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Fabege AB reported its financial results for the second quarter of 2025, highlighting a stable performance despite a challenging market environment. The company’s rental income for the first half of the year reached SEK 1.7 billion, with a net operating income of SEK 1.233 billion. The stock price increased by 2.39%, closing at SEK 79.55, as investors responded positively to the company’s strong balance sheet and strategic initiatives. According to InvestingPro data, Fabege maintains a market capitalization of $2.69 billion and has demonstrated its commitment to shareholder returns with an impressive 28-year streak of consecutive dividend payments, currently yielding 2.46%.
Key Takeaways
- Fabege’s rental income decreased by 3.3% like-for-like in the first half of 2025.
- The company’s net operating income stood at SEK 1.233 billion with a surplus ratio of 72%.
- Fabege completed the first phase of a housing project in Haga Norra and updated its Green Framework.
- The stock price rose by 2.39% following the earnings announcement.
Company Performance
Fabege’s performance in Q2 2025 reflected resilience in a market characterized by rising vacancy rates and a calm transaction environment in Stockholm’s office sector. The company maintained its focus on property management, reporting a profit of SEK 657 million, up from SEK 600 million in the previous year. Despite a decrease in rental income, Fabege’s strategic initiatives, including energy efficiency collaborations and property renovations, supported its stable performance.
Financial Highlights
- Rental income: SEK 1.7 billion (-3.3% like-for-like)
- Net operating income: SEK 1.233 billion
- Profit from property management: SEK 657 million (up from SEK 600 million)
- Surplus ratio: 72%
- Total property value: SEK 78.3 billion
Outlook & Guidance
Looking ahead, Fabege aims to increase occupancy rates to 95% and is optimistic about improving net letting in the second half of 2025. The company plans to continue project completions and explore potential value-creating transactions. Fabege’s long-term goal is to achieve a total return in its property portfolio. InvestingPro analysts expect the company to remain profitable this year, with additional insights available in the comprehensive Pro Research Report, which provides detailed analysis of Fabege’s financial health and growth prospects among 1,400+ covered companies.
Executive Commentary
Stefan Dahlbo, CEO of Fabege, emphasized the company’s belief in the Stockholm office market, stating, "We believe in Stockholm, we believe in offices." He also highlighted the focus on growing management profit, describing the results as "a stable result in a continued weak market."
Risks and Challenges
- Rising vacancy rates in Stockholm’s office market could impact future rental income.
- The calm transaction environment may limit opportunities for property sales or acquisitions.
- Economic uncertainties could affect tenant demand and lease renegotiations.
- Increasing interest rates may influence borrowing costs and financial flexibility.
The company’s strategic focus on occupancy rates and energy efficiency, coupled with a strong balance sheet, positions it well to navigate the current market challenges.
Full transcript - Fabege AB (FABG) Q2 2025:
Conference Moderator: Welcome to the Fabege Q2 2025 report presentation. For the first part of the conference call, the participants will be in listen only mode. During the questions and answers session, participants are able to ask questions by dialing KEY5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Stefan Dahlbo and CFO Åsa Bergström. Please go.
Stefan Dahlbo, CEO, Fabege: Good morning and welcome to our presentation for the first half of 2025, including the second quarter, of course. With me here in the room I have CFO Åsa Bergström and also Peter Kangert, Investor Relations. As usual, we will end with a Q&A session. Next slide, please. Our strategy with focus on Stockholm is of course still valid. We believe in Stockholm, we believe in offices. I will come back to that later in the presentation also. Why so? Please also let us talk about the figures first.
