TSX runs higher on rate cut expectations
Sveafastigheter AB reported robust financial results for the fiscal year 2024, highlighted by significant increases in rental income and net operating income. The company’s strategic focus on profitability and organic growth is reflected in its full-year performance, despite restructuring costs impacting the bottom line. The market reaction was neutral, with the stock price remaining stable.
Key Takeaways
- Full-year rental income increased by 20.9% to $1,361 million.
- Net operating income rose by 25.5% to $860 million, with a margin improvement.
- The company completed 1,138 apartments in 2024 and plans further developments.
- Sveafastigheter took over property management for 5,200 apartments in January 2025.
Company Performance
Sveafastigheter AB demonstrated strong financial performance in 2024, driven by a strategic focus on increasing profitability and expanding its development portfolio. The company completed 1,138 apartments and has 1,030 under construction, with a significant portion of its projects concentrated in the Stockholm-Malardalen region. The company’s operational efficiency was evident in its improved net operating income margin, which increased by 2.3 percentage points to 63.2%.
Financial Highlights
- Full Year Rental Income: $1,361 million (up 20.9% year-over-year)
- Net Operating Income: $860 million (up 25.5% year-over-year)
- Q4 Profit: $256 million
- Non-recurring restructuring costs: $25 million in Q4, $61 million in 2024
Outlook & Guidance
Sveafastigheter is targeting a net operating income margin of 70% within the next five years. The company expects strong rental growth in 2025 and 2026, with 80% of its 2025 rent agreements already finalized, reflecting an average rent increase of 4.8%. InvestingPro data indicates a substantial revenue growth forecast of 73% for FY2024, though analysts anticipate profitability challenges in the near term. Subscribers to InvestingPro can access detailed financial projections and additional insights through the exclusive Pro Research Report. The company also plans to renovate 2,000 apartments over the next five years, with an estimated return of 7% yield on apartment upgrades.
Executive Commentary
CEO Erik Kavermark highlighted the company’s strategic progress, stating, "We are now demonstrating that we are delivering on our strategy with focus on increased profitability and organic growth." He emphasized the company’s commitment to providing secure and thriving living environments for current and future generations. Kavermark also noted the potential for strong real rent development in the coming years, following a period of high inflation.
Risks and Challenges
- Economic Uncertainty: Macroeconomic pressures could impact rental demand and property values.
- Inflation: Continued inflationary pressures may affect operating costs and profitability.
- Regulatory Changes: Changes in housing regulations could impact development timelines and costs.
- Market Saturation: Increased competition in key regions could affect the company’s market share.
Q&A
During the earnings call, analysts inquired about the company’s property management cost efficiencies and the impact of restructuring costs on financial statements. The management clarified these aspects, emphasizing their commitment to maintaining operational efficiency and transparency in accounting practices.
Overall, Sveafastigheter AB’s 2024 performance reflects its strategic focus on growth and profitability, positioning it well for future expansion in the Swedish property market.
Full transcript - Sveafastigheter AB (SVEAF) Q4 2024:
Conference Operator: Welcome to Svia Fastihator Q4 Earnings Call twenty twenty four. For the first part of the presentation, participants will be in listen only mode. During the questions and answer session, participants are able to ask questions by dialing 5 on their telephone keypad. Now I will hand the conference over to the company. Please go
Kristel, Head of Treasury and IR, Svea Fastihator: ahead. Welcome to Svea Pasteghetto’s earnings call and presentation of our year end result 2024. My name is Kristel, and I’m Head of Treasury and IR. Today’s presenter is CEO, Erik Kavermark. After presentation, we are opening lines for Q and A.
Now I’m handing over to CEO, Erik Kavermark. Please go ahead, Erik.
Erik Kavermark, CEO, Svea Fastihator: Thank you, Thyssen. Good morning, everyone. My name is Eric Kavmermark, and I’m the CEO of Svyafastater. Twenty twenty four was an eventful and successful year for Svyafastater, during which we have created and listed Sweden’s largest listed pure play residential company. Despite our short history, we are already demonstrating that we are delivering on our strategy with focus on increased profitability and organic growth.
