Samhällsbyggnadsbolaget i Norden AB (publ) (SBBB) Earnings Call Transcript & Summary

A warm welcome to SBB's Capital Markets Day in 2021. This is the third CMD that we are holding over the -- well, since late 2018, and it's definitely been a ride since the first one. Back in 2018, we were more than 100 attendees in Stockholm. I think we set the target of a portfolio approaching SEK 40 billion, which was later revised to SEK 55 billion. The second one was also in Stockholm. We then only had a handful of participants in the audience due to the recent outbreak of corona. And at that time, the targets for the portfolio was at SEK 125 billion. And now 15 months later, we are here in Skellefteå in this amazing new culture house built all in wood and just recently opened earlier this week. So we will soon begin with the official program. But as we are here, we have the great pleasure to actually be joined by Lorents Burman, who is the Chairman of the Municipality Board here in Skellefteå. You can call him the Mayor of Skellefteå, basically. And he will give a brief introduction in Swedish. And then we will move on to the official program, which will be held in English. So Lorents, please?

[Foreign Language]

Thank you, Lorents. Just for the English viewers then, what Lorents basically was saying here is that Skellefteå is at the center of the green energy shift that is now taking place globally. And they are now building here in Skellefteå the Europe's largest battery factories being built. And this obviously is attracting large investments throughout the value chain, up to SEK 130 billion of investments, of which a large part, of course, is in residential properties. Earlier this morning, some of the participants here were also attending the construction start of 161 new apartments under SBB's eyes here at Skellefteå. And he also said a few words about the great partnership that Skellefteå municipality and SBB has built over the past years. And you will also hear a bit more about that later on in the presentation. So now we're moving into the official program. And we will keep ongoing with the full presentation without any breaks today. We will conclude this with a Q&A session. We think that we will be all done by 12:00 at the latest. [Operator Instructions] So moving into, here, you can see an overview of today's presenters. They will all introduce themselves when entering the stage, so we won't stop at this slide. Here, you can see the agenda. We will start with an introduction to SBB. Then we will do a deep dive into the business value and the -- into the business model and how we are creating shareholder value. We will then round off with a balance sheet and treasury update. Ilija will say a few words on the new targets that were presented yesterday evening. And then it's time for the Q&A. So with that being said, I welcome Ilija, Oscar, Marika and Carl to the stage for the first part of the presentation.

