Neobo Fastigheter AB (publ): Interim report January-June 2024
January–June 2024
· Rental income increased to SEK 454 m (434). For the like-for-like portfolio, rental income increased by 7.3 percent. The impact on the residential portfolio of this year’s rent increases, which averaged 5.1 percent, will have full effect in the third quarter.
· Net operating income increased to SEK 229 m (226) during the period. For the like-for-like portfolio, net operating income increased by 3.4 percent.
· Profit from property management decreased to SEK 68 m (75).
· The property portfolio’s value at the end of the period amounted to SEK 13,742 m and changes in the value of properties for the period amounted to SEK -220 m (-534), of which SEK -216 m was unrealized and SEK -4 million was realized attributable to divestment of properties.
· Net loss for the period amounted to SEK -110 m (-344).
· The net asset value amounted to SEK 44.70 per share (50.93).
April–June 2024
· Rental income increased to SEK 227 m (220) as a result of rent increases and a decrease in the vacancy rate.
· Net operating income increased to SEK 139 m (128) due to higher rental income and lower property expenses.
· Profit from property management for the second quarter increased to SEK 58 m (46) as a result of higher net operating income and reduced central administration costs.
Significant events during the second quarter
· The Tegelbruket 4 retail property in Falun was divested at an underlying property value of SEK 75 m, which is 18 percent over the most recent external valuation conducted.
· Participant of the UN Global Compact, which is one of the world’s largest sustainability initiatives.
· Anneli Lindblom was elected as new Board member at the Annual General Meeting.
Significant events after the second quarter
· A loan of SEK 955 m maturing in Q2 2025 was refinanced at a lower margin than the average margin for Neobo’s loan agreements.
· On July 1, Neobo was included in Nasdaq’s First North 25 index, which measures the performance of a selection of the largest and most traded securities listed on Nasdaq Nordic First North Growth Market.
CEO Comments
Higher rental income and value-generating refinement
Our operations are continuing to develop positively, reporting higher rental income of 7.3 percent for the like-for-like portfolio. There is significant demand for rental apartments in Sweden, which combined with active property management and refinement efforts has enabled rent increases and a lower vacancy rate in the portfolio. During the spring, we renovated about fifty apartments, further supporting the healthy income trend.
At the end of the quarter, we had completed all rent negotiations in our residential portfolio with an average rent increase of 5.1 percent. The higher rents had a positive impact on the second quarter and will take full effect in the third quarter of the year.
Intensive work is in progress to increase our surplus ratio and occupancy rate in Neobo. Thanks to dedicated efforts from our employees, we have succeeded in reducing the number of vacant apartments in Falköping, Sundsvall and Örnsköldsvik from 144 to 42 since we founded Neobo.
Value-generating investments
The fundamental objective of everything we do is to create attractive and sustainable living environments where people can thrive and feel secure. Work to refine our property portfolio continues and during the first half of the year we have invested SEK 56 m in value-creating measures that have generated an attractive return of between 5 and 15 percent and contributed to increasing our property values.
Continued portfolio optimization
The optimization of our portfolio has continued and at the end of June we divested the Tegelbruket 4 retail property in Falun at an underlying property value of SEK 75 m. The price is 18 percent higher than the most recent external valuation conducted and the transaction yielded a positive earnings effect of SEK 10 m. The divestment means that we have exited Falun and it unlocks capital for reinvestment in strategic properties.
Improved financing climate
Neobo’s high hedge ratio has effectively offset the robust upswing in interest rates that has taken place since 2022. During the second quarter of this year, the Swedish Riksbank cut the policy rate by 0.25 percentage points and thus commenced the downward interest rate trajectory anticipated by the market. For us, the interest rate cuts will improve opportunities to carry out value-generating investments that will further increase the return from our property portfolio.
At the end of the six-month period, we refinanced and extended bank loans for just over SEK 1 billion at a lower margin than the average margin for our loan agreements. This is a sign of strength for Neobo and a clear indication of improving market sentiment.
By extending our loan-to-maturity period and securing financing at favorable rates we have further strengthened our financial position and increased the predictability of future cash flows.
Next stage of our exciting journey
After an intensive first half of the year, we are now preparing for the next stage of our journey with the aim of realizing the substantial potential of our property portfolio and creating an attractive total yield for our shareholders. On July 1, Neobo was included in Nasdaq’s FN25 index that measures the performance of a selection of the largest and most traded securities listed on Nasdaq Nordic First North Growth Market. In parallel, an extensive effort is under way to prepare Neobo for a switch to Nasdaq Stockholm’s main list, for the purpose of creating the best conditions for Neobo on its journey ahead.
Stockholm, July 10, 2024
Ylva Sarby Westman, CEO