SriaFaciete, in its present form, was established in June. Therefore, it is relevant to begin with a brief summary of our business model and how SWEA Facieta has been formed before we move on to our performance in the fourth quarter. Our mission is to manage and develop homes for more people where current and future generations can thrive and feel secure. This is what we do in our daily work to reach our vision to be Sweden’s leading residential company. Let’s go over to slide five and our business model.
Sofia Fazilet’s business model is based on two strong business areas, our property management and our new construction. The combination of these two business areas gives us access to both the strong and stable cash flow from our sizable portfolio of standing assets in a rent regulated market and a profitable growth from our new developments. We currently have 14,669 apartments in standing assets, of which 93% are located in Sweden’s Three metropolitan regions and university cities. Additionally, we have ten thirty apartments under ongoing construction and 6,844 apartments in our development portfolio, of which 93% are located in the Stockholm Maladolid region. With a strong property portfolio, experienced in house organization and a conservative capital structure, we are confident in our targets, which focus on increased profitability and organic growth.
Our operational targets for the next five years include start construction of 600 to 800 apartments annually, obtaining land allocation for 800 apartments per year and upgrading 2,000 apartments. Through profitable investments in both standing assets and new construction, we are on a clear path to increase our NOI margin with a financial target to reach 70% including property administration within the next five years. In addition, we have a financial target to achieve average annual growth of at least 12% in net asset value over a business cycle. Our new construction will not only drive profitable growth for Sphere plus Delta but will also increase our presence in the Stockholm Malolalla region. Now, let’s move to slide six and have a look at our history.
To understand our historical financial figures, it is important to consider our history. Svea Fazietta was established in June through the merger of properties from three separate companies, creating a large operational focused residential company with a portfolio consisting of only wholly owned residential properties and a clear and transparent capital structure with low risk. In January, we took over the property management for 5,200 apartments and our in house property management team now manages our entire portfolio of 14,669 apartments. This transition gives us economics of scale and enables us to apply our value adding property management strategy across all of our assets. Although our history as one large company is relatively short, our organization has managed a large part of the portfolio for a long time, but then as part of a larger group where the focus wasn’t solid on the residentials and operations.
Consequently, we have extensive knowledge of our assets and a strong foundation to continue to build on for the long term. In the fourth quarter, we reached an important milestone with our listing on Nasdaq First North Premier growth market and welcomed over 10,000 new shareholders. The listing and broad net ownership will provide Sphere plus data access to better long term financing. With that introduction, let’s take a look at our performance in the fourth quarter and start with slide nine. Our rental income grew by 22.6% to $350,000,000 and our NOI increased by 36.9% to million.
This strong growth was driven by the completion of new developments, the annual rent increase and efficiency improvements in property management. Profit from property management amounted to $39,000,000 Changes in property values were $195,000,000 meaning that after eleven consecutive quarters of decreasing property values, we saw an increase in the fourth quarter. Zwia Fazietta delivered a strong result in the fourth quarter amounting to two fifty six million dollars impacted by non recurring costs related to the restructuring and formation of Zwia Fazietta of $25,000,000 After closing the full year, we can, on next slide 10, see that we have delivered according to our ambitious strategy. During the year, we have experienced strong growth in rental income and an even stronger increase in net operating income. Our rental income increased by 20.9% to $1,361,000,000 dollars and in the like for like portfolio, it grew by 5.6%.
Net operating income increased by 25.5 to $860,000,000 with an increase of 8.4% in the like for like portfolio. As mentioned, our strong growth primarily derived from the completion of new developments and the annual rent increase. In the fourth quarter, we completed 120 apartments and for the year, we have completed eleven thirty eight apartments from our new developments. Properties that have not, the annual rent increase landed at 5.2%. At Sverafastietr, we focus on operational efficiency and increasing the profitability from property management.