Åsa Bergström, CFO, Fabege: Thanks, Stefan. Yes. Rental income for the first half year amounted to SEK 1.7 billion, just below the same period last year. On a like-for-like basis, income decreased by SEK 53 million, equivalent to -3.3%, which mainly related to relocation. Due to the previous year’s negative net lettings, occupations in completed projects were offset by reduced income related to divested properties. Net, a plus SEK 40 million, net operating income decreased to SEK 1.233 billion. Property expenses include a non-recurring item of SEK 7 million. Other deviations mainly related to high maintenance costs and property tax, and the surplus ratio thus amounted to 72%. During the second quarter, the first phase was completed in the housing project in Haga Norra with the completion of 23 apartments. This meant that Bostad reported sales of SEK 128 million and a gross profit of SEK 23 million.
Central administration cost amounted to -SEK 59 million. Net interest items came in just below the previous year. Higher debt was offset by lower average interest rates during the period, and the result in associated companies amounted to -SEK 37 million and related to the period’s capital contributions to Arenabolaget. Share in profit of other associated companies only amounted to minor amounts. This meant a profit from property management of SEK 657 million compared to SEK 600 million in the previous year. Unrealized changes in value amounted to -SEK 85 million in the quarter and -SEK 650 million accumulated in the first half of the year. I will come back to this very soon. We have also written down development properties relating to future project opportunities in Flemingsberg, start by -SEK 21 million.
Realized changes in value of -SEK 37 million related to the sale of Englunda, which was vacated in the first quarter, and the valuation of the derivatives portfolio following long-term interest rates, which fell during the quarter. During the period, the surplus value decreased by SEK 329 million. The tax expense, which related to deferred tax, amounted to SEK 116 million, of which SEK 128 million related to a reversal of deferred tax in connection with the sale of the property in Lingham. Next slide please. During the second quarter, we have independently valued approximately 40% of the property portfolio, supplemented with internal valuations of other properties. The average yield increased during the second quarter by a further 0.01 percentage points to 4.56%. This was 4.54% at year end. In the first quarter we reported negative changes in value of -SEK 565 million.
This was mainly related to the fact that the valuers expected longer vacancy periods and slightly lower rent levels, primarily in Solna where we do have some vacancies and longer implementation periods for future project opportunities. In Flemingsberg, now in the second quarter, the changes in value amounted to -SEK 85 million net of minor adjustments, both upward revaluations and impairments. Overall changes in value during the period thus amounted to -SEK 650 million. The total property value thus amounted to SEK 78.3 billion. In addition, there is a property value of development property portfolio in Bostad of SEK 0.9 billion. Next slide please. Reported equity amounted to SEK 119 per share and the long term EPRA MRV amounted to SEK 147 per share. The equity asset ratio amounted to 45% and the loan-to-value ratio was unchanged at 43%.
Both of these key performance indicators confirm our continued strong balance sheet and the interest coverage ratio amounted to 2.5 moving 12 months which is in line with the previous year. Next slide please. Access to and pricing of financing is still very good. This applies both to capital market and to banks. Since the vacation of the property Englingen in March when we received almost SEK 1 billion, our activity has been at a relatively low level. We have refinanced and extended a bank facility of SEK 1.5 billion. During the second quarter we issued a total of SEK 700 million in new three year bonds at a margin of approximately 1%. In connection with this, smaller amounts were repurchased in relation to maturities during the autumn. After that there are remaining bond maturities of SEK 1.7 billion in the autumn which we intend to refinance with new bonds.
In June, the annual update of the MTN prospectus was carried out. We also launched an updated Green Framework with a second-party opinion from S&P Global. Undrawn revolving credit facilities totaled SEK 6 billion at the end of the quarter. Overall, we continue to have good preparedness for upcoming financing needs and refinancings. We have facilities in place to cover the upcoming loan maturities. Next slide please. Of the loan portfolio, 49% is fixed mainly based on long term maturities and mostly through straightforward interest rate swaps supplemented by some fixed rate bonds. In addition, there are callable interest rate derivatives totaling SEK 7 billion which are still running. Straightforward interest rate swaps run with fixed interest rates between 0.11% and 2.18% and the callable interest rate derivatives run with an interest rate between 1.82% and 2.5%. The average fixed rate term amounts to 1.5 years.
