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

Welcome to the Balder Q3 Report 2026. Now I will hand the conference over to IR Jonas Erikson. Please go ahead.

Hi, everyone, and welcome to this presentation of Balder's Q3 results 2026. With me in the room, I have Sharam Rahi, CEO and CFO of Balder. And I will first hand the word to them for a run-through of some of the slides, and then we will open up for questions.

Thanks, Jonas. As usual, we start with this picture. Our portfolio is roughly half residential and half commercial. We have a portfolio value of SEK 246 billion and an occupancy rate of 95% and net debt of 50.2%. We have a good liquidity of SEK 25 billion and NAV per share now stands at SEK 97. That's a growth compounding rate of 24% since the start of Valde. Our credit rating from S&P remains at BBB with a stable outlook. If you look at the figures for this quarter, rental income is up 6%. Profit from the property management is down 2%. If you adjust the comparative figures for the effect of distribution of Nuon means that had an increase of 11%. Our funding cost increased from last year, but at a slower pace than our portfolio has grown. In current earning capacity, we have seen an increase in profit per share of 11% adjusted for Nordion's contribution in the comparative figures, which means that we've seen an underlying healthy growth. Like-for-like rental growth is 1.2% and NAV per share is now SEK 97 that -- as I said before. Looking at the earning capacity, you can see that the rental income is up and net financial items is up as well. All in all, SEK 6.1 billion, which is unchanged from the last quarter and SEK 5.2 per share. You can also see that the improvement per share is a bit better than the profit improvement. The reason is that we bought back roughly 13 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. The residential side of the portfolio is a little bit more than 50% of the portfolio. Office stands for 15% retail, 11%; Industry logistics, 7% and other stands for 13%. And the 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 is of course -- which, of course, we will continue. If you take a longer time horizon, we have a really good improvement over the years. The latest 3, 4 years has been flattish, obviously, because of the interest rates going from 0 and upwards and because of the distribution of Nordion. Here, you can see that the development of property values, net debt to total assets and occupancy. We have, over time, increased the portfolio and the net debt has been around 50% for some time. We would like to decrease our leverage a bit over the coming years. 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. Yes, that was all for me. And now I will hand over to Eva 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. 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. Our average funding cost has increased slightly in the quarter. 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 on our financing costs compared to our normal hedging activities. Net debt to total assets is down a bit to 50.2% in spite of continued share buybacks. The ICR is at 2.4% and rolling 12 months net debt to EBITDA is 13% -- if you look at Q3 compared to last quarter, net debt to EBITDA was down 0.7x, primarily due to FX effects and that acquisitions made in previous quarters were not fully reflected in the EBITDA for the second quarter. Here, you can see the long-term trend of the portfolio value in relation to net debt to total assets. As I mentioned on the previous slide, net debt to total assets came down a little bit during the quarter from 50.4% to 50.2%. Current incumbence level is at 24.1%. And with our current funding mix, we think a level roughly in 23% to 25% range is where we will be. Over to the maturity structure. During the quarter, we took advantage of the favorable conditions in the bond market and issued a green bond in the CF market amounting to SEK 500 million on the tighter spread levels in 2021. Currently, our bond funding is cheaper than the bank funding comparing like-for-like maturities. However, during the last few weeks, there has been a widening of bond spreads, in particular, in the urban market. So let's see how things develop in coming months and quarters. . This slide we have shown before, and it's a structural overview of the funding and capital side. As we said before, we 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. I would not expect net debt to decrease in absolute amounts, but rather EBITDA being the factor that will improve this metric. Here is also an updated calculation on the convertible bond, which when that is converting, assuming that we are above the strike price, obviously, will have a positive effect on the indebtness numbers. That was all from us and on that, I will leave the floor open for questions.

[Operator Instructions] next question comes from [ Staffan Bulow ] from SB1 Markets.

I have a couple of questions, starting off with the buyback. So you repurchased shares for SEK 700 million this quarter, and that's a run rate of SEK 2.8 billion or 5% of the shares, as you say, in the CEO letter and you've reached the conclusion that, that piece suits you well. Could you elaborate on how you have reached that conclusion.

Staffan, I think when you look at our cash flow run rate and then you deduct some sort of minor investments that we always take in development projects or existing portfolio then you have a certain amount left. So if we are pretty much 0 net buyers in the market, you'll end up with something around that number. We might even be able to buy something small. But really using the cash flow for share buybacks for the most part.

All right. So free cash flow funded buybacks understood. And looking at the investment cash flow in Q3, you've been a net buyer of investment properties quite small, but still, do you expect that case -- to be the case going forward as well? .

I think as Sharam mentioned, the CEO, let you as well that we -- most of those transactions have been ongoing discussions for a long time. So I don't think we would have initiated those discussions today when we have this share price level, the relative attractiveness of share buybacks is too high. At the same time, I think the difference is not as large as you might think because the acquisitions that we have made, I think we feel are pretty decent. I think ultimately, Stefan, I mean, I fully realize why you're focused on the share buybacks. But I think from our perspective, having 11% growth of the profit from property management per share in Q3 compared to last year. . I think that's sort of more the number that we are trying to optimize. So obviously, share buybacks is a very good tool on the share prices at the current level. It's not the only tool box sort of.