As mentioned, our target is to increase the NOI margin, including property administration, to 70% within the next five years. Even though we have a short history as a pure play residential company with an operational focus and it was only in January 2025 we took over the property management for all of our properties, we already see that our NOI margin is increasing. In 2024, the NOI margin increased by 2.3 percentage points to 63.2% and including POPN Administration, it increased by 0.5 percentage points to 55.7% compared to 2023. Let’s go over to our occupancy rate on Slide 11. An important focus area for Sverafasthetor is to improve our occupancy rate.
As shown in this chart, the occupancy rate remained relatively stable throughout 2024. We expect it to increase going forward, driven by measures we have implemented, including appointed ahead of leasing and increased marketing and advertising efforts. New developments are in general located in strong areas with high demand for housing, although occupancy rate can vary until a mature level is reached. The mature occupancy rate for new developments is typically significantly higher than for older buildings. Therefore, it is important to focus on properties older than three years, which also represent the vast majority of our portfolio.
From the chart, we can see that the occupancy rate for buildings older than three years has increased by 0.2 percentage points since last quarter. On the next page 12, you see our income statement. We delivered a strong result for the quarter of $256,000,000 impacted by non recurring costs related to the restructuring information of Svea Fazietta of $25,000,000 Looking at the full year, the restructuring information of Svea Faz theater contributed to $61,000,000 in administrative costs in 2024 that are non recurring. Furthermore, as mentioned earlier, Svera Fastierta was established in June and until then, our interest costs include costs for parent loans, which are not representative for Svera Fastierta as a stand alone company. Additionally, the creation of the legal structure resulted in higher tax expense for 2024 than what can be expected going forward.
Let’s go over to sustainability, which is at the core of everything we do at Sverastiater. Svea Fazietta has historically been at the forefront when it comes to sustainability and we are now preparing to strengthen that position further. During the year, we conducted a double materiality assessment and identified our 10 key material sustainability topics. We are now setting our targets and defining the metrics we will use to track our progress. Our climate emission reduction targets will be set in accordance with SPTI’s criteria.
We are well prepared for the upcoming energy performance of buildings directed, EPDD, and continuously monitor the energy performance in our portfolio, taking measures in our worst performing assets. As a result, we both strengthened the portfolio’s ESG metrics and achieved a solid return on our energy investments. During the year, we invested $55,000,000 in projects, improving the energy performance. As highlighted earlier in the presentation, Sphere plus FASTET have two strong business areas, our property management and our new construction. To fully understand the value creation within Sphere plus FASTET, it is important to understand each business area and their respectively assets.
Let’s start with our business area Property Management and our properties under Management on slide 14. So we have Fasteta has a sizable portfolio of standing assets with 14,669 apartments under management, of which 94% are located in Sweden’s Three metropolitan regions and university cities. The property value amounts to $24,800,000,000 and the rental value is $1,600,000,000 As mentioned, we have had a strong rental growth for the full year in the like for like portfolio with an increase of 5.6%, primarily driven by the annual rent adjustment. Furthermore, the NOI margin is strengthened due to apartment renovations and energy investments where we lower our energy consumption and consequently reduce operating costs. During the year, we renovated 73 apartments and invested $55,000,000 in profitable energy saving investments.
In 2025, we will increase the pace in apartment renovations as part of our goal to renovate 2,000 apartments over the next five years and we will continue to invest in profitable energy efficiency projects. Rent agreements for 2025 have been finalized for 80% of the portfolio with an average increase of 4.8%. On the 01/01/2025, we took over the management of 5,200 apartments. Now, all of our 14,667 apartments are managed by our internal property management organization ensuring a uniform and efficient property management for all of our assets which strengthens our operational efficiency. In addition to increased profitability, we see that our local and present property management improves tenant satisfaction, as highlighted when we received the award Kun Kristallen for the largest uplift in tenant satisfaction in 2024.