Adjusted for the estimated maturity of the callable swaps, the fixed rate term increases to 2.4 years. The Riksbank cut of its policy rate in June has not yet had a full impact on our financing. We also see potential for lower margins in connection with upcoming refinancing of both bonds and bank loans. Meanwhile, this is offset by swaps at low interest rates that matured during the year. As I have said earlier, we expect that the average interest rate will remain just below 3%. At the end of June, we reported an average interest rate of 2.89% for a moving 12 month period ahead. An increase in the market interest rate of 1 percentage point will generate a higher interest expense of approximately SEK 153 million, all else unchanged.
A corresponding reduction in the market interest rate by 1 percentage point will result in a reduced interest expense of SEK 96 million. Over to the next slide please. Something new in the second quarter, as I just mentioned, is the updated Green Framework. The framework is based on third party certified properties and ambitious energy targets. As before, it’s mainly based on the Green bond principles adapted to the EU taxonomy. The framework is primarily aimed at the capital market, where we have only borrowed using green financing for several years now. S&P Global has issued a second party opinion with a median Green rating for the green terms and conditions. The framework and associated documentation is published on Fabege’s website during the quarter.
We have otherwise continued to work in line with our environmental and sustainability targets relating to, among other things, the properties, energy consumption and reduction of CO2. During project development, we have recently started a collaboration with Mestroven, Swedish company, to take the next step in further streamlining and managing the energy consumption in our properties. This will be noticeable in both consumption and costs in the longer term. Another initiative is the dismantling of older properties that is now being carried out along Dalvägen in Solna. We have set a high target where at least 80% of the demolition material must be reused or recycled. A lot of material goes back to suppliers for recycling. Other materials are recycled on site. We have recently sent 1,600 windows to Ukraine to help with reconstruction. Back to you, Stefan.
Stefan Dahlbo, CEO, Fabege: Thank you.
Also.
The next slide please. The transaction market for office in Stockholm has been relatively calmer during the first half. There are some transactions that have been announced, some in the CBD and then more, they have been good prices, and some right outside the CBD and in the city, for example. We don’t know exactly the price that have not been published, but the indications we have are that they are in line with the regulations we have in our different areas. Next slide please. The office market in Stockholm or in our area continues to be quite slow. During the second quarter, we have noted some increased activity in the numbers of inquiries and viewings. That also makes us a little bit more hopeful for the second half of this year. The vacancy rates continue to go up, as it has done. The trend continues from the last years.
As we all know, the number of employees in office intensive industries are high in Stockholm. That also means it’s a little bit more volatile for this than maybe you can see in the rest of Sweden, because the office related professions in Stockholm are very high in most sectors, in service sectors, in tech, in life science, in finance advisories, and so on, less in the industrial related professions. We are a little bit more, I think it’s time to get a little bit more optimistic for the next, at least for 2026. Next slide please. This is also one of the reasons the office space is not there. Very few projects going on and the office space is not supposed to or expected to increase.
As we know, the location is everything, and that’s even more clear over the last year, over the last June, the last years, that to have good commuting opportunities and possibilities is even more important than it was five years ago. That trend continues to be strong. Next slide please. The occupancy rate in our management portfolio is, as you know, one of our challenges, but also one of the future opportunities. In the management portfolio, we have 87% occupancy rates. It will continue to be a little bit lower before it will turn up again. It is because of what we have seen the last years of Internet leveling. Next slide please. In the renegotiations during the first half, most of the terms were extended. Most of the contracts were extended unchanged terms. The SEK 100 million we had closer remigation we had to decrease with the -3%.