Thanks, Adrian. And it's a great pleasure for us to do our Capital Market Day here in Europe's most sustainable buildings -- most sustainable building. This building that we have built together with municipality of Skellefteå and the -- where municipality has 50 years lease has been build completely in wood, in timber. It is 26,000 square meters. It is 20 floors high. And all of the inside of the house has the highest possible environmental certification. Even reserve power will be secured by most innovative technology provided by Northvolt in order to secure that not even reserve power is fossil. So a unique place. And I'm happy that this unique, Europe's most sustainable building is also giving us opportunity to present our Vision 2030 to be climate positive. And my colleague, Marika, will give you more flavor on that later on. My name is Ilija Batljan. I'm the CEO and the Founder of SBB. And I'm happy to start today's presentation with our new goals that were presented yesterday evening after Board's strategic meeting. We are focusing on to continue to grow our business to become Europe's largest real estate company. We have the best-in-class operational platform, we have people, we have strong financial position and we have clear targets. It is also why we revised our target concerning growth from being a company of having a portfolio of SEK 125 billion, 2025, that was the target from the last year, to revise that target to SEK 300 billion, 2026. We also see that we have a strong focus on delivering value to the shareholders and value to the society through our property development and new construction of social infrastructure. That is why we are increasing our target for income from property development, almost doubling it from before SEK 1 billion to SEK 1.4 billion to the new target that we will deliver income from property development of SEK 2 billion to SEK 2.5 billion. We also continue to focus on strengthening our financial position and emphasizing our part to have BBB+ in short term and becoming A- company in long term. And finally, one of the most important issues, both for us and for all of the society, climate issue. We are launching this morning our updated Vision 2030 with focusing on SBB climate positive by 2030. Well, we had discussion at the Board meeting yesterday about the new target of SEK 300 billion that can seem very ambitious. We were also very keen to show how we can achieve that target in the most efficient way. And at this slide, you can get illustration. This is just to illustrate to you how we are going from SEK 170 billion in property value at the end of Q2 this year to SEK 300 billion at the end of 2026. I mentioned before, we have strong building rights portfolio. We have the largest amount of apartments in our building rights portfolio of all European businesses. We have doubled the numbers that largest European real estate business has. We have 59,200 apartments that we have in our building rights portfolio. So if you just assume that we will build 15,000 apartments next 5 years. On top of that, we have already, and you can find those numbers in our Q2 report at Page 24, we have already meeting construction or prepared for construction assets for more than SEK 30 billion that are delivering an NOI of almost SEK 1 billion. If you add on top of that, that we have still one of the highest net initial yields, we had in our latest valuation yield of 4.34%. The market yield is probably more than 100 basis points less than that. We have been able to deliver an increased income with more than 100 bps over inflation, over CPI since starting the company. So if you pull all those pieces together and then given our strong focus on transaction, use that equity to buy some new properties, you will see that the target of SEK 300 billion is fully within the reach and without new equity, from SEK 117 billion to SEK 300 billion in 5 years, becoming one of the largest real estate businesses in Europe. As I said in the introduction, today, to be leading actor in whichever business, sustainability and climate issues are going to be keys. That is why we are happy to present our Vision 2030 where we will become climate positive in the entire value chain, where we are going to connect our sustainability work at the ground with sustainable finance and targeting to have at least 90% of social assets in our portfolio, also in that way, supporting society development and, at the same time, doing the work that is needed around the globe to be climate adapted and prepare our property portfolio so we can cope with climate risks. And if you want to see how this work in practice, please visit Falkenberg. There, you will see how we have done this in practice, that we have built beautiful apartments by the sea with 360-degrees open view and, at the same time, invested together with municipality to adapt so we can cope with future climate risks. We are specifying very clear targets on environmental side, focusing on reducing energy usage and climate impact, but also focusing on the entire value chain. That is why we have as a target that at least 50% of SBB's new construction shall consist of wooden buildings from certified forestry. We have continued to develop our work on social sustainability where we, today, are a leader in the real estate space. This summer, we offered 200 young people summer jobs with all of our staff contributing. We are supporting municipalities so they can offer apartments, today's social work. And finally, we continue to strengthen our governance and financial position with focusing having BBB+ in short term, A- rating in long term and also focusing to take the next step by having 100% sustainable financing and also make sure so we classify our shares as green share on Nasdaq Stockholm. Now I will give the floor to my colleague, Marika, that will dive deeper in our Vision 2030. Please, Marika.

Thank you. Good morning, everyone. My name is Marika Dimming. I'm Head of Sustainability here at SBB. This is our road map to becoming climate positive. Our compensation through new renewable energy and new technologies will be larger than remaining CO2 emissions. So looking back, when Ilija started the company in 2016, we have always had a great focus on sustainability. We have been making continuous improvements through energy efficiency measures. We have exchanged heating systems, and we have signed green electricity contracts with our tenants. Where are we now? We are accelerating initiatives to improve energy efficiency and heating systems. We have renewable electricity in 100% of our property portfolio. We are expanding solar power. We are installing charging stations, and we have a new initiative with wind power. 50% of all our new construction is in wood. Looking forward, we will be constructing wind farms. We will be placing a lot tougher requirements on district heating suppliers. A large part of our portfolio will have charging stations, and we will place strict requirements on a climate-effective construction processes. Looking ahead towards 2030, we expect a large share of our service fleet to be electrified. The entire energy needs of our company will be covered by solar and wind power whilst expansion will continue. And the emissions from our construction process will be -- will sharply decrease. We're rated by several so-called ESG rating providers. Those ratings are both solicited and unsolicited. I think this slide speaks for itself. As you can see, MSCI has upgraded us from BB to A. Sustainalytics have reduced our ESG risk. It's now almost negligible. And you can see here to the right where we stand in respect of our peers. And from ISS, we have received an industry leader score. So I think, yes, this slide speaks for itself. Thank you. I will now hand over to Oscar.