Strong rental growth, apartment renovations, reduced energy consumption and economics of scale in the property management combined with the new builds added from our ongoing construction, form the foundation of our journey to increase our NOI margin with a goal of reaching 70% including profit administration over the next five years. On the next slide, the age structure of the portfolio is presented. 68% of our properties under management are built before the year 2010 and has a property value per square meters of Sec 20883 and consequently 32% are built 2010 or later and has a property value of Sec 40,434 per square meter, resulting in an average property value of our portfolio of SEK $24,722 per square meter. In the lower table, you can see that our newer populists have strong exposure to Stockholm Maladolid Region and this exposure will increase as we continue to add new bids from our new construction portfolio. So with that said, let’s go over to our second business area, new construction and first have a look at our populists under construction.
Svea Facetre currently has ten thirty partners under ongoing construction, which will be completed over the coming two years, adding an estimated $2,400,000,000 in property value and $134,000,000 in estimated rental value at completion. In the third quarter, we started three new projects comprising five forty apartments and during the year, we completed eleven thirty eight apartments of which 120 apartments were completed in the fourth quarter. Our new construction provides Via Passaic a solid return on invested capital and grows our portfolio in strong regions with properties that have a significantly higher NOI margin compared to older assets. We have a target of starting 600 to 800 partners annually over the next five years, focusing on the Stockholm Maladolid region. These projects derive from a very strong development portfolio, which is presented on the next slide 17.
The most important resource for new development is building rights in strong locations and Svera Fazietta is well positioned with a development portfolio of 6,844 apartments with 93% located in the Stockholm Maladolin region. This strong development portfolio has taken ten years to build and is the result of long standing relationships with municipalities and our track record of delivering high quality projects with a strong sustainability focus over the years. Svea Faceta is a preferred partner for many municipalities and we are pleased to have received land allocation for approximately 100 apartments in Suwon Na during the fourth quarter, where we plan to develop rental apartments with focus on families with children. Our new construction generates a solid return on invested capital and strengthens our portfolio with high quality assets in strong locations. Our estimated margin remains well above 15%.
CF asset has a growing portfolio and during the year, as mentioned, we have completed eleven thirty eight departments in our ongoing construction that not had full impact on the earnings statements in 2024. Our current performance is presented in our earnings capacity shown on the next slide. In the earnings capacity, we present both the earnings from our outstanding assets and the expected earnings from our ongoing construction that will be completed within the next twelve months presented in two separate columns. Please note that our ongoing construction doesn’t include all of our ongoing projects. As mentioned earlier in the presentation, we have completed the rent negotiation for approximately 80% of the portfolio.
In earnest capacity, we have included an estimated increase for the remaining 20% of the portfolio applying the same average increase of 4.8%. Compared with the earnings capacity in the previous quarter, the cost base has been adjusted to reflect the cost level for 2025 where for example, tariffs for district heating and water are higher. Other income relates to the external property management assignment where we managed a portfolio of almost 4,000 apartments until 2026. The costs for this assignment are included in our central administration at $42,000,000 Let’s go over to our property values on slide 19. We conduct external valuations of all of our properties on a quarterly basis.
Since the market peaked in the first quarter of twenty twenty two, the average yield requirement has increased from 3.1% to 4.4% in the fourth quarter. During the same period, property values for the like for like portfolio decreased by 16% where a strong NOI development mitigated the full effect of the sharp shift in yield refinements. We have seen that yield requirements stabilized during 2024 and after eleven consecutive quarters of declining property values, we had an uplift of $195,000,000 in the fourth quarter. The transaction market is also recovering, increasing by approximately 45% in 2024 compared to the previous year with Residential Properties being the largest segment. Now, we will go over to our financial structure on Slide 20.
