Heimar Q3 2025 presentation: Rental income and EBITDA both up 8.2%, financial stability improving

Introduction & Market Context

Icelandic real estate company Heimar hf (NASDAQ:HEIMAR) released its third-quarter 2025 investor presentation on October 22, highlighting consistent growth in rental income and improved financial stability metrics. The company’s stock saw a modest 0.54% increase to ISK 36.8 following the presentation, despite the broader market facing challenges.

Heimar’s presentation emphasized its resilient revenue base and strengthening fundamentals, with the company positioning itself as a stable investment option in the Icelandic market. With a beta of just 0.29 according to available data, Heimar offers significantly lower price volatility than the broader market.

Quarterly Performance Highlights

Heimar reported an 8.2% year-over-year increase in rental income for the first nine months of 2025, reaching ISK 11.2 billion. This growth includes 4% real revenue growth on top of inflation. The company’s EBITDA also grew by 8.2% to ISK 8.1 billion, maintaining a healthy EBITDA-to-rental income ratio of 72.0%.

As shown in the following income statement and performance metrics, the company has demonstrated consistent improvement in its operational results:

For Q3 2025 specifically, Heimar’s performance was even stronger, with rental income growing 14.6% and EBITDA increasing by 15.4% compared to the same quarter last year. The company’s focus on operational efficiency is evident as EBITDA growth outpaced rental income growth in the quarter.

The company’s revenue growth can be attributed to several factors, as illustrated in this waterfall chart breaking down the components of the 8.2% increase:

Inflation contributed 4.2 percentage points to the growth, while property portfolio changes added another 3.8 percentage points. The company signed 21 new lease agreements in Q3 2025 covering approximately 19,000 square meters, further supporting future revenue growth.

Financial Position

Heimar’s balance sheet continues to strengthen, with the equity ratio increasing to 32.4% (up 1.4 percentage points year-over-year) and the leverage ratio decreasing to 60.6% (down 2.9 percentage points). These improvements reflect the company’s strategic focus on enhancing financial stability.

The company reported total assets of ISK 231.2 billion as of September 30, 2025, with investment properties valued at ISK 222 billion. Net profit for the first nine months of 2025 was ISK 2.9 billion, down from ISK 5.6 billion in the same period of 2024, primarily due to a smaller fair value adjustment of investment properties (ISK 3.1 billion versus ISK 7.6 billion).

Heimar maintains a comfortable debt maturity profile with no refinancing needs through 2026, providing financial flexibility for the coming years. The company recently issued a new green bond series maturing in 2028, with green financing now accounting for 38% of total interest-bearing debt.

Strategic Initiatives

Heimar’s strategy focuses on concentrating its portfolio in core geographic areas, with 75% of rental income currently derived from these locations. The company aims to maintain this proportion between 70-80% in the long term. Public entities account for 30% of tenants (with a long-term goal of 30-40%), while listed companies represent 12% (with a target of 10-15%).

The following map illustrates Heimar’s strategic focus on key areas in Iceland, particularly around Reykjavik:

Sustainability remains a priority for Heimar, with environmentally certified buildings now comprising 42% of its portfolio. The company aims to increase this to 50% in the long term. Heimar received 84 points in Reitun’s 2025 sustainability performance assessment, achieving above-average scores in all categories and showing year-on-year improvement.

Development Projects

Heimar highlighted several ongoing development projects that will contribute to future growth:

1. Construction of a seven-story, 14,000 m² office building at Dvergshöfði 4, with the first lease agreement already signed for approximately one-third of the building. The first spaces are expected to be delivered in early 2027.

2. Expansion of the Sóltún nursing home by 3,500 m², adding 67 nursing rooms for a total capacity of 159 rooms upon completion in fall 2027.

3. Development of an ambitious food hall in Smáralind shopping center, featuring 13 restaurants with an expected opening in mid-November 2025.

Capital Allocation & Shareholder Value

Heimar has been actively implementing its share buyback program, having completed an ISK 500 million program with potential for up to ISK 2 billion in buybacks for the year. Currently, 1.59% of total share capital is held as treasury shares.

The company emphasizes intrinsic value as the benchmark for its buyback decisions, with the calculated intrinsic value at ISK 46.3 per share, suggesting potential upside from the current trading price.

The ownership structure remains stable, with the top 20 shareholders holding 83.39% of the company. Major shareholders include Omega fasteignir ehf (12.68%), Lífeyrissjóður starfsmanna ríkisins (9.39%), and Brú lífeyrissjóður (9.00%).

Forward-Looking Statements

Looking ahead, Heimar expects additional revenue streams from its development projects and ancillary services. The company aims to increase ancillary revenues from the current ISK 150 million annually to ISK 200 million by 2026.

Heimar also highlighted the potential impact from its Klasi associate company, estimating a contribution of ISK 800-1,400 million to annual profit.

With a solid foundation of long-term leases (average term of 6 years), high occupancy rates (97%), and a diversified tenant base, Heimar appears well-positioned to maintain stable growth despite market challenges. The company’s next financial update is scheduled for February 12, 2026, when it will release its annual results for 2025.

Full presentation:

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