Some of them are relatively large contracts in Solna, where we had a little bit when the annexation meant that some of those. I think it’s three contracts that have quite a big impact on this figure. We still expect most of the future renew agents to be extended on unchanged terms. The net letting was negative for the quarter and for the first six months with SEK 6 million. We had a positive of SEK 6 million in the first quarter and negative of SEK 12 million in the second quarter. It was mainly related to one tenant that decreased the area during period. Very few contracts. Both were on the plus or minus, you can say. It was relatively quiet on the gross level. We have a lot of, as said before, a lot of discussions. I’m more optimistic for the second half of the year.
Next slide, please. This is. We used to show you the rental development for what we know today in the existing lease portfolio, including the projects we have seen in the beginning of this year. In the second quarter, Alfa Laval moving in. We have part of that in Q2. We will have Saab in Q3 and Q4 and that’s also a silicon lifted planner in the beginning of next year. The negative is of course that what we know about the tenants that are leaving us, but better for next year and then we’ll continue. This is the trend we are working for, of course. Next slide, please. We also used to show you the stable customer this slide. With the stable customers there are largest tenants with Saab still at top.
Of course.
Saab will be our new list. Alfa Laval is new on the list. According to Combendum and the situation of the reconstruction or the fire damage, it’s still not settled. We have an agreement with them, but it hasn’t been legally binding yet because there is a smaller channel that is still challenging the agreement. Hopefully, we will know later today maybe or at least during July a little bit more. To be continued, so to speak. Next slide, please. We have completed a COR in Haga Norra. It’s a fantastic building and we still have two floors to sign. We are optimistic that that will be done during the next six months. Alfa Laval have moved in and probably is really working very, very well. We still have 500 square meters or 500-600 square meters vacant there with an option to Alfa Laval to take on.
We will know more about that later this year. In Flemingsberg, Hurston Textile Foyer is continuing to develop very well. It’s also a fantastic building. We’re now working with everything from the tenants to the restaurants. We signed this week or last week a new contract for one of the floors. Now we have just one floor left. I think it’s 86% occupied right after that.
So.
It’s moving on, so very few now. It’s only Saab that is on when we were expecting to move in later this year. Next slide please. You can see it here. Merton 4 for last run. It’s almost finalized or finished, and they are starting in September, starting to move in. During the period, we have started renovation of Van der Garden center. It’s mainly the facade, but also everything from ventilation too, we will do at the same time. In Arenastaden, we have started to demolish part of Kairo to make it, first of all, just to be able to start the infrastructure work with the roads and everything to be ready when the subway is open at the end of 2028. Also, make it possible for us to have for the future, for future microbit, for future projects. Next slide please.
In Bostad, they have completed and, as also said before, settled or completed Upper Alma, and we continue to sell the owner apartments. The next pro in the upcoming phases of the apartments, we have sold. We have sold quite good during the quarter, and the rental apartments, the seven-day rental apartments, will be completed for agriculture during autumn 2025. It will continue to develop according to plan. Next slide. Our building rights, just to remember, we still have, as you know, 1.2 million square meters. Almost 40, almost half of it is legally binding, and this is for the future opportunities. Of course, today we are more, it’s a wait move to prepare for the future, but we’re not starting anything right now on speculation. Next slide please.
Obviously, could be started in the near term if we can find the tenants, or in Förro Kairo, maybe more than 75,000 square meters and almost 200 apartments. We have discussions here, and we are working with it in the market, of course. We will keep you informed. In Haga Norra, we can start the next phase of development for the residentials, but we will, maybe we would like to sell more in the existing products before taking any decisions. Next slide please. In Västra Kungsholmen, as you know, Tegeludden, the plan was binding end of last year after 14 years of work. We are having discussions how to develop that building for the future, and it’s one of business park. The most positive there is right now that NCC have started to build the house in the middle that Svenska Kraftnät will move in a couple of years’ time.
