Fabege AB (publ) (STO: FABG) Q2 2025 Earnings | 07/08/2025

Fabege AB (publ) presented its Q2 2025 report, highlighting a stable performance in a challenging market with a continued focus on its Stockholm office portfolio.

Financial Overview (First Half 2025):

• Rental Income: SEK 1.7 billion, slightly below the same period last year.

• Like-for-Like Income: Decreased by 3.3% (SEK 53 million) mainly due to tenant relocations from negative net lettings in the previous year.

• Net Operating Income: Decreased to SEK 1.233 billion.

• Surplus Ratio: 72%.

• Profit from Property Management: SEK 657 million, comparable to SEK 659 million in the previous year.

• Unrealized Changes in Value: Negative SEK 85 million for the quarter, and negative SEK 650 million accumulated for the first half, primarily due to longer expected vacancy periods and slightly lower rent levels in Solna, and longer implementation periods for future projects in Flemish Berg.

• Property Value: Totaled SEK 78.3 billion.

• Equity per Share: SEK 119.

• Loan-to-Value (LTV) Ratio: Unchanged at 43%, confirming a strong balance sheet.

• Interest Coverage Ratio (ICR): 2.5 (moving 12 months), in line with the previous year.

• Average Interest Rate: 2.89% at the end of June, with an expectation to remain just below 3%.

Financing and Balance Sheet:

• Fabege maintains good access to and pricing of financing from capital markets and banks.

• Refinanced and extended a bank facility of SEK 1.5 billion.

• Issued SEK 700 million in new three-year bonds at approximately 1% margin.

• SEK 1.7 billion in bond maturities remain for autumn, with plans to refinance.

• Undrawn revolving credit facilities totaled SEK 6 billion at quarter-end, ensuring preparedness for upcoming financing needs.

• 49% of the loan portfolio is fixed, mainly through long-term maturities and interest rate swaps.

Sustainability Initiatives:

• Updated green framework based on third-party certified properties and ambitious energy targets, aligned with EU taxonomy and green bond principles.

• Collaboration with Myrspoven to streamline and manage energy consumption in properties.

• High target (at least 80%) for reuse or recycling of demolition material from older properties, with 1,600 windows recently sent to Ukraine for reconstruction.

Market and Operations:

• Transaction Market: Relatively calm in Stockholm's office market, with transactions (some at good prices) in line with Fabege's valuations in different areas.

• Office Market: Activity (inquiries and viewings) increased towards the end of Q2, bringing optimism for the second half of the year. Vacancy rates continue to rise.

• Occupancy Rate: 87% in the management portfolio; expected to remain lower before increasing, with a long-term goal of reaching 95%.

• Net Letting: Negative SEK 6 million for the first six months (positive SEK 6 million in Q1, negative SEK 12 million in Q2) primarily due to one tenant decreasing area. Fabege aims for a positive net letting of SEK 80 million for the full year.

• Renegotiations: Most contracts were extended on unchanged terms, with a net decrease of 3% for the SEK 100 million in closed negotiations.

• Key Tenants: SEB remains the largest tenant, with Saab and Alfa Laval new on the list.

• Project Development:

  • Completed the first phase of a housing project in Haga Norra, selling 23 apartments.

  • Alfa Laval has moved into Haga Norra, with two floors remaining to be signed.

  • Textiltorget in Hammarby Höjdstad is developing well, with one floor remaining vacant after a recent signing.

  • Renovation of the Vendor Grand Centre and demolition of the Tower of Cairo in Arena Staden have begun.

  • Good sales of apartments in Birbostad; rental apartments to be completed in autumn 2025.

  • Significant building rights (1.2 million sqm) for future opportunities, though no new speculative projects are starting currently.

Outlook:

• The company is optimistic about improving net lettings in the second half of 2025.

• Long-term focus on increasing occupancy rates to 95%, completing existing projects, preparing for future developments, exploring value-creating transactions, and maintaining cost efficiency.