Thank you, Marika. My name is Oscar Lekander, and I'm the Head of Business Development at SBB. I should give you a short introduction about our portfolio. SBB holds assets within the Social Infrastructure segment, meaning community service properties and rent-regulated residentials. We have today and/or by Q2 had properties for almost SEK 117 billion. 75% of these are located in Sweden, 10% in Norway and approximately 7% in Finland. And we have dipped our toes into the Danish market with assets for approximately SEK 1 billion. And this is probably the safest assets in the world. 98% of our rental income is coming either from rent-regulated residentials or social or community service properties, direct or indirect from the Nordic welfare states. This is giving us a passing rent of more than SEK 6 billion and a net yield of 4.1%, net yield. Another important point of this picture is also our average value per square meter. Our average value is SEK 22,000 per square meter. That's close to half the replacement cost for these kind of assets. Looking into more details about our rental income. You can see that more than 40% is coming from different residentials properties, either rent-regulated residentials or publicly funded residentials, such as elderly care homes or LSS housing, housing for people with special needs. Moreover, we have a lot of income coming from educational properties, such as schools, preschools and universities, all supported by the Nordic welfare states. And as you can see, we have an average lease time of 9 years, but in practice, even longer. This gives us an exposure against the mega trends in the world. We have an exposure against 4 countries that have a stable population growth. And we also have an exposure against the demographic trends where we see people are getting older and older. By 1990, the people older than 65 years was 25 -- 24%. It's expected to be 40% by the end of 2040. This has -- you can understand, gives a great demand and need for additional community service spaces. Just in Sweden alone, there is a need for an additional 7.7 million square meters. This is a good picture of SBB and to understand where SBB is working with. You will understand it better in the end of this day. We have probably the most secure cash flows in the world, giving us a rental passing rent of more than SEK 6 billion. We have a great focus on sustainability, and we are trying to create additional values to our shareholders from our 3 different value-add strategies. Now I will hand over to Carl that will explain this in practice.

Thank you, Oscar. I'm Carl Lundh Mortimer, working with real estate transactions and business development at SBB. As you know, we are in Skellefteå today. And Skellefteå is a really good example of how investments in social infrastructure can support and contribute to investments in other sectors. And Skellefteå today can actually be described as a klondike of the Nordic region due to extensive investments in industrial capacity and in infrastructure. Total investments in Skellefteå over the next year is estimated to be approximately SEK 130 billion, and it's much fueled by the Northvolt investment here. They will build the world's greenest battery factory. And these large-scale investments, they're estimated to lead growth of approximately 10% -- 20% over the next 10 years. And to support these investments, it's of course necessary to also invest in social infrastructure. And here is SBB playing a key role. We are investing in this culture house, SARA, that we are in today. And we are also investing in 1,500 new rent-regulated residential here in Skellefteå to support the growth. And we are convinced that the population growth, together with our investments in social infrastructure, the large industrial investments and a good collaboration with the municipality will lead to additional optimism in the entire region to enable for further investments and further opportunities for SBB to invest. And I think, as I said, this is a really good example of how social infrastructure investments can support other investments. Yes. And now I will talk a bit about how we, in reality, work with our value-add strategies. This example relates to residential property. And as you all know, we are always active on the transaction market we are working with. We have a strong balance sheet, and we are always on the market. And that means that we can act when we think the price is right and the timing is right for a specific property. And that gives us an advantage on the transaction market. And in this specific case, we acquired this some years ago. And for residential property, what we do in the beginning is that we -- the first thing we do is we are having a dialogue with the local tenant organization to set the rent after renovation. And we are also having a dialogue with the municipality to initiate the zoning process. And if we start to discuss the renovation, we normally have a renovation -- we normally have a tenant turnover of 10% per year, meaning that we can renovate 10% of the apartments. And with normal tenant rent uplift, lower cost and average cost for renovation, we normally end up at a yield of 5% to 7%, which is significantly higher than the valuation yield. And property development -- excuse me. Yes...

On the top, what Carl is emphasizing is that is on the top of a parallel process with renovation, the property zoning is fulfilling. And in this case, we have been able to zone 25,000 square meters of additional gross floor area, which in total, if you look, you have a profit from a refurbishment process of SEK 140 million. You have profit from building -- or in creating building rights of SEK 156 million. And at the end of the day, total value creation of SEK 420 million from value at the investments of SEK 780 million.

