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Sveafastigheter AB (SVEAF) reported its second-quarter earnings for 2025, highlighting a significant increase in net operating income (NOI) and a modest rise in stock price. The company saw its rental income grow by 13% to SEK 383 million, while its NOI increased by 19.4% to SEK 269 million. Despite a net profit loss of SEK 155 million due to non-recurring costs, the stock price rose by 1.23% in pre-market trading, closing at SEK 37.90. According to InvestingPro data, the company’s stock is currently trading near its 52-week high, with an impressive revenue growth of 88.7% over the last twelve months.
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Key Takeaways
- Rental income increased by 13% to SEK 383 million.
- Net Operating Income (NOI) rose by 19.4% to SEK 269 million.
- Occupancy rate improved to 95%.
- Stock price increased by 1.23% in pre-market trading.
- Targeting a 70% NOI margin by June 2029.
Company Performance
Sveafastigheter AB demonstrated robust performance in the second quarter of 2025, with significant growth in rental income and NOI. The company’s strategic focus on apartment upgrades and energy projects contributed to its improved financial metrics. Despite the net profit loss, primarily due to non-recurring costs, the company maintained a strong operational stance with a 95% occupancy rate, up from 94.3% in the previous quarter. InvestingPro analysis reveals a strong gross profit margin of 67.8%, though the current ratio of 0.55 indicates potential liquidity challenges. The company maintains a "GOOD" overall Financial Health Score of 2.71 out of 5.
Financial Highlights
- Revenue: SEK 383 million, up 13% year-over-year.
- Net Operating Income (NOI): SEK 269 million, up 19.4% year-over-year.
- Net profit: Minus SEK 155 million, affected by non-recurring costs.
- NOI margin: 65%, with a target of 70% by June 2029.
Market Reaction
The market reacted positively to Sveafastigheter AB’s earnings report, with the stock price rising by 1.23% to SEK 37.90. This increase reflects investor confidence in the company’s strategic initiatives and its ability to enhance operational efficiency. The stock movement also aligns with the company’s strong occupancy rates and planned future developments.
Outlook & Guidance
Looking forward, Sveafastigheter AB plans to initiate the construction of 600-800 apartments annually and aims to achieve a 70% NOI margin by June 2029. The company expects lower non-recurring costs in the second half of 2025 and no such costs in 2026. Additionally, the company is targeting further improvements in occupancy rates. InvestingPro analysts maintain a positive outlook, with consensus forecasts indicating a return to profitability this year and an EPS forecast of $0.20 for FY2025.
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Executive Commentary
CEO Erik Hevermark emphasized the company’s strategic goals, stating, "Our vision is simple yet ambitious, to be Sweden’s leading residential company." He also highlighted the company’s commitment to energy efficiency, noting, "We continuously carry out profitable energy investments that reduce energy consumption." Hevermark also clarified the company’s acquisition strategy, stating, "Growth through acquisition is currently not a priority."
Risks and Challenges
- Non-recurring costs impacting net profit.
- Market saturation in key metropolitan regions.
- Potential economic downturn affecting rental income.
- Regulatory changes in Sweden’s housing market.
- Competition from other residential real estate companies.
Q&A
During the earnings call, analysts inquired about the Kruong Gautam project disposal and the company’s acquisition strategy. Sveafastigheter AB confirmed its focus on organic growth and ongoing efforts to improve occupancy rates. Additionally, the company addressed questions about administrative cost expectations and the impact of energy investments on long-term profitability.
Full transcript - Sveafastigheter AB (SVEAF) Q2 2025:
Christel, Head of Treasury and IR, Svea Fasegeter: Welcome, everyone, to Svea Fasegeter’s earnings call and presentation of our Q2 result 2025. My name is Christel, and I’m head of treasury and IR. Today’s presenter is CEO, Eric Hevermark. After the presentation, we are opening the lines for q and a. Now I’m handing over to Erik.
Please go ahead.
Erik Hevermark, CEO, Svea Fasegeter: Thank you, Kristel, and a warm welcome from me as well to Zvi Faster Hertas’ second quarter earnings call. In Q2, we continued to strengthen our key operational metrics, which I’ll walk you through a bit later in the presentation. Svea Fassiete is Sweden’s largest listed pure play residential company with assets totaling 28,600,000,000.0 SEK. Our business model rests on two strong pillars, property management, which provides stable and resilient cash flow, and new developments, which drive profitable growth. Our vision is simple yet ambitious, to be Sweden’s leading residential company.