That will also make it possible for us to develop, package that for offices, 20,000 square meters offices, and for residentials and some, but then to be even here to be continued. It’s not any decisions made right now, but we’re working to be able to use those opportunities for the futures. Next slide please. Everything this will lead to long term growth. Of course, our focus right now is letting to increase the occupancy rates back to the 95%. It will, we have said it before and of course is still true. It will take some years, but that’s a full focus. It’s focused also of course on completing the existing projects and in the near term to welcome Saab. We have work for making to be able to for the future projects.
We are continuing to look at and having discussions for transactions that can create values and as usual the cost efficiency is in focus. To summarize, growth of management profit is in focus. Has been poor for the last years due to a lot of circumstances still. I’m more optimistic for the next years and we will long term have the best total return in the property portfolio in listing companies. It’s for us to show generally. I think we can summarize it with, it was a stable result in a continued weak market. We have right now focus on letting and on the daily growing of managing our portfolio properties. Please, questions.
Conference Moderator: If you wish to ask a question, please dial key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial key 6 on your telephone keypad. The next question comes from Stephanie Dossman from Jefferies. Please go ahead.
Good morning and thank you for this presentation. I had a question regarding the net lettings target for this year because at the end of 2024 you were guiding on SEK 80 million for this year, positive of course. It doesn’t seem to be the trend. Could you give an update on that target and see how confident you are to improve net lettings in the second half? Would it be possible also to give a breakdown of your like-for-like rental growth between inflation, negative reversion, and so on? More generally speaking, what is the reversionary potential on your portfolio please?
Stefan Dahlbo, CEO, Fabege: Thanks for the question. First, the net letting target of $80 million is still valid and that’s what we target going for. I’m looking forward to a better second half of the year, and as we said during the presentation, we see more activity for showings and different discussions at the end of this quarter. I’m looking forward to the second quarter with some self-confidence. You asked about the.
Breakdown.
Åsa Bergström, CFO, Fabege: Of.
Development of like-for-like growth. Yes, and there is some information in the presentation and also in the slides. As we said, the like-for-like was negative by SEK 53 million. This is due to companies leaving and a result of the negative net lettings of last year. That was equivalent to -3.3%. Indexation was only a very small number in the beginning of this year. It didn’t really have a large impact. There was one property sold, Gladian, which had a negative impact. On the other hand, as we.
Also, mentioned there is a positive impact.
From companies moving in into finalized projects, and the net of those two last ones is plus SEK 40 million.
Stefan Dahlbo, CEO, Fabege: I think we also have the V Grand center that we are.
Åsa Bergström, CFO, Fabege: That’s part of vacation. Yes. Yeah. Also, when it comes to renegotiations, the net was minus 3%. This has not really had the impact on rental income yet because there’s a time lag between the negotiation and the signing of a new contract and when it comes into effect. There is also a graph in both the presentation and in the report that reflects the rental income in the coming four quarters.
Thank you. Maybe if I may, Åsa Bergström.
Conference Moderator: Your line is now unmuted. Please go ahead.
Thank you for that. Just a follow-up maybe on the reversionary potential. I mean, could you give some colors on if your portfolio is over-rented currently and by how much, and what is, in your view, the negative reversion we can expect on the market as a whole? There has been a strong indexation during the last three years. What is the reversionary potential on the market, both on the market and your portfolio, please?
Stefan Dahlbo, CEO, Fabege: I don’t think that our portfolio is over rented. Most of the contracts are prolonged on existing terms. That’s also what we see in the market, that we are at the market level. The market rents are above the contracted rents. Still, we also have some potential in some contracts, some old contracts that are maybe signed 10 years ago. Since our areas are even more attractive, maybe with a higher rental level in the area. In general for the market, I would say it’s about. Of course, there are some contracts that are over rented as we can see. Most, and I think that’s true even for the other companies and our colleagues in the sector. In the CBD we even see maybe an uptick on the best locations. You can see higher rents than have been in the existing contracts, but that’s in some parts of the CBD.
Did that answer your question?
Yes, pretty much. Thank you.
