signed the lease, but at least I like them spreading the words. Posthornet One, phase two, a new build office of 9,900 square meters right beside Raffinaderiet and the central station in Lund. Investment, SEK 448 million, and completion is planned to Q4 2025. Procurement is completed, production start is planned later this year. At Tomaten, we will build a facility for Impact, 6,400 square meters 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 to develop in Västerbro in Lund. Good combination. Completion in Q2 2024. For Nederman in Helsingborg, with a 20-year lease, we are ongoing with this project of 25,000 sq m at Rausgård 21. Investment, SEK 420 million, and completion in Q3 2024. A long-term investment that also gives a good boost to the surroundings. Our project at Huggaren 13, now 80% pre-let, and both phases are in full production. A multi-tenant logistic facility with start of completion in Q2 2023. Snårskogen 5, the first project is for Doka, 2,200 sq m, investment SEK 60 million, and a completion in Q2 2023.
Next one at the same property, Snårskogen 5, we also start a project for Rollco, 3,600 square meters, investment SEK 78 million, completion in Q3 2024. At Klarbärsodlingen 15, we invest SEK 141 million for Springhill and room for one more tenant, so 75% pre-let. A very short production time, so completion in Q4 2023. A new one, Sunnanå 12:54. 100% pre-let, 17,000 square meters logistic, and completion is planned in Q1 2025. That was some of the ongoing portfolio. Let's also mention something about future investments. Very important for us to have a plan a long time ahead so that we are prepared when opportunities arise. This is for possible project in Lund and Helsingborg. I think you've seen them before. Vetskapen 1 at Science Village area.
16,000 square meters at Ideontorget, just beside the tram station. We can split this into several phases. Polisen 7, offices in the city center of Helsingborg. At Västerbro in Lund, where we can develop somewhat 70,000 square meters in the future. Zoning plans are approved for the first three projects. Next slide, Börshuset, what I think will be the best possible offices in Malmö in the future. Discussions with possible tenants is ongoing as well as a design phase. The latest, the last tenant moves out in June, so after that we can start the project if everything works out the way you want. Possible completion in Q3 2025. A few other possibilities from the industrial and logistics segment. Tomaten one, additional 2.500 square meters. Bilrutan 5 in Helsingborg, in Landskrona.
14,000 square meters logistic just beside the highway. We have also land at Örja and Pådrivaren in Landskrona, close to Bilrutan. This project Sunnanå at 12:26 in Malmö is a new one, approximately 4,000 square meters. Here are some examples of what we can call fill-in projects on existing land. When demand increase, we can add on value. These possibilities are all in Malmö. Stenåldern, Benkammen, Spånbostrand, and Hindbygården. Of course, we continue inexhaustible with Nyhamnen. The light blue buildings in this picture are from our running portfolio, and the dark blue is building possibilities on our land or where we have land allocation agreement with the municipality of Malmö since many years. One example in that area is Slagthuset.
We own the land and have planned permission for housing, but we think that the area needs a higher density, and we will work for that. Offices at best location is our goal, of course. Some other projects in this area, both from Nyhamnen and Dockan, and a mix of approved zoning plans, ongoing plans, and applications for zoning plan. Let's summarize Q1 2023. Once again, record high rental income, +22%, operating surplus, +20%, positive net letting, increased occupancy rate, higher financial costs, and our stable balance sheet and access to liquid funds gives us opportunity to continue with our investments. By that, we are open for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Markus Henriksson, from ABG Sundal Collier. Please go ahead.
Thank you very much. Good morning, Ulrika and Arvid. First off, a lot of companies nowadays do talk about divestments to reduce debt. What's your view on Wihlborgs' situation? Are you looking into divestments or acquisitions currently?
We always look at possible acquisitions and try to be picky as usual, choosing the right ones. Divestment is not our goal at the moment.
Very clear. Thank you. Have you seen any deals, transactions out for sale here in the beginning of 2023, either in office segment or in the logistics that you think is representative of your portfolio?
Not that I can think of. No.
Okay. moving to projects. You discussed a lot there. The question on Posthusen as one. It's quite some time before completion, but could you give us an update on potential lease discussions and what yield on cost you hope to achieve in that project?
Yield on cost, close to 6%. Yes, positive discussions ongoing. No signed leases yet, but the location is very good. Also the quality is... I'm totally secure that we will fill that up in a good way. Also the rents in Lund are moving to very decent levels.