And you've made on divestment of associated company Andelin the quarter. Are you looking to divest more associated companies and JV structures?

No. And almost no part of a sort of divestment program of in kind. It was, I think, Ewa, alluded to that when we started that process as well that -- it's a sort of generation shift in that company and we've built the company with the foundries and when they retired, we decided to divest it. So it's not sort of part of a structural program to divest things. But we will say good timing into those and the other 1 as well.

Okay. That makes sense. And one final question that's on the like-for-like outlook for Finnish resi, what is...

Sorry, let me just add 1 thing on the Stefan. I think what we said as well for the last few quarters is that JVs, obviously should exist for a reason and for a purpose. There's no point in having loads of assets in JVs for the sake of it. And you have seen us obviously divest some of those in the last few years. So in that sense, I think we'll become a little bit more stringent, and there has to be a very, very clear purpose with the JV. And Anton is 1 example. We also divested part of the portfolio that we own together with investors recently as you've seen. So I think -- I just wanted to add that to the discussion around the JVs.

Thanks for this clarification. And then my final question was on the like-for-like outlook for Finnish resi for next year.

I don't think we try to forecast that. I think your is as good as ours in a way. What we can see is that the finish economy seems to be recovering. There's been sort of estimate upgrades of Finnish GDP during the year. And I think the general consensus seems to be that the labor market is finally looking to improve, will improve, sort of, more noticeably into next year, all else equal with a very, very low new construction and recovery of the economy and the market, I think, should be positive for our business there as well. .

The next question comes from Robert Phillips from Green Street.

I just had 2 questions from my side. So firstly, you've asked management to reevaluate how you work with the aim of reducing costs and vacancy. And I was just wondering if you could just kind of elaborate a bit on those plans and what specifically you're funded differently to achieve that. .

Well, I think the point that we're trying to make is that we need to be prepared to reevaluate everything with you. And I think the signal is that we're not comparing to the efficiency level that we have. So let's us look everywhere we can look to find efficiency improvements. We meant in 1 example in the report where we're moving our Norwegian the headquarter for [indiscernible] from Oslo to Trenum. that will save a bit of money and actually move it -- move the temporary management closer to its clients as well for the 2 sort of good aspects with it. And there are many more examples that we're working with. We're not planning to give any clear guidance, Sharam stated in the CEO letter that we're expecting costs to go down in absolute terms. And -- but we also feel that we might need to do a little bit of investment to make that happen. But the direction is down. And I think that's the clear message. And we don't have sort of a finalized list yet of exactly what components will make that happen. We are not content with the efficiency. We see potential in various areas that makes us confident that we can have a decline in the central administration expense.

Perfect. And then just secondly, on your debt metrics. They're, of course, slightly higher than your targets. I was just wondering how you plan to balance continued buybacks against getting your leverage back to targets?

Yes. No, it's a relevant question. We -- if you look at the different metrics, I think they exist for slightly different reasons. So the net debt-to-EBITDA metric where we are sort of the furthest away from the target has been a sort of self-imposed target that we issued as a sort of more of a directional statement and the more let's call it, hard or the factor restrictions on our balance sheet are obviously the leverage metrics from S&P, and they were well in line with where we need to be for the current AAA rating. I think long term, we still are clear that we want the leverage to come down slightly but it's not going to happen at a very dramatic pace. It's not going to require us to take active actions with the balance sheet, but rather have those metrics improve slightly year-by-year going forward. I think Ewa mentioned as well that the net debt to EBITDA targets, we don't expect the net debt to decline in absolute amounts, but rather the EBITDA doing the job of, sort of, closing that gap over time. But it's going to take a while. It's not -- we're not particularly stressed about that.

Next question comes from Lars Norrby from SEB.

A follow-up question on share buybacks. First of all, I appreciate the clear message. Right now, it's the best investment available according from the CEO statement. Funding it through cash flow is one thing. Another thing is to finance buybacks through divested properties. I'm thinking, of course, about what Castellum has been doing, which freed up some SEK 8 billion yesterday for buyback. What's your view on divestments from the buybacks. Is that an option for you? .

I think we're always weighing all the capital allocation options, but also I read the Castellum reports, I don't know what, kind of, growth numbers that you're looking at, but we are pretty okay with the 11% year-over-year growth in profit and property management per share that we showed in Q3. So I think that's our main metrics that we're trying to steer on if we can find interesting opportunities to divest something to share buybacks, that is definitely on the table as well. But it's the earnings per share that are, sort of, overriding metric that we're trying to optimize. .

Well, let's just assume that if you would sell something, either it's because you're actively looking for it yourself or your approached by another entity, I would like to buy a portfolio for you and you think it's a fair price. The proceeds of such a transaction. What we do the for?

I mean if we were to be net sellers, I would assume that we would use that for share buybacks, definitely. I mean after some debt repayment, obviously.