And our mission goes hand in hand with that, to manage and develop homes for more people, homes where current and future generations can thrive and feel safe. In the second quarter, we kept building momentum, improving our key operational metrics and profitability, right on track with our strategy. This quarter is also special. It marks Svea Faziete’s first full year as a company. Before diving into the Q2 numbers, I want to take a moment to reflect on what we’ve accomplished in just one year, shown on the next page, page five.
Svea Facet was restructured and formally established in June. Just four months later, in October, we were listed on Nasdaq’s first North Premier Growth Market, welcoming around 10,000 new shareholders. In January, we took over the management of the remaining part of our portfolio, bringing all properties under our own management. In February, we received an award for the largest improvement in tenant satisfaction. Our strong and conservative financial profile was confirmed in May when we were assigned an expected investment grade rating of BBB minus with positive outlook, which was affirmed in June.
In June, we issued three and five year green bonds totaling SEK 1,200,000,000.0, followed in July by an additional 0.5 bond maturing in 02/1930. As mentioned, in October, Fast Theater became a public company through our listing on the Nasdaq growth market. Despite the demanding work involved in taking Svea Fast Theater public through an IPO, we announced our ambition to be listed on the main market within twelve months. We achieved this in just eight months, starting to trade on the main market, Nasdaq Stockholm, in June. Very few companies have managed an upgrade from the growth market to the main market in such a short time frame.
This accomplishment reflects not only the quality of our processes and routines, but above all, the competence and dedication of our employees. Alongside this highly eventful and evidently successful year, we have remained focused on our strategy, enhancing profitability in our standing assets and driving growth through new construction. In the second quarter, we continued to deliver on this strategy. Let’s move over to the next page and the financial results for the second quarter. Our rental income grew by 13% to $383,000,000, and our NOI increased by 19.4% to $269,000,000, meaning that rental income continues to grow faster than costs.
This strengthens the important NOI margin, which I will return to later in the presentation. Profit from property management amounted to SEK97 million, impacted by nonrecurring administrative costs of SEK40 million. I will provide more context on administrative costs shortly. Changes in property value totaled minus 137,000,000, mainly due to revised market assumptions for a couple of projects in ongoing constructions and project development. Finally, net profit for the quarter was minus $155,000,000 impacted by the nonrecurring cost of $40,000,000 mentioned earlier and $89,000,000 in value changes in financial derivatives, a noncash accounting effect resulting from lower market rates.
Let’s turn to the next page, Slide seven, where we look at the performance from our standing assets for the first half of the year. Rental income grew by 16.5% to $759,000,000, while net operating income increased by 24.3% to $487,000,000. In the like for like portfolio, rental income increased by 5.3% and net operating income by 9.3%. As noted on the previous slide, we continue to strengthen our NOI margin, which for the last twelve months stands at 65%, or 58.2% including property administration. Our target is to reach a 70% NOI margin including property administration by June 2029, and we are clearly on track to meet that goal.
Our rolling twelve months NOI margin, including property administration, has increased by 3.2 percentage points since the second quarter last year. As a pure play residential company, with a sizable portfolio of standing assets and an in house organization, we have several key drivers to further strengthen profitability. On the next page, we highlight four main factors. Firstly, through apartment upgrades, we not only achieve substantial rent increases, but also deliver attractive apartments that require minimal maintenance over the long term. Our goal is to upgrade 2,000 partners over the five years starting June.
We’re stepping up the pace. This year’s forecast is now two fifty upgrades, up from the 200 we projected in Q1 for 2025. We carry out upgrades when the partners become vacant and are seeing strong demand for these units in several of our cities, which is why we now are accelerating the pace this year. In the second quarter, we completed 64 upgrades, 44% of which were in Stockholm County. Secondly, a key focus for SVF Asete since our establishment has been increasing occupancy rate.
In Q2 last year, which marked our starting point, the occupancy rate was 94.3%. Today, it stands at 95%, an increase by 0.7 percentage points. This is particularly notable given the recent media coverage on increasing vacancies in the residential segment. As projected in Q1, vacancies have increased in Koleftio, and this was offset by strong lepting across the rest of the portfolio. The residential marketing of Koleftio has, as expected, been affected by the bankruptcy of Northvolt.