Thank you very much, Ilija. And in total, this case, as Ilija said, we have been able to generate SEK 420 million in profit in this case by working with our value-add strategies. And I think it's important to stress that this is in excess of the profit from property management, and this is only by working with value-add strategies. The next example is quite similar, but it's for community service property. And the difference is that you have a different tenant mix. The similarities is that we are working with property development and we -- and how we're working on the transaction market. But as I said, the difference is the tenant mix. And here, we have public tenants. And with public tenants, we have a very structured process. We have meetings every quarter to learn about the tenants' demand requirements and future needs. And the purpose for us in having that dialogue is, of course, to be able to invest for them, to increase the NOI and also to prolong the WAULT. And all in all, for this property, we have invested SEK 70 million over the last years to generate a total profit of SEK 107 million and a yield on cost of 9%. And on the building rights side, it's quite similar with -- as the previous case. But here, we have developed 8,000 square meters of building rights, total profit of SEK 32 million from building rights and an additional SEK 46 million in profit when building with our concept buildings on the building rights. And here, we have created SEK 196 million in value from our value-add strategies over the last years. And I think it's important to emphasize, as for the previous example, this is in excess of the rolling NOI. So this is only due to our value-add strategies. And we have exemplified with 2 examples here, and it's only 2 examples out of our total portfolio of 1,900 properties, which I think gives you an -- it gives you a flavor of how much value we can create from working with value-add strategies in our entire portfolio. And now handing back to Ilija.

Thank you, Carl. And just to give you some more flavor on the team, we have a very long experience in our team. We are focusing on attracting best talents. And you will meet through the day the majority of those persons. One of the persons that you will not -- that is not presented is Lars Thagesson, our Deputy CEO, one of the founders of Hemfosa and one of the most experienced persons in the real estate market. So we do think that our team and our operational platform, supported by 325, 350 persons, is one of our competitive advantages. The management team is supported by experienced Board members. We have Lennart Schuss, Founder of Catella, as the Chairman of the Board; Sven-Olof Johansson, Founder of FastPartner; Fredrik Svensson, next, largest owner in Balder through Arvid Svensson and a Board member there since 2005; Eva Swartz Grimaldi, an experienced professional, both as a CEO and as the Chairman of the Board in different companies; Anne-Grete Strøm-Erichsen, the former Norwegian Minister of Defence and Healthcare, also with long track record from Norwegian business community; and Hans Runesten, that among others, has been involved when Sagax started. Then just to summarize the introduction part, you have seen -- you have heard about our targets. You have heard about our real estate portfolio that is delivering income of rolling basis at the end of Q2 of SEK 6.1 billion. And if you follow on the slide, you will see that we have a cost for our investment properties of SEK 1.7 billion. We are investing a lot of money in maintenance and taking those costs through P&L. That is actually a difference between us and many other companies in Europe that are almost fully activated the maintenance cost. If you look at some of our Nordic peers, you will see that we are having doubled the cost for maintenance as our peers. And that is because we are a long-term investor and we are focusing on 100-years perspective, not on this next quarter. After property cost, you will see that we have a NOI of SEK 4.4 billion. And then after financial cost, profits from joint venture and associated companies, with some adjustment, you will land at operational profit of around SEK 4 billion or SEK 2.23 per share. But as Carl mentioned, we are not only making money from property management. That is our basic business. But on top of that, we are delivering profit every day on a recurring basis from property development, from refurbishments and renovations, from transaction. So if you add our profit from those businesses and then, of course, you have to subtract and take into account that we are paying dividends to the hybrid bonds and to the D shares, and that is in total SEK 878 million, and we have some minority interest of SEK 86 million, so you will land in a profit of SEK 6.4 billion or a rolling basis SEK 4.5 per share in adjusted profit -- in adjusted operating profit to ordinary A and B shareholders, SEK 4.5 per share. But this is just on the numbers at the end of Q2. As I mentioned before, we have ongoing construction projects. I was this morning and I'm still having a helmet because I came from starting construction of additional 160 apartments. On Monday, I started construction in Uppsala of more than 150 apartments. I'm wearing helmet almost every day, week. And that is, if you look at our Page 24 in Q2 report, that is around SEK 0.6 per share. So you should be able to assume that we will deliver at least between SEK 4.5 and SEK 5.10 per share in the years to come -- SEK 5.5 to SEK 5.10 per share. I think that is all from introductory part. And now we will dig in more in our portfolio. So please, Oscar?