CFAsietta has a solid financial position. We have an attractive financing structure that is focused on traditional bank financing but also includes two unsecured bonds which gives us further benefits of diversification of funding sources. In connection with IPO, we refinanced several loans including one short term loan of $1,077,000,000 dollars with a new maturity in 2027. Additionally, we entered a credit facility agreement of $1,000,000,000 Highlighting our strong financial position is our loan to value at 42%. Interest coverage ratio was 2.2 times and average interest rate was 3.27%.
Our focus going forward is to maintain strong balance sheet and low risk financial structure together with attractive funding mix. To conclude on the final page of the presentation, the key takeaways from the fourth quarter. We have had a strong growth in rental income and net operating income with an increased profitability. Svea Faziet has a strong capital structure with low risk, which enables us to continue to grow through new developments and apartment upgrades. And on top of that, we will have a strong rental development this year and presumably also next year, 2026.
Thank you so much for listening. We are now ready for your questions.
Conference Operator: The next question comes from Keyvan Shervanpour from SEB. Please go ahead.
Keyvan Shervanpour, Analyst, SEB: Thank you and good morning. I just have a couple of questions. First, this one off that you mentioned, 61,000,000 for 2024. Could you maybe quantify this for Q4? Is it 24,000,000, try estimate?
Erik Kavermark, CEO, Svea Fastihator: In Q4 and it’s also presented in the report, it was 24,000,000.
Keyvan Shervanpour, Analyst, SEB: Okay. Good. And also when it comes to upgrades, you upgraded 73 apartments last year and you have this target of 2,000 upgrades within within five years. How many upgrades do you plan to do in this year and the year thereafter?
Erik Kavermark, CEO, Svea Fastihator: So, we believe that we will upgrade approximately 200 apartments in 2027
Keyvan Shervanpour, Analyst, SEB: 2025.
Erik Kavermark, CEO, Svea Fastihator: Sorry, 2025. Okay. Yes. Fifth year. Yes.
Keyvan Shervanpour, Analyst, SEB: Perfect. And also, you mentioned this 3.5% increase from two year agreements. Do you have any type of indication for rent adjustments in 2025? What do you expect there?
Erik Kavermark, CEO, Svea Fastihator: In 2025?
Keyvan Shervanpour, Analyst, SEB: In 2027.
Erik Kavermark, CEO, Svea Fastihator: No. We don’t have an estimate on 2027, but we believe that we still are lagging since the high inflation period. We now have left and believe that we will have a strong real rent development the coming years in Q1 twenty twenty seven.
Keyvan Shervanpour, Analyst, SEB: Okay. And also another question in the earnings capacity. So you have some units that have been completed in the last few quarters and you adjust the vacancy rate three quarters back. How many units currently have an adjusted vacancy rate and how will this develop during the coming quarters?
Erik Kavermark, CEO, Svea Fastihator: We can come back to you with us on that question. I don’t have the exact number of apartments.
Keyvan Shervanpour, Analyst, SEB: Okay. And just one final question. And that’s related to that you’re taking some property management in house from this year. Is this fully reflected in the earnings capacity?
Erik Kavermark, CEO, Svea Fastihator: Yes, I would say so. In the earnings capacity presented in our Q4 report, it is reflected, yes.
Keyvan Shervanpour, Analyst, SEB: Because if I recall, you mentioned that this will result in some cost savings. But when I look at the earnings capacity, it seems like costs are up versus the last quarter?
Erik Kavermark, CEO, Svea Fastihator: The upside with in house property management is that we can decrease our costs on several levels in our income statements, including lowering our energy consumption and also improving our occupancy rate. So I would say that it will have an impact on several parts of our cost base and it will improve our NOI margin.
Keyvan Shervanpour, Analyst, SEB: Okay. So you expect cost savings in upcoming quarters, but this seems as defect in Q4 is, as far as I can see, nothing.
Erik Kavermark, CEO, Svea Fastihator: What are you looking at then when you see that we don’t have any positive effect from our in house property management?
