Fastighets AB Balder (publ) (BALDB) Earnings Call Transcript & Summary

Welcome to the Balder Q2 Report 2026. [Operator Instructions] Now I will hand the conference over to IR Jonas Erikson. Please go ahead.

Good morning, everyone, and welcome to this conference call for Balder's Q2 2026 results. With me in the room, I have Sharam and Ewa, our CEO and CFO, who will take you through some slides initially, and then we will open up for questions.

Thanks, Jonas. Yes, most of you have seen this picture before, but I think it's good to show it again. Our portfolio is roughly half residential and half commercial. We have a portfolio value of SEK 241 billion and occupancy rate of 95% and net debt of SEK 50 billion. We have a good liquidity of SEK 23 billion. NAV per share stands now at SEK 94.3, and that's a growth compounding rate of 24% since the start of Balder. Our credit rating from S&P remains at BBB with a stable outlook. If you look at the figures for the second quarter, rental income is up 5%. Profit from property management is down 10%. But if you adjust the comparative figures for the effect of distribution of Norion, we instead have an increase of 3%. Our funding costs increased from last year, but at a lower pace than our portfolio has grown. We have also a bit higher central admin expenses. And that is partly because of slightly higher activity in new development and partly because of -- because we are investing a bit in digitalization and making our central functions more streamlined. The effect should be that we can scale the business more efficiently in the coming years. And on the income side, we also need to work even harder with our occupancy. We have an amazing team, and they always do well even in the challenging market conditions. In current earning capacity, we see an increase of 10% adjusted for Norion's contribution in the comparative figures, which means that we see an underlying healthy growth. Like-for-like rental growth, 1.2% and NAV per share is SEK 94.3, as I said before. Looking at earning capacity, you can see that the rental income is up and net operation income is up as well. All in all, this summarized down to SEK 6.1 billion and per share, SEK 5.21. You can also see that the per share improvement is a bit better than the profit improvement. And the reason is that we bought back almost 16 million shares in this quarter. Here is an overview of the portfolio, which is very well diversified. Helsinki is the single largest region, followed by Gothenburg, Stockholm and Copenhagen. And the residential side of the portfolio represents a little bit more than 50% of the portfolio. Office stands for 16%; retail, 11%; Industrial logistics, 7%; and other stands for 13% and hotel are the majority of that. Looking at the whole portfolio, you can see that 80% is located in capitals and larger cities. We have always had a long-term view on the business, which, of course, will continue. If you take a longer time horizon, we have a real good improvement over the years. The latest 3, 4 years has been flattish, obviously, because of the interest rates going from 0 and upwards. Here, you can see the development of property values, net debt to total assets and occupancy. We have, over time, increased the portfolio and net debt is now at 50% in the longer time period. We would like to come down. Occupancy rate is now 95%. And as you can see, it has been very stable, which is an effect of our diversified portfolio. The explanation for a bit weaker occupancy compared to earlier 96% is primarily due to some weakness in the office segment occupancy. And now I will hand over to you, Ewa, to comment a little bit more about the financing.