Thank you, Ilija. Am I running with this microphone? Or -- okay. I'll put it here. Yes, now I should give you some more flavor on our asset portfolio. We have 3 different asset classes: community service properties, rent-regulated residentials and publicly funded residentials. Community service properties, approximately half of our portfolio. It is mainly educational properties, police stations and other government-backed tenants. Here, you can see one of our schools on the picture in the center of the slide. Our largest tenant with this segment is the Swedish state that stands for almost 15% of the rental income directly. The average lease time is more than 9 years. We have an average square -- value per square meter that is SEK 23,500 and basically 1 -- 2/3 of the construction of new buildings. And you can also see that we have supporting population growth around all 4 different Nordic countries, which creates the needs of additional community service properties. Looking into the lease terms, we have, in general, 10- to 15-year lease. No break clauses whatsoever in the lease terms. And they are 100% CPI-linked. Looking into the publicly funded residentials, which is mainly elderly care homes or LSS housing, housing for people with special needs. This is approximately SEK 22 billion of our portfolio, giving us a passing rent of almost SEK 1.2 billion. And here, the propensity to prolong the lease is almost 100%. And that is due to the fact that we have these demographic trends in all 4 Nordic countries creating a greater demand for new construction. The lease term here is kind of similar to the ones in the community service properties. They signed a little bit -- tend to sign a little bit longer leases here, 15 to 25 years. No break clauses here either and 100% CPI-linked. And then we have the rent-regulated residentials, which is SEK 28 billion and where we have almost 16,000 apartments. And our average value for these apartments is SEK 20,262 per square meter. This is less than half the new construction cost. And the average rent per square meter is less than SEK 1,100 per square meter and year. You can translate that to EUR 9 per square meter and months. We are working closely with the municipalities around Sweden to create new housing for the increasingly demand. And we therefore became the first member of the Public Housing Sweden, the first private member. And as you can see, this is still a great demand, on the left side of the slide, where we have [ cues ] around 10 years for all different Swedish cities. We're also seeing a stable rental growth, but still well above inflation. And here's also an important slide to understand our portfolio. Here, we have compared the rent for different asset classes with the rents in new construction. And as you can see, our rent is 40% to 50% below the rent in new construction. And this creates the opportunities to do the investments Carl described earlier in residential housing as well within the community service properties and also an opportunity to increase value for our shareholders. We also do investment in joint ventures and associated companies. Here is 2 of our largest joint ventures: Hemvist, which is a company focused on rent-regulated residentials in Stockholm, and Viktor will give you some more flavor on that later on in the presentation; and we also have PPI investing in community service properties in Norway. An important feature to understand about the joint venture and associated companies is that when we invest in these kind of companies, we always do it from an asset perspective, meaning that we analyze the property, property by property before we invest. We are coming from the asset side. We are invested in properties. We have also invested in JM, which probably holds the best land bank in Stockholm there is. And we've also invested in Publicus and Origa Care, which holds high-quality community service properties.

An important -- just to add to this slide because we get a question from an analyst this morning, if profits from EM -- or JM is included in our targets delivery, SEK 2 billion, SEK 2.5 billion from property development, it is not. So profit from JM and future profit from JM is coming on top of that. So with that, we want to conclude this introductory section, and we will give the word to Adrian to guide us further. Please, Adrian?

Yes. Thank you. Thank you so much for that introduction and report. So we're now moving into the next block of the presentation, which is the business model more in depth. And we will start in the bottom of it, that is the property management. So I will be joined by Annika Ekstrom and Henrik Melder on stage. And well, yes, the floor is yours.