Conference Moderator: The next question comes from Adam Shapton from Green Street. Please go ahead.
Good morning. Thank you for the presentation. Just one on balance sheet. If you look at your key ratios, debt ratio and ICR as well, you’re either beyond or close to your self-imposed target. Can you talk about how comfortable you are running, for example, with the debt ratio more than one turn above your target and how you see the trajectory for that over the next year or two and how you’re going to get, for example, a debt ratio back below 13%, assuming that remains your target.
Åsa Bergström, CFO, Fabege: Just to begin with, the development of the net debt ratio is really depending on the repurchase of shares that we did a couple of years ago that took this metric from in line with our internal targets up to where it is around now, around 14. I think with less project investments going forward, there will be an improvement in this metric. It’s not the main metric for us. We are more looking into loan-to-value level and interest coverage ratio. Those are the two that matches the most for us.
Stefan Dahlbo, CEO, Fabege: For the banks, you could say.
Åsa Bergström, CFO, Fabege: For the financing sector too. Yes.
Okay. The debt ratio target is a bit of a soft target. I just wanted to clarify on the previous question on the reversion in the portfolio. You made quite a number of comments, and I wasn’t sure I completely followed them. Did you say, Stefan, that most contracts are over rented?
Stefan Dahlbo, CEO, Fabege: No, I say that most contracts are in line with market rents. Most contracts are prolonged on existing terms.
Okay, that’s what you expect going forward. Okay, that’s very good.
Thank you.
Conference Moderator: As a reminder, if you wish to ask a question, please dial key 5 on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
Åsa Bergström, CFO, Fabege: Yeah, we have one question here from Kempen or two questions really. You’ve signed an LOI with the city of Solna for the disposal of Haga Norra. There’s been some opposition in the local government. In case this falls through, would you be willing to sell other assets instead?
Stefan Dahlbo, CEO, Fabege: Actually, they were at the sauna store. They contacted us to ask if we were.
If they were able to or if.
We could discuss if they could acquire it. Now as you said it’s more opposition and it probably will not be a sale right now. We were not outselling it so we don’t have any. We don’t like it. We can discuss other solutions for that with the City of Solna. We are.
We.
We’re not in a situation that we need to sell. No, the short answer is no.
Åsa Bergström, CFO, Fabege: The second question is as we’ve discussed before, you likely need more projects in the pipeline to secure net letting. What is the outlook for that, and are you confident on signing more pre-lets?
Stefan Dahlbo, CEO, Fabege: You should never be sure before it’s on the printed sign, but yes, I’m optimistic. Yes.
Åsa Bergström, CFO, Fabege: There’s also one question from Goldman Sachs. What actions are you taking to improve occupancy to 95%? Unemployment rates are still high in Sweden.
Stefan Dahlbo, CEO, Fabege: The unemployment rate, you’re correct. We have a lot of activities and I think the areas we have are attractive. We have even more people working with the letting. We have a lot of showings, activities in the market. The main thing at the end, I think it’s about attractiveness for our areas and I think that’s positive.
A little bit better.
Also, the demand in the market will help us a lot, so even though I’m optimistic for the future.
Conference Moderator: The next question comes from Stephanie Dossman from Jefferies. Please go ahead.
Sorry to be a pain, but another follow-up question. Maybe you touched upon looking at transactions. What would you target in terms of assets, location, yield for acquisitions, please.
Stefan Dahlbo, CEO, Fabege: We haven’t any targets for faculties right now. We are focusing on the existing areas. We are focusing on especially the vacancies and to take the opportunities for the future projects because we think that’s the best way of creating values for us even over the next years. That’s the main focus right now.
Åsa Bergström, CFO, Fabege: Thank you.
Conference Moderator: There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Stefan Dahlbo, CEO, Fabege: Thank you very much for joining us this morning. If you have any questions or would like to have any discussions with us, please give Peter or myself a call. Have a nice summer. Thank you very much.
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