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

January–September 2023
· Rental income increased to SEK 658 m (635). For the like-for-like portfolio, rental income increased by 4.9 percent as a result of rent increases and a reduced vacancy rate.
· Net operating income increased to SEK 366 m (329) during the period. For the like-for-like portfolio, net operating income increased by 3.7 percent, after adjustments for items affecting comparability, mainly due to increased rental income.
· Profit from property management totaled SEK 127 m (161). The reduction is primarily a result of higher financial expenses but also increased central administrative costs. Items affecting comparability of SEK 15 m were charged to administration costs for the period.
· The unrealized change in value of the properties amounted to SEK -926 m (-819) for the period.
· The value of the property portfolio totaled SEK 14,379 m at the end of the period, which is a decrease of 6.0 percent compared with year-end.
· Net loss for the period amounted to SEK -795 m (-516), corresponding to SEK -5.46 per share (-3.55).
· The net asset value amounted to SEK 48.60 per share (65.86).

July–September 2023
· Rental income increased to SEK 224 m (213) during the quarter, as a result of the rent increases and a decrease in vacancies.
· Net operating income increased to SEK 140 m (128) due to higher rental income and reduced costs.
· Profit from property management for the third quarter totaled SEK 52 m (67). The decrease is due to higher financial expenses and increased costs for central administration. Items affecting comparability of SEK 6 m were charged to administration costs in the third quarter.
Significant events during and after the third quarter
· In September, the Board of Directors adopted Neobo’s sustainability strategy and sustainability policy and work to prepare concrete sustainability targets is under way.
· An Extraordinary General Meeting on October 4 resolved to expand the Board of Directors by one person and Jakob Pettersson was elected as new Board member.
· Jonny Göthberg, Neobo’s Head of Property Management, has chosen to resign and will leave the company at year-end.

CEO Comments
Focus on vacancies are starting to pay off   
Despite challenges in the world around us, our operations have continued to perform positively and net operating income for the first nine months of the year rose by more than 11 percent year-on-year to SEK 366 m. For the like-for-like portfolio, net operating income increased by 3.7 percent and rental income by 4.9 percent. The surplus ratio improved to 56 percent (52) for the interim period and to 63 percent (60) for the quarter. This is a clear improvement, but more can be done to further increase the surplus ratio.

Work to reduce vacancy rates in the portfolio is a long-term commitment focusing on a number of different measures, such as improved marketing, renovating empty apartments and conducting activities to increase tenant satisfaction and reduce tenant turnover. It is gratifying to see that our efforts have started to produce effects. Since year-end, residential vacancies have declined from 6.6 to 6.0 percent.

Stable financial position
Profit from property management fell to SEK 127 m (161) mainly due to higher financing costs. Interest rates continued rising during the year but our high hedge ratio has enabled us to limit the impact of this. Our average interest rate was 3.2 percent at the end of the period and the average fixed rate period was 1.9 years. Our financial position is stable, with a low loan-to-value ratio, long loan-to-maturity periods and comprising solely bank financing, which is a strength.

Since year-end, the property portfolio’s value declined by 6.0 percent as a result of increased yield requirements for properties, and the average weighted yield requirement used in the valuations is now 4.5 percent (4.1).

Sustainability strategy adopted
During the quarter, we finalized our sustainability strategy and sustainability policy, which were adopted by the Board in September. Sustainability activities are an integrated part of the company and are based on three perspectives – Sustainable living environments, Corporate social responsibility and Sustainable business. Activities to prepare concrete sustainability targets are proceeding and our ambition is that these will be decided and communicated at the start of next year.
Well placed for increased yield moving forward
During the year, we have laid the foundation to increase the return from our property portfolio by raising rental income, reducing the vacancy rate and implementing value-generating investments.

The rent increases have not fully offset our increased costs but we are optimistic about upcoming rent negotiations. The three-party agreement between the Hyresgästföreningen (Swedish Union of Tenants), public utility housing and Fastighetsägarna (The Swedish Property Federation) means that interest rates and inflation are variables that must be taken into consideration during rent adjustments. Since we have now had a longer period with high inflation and rising interest rates, we expect the outcome of the upcoming rent negotiation to be higher than in 2023.

During the year, we built an organization with dedicated employees who actively strive to form attractive and sustainable living environments where people can thrive and feel secure. This is the best platform for the creation of long-term value for customers and shareholders.

Stockholm, November 16, 2023

Ylva Sarby Westman, CEO