Hi, everyone. And my name is Annika Ekstrom. Is this working correct? Okay. Fine. I'm Head of Asset Management. The world's safest assets needs the world's best property management team, and I'm very lucky because I have both. I have 2 asset management teams, one for community service properties and one for rent-regulated residentials. They are all led by our experienced team with an average of 25 years industry experience. They all have an extensive network and the market knowledge that generates new business. I would also like to mention all our employees that takes care of our properties and tenants every day. They all do a wonderful job. Increased surplus ratio is a proof of that. We have a very efficient property management. Efficient property management is, in my opinion, dedicated and competent employees together with short decision paths. We also gained considerable economies of scale due to our size. We can add more properties without having to increase the organization at the same pace. And we have our local SBB offices in Norway, Finland and Sweden. And in Sweden, we have over 30 offices. This means that we are close to our tenants and have a local knowledge. We focus on revenues. And as you heard Carl mentioned before, we have meetings with our community service tenants quarterly. In this way, we capture their needs at an early stage. We don't wait until the lease expires. And our ambition is to sign prolonged leases, leading to higher NOI and increase WAULT, 2 to 3 years before the lease expires. And you can see to the graph -- to the right in the graph, you can see the propensity to prolong at lease expiry. Properties with the high specialization, such as police stations, education facilities and elderly care homes, have very high propensity to prolong at lease end. You also see examples of properties where we have signed long leases after tenant improvements. We have a 23-year lease with the Haninge Municipality for educational purposes, a 10-year lease with the Finnish police and a 20-year lease with the Swedish state for the tenant SOS Alarm, all tenants that demand a high degree of specialization. And now I will hand over to Henrik.

Thank you, Annika. Good morning. My name is Henrik Melder, I'm the Head of SBB's Norwegian operations. I'm here to talk about how we organize the business in Norway. Since 2017, we have grown the business in Norway by SEK 10 billion, from SEK 7 billion to SEK 17 billion this year. We have also done a lot of job with merging the Hemfosa and SBB companies, and that includes both the businesses and the people. Further on, we have used our time well and professionalized and restructured the whole Norwegian company, and we have recruited the best real estate professionals in Norway. We have divided the business into 6 main regions, both geographically and business areas. That includes East, West, South, Oslo, preschools and health care. Two more businesses are added this year. That includes transactions and real estate development. As a consequence of this, we have recruited the market's best transaction manager and real estate development manager. We have done all this to utilize the market and our existing portfolio even better. As you now have recognized, we have more or less replicated the SBB model in Sweden, but in a much smaller scale. By having a strong local organization, we utilize the market better, combining this with backing from the best-in-class Europe resources in the SBB head office. We also can keep the number of employees down as well as we keep our overhead costs low. To have success with this model, you, among other things, need to have a small but strong local presence and you need to work closely across the borders, and the local business need to have the necessary autonomy. We are convinced that this model gives us the necessary competitive edge in the market. But at the same time, we can act and move on deals that normally would be too big for a company SBB in Norway size. I'm convinced that without increasing our costs significantly and with the support and know-how from the head office in Sweden and the rest of the organization, we can double the size of the Norwegian company within the next few years. The proven success in Norway makes me 100% sure that this model should and could be applied to other markets as well and other countries. To sum this up, we have created a scalable model for growth into new markets. We have a strong local organization. I have handpicked my Norwegian dream team. We have a strong local mandate, enabling decisions near the tenants and the market, essential for a successful model in the local market. And we have backing from the best-in-class management in Stockholm HQ. And we have a strong balance sheet, enabling us to take out the full potential in the market. And we are -- this model is applicable for business expansion into other new markets. Thank you.

Yes. To summarize this section, we have the best property management team to take care of our low-risk tenants. We have a proactive and systematic way of working. And we have a scalable model applicable for business expansion. Thank you.

Thank you.

Excellent. Thank you, Annika and Henrik. So we're now moving on in the business model. And the next part then is the 3 value-add strategies. And we will start off with the first one, that is the income that is generated from property development. And with me on stage, I will have Krister, Viktor, Erik and Jenny. And Krister, you are first.