As a result, in July, we decided to use an option on our project Kyunggatan, meaning we will not complete the development of 178 departments, and instead the municipal residential company Schiebo will take ownership of the completed project. While it’s encouraging that new owners to the battery factory has been communicated, our portfolio of Grefio, which consists of 97 lower rent partners compared to new builds with hybrid, leaves us comfortable with our exposure in the city, regardless of how the factory’s production develops. Thirdly, Zvea Fasseter’s sizable Stockholm focused development portfolio provides us with the opportunity to grow profitably, adding new builds with significantly higher NY margins compared to older properties. New developments in the Stockholm Maladale region are estimated to achieve on average NOI margin above 85%. Our target is to start construction of 600 to 800 apartments annually.
In the quarter, we completed 161 apartments, bringing the total for the last twelve months to four eighty three apartments. Finally, as a large pure play residential company with an operational focus, we benefit from economies of scale. That said, our intensive and milestone packed first year, which I outlined earlier in the presentation, obviously generated administrative costs that are not representative of Svea Fastigatesh operations under normal business conditions. During the period, the nonrecurring costs amounted to SEK 25,000,000, of which SEK 40,000,000 was in the quarter. We are now adapting the organization to the new phases VFASIA has entered, what we can call ordinary business phase, and the run rate cost for our organization is reflected in our earnings capacity.
The table on the lower right of this page shows both our actual administrative quarterly costs with nonrecurring costs presented separately and the corresponding costs based on our earnings capacity for comparability. While we will continue to have nonrecurring costs in the second half of the year, they are expected to be significantly lower than in the first half. Now let’s move over to Slide nine and sustainability, which is fully integrated into our organization and business. We continuously carry out profitable energy investments that reduce energy consumption and thereby lower our property costs. During the quarter, we invested 50,000,000 in energy projects.
At Svea Fasseter, we place strong emphasis on social sustainability, and we believe it plays an important role in increasing the attractiveness of our apartments and residential areas. We have therefore decided to conduct a pilot study in which we remove income requirements for tenants in 40% of the portfolio. Our belief is that this will lower the threshold to the housing market for many people, while at the same time strengthening our profitability by increasing occupancy rate and reducing administrative costs. As part of our commitment to social sustainability, we also offered summary ops to 50 young people this year. Svea Fatihertes property portfolio is valued at 28,600,000,000 and consists solely of residential properties.
All assets are valued by external appraisers each quarter. The portfolio is divided into three categories: properties under management, properties under construction and properties in project development and billing rights. Let’s take a quick look at each category, starting with properties under management on the next page. Svea Fasseter has 15,094 apartments in standing assets, with a value at 25,400,000,000.0. 94% of the portfolio is located in Sweden’s three metropolitan regions and university cities, and 73% is in our 10 largest cities.
Around two thirds of the portfolio was built before the year 2010, with the remaining onethree constructed after 2010. During the quarter, we made our first acquisition when we acquired two properties in Stockholm comprising 137 apartments. These properties can be managed within our existing organization, are located in attractive micro locations and offer development potential through apartment upgrades, providing a solid foundation for strong total returns over time. Growth through acquisition is currently not a priority. However, complementary acquisition as well as disposals to strengthen the portfolio and enhance our operational efficiency are relevant.
We will now begin negotiations for the 2026 rent increase. Since these negotiations have not yet started, it is difficult to predict the outcome. The two years agreements that some companies have made and that include next year’s rent increase indicate an average increase of 3.5% for 2026. However, we believe that the increase for next year should be higher, and this will be our position when entering negotiations with a tenant association. Association.
Let’s move on to our properties under construction shown on the next page 11. As mentioned earlier, during the quarter, we started the construction of 87 apartments in Nakht Gap, where we are developing attractive homes in an area with a low share of rentals. The estimated project margin, the ratio between the estimated value at completion and our investment cost, is about 18%, in line with the estimated average project margin for our properties under development. I’ll present this portfolio on the next slide. During the quarter, we completed the final phases of our projects Bonn Muskhan in Uemu and Juleni Koleftio, adding 161 apartments to our properties under management.
It’s worth noting that Juleni Koleftio has lower rents than typical new builds due to former government subsidies aimed at providing affordable housing, a program that is no longer in place. As already said, we have exercised an option for our project Krumgaarten and Koleftu with 178 apartments. This means Zvi Fostei will not be the owner of the property, and the project will be excluded from ongoing construction in the third quarter this year. The impact on Q3 result is estimated at minus SEK 6,000,000. The figures presented on this slide include However, you can find the Kunglautan’s figures in a table in our interim report, so you can easily calculate the portfolio excluding this project.