Thank you for that. What is a decent level in Lund nowadays?
Think that for new build projects with good quality and right location, you should be quite close to SEK 3,000.
Perfect. Thank you. One last question. Last quarter, I think you had 8% CPI assumption in your valuations. Many other companies are currently at 4%. Do you have any view here that you want to share with us?
Like I think when looking at assumptions in the valuation models, you need to factor in all assumptions, not just highlighting one assumption. If you look at how our external appraisers put in assumptions in their models, as of end 2023, sorry, end 2022, the indexation assumption was 8%, but at a different assumption for the market rent development, meaning that not necessarily everything would feed through. I mean, you really have to look at the market rent expectations, the indexation expectations, the cost expectations, as well as potential yield requirement changes and potential changes in the discount rate at which you discount the foreseeable cash flow.
Overall you can say.
I agree on that.
Yes. You can say, if you-
Sorry.
If you look a year back and look at the reports of how much the yield requirements have moved, I would say that we have followed that line. We started a bit earlier.
Thank you for that. I should interpret that answer as that you are quite cautious on some of the other metrics. That's what you're trying to clarify.
We feel that we are not stretching valuations in any way.
Perfect. Thank you. Those were my questions.
The next question comes from Erik Granström from Carnegie. Please go ahead.
Thank you. Good morning, everyone. I have a few questions as well. If we start by looking at the development of income from property management, it did come down a little bit year-over-year now in Q1. I know that you don't give any guidance, but given what you know now of this type of development and so on and financial costs, do you think that you could reach a growth in income from property management this year versus last year? In 2022 you did achieve a little bit of growth even though we saw increasing interest rates. What do you think is doable this year?
Well, as you know, we don't make any forecast apart from what you can find operationally in the property table, in the report, as well as the details on our debt portfolio. Basically what you need to assess for yourself is of course which underlying market interest rate developments do you expect for the rest of the year. That will be the determining factor. As you can see in the report just published, the core operations develops strongly. The question mark is the rest of the year, what will happen to market interest rates.
Absolutely. In terms of your comment, during Q1 with some expiring swaps as well as new swaps, do you expect to do a large proportion of that throughout the year as well? I believe you have SEK 2 billion expiring this year in terms of swaps, that we should also expect that cost to increase in general.
You will have an effect of that during the rest of the year as well. To elaborate a bit on our interest rate hedging policy, what we've said or stated in our policy is that we want to have a certain proportion of interest rate maturities, a minimum and a maximum level during a period of zero to one years, one to two years, two to three years, et cetera. That basically means that in any given year, some interest rates will... Or some interest rate swaps will expire, and we would gradually enter into some new interest rate swaps. That of course will have an effect as well.
Understood. thank you. My final question regards, the maturities of the bonds of SEK 820 million are the, that you mentioned. I believe you said it was in Q3, Q4?
Correct.
Have you started sort of thinking in the discussions of how to refinance this? Is this something that is already sort of completed and done, and are you looking to do this in terms of secured financing through the banking system? Or would you like to go on into the capital market and sort of try the cost there at this point?
If the bond market functions the way it does today, it's likely that we will repay those bonds, using existing unutilized credit facilities with banks. At the same time, we follow the development in the bond market because of course, ideally, we will also in the future be able to be active in the bond market on reasonable terms, at least. You saw some improvements in the bond market in February. Then we had some financial market turbulence with Silicon Valley Bank and Credit Suisse, et cetera. And it's a number of months before the maturity of these bonds. If the bond market recovers, stabilizes, improves, we may be active in the bond market again.
Okay, understood. My final question is regarding unutilized credit facilities. I believe they came up a little bit during the quarter versus year-end, meaning that you're sort of increasing your capacity. You also mentioned that that obviously comes with a cost. What's your thinking for the rest of the year? Should we expect unutilized credit facilities to continue to increase throughout 2023? Do you feel that this just north of SEK 3 billion is sufficient?
North of SEK 3 billion is sufficient. The development during the rest of the year, of course, depends a bit on what will happen in the bond market. Will we use part of those SEK 3.3 billion to repay the SEK 800 million? Obviously, of course, will we see any acquisition opportunities? What will the level of project investments actually end up with towards the end of the year? We have, as you know, a dividend payment in a few days time that will of course also affect credit facilities utilization.