Okay. Thank you, Adrian. I'm Krister Karlsson, head of the business. And I have been working for almost 25 years in the construction company, NCC. And after that, I worked in Rikshem together with Oscar and Ilija, and we have a lot of, for example -- and Erik, too. And after that, I joined the SBB company when it was founded by Ilija. And in my team, we have Jenny, Erik and Viktor, and they will introduce themselves. And I also have Mats Silow. He's head of building rights part of the business. And both Jenny, Erik and Viktor and Mats has their own experts, so to speak. Mats even have architect in his group to make the first analysis when we're looking into the developments. Okay, let me guide you through our targets and key figures. As you can see up to the right, this is the target that we have had until yesterday evening. So this is the old target. We were set to deliver SEK 1 billion to SEK 1.4 billion on a yearly basis. And actually, we exceeded that goal in the first 6 months of this year. So I think that's the reason -- that's one reason. And the other one, the reason is, of course, that the company is growing as such. So therefore, we have our new target, SEK 2 billion to SEK 2.5 billion on a yearly basis. And a little bit about our portfolio. As Ilija said, we have the largest building rights volume, almost 9 million square meters in apartments to build. And upon that, we are -- we have almost 13,000 apartments under project development and also have almost 3,000 apartments on ongoing construction. So if you add those square meters to the 15,000 apartments, you will see that we with -- our 59,000 apartments is the biggest in -- the biggest developer in Europe. And to that, we shall also add 110,000 square meters of community service properties that are under construction, example in [ Västra Götaland ] in Gothenburg. Our business will deliver a remaining profit of SEK 37 billion the upcoming years. And if we split that one up, you will see that we have SEK 28 billion that will come from the building rights portfolio, the 3 million square meters building rights; and the other one, the SEK 9.1 billion, will come from our ongoing project portfolio. And I would say that the first one, the SEK 28 billion would come in the next upcoming 10 years and the SEK 9 billion will come in the upcoming 5 years. Okay. This is an interesting picture, and it shows that we are heavily increasing our organic growth through new construction. As you can see, 1 year ago, we had ongoing investments for SEK 3 billion, and now we have SEK 21 billion. So we increased our own investments by 7x on 1 year. And what does that mean? I think Ilija talked about this earlier, but I can give you a flavor, too. This means that we will raise the profit from property management with almost SEK 900 million. And we are delivering our project at a yield on cost of 4.9%, and the market value is about 3%, and that means a profit of SEK 13 billion. And we have 4 of those -- 4.5 of those on the balance sheet. Sorry. Okay. So now I have talked a little bit about the key figures and the profit. And this will explain to you, I hope, how we are making these profits. This is an example from the Stockholm region. As you can see to the left is that's a cash flow transaction that we made in 2016. As you can see, we have quite low utilization of the land. And the area is located 3 to 4 minutes walking to the commuter train station. It's important to us due to the new goals connected to the 2030 Vision. We bought the property for SEK 135 million. And day 1, after we have bought it, we started up to work with the municipality to start up the zoning. And it's the middle -- in the middle here. We started to zone both for elderly care and for residentials. So the total amount of square meters that we have zoned in this area is 35,000 square meters. And it's a market value of SEK 5,800 per square meters. So after 2.5 year -- about 2.5 years, we had raised the value with SEK 202 million, and this is more or less without spending any cash at all. And at the same time that we did the zoning, we also worked with raising the NOI. We renovated 144 apartments, and we found areas to build additional apartments. And that gave us a profit of SEK 50 million. And now we are waiting to get the building permit and then we'll start the construction. As Ilija told you, he's going to visit this with the helmet and start the construction as well. And after we have done the construction, we will earn another 35 -- SEK 350 million connected to 35,000 square meters and a profit of SEK 10,000 per square meters. So from the first acquisition of SEK 135 million, we made a profit of SEK 200 million without spending any cash. And then we made another SEK 50 million by renovating and finding new apartments. And we will earn another SEK 350 million when construction the apartments. And this is another case next to -- in the Malmö region. We bought more or less vacant property for SEK 16 million. This is more or less the same situation as the other one. It's really near to the commuter train station, 4 minutes to walk and also has quite low utilization if you look into the land in connection to the building. We have started the zoning plan. And we will, when the zoning plan get legal force, have approximately 40,000 square meters of building rights for residentials with a market value of SEK 6,000 per square meters. So here, we will make a profit of SEK 240 million in the first phase. And this is more or less the same as I told you before. Here, we don't spend any cash at all. And the time frame says that we can start the construction in 2023. And our estimation is that we will earn another SEK 8,000 per square meters when we start the construction, and that will bring us another SEK 320 million. So starting up with SEK 16 million, ending up with SEK 560 million. The last example, this is a very popular residential area. We own the land that you see up to the left. The tenants are very happy. But unfortunately, there are no elevators in the houses as a lot of houses built in the '60s. So we have started up zoning to add new construction and new houses with elevators within it. It's 10,000 square meters. The market value would be approximately SEK 3,000 for the building rights. And we estimate the construction profits to SEK 8,000 per square meters. This adds SEK 110 million in profit in this area. So now I will hand over to Erik, and he will guide us through the construction phase.