Keyvan Shervanpour, Analyst, SEB: I’m just looking straight at property expenses this quarter versus last quarter and costs are up by $23,000,000
Erik Kavermark, CEO, Svea Fastihator: Okay. But we all have also entered a new year, 2025. And for an example, we have higher tariffs for, for example, district heating. So you can’t compare it line online compared to Q3. So we see that we are operational more efficient in 2025 and that is reflected in our earnings capacity.
Keyvan Shervanpour, Analyst, SEB: Okay, good. Thank you. Those were my questions.
Conference Operator: The next question comes from Stefan Bulow from Nordea. Please go ahead.
Stefan Bulow, Analyst, Nordea: Good morning and thank you. A couple of questions from my side. Starting off with rental income, it was $357,000,000 in Q3. Looking at the Q4, it was $352,000,000 so down $5,000,000 despite that you have completed 120 apartments in Q4. So I’m just trying to understand why rental income is down Q on Q.
Erik Kavermark, CEO, Svea Fastihator: Thank you. That is actually a good question. At the end of the second quarter, Sveriyet Faceta was legally restructured and properties were combined from three different companies. Because of this restructuring, a small correction was made in regards of reinvoicing, which had an effect on Q4 rental income, meaning that the rental income actually was higher in the fourth quarter, but the correction resulted in a lower rental income in our income statement.
Stefan Bulow, Analyst, Nordea: Okay. I see. But going forward, rental income and earnings capacity will be sort of more representative, because I think if you look at the Q3 earnings capacity, it indicated an rental income for Q4 of $358,000,000 and now it was $352,000,000 but this it occurred a one off effect in Q4. So going forward, we can perhaps Yes, it’s
Erik Kavermark, CEO, Svea Fastihator: accounting effect due to reinvoicing. So actually, the rental income in the fourth quarter was more like SEK $364,000,000 and lower in the third and second quarter.
Stefan Bulow, Analyst, Nordea: Okay. That is clear. And in terms of the rent increase in your portfolio, you mentioned completed renegotiations have ended up on an average rent increase of 4.8% for 2025.
Erik Kavermark, CEO, Svea Fastihator: Yes, that’s correct. Stefan, are you still there?
Stefan Bulow, Analyst, Nordea: Yes, I’m here. Could you hear my question?
Erik Kavermark, CEO, Svea Fastihator: I didn’t, I thought I think we lost you for a couple of seconds, so I didn’t get the question.
Stefan Bulow, Analyst, Nordea: Okay. I’ll repeat the question. I’m wondering about the rent increase, how large share of the property portfolio will have a rent increase as of January 1?
Erik Kavermark, CEO, Svea Fastihator: So we are still negotiating 20% of the portfolio. And as part of that negotiation, it’s also when the new rent will kick in. So it’s hard to say at the moment.
Stefan Bulow, Analyst, Nordea: But is it fair to assume that the round?
Erik Kavermark, CEO, Svea Fastihator: The absolute majority is from the January 1 and we are still negotiating 20% of the portfolio.
Stefan Bulow, Analyst, Nordea: Okay. Thank you. And one final question from my side. What is your view on divesting properties to showcase your property values?
Erik Kavermark, CEO, Svea Fastihator: Well, I don’t see that we need to divest to show our value. We external values all of our properties on a quarterly basis. But we do see the potential to increase our operational efficiency both through divestments but also acquisitions to where we want to grow in stronger regions.
Stefan Bulow, Analyst, Nordea: Okay. Thank you. Those were my questions.
Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Kristel, Head of Treasury and IR, Svea Fastihator: We have actually received one written question. And question is, what are your estimated return on upgrades of apartments?
Erik Kavermark, CEO, Svea Fastihator: On average, 7% in yield on costs.
Kristel, Head of Treasury and IR, Svea Fastihator: Good. That that was the last question.
Erik Kavermark, CEO, Svea Fastihator: Okay. Thank you all for questions and for listening. With that, we conclude this call. Thank you and goodbye.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.