We are planning for further construction starts this year, coming from our strong development portfolio presented on the next slide. Our development portfolio has taken us more than ten years to build. The 6,395 apartments, of which 5,160 are rentals, reflect our long term relationships with selected municipalities, completion of more than 2,000 apartments in the Stockholm region, and strong credibility in sustainability. Notably, 93 of the portfolio is located in the Stockholm Nalladolid region, 85% in Stockholm County and 49% in the city of Stockholm. This portfolio isn’t easily replicated.
Our portfolio gives us the opportunity to expand our presence in the Stockholm region with high quality buildings. The projects give us a strong return on investment, on average estimated well above 15%, and at completion of properties in prime micro locations with long term housing demand, properties that on average generate an estimated NOI margin above 85%. As previously mentioned, 87 apartments have moved from properties under development to properties under construction when we started the construction in Akka. In addition, the portfolio has shrunk due to a discontinued zoning plan in Kyrgyzl. We are now discussing a replacement landlord with the municipality.
After the quarter, we acquired a smaller building right in a Strommerk location in Solentuna with a legal force zoning plan in place. We are planning to start construction for this project next year. Let’s move on to our earnings capacity on the next Page 13. Compared to the previous quarter, our rental value increased by SEK 33,000,000, driven by the Stockholm acquisition, completed new constructions and apartment upgrades. Vacancy remained unchanged despite the larger portfolio, corresponding to a 0.1 percentage points increase in occupancy rates.
The line item other income relates to our external property management assignment, where we managed nearly 4,000 apartments. The associated cost of 44,000,000 are included in central administration. Next, we look at our financial structure. As I mentioned earlier, Svea Fazete’s solid financial structure combined with low risk assets was confirmed during the quarter when we received an investment grade rating of BBB- with positive outlook from Fitch. On the back of this rating, we issued new green bonds totaling €1,200,000,000 during the quarter and an additional €500,000,000 after the quarter.
The issuances strengthened our financial flexibility, and the proceeds will primarily be used to repay short term secured debt. And also, part was also used to finance the Stockholm acquisitions. Our LTV remains prudent at 43%. The average interest rate has increased slightly to 3.42% this quarter as a result of the bond issuance in the quarter and the repayment of secured loans after the quarter. At this year, Fazeta was established in June.
Our historical financial figures include a substantial interest rates on intergroup loans, interest that naturally was detected when calculating our ICR. This is the first quarter without adjustments for internal rates, and consequently, ICR has decreased to 1.9. Finally, let’s go over the highlights from our interim report. Srea Faziete delivered strong NOI growth in the period with an increase of 24.39.3% in the like for like portfolio. Profit from property management strengthened to 97,000,000 despite nonrecurring cost of €40,000,000 In just twelve months, we had increased occupancy rate by 0.7 percentage point to 95%.
Our strong financial position was confirmed by our investment grade rating of BBB minus with positive outlook. We focus on creating greater financial flexibility and improved rating, and we issued new green bonds of 1,200,000,000.0 during the quarter and an additionally EUR 500,000,000.0 after the quarter. That concludes our prepared remarks. We will now hand back to the operator and open the line for questions.
Conference Operator: The next question comes from Ki Bin Shervantur from SEB. I
Ki Bin Shervantur, Analyst, SEB: have a couple of questions. And first follow-up on the Kruong Gautam project. You mentioned that it will have a 6,000,000 impact in Q3. Could you maybe elaborate which item this will affect? That’s the first question.
So
Erik Hevermark, CEO, Svea Fasegeter: the line items that we’ve affected is properties under construction and also the corresponding debt for the ongoing construction.
Ki Bin Shervantur, Analyst, SEB: So we we it’s in the p and l, which p and l item would that be?
Erik Hevermark, CEO, Svea Fasegeter: Value changes.
Ki Bin Shervantur, Analyst, SEB: Okay. Good. And I also have a follow-up question on that. And that is you have invested 109,000,000 in the projects, but will not have ownership upon completion. Will you be compensated for that in any way?
Erik Hevermark, CEO, Svea Fasegeter: You mean for the project? So this project was fully financed by the contractor.
Ki Bin Shervantur, Analyst, SEB: Okay. So that will not not have any implications that you will not finalize the project?
Erik Hevermark, CEO, Svea Fasegeter: No. That’s that is correct.
Ki Bin Shervantur, Analyst, SEB: And I also yep. Good. And also another question on the value changes. You have quite large negative value changes despite that they have higher occupancy and slightly lower yield requirement. And you mentioned that you have revised some market assumptions.
Could you maybe elaborate what types of assumptions this is?
