Neobo Fastigheter

January–March 2024

• Rental income increased to SEK 227 m (214). For the like-for-like portfolio, rental income increased by 6.9 percent as a result of the preceding year’s rent increases in the residential portfolio, decreased vacancies and the rent increases for the year in commercial contracts. The full effect of the rent increase for the year in the residential portfolio will be seen in the third quarter and has not appreciably impacted the first quarter.
• Net operating income for the first quarter decreased to SEK 91 million (98). The decrease is partly explained by the fact that the comparison between the first quarter of 2023 and the first quarter of 2024 is misleading, as costs attributable to the first quarter of 2023 were not received until the second quarter of 2023. The decrease is also explained by increased heating and snow removal costs as a result of a colder and snowier winter.
• Profit from property management amounted to SEK 11 million (29). The decrease is partly explained by the fact that the comparison between the first quarter of 2023 and the first quarter of 2024 is misleading, as costs attributable to the first quarter of 2023 were not received until the second quarter of 2023. The decrease is also due to increased operating and financing costs, as well as administrative costs affecting comparability of SEK 2 million in the first quarter.
• The unrealized change in value of the properties amounted to SEK -130 m (-329) during the period.
• The value of the property portfolio totaled SEK 13,798 m (14,018) at the end of the period.
• Net loss for the period amounted to SEK -27 m (-222), corresponding to SEK -0.19 per share (-1.53).
• The net asset value amounted to SEK 44.99 per share (45.83).

Significant events during the first quarter

• In February, six residential properties in Eskilstuna were divested at an underlying property value of SEK 113 m, which was in line with the most recent external valuation conducted.
• Neobo completed its first climate report and established short- and long-term sustainability targets.
• Neobo became a member of the European Public Real Estate Association (EPRA) during the quarter.
• In February, Peter Wågström stepped down from the Board of Directors at his own request due to a commitment in another company.

CEO STATEMENT
Higher rental income and falling vacancy rate
Our operations are continuing to develop positively, with higher rental income and a falling vacancy rate. Rental income has increased by 6.9 percent in the like-for-like portfolio, and there is significant demand for rental apartments in Sweden. Alongside the positive income performance, our costs for heating, snow removal and financing, among other things, have increased. In addition, the comparison between the first quarter of 2023 and the first quarter of 2024 is not fair, as costs attributable to the first quarter of 2023 were not received until the second quarter of 2023.

Steadily falling vacancy rate
Reducing the vacancy rate is one of our top priorities. We entered last year with a vacancy rate in the residential portfolio of 6.6 percent and ended the first quarter of this year at 5.0 percent. There were a number of measures that led to this improvement, such as more efficient marketing, renovation of vacated apartments and a focused effort from our committed employees. At our Tidaholm property, with a total of 237 apartments, we succeeded in reducing the number of available apartments from 42 to 9 in 2023 owing to a dedicated and solution-oriented effort from our team on site.

We are also continuing to work purposefully with insights from the customer survey that was conducted last autumn to increase the attractiveness and comfort in our residential districts, thus further increasing customer satisfaction and further reducing the vacancy rate.

Optimization of our portfolio initiated
In February, we divested six low-yielding residential properties in Eskilstuna at an underlying property value of SEK 113 m, which was in line with the most recent external valuation conducted. The six properties in Eskilstuna are facing significant investments, which means the sale will help to strengthen our cash flow as we move forward. Liquidity in the transaction market has increased markedly since the preceding year, which is positive both for us and for the property market as a whole.

Stable financial position based exclusively on bank financing
Neobo has a stable financial position based exclusively on bank financing from banks in the Nordic region. Our high hedge ratio has effectively offset the robust upswing in interest rates that took place over the past year. To increase predictability in future cash flows and further reduce financial risk, during the quarter we entered new swap agreements and extended our fixed interest term to 2.8 years (2.2).

The yield requirement continued to rise during the quarter, and the average yield requirement used in external valuations now totals 4.9 percent. However, the decrease in value of the property portfolio as a result of higher yield requirements was offset by the assumptions of higher rent increases in coming years. The unrealized change in value of the properties represented a decrease of -0,9 percent during the quarter.

Ongoing rent negotiations
At the end of the quarter, we had completed negotiations for about 74 percent of our rental income in the residential portfolio with an average rent increase of 5.1 percent. The remaining negotiations are expected to be completed during the second quarter and will take full effect in the third quarter of the year.

Focus on sustainable value creation
Our prime focus is on increasing the return from the property portfolio by raising rental income, reducing the vacancy rate and implementing value-generating investments. We have also begun our crucial sustainability journey, which you can read more about in the section on sustainability in this report. Together with continued refinement and more active portfolio optimization, this will bring us closer to our goal of a return on equity of at least 10 percent.

An intense effort is now under way to prepare Neobo for a switch to Nasdaq Stockholm’s main list during the year, for the purpose of creating the best conditions for delivering an attractive total yield to our shareholders going forward.
 
Stockholm, April 23, 2024
 
Ylva Sarby Westman, CEO