• Rental Income: Just over SEK 3.4 billion, slightly higher than the previous year.
• Operating Surplus: Growth in the identical portfolio, surplus ratio at 74%.
• Net Letting: Negative net letting of minus SEK 108 million for the year.
• Net Operating Income: Improved despite SEK 29 million provision for Convendum.
• Property Value: SEK 78.9 billion, with a development property portfolio value of SEK 800 million.
• Profit from Property Management: Just over SEK 1.3 billion, approximately SEK 100 million lower than the previous year.
• Unrealized Changes in Value: Minus SEK 1.2 billion for the entire period.
• Interest Coverage Ratio: 2.5, in line with the previous year.
• Average Interest Rate: 2.98% at year-end.
• Equity per Share: Increased to SEK 122 per share.
• EPRA NRV: SEK 148 per share.
• Loan-to-Value Ratio: Unchanged at 43%.
• Equity Asset Ratio: Unchanged at 46%.
• Dividend: Proposed SEK 2 per share, paid 4 times a year.

• Warning! GuruFocus has detected 9 Warning Signs with FRA:WILC.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fabege AB (FRA:WILC) reported increased rental income and improved net operating income in the fourth quarter.
• The company maintained stable property values over the last six months, with slight positive changes in value during the third and fourth quarters.
• Fabege AB (FRA:WILC) has a strong financial position, with an unchanged equity asset ratio of 46% and a loan-to-value ratio of 43%.
• The company achieved its energy target, reducing energy consumption to an average of 70 kilowatt hours per square meter.
• Moody's confirmed Fabege AB (FRA:WILC)'s Baa2 rating and changed the outlook from negative to stable.

Negative Points

• Fabege AB (FRA:WILC) experienced negative net letting throughout the year, with a total of minus SEK 108 million.
• The company reported a decrease in profit from property management, approximately SEK 100 million lower than the previous year.
• Unrealized changes in value amounted to minus SEK 1.2 billion, despite slightly positive value changes in the third and fourth quarters.
• The office and rental markets have been challenging, with vacancies continuing to grow in Stockholm.
• The company made a provision for rental losses related to Convendum, amounting to SEK 29 million.

Q & A Highlights

Q: How much of the 4.5% like-for-like rental income growth was driven by inflation, and how might recent inflation figures affect future business plans? A: The indexation in 2024 was roughly 6%, with the 4.5% being a net result of indexation and tenant movements. The recent inflation figures are too early to assess for impact, but the focus remains on when lower interest rates will affect the economy, expected in the spring.

Q: Is there a trend of tenants downsizing, as seen with SBAB, and could this affect long-term vacancy rates? A: SBAB's move was more about location preference rather than downsizing. While some companies are reassessing office space needs, others require more space. The trend is not necessarily indicative of a structural shift.

Q: Are the new projects expected to secure pre-lets, and is there interest from tenants? A: There is interest, particularly in the Arenastaden project, but discussions are expected to take time due to the project's size. The company remains optimistic about securing pre-lets.

Q: How will the Riksbank rate cuts affect debt costs, and what are the sensitivities to interest rate changes? A: A 1% decrease in market interest rates would positively impact the financial net by approximately SEK 90 million. The sensitivity has changed due to market interest rates and derivative portfolio adjustments.

Q: What is the outlook for achieving the net letting target of SEK 80 million in 2025? A: The target is considered achievable due to expected market improvements and project completions. The company is optimistic about reaching this goal despite economic challenges.

Q: How does the company plan to address the current debt ratio, which is above the target? A: The sale of the Ynglingen property will help reduce the debt ratio. The company is not stressed about the current level, as it is mainly due to past share buybacks.

Q: What is the impact of the Convendum restructuring on rental income, and will there be further provisions? A: The SEK 29 million provision was a one-off in 2024. Future impacts will depend on the reconstruction outcome, with some rent discounts expected but no further provisions planned at this time.

Q: Is there a risk of structurally higher vacancy rates due to changes in office use? A: While structural changes are acknowledged, the company believes its prime locations and quality spaces will maintain demand. The lack of new office supply also supports a positive outlook.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.