Neobo Fastigheter AB (publ): Interim report January-March 2023

January–March 2023
· Rental income for the quarter increased to SEK 214 m (209). For the like-for-like portfolio, rental income increased by 1.6 percent. The impact of this year’s rent increases for residentials, which averaged 4.3 percent, will have effect during the second quarter.
· Net operating income increased to SEK 98 m (89) during the quarter. For the like-for-like portfolio, net operating income increased by 6.6 percent due to increased income and reduced costs.
· Profit from property management totaled SEK 29 m (36) during the quarter. The decrease is primarily a result of higher financial expenses.
· The unrealized change in value of the properties amounted to SEK –329 m (–187).
· The value of the property portfolio totaled SEK 14,904 m (17,815) at the end of the period.
· Net income for the period amounted to SEK –222 m (–37), corresponding to SEK –1.53 per share (–0.25)
· The net asset value amounted to SEK 52.12 per share (71.13).

Significant events during the first quarter
· Shares of Neobo were listed on the Nasdaq First North Premier Growth Market on February 10, 2023.
· During the quarter, Neobo finalized the refinancing of existing external financing of SEK 2 billion.
· Restructuring of the derivative portfolio was carried out during March, which led to an increase in the hedge ratio from 74 to 76 percent and a prolonged average fixed interest term from 1.8 to 2.3 years.
· Development of a sustainability strategy with concrete sustainability targets started during the quarter.

Stable start to the year
The first quarter as an independent company was intensive and included the stock exchange listing, work to continue building the organization and business planning. It is gratifying that we, despite all of this, have maintained our focus on our core business and have reported a good start to the year.

Net operating income increased 10 percent to SEK 98 m. For the like-for-like portfolio, net operating income increased by 6.6 percent due to higher rental income and good cost control. Profit from property management fell to SEK 29 m (36) due to higher financing costs during the quarter and the property portfolio’s value declined by 2.6 percent as a result of increased yield requirements for residential properties.

Strong financial position
In a world of rising interest rates and high inflation, it feels reassuring to have a low loan-to-value ratio and long loan-to-maturity. All of our financing consists of bank loans and at the end of the quarter we had a loan-to-value ratio of 47 percent, an average debt duration of 4.1 years and an increased fixed interest rate of 2.3 years.

Good outcome from rent negotiations
At the end of the quarter, we had completed negotiations for about 70 percent of our rental income in the residential portfolio with an average rent increase of 4.3 percent. The remaining negotiations are expected to be completed during the second quarter. The increase is below current inflation but historically property owners have been fully compensated for inflation over time, which we expect will also be the case moving forward.

Top priority is reducing vacancy rates
Reducing our vacancy rates is our top priority. For the quarter, leasing was positive for residential properties and vacancies decreased from 6.6 percent to 6.4 percent. However, vacancies in our commercial premises increased from 11.3 percent to 13.0 percent as a large premises was vacated in a public sector property in Sollentuna. In order to reduce vacancies in the residential portfolio, we are now focusing on a number of measures, such as renovating empty apartments and conducting activities to increase tenant satisfaction and reduce tenant turnover. When it comes to vacant commercial premises, we are working purposefully to find the right tenants and in some cases also other uses for the premises to accomplish our leasing goals.

Focus on increased yield and sustainability
Our prime focus here and now is on increasing the return on the existing portfolio by raising rental income, reducing the vacancy rate and implementing value-generating investments. In the next stage, we will also review the potential to optimize the portfolio to add further value.

We also accelerated our sustainability activities and launched an initiative to draft a sustainability strategy with concrete targets linked to this. Moving forward, we will focus intently on both environmental and social sustainability, and will prioritize initiatives that reduce our climate impact and increase security and satisfaction for our customers.
We have an exciting journey ahead of us!

Stockholm, May 10, 2023

Ylva Sarby Westman, CEO