Thank you, Sharam. Looking at the financing, the funding mix is more or less a 50-50 split between bank and bond financing. We have a slightly more bond financing as of now compared to last quarter. The level of available liquidity is continuously a bit elevated due to the concentration of large maturities in the beginning of '27. The interest rate fixing and hedging ratio is stable and the average interest rate is unchanged compared to last quarter at 2.9%. Our funding is now well reflective of the interest rate curve and margins. So I wouldn't expect any significant shifts in our funding costs in relation to the net debt on the cash funding side. During the last couple of years, because of the volatility in the rates market, we have had the opportunity to enter hedges with optionality like an extendable swap at very favorable rates. It's hard to judge whether these opportunities will continue. If they don't, this might present a slight headwind in our financing costs compared to our normal hedging activities. Net debt to total asset is up a bit to 50.4% due to the distribution of Norion and to some extent, share buybacks. The ICR is at 2.5 and rolling 12 months net debt to EBITDA is 12.8. Per quarter end, net debt to EBITDA was down 0.3x compared to last quarter. Here, you can see the long-term trend of the portfolio value in relation to net debt to total assets. As you can see here, as I mentioned in the previous slide, net debt to total assets increased during the quarter related to the distribution of Norion and share buybacks. Current encumbrance level is at 24.5%. And with our current funding mix, we think a level roughly in the 23% to 25% range is where we will be. So over to the maturity structure. On the bank side, it has been business as usual, rolling maturities. In the bond market, we have been taking advantage of the favorable conditions and issued bonds in the SEK market amounting to SEK 1.6 billion. Currently, our bond funding is cheaper than the bank funding, looking at like-for-like maturities. This slide we have shown before is a structural overview of the funding and capital side. As we have said before, we will continue to have a balanced capital allocation until reaching our target of 11x net debt to EBITDA, and that target remains unchanged. We expect net debt to EBITDA to gradually come down, but we see no reason to be forceful about it. The direction is more important than the pace of the reduction. Here, you can also see an updated calculation on the convertible bond, which when that is converting, assuming that we're above strike price, obviously, will have a positive effect on the indebtedness numbers. And in terms of funding strategy, there is no change compared to previous quarters. That was all from us. And on that note, I will leave the floor open for questions.

[Operator Instructions] The next question comes from Fredrik Stensved from ABG Sundal Collier.

A couple of questions. The first one is, Sharam, you mentioned in the CEO statement that there is some higher central costs and some upfront investments. Are you able to quantify those? And assuming those upfront investments are sort of temporary, anything we should keep in mind in terms of timing?

Yes, I said that. And that is -- some of them are only ones, but some of them is for the digitalization for coming years. And because we think that we can make the system more for -- to put together the other countries in the same system. So maybe for coming years, you can -- it takes 2, 3 years to change the system. And you are not going to see any dramatically changes or higher costs. But I just wanted to start that with this quarter to say that we are going to have these costs.

Let me mention, Fredrik as well. In this quarter, there was a one-off number that was more of a periodization effect between Q1 and Q2. So Q1 was some SEK 7 million, SEK 8 million lower than it should have been normally and Q2 was SEK 7 million, SEK 8 million higher. So the -- if you look at the quarterly numbers, then Q2 is a bit too elevated compared to the run rate sort of. But I think this -- when it comes to the digitization, we haven't made an exact calculation ourselves, but we're talking about a few tens of millions of SEK annualized this year and about as much next year. So that's what we know now. But the whole sort of program is not set in stone exactly how it will progress. So we'll see a little bit how that goes.

Yes. That's great and helpful. Secondly, you talk about the commercial market moving in the right direction or in a positive direction. Any specific segment that you would like to call out there?

Yes. We see a bit better movement in the office segment in Stockholm, Gothenburg. So we see the trend is positive, but that's all we see. So we see that the trend is positive. And we like that it's in the right direction for now.

And we can obviously see the interest from clients on the different -- in the different segments. So when it comes to like smaller offices, you're talking 100, 200, 300 square meters, there we can see a clear pickup in interest. And then I think when you look at the total volume, you don't really see that yet in the occupancy numbers. But in terms of market activity, incoming calls and some of those smaller units is where things usually start when there is a recovery, and that we're starting to see. But let's see how much that translates into sort of larger volumes on the total as well. I think that's a little bit too early to make that call.

Yes, that's clear. Final one, maybe a detailed one, but the transactions you closed during the quarter, did those contribute in any meaningful way during the quarter? Or did they close sort of end of period?

Not in a meaningful way.

Firstly, they were not as large as in Q1. In Q1, we had quite a large chunk of transactions that closed really at the end of Q1.

Yes. I would say it's mostly them that contributed this quarter.

Yes. So the transaction volume was much smaller in Q2 and it was not a sort of exaggerated impact in terms of the quarterly effect either.

The next question comes from Andres Toome from Green Street.