Erik Hevermark, CEO, Svea Fasegeter: Well, it’s due to a variety of factors, including revised estimates from construction costs and also adjusted time lines. And additionally, we, as I mentioned, lost one project in Thierryse because the zoning plan was discontinued. But in that case, we are in discussions with the municipality about an alternative land lot.
Ki Bin Shervantur, Analyst, SEB: Okay. Good. And also, just a final question, and that’s on the nonrecurring items. So you mentioned that you expect minor costs in the second half of the year. Could you maybe quantify how much you would expect?
Erik Hevermark, CEO, Svea Fasegeter: Well, we don’t provide any guidance on our administrative costs. But as mentioned in the presentation, we expect them to be significantly lower in Q3. And our run rate level for administrative cost is reflected in our earnings capacity. But it as said, it will be significantly lower in the second half of this year.
Ki Bin Shervantur, Analyst, SEB: Okay. But do you expect the majority of this cost to be in Q3? Or is it in equally divided between Q3 and Q4?
Erik Hevermark, CEO, Svea Fasegeter: I would say equally divided for Q3 and Q4.
Conference Operator: The next question comes from Stefan Bulow from Nordea. Please go ahead.
Stefan Bulow, Analyst, Nordea: Thank you and good morning. I have a couple of questions will I ask you, which I will ask one and one. So starting off with the occupancy rates, it improved in the quarter and stands at 95%. Would you say that you have reached a normalized level now? Or do you see further improvements of the occupancy rates?
And perhaps if you can comment if you’ve seen any trend in Q3.
Erik Hevermark, CEO, Svea Fasegeter: No. We see further potential to increase our compulsory rate. We haven’t communicated a target for our occupancy rate, but we we do believe that we will further strengthen our occupancy rate going forward. And we see positive signs across the portfolio when it comes to electing besides where we are expecting increased occupancy rates also in the third quarter. But for the portfolio as a whole, we see a positive trend.
Stefan Bulow, Analyst, Nordea: Okay. Thank you. And a question on admin costs on the slide with the breakdown of admin costs. You indicate quarterly central admin costs of SEK 40,000,000 going forward in the earnings capacity. When do you expect to reach that?
Is that in early twenty twenty six or or later in in 2026?
Erik Hevermark, CEO, Svea Fasegeter: So so we expect nonrecurring cost, but as as said, significantly lower in the second half of this year, and we don’t expect any nonrecurring cost in 2026.
Ki Bin Shervantur, Analyst, SEB: Okay.
Stefan Bulow, Analyst, Nordea: And one final question from me, and that is about the acquisition that you did in June. You acquired apartments in Stockholm for SEK230 million. Could you say something about the transaction yield and sort of the rationale of acquiring properties when you have a large project portfolio?
Erik Hevermark, CEO, Svea Fasegeter: I can start with the second part of that question. So growth through acquisition is currently not priority, but but, however, complementary acquisition as well as disposal to to enhance the return from the portfolio, improve the operational efficiency are relevant when good opportunities arises. What we do focus on is profitable growth through our new construction and also increasing the average debt maturity as well as improving our credit rating. That is our our focus at the moment. That said, in a changing world, we must remain adaptive.
And should circumstances shift, we do not roll out share buybacks in the future. And when it comes to our Stockholm acquisition, as you mentioned, you you you had the property value at 250 230,000,000, which was agreed upon agreed upon, and and you also have the rental value. And and we have a NY margin in line with with slightly above their portfolio as a whole. And and by that, I think you can calculate the yield for that acquisition. And if you want any more more details, we we can take it offline after this meeting.
Stefan Bulow, Analyst, Nordea: Okay. Thank you. That’s clear. Those were my questions. Thank you.
Conference Operator: There are no more callers at this time. So I hand the conference back to the speakers for any written questions and closing comments.
Christel, Head of Treasury and IR, Svea Fasegeter: Thank you. We have received one written question, and the question is as follows. You were eager to get the share buyback approval in place at the AGM. When will we see some buyback action?
Erik Hevermark, CEO, Svea Fasegeter: So is a long term operational focused residential company that creates profitable growth primarily through new construction, mainly in Stockholm region. And as I mentioned, at the moment, our priorities are new developments and increasing the average debt maturity as well as further improving our credit rating. That is our view for now. And with that said, as I also just mentioned, in the changing world, we, of course, need to be adaptive. And if circumstances change, we do not rule out share buybacks in the future.
Christel, Head of Treasury and IR, Svea Fasegeter: That’s that’s it. No questions.
Erik Hevermark, CEO, Svea Fasegeter: Well, thank you for your time and attention today. We look forward to speaking with you again next quarter. Have a great day, everyone.
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