Okay, perfect. Those were my questions. Thank you very much.
The next question comes from Lars Norrby from SEB. Please go ahead.
Hello, and good morning.
Good morning.
I have a question about the impact from the economy. I mean, you're reporting high growth in rental income, high growth in net operating income, and for that matter, positive net letting. Do you see any kind of impact from the slowing economy on your customer base or tenants?
I would say that, what we have seen lately, the last years, I would say, is that the tenants they need to make the workplace even more attractive, so that they can get their employees back to the workplace. That continues. Good, very high focus on that. We also see, of course, examples of can we do this more efficiently, in any way. All these kind of actions taken from our customers is a good thing because that makes them more attractive for the future. I think as long as we follow these needs, but we see very different kind of needs because the market consists of different kind of businesses. I think, of course, I expect that we will see, also examples of business that are really struggling ahead. That is a part of it, and, I don't see any large signals on that at all.
How about remote working? It's a factor in Stockholm. How much of a factor is it in Malmö or Copenhagen? In what way does it affect your business?
I think that a combination is here, of course, but also that maybe we have in this region, have a bit of a better possibility to get to work without taking too long time for that. The to working together is an attractive product. What I is a bit worried about is that when we see... I think I mentioned that last report maybe that in the last Microsoft report about remote work, employees use the same reason why they choose to work from home and why they go to the office. I choose to work from home because I want to work focused. I choose to go to work because I want to work focused.
If you ask, if you are able to give your employees the kind of areas needed for doing the work at the workplace, I think that's might be a challenge for the future. If you think that all the areas should consist of, you know, open areas where you can do nice things and meet and greet and drink coffee and such. You have to also bear in mind that you have to give the opportunities to actually work focused at your workplace. You see examples from, you know, these kinds, table tennis. You know how much that sounds? That's a really disturbing sound for many people. You have to...
I know that it is important, of course, that you want to achieve attractive areas, but attractiveness consists of different things, and you have to combine that on your workplace, I think. I think we see more of that now. Also more closed areas and more focused areas and even single rooms and such that are increased in a bit.
Okay. Final question from me is regarding transactions and property values. You're reporting virtually zero value changes in the quarter. At the same time, transactions in the market, talking about the total Swedish market, which you mentioned in your report, are down sharply in the Q1. Doesn't this create quite a lot of uncertainty about property values when liquidity is not there in the market? How do you feel about that, and how is it reflected in your valuations?
Even if the valuation is minus SEK 28 million, and that is close to zero, so that doesn't mean that it's no changes between properties. Something's up and something's down. As mentioned before, we started a bit earlier than we have seen many others on the way up with the market yields, for examples. Of course, these market parts have been. We have to have constantly discussions with our appraisers, of course, when we do our valuations also in this quarter. I think we saw in Q4, for example, we have industrial segments were valued down a bit more than the office part. Close to zero now doesn't mean that we don't have any changes in the total between the properties, but mentioning.
I take your point that a very low transaction volume, of course, makes it more tricky to find relevant comparisons in, so to speak, real transactions. What we can do is, of course, to focus on continuing to generate a decent cash flow. That we can actually affect, and at some point in time, that will feed through also in valuations.
Okay, very good. Thank you.
The next question comes from Danske Bank. Please go ahead. Danske Bank, your line is now unmuted. Please go ahead. Please state your name and company. Please go ahead.
If there's no question from Danske Bank, I received a question via email here relating to the webcast. It comes from David Flemmich at Nordea. The first part of the question relates to interest rate hedging, and I believe we've actually already answered that part of the question previously during the Q&A session. The second question is, can you elaborate a bit on the development of bank margins in recent quarters? What is the average margin in your portfolio? Bank margins in our bilateral bank agreements are moving slightly upwards. I'd say a bit over a year ago, a three-year bank credit would probably have cost us about 120 basis points in margin.
Currently, it would probably cost us in the region of 150 basis points. There's been an increase during the year, although not at all as dramatic as in the bond market. The average bank margin in our portfolio, without having the exact number in my head, I would say that it is probably around 120 basis points on average, maybe a touch below that. I hope that answers your question, David.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Okay. Thank you for today. Of course, you're always welcome with additional questions in other forums than this. Bye that.
Okay. Wish you all a good day. Thank you very much.
Thank you.