Thank you, Krister. Can I stand here? My name is Erik Hävermark, and I'm Head of Construction. As you've been told, SBB has the largest development portfolio in Europe, including 59,000 apartments. And by that, our SBB, the company that has greatest access to building rights, which are the most scarce resource in developing new buildings. And SBB has almost 3,000 apartments in ongoing production, which means our organization, our working methods, processes and routines are best-in-class. In addition to that, SBB has made an agreement with the industrial apartment manufacturer, Sizes Works, where we will, in a large scale, develop new residential buildings in wood in Sweden. And by that, SBB has secured construction resources for the foreseeable future at a very attractive cost level. And a general increase in construction and material prices in the future will have a limited effect on SBB's project costs. And to have a greater impact and control over the construction phase and also be able to, in a deeper way, focus on sustainability issues and also drive industry development, SBB has become a part owner in Sizes. We have developed 4 concept buildings named L1, L2, T1, T2, with focus on good architecture, cost efficiency, attractive apartments with a high housing standard and, above all, sustainability with wooden frames and a very low energy consumption in the completed buildings, which are in line with our Vision 2030 that Marika told us about earlier. In a factory in Östra Gräsvägen, where you have a weatherproof and safe environment, large parts of the buildings are put together on an assembly line with a production method that bears high resemblance to how cars are produced. The buildings are then delivered to site in modules where they are assembled to completed buildings. And the factory are close by the harbor and Baltic Sea, so environmental-friendly transportation by cargo ship is possible. On this slide, you can see pictures from -- on the factory, both outside and inside, from the assembly line. You can also see modules delivered to site where they are assembled to complete the buildings. And those pictures are from our project in Nykvarn where we are developing 178 apartments. You can also see pictures from 3 of our 4 concept buildings: L1 and our project in Motala where we will develop 78 apartments; L2 and a project in [ Kiruna ] where we will develop 80 apartments; and T1 from our project in Karlskrona where we will develop 120 apartments. This modern method of construction with a high automization and in an off-site factory will enable us to deliver new residential buildings in a higher rate, at a lower cost and with a better quality and in a more sustainable way compared to traditional methods of construction. And the construction time is more than half the time compared to traditional construction. So with these 3 cornerstones, our building rights, our house factory and our organization and people, we control the whole value chain. And we are more or less like a machine that will deliver new residential buildings in Sweden in an increasing rate that will generate an additional increase in rent to SBB year-by-year. Thank you. Now I will hand over to Viktor.

Thanks. Hello. My name is Viktor Mandel. I'm the CEO of Sveafastigheter, one of the subsidiaries of SBB focusing on residential development in Stockholm region. And I will talk a little bit about how we work to expand our portfolio of building rights and the company. And since we work in the regulated rent space, we cannot buy land on the open market since co-ops usually are worth more. So we have to work very close with the municipality and make attractive proposals for the municipality. And we work proactively and data-driven to find new spaces. And currently, we have more than 1,200 active applications for new sites in the Stockholm region. And our pipeline today is 5,000 units, and we have production of 1,200 units today. So what we offer is high-quality architecture. We work very much with social sustainability and environmental sustainability. And I will show you some examples of our projects. And we also work with economic sustainability to differentiate the rents depending on the location and the target tenants. So high-quality architecture is key for Sveafastigheter because we have to offer something back to the municipality when they sell land to us at a discounted rate so we can do rentals. And we work with the best architects and have achieved a lot of attention for our designs. So we won numerous architecture awards. Last week, we won Uppsala architecture prize. And our project Discus in Nacka has also won the World Architecture News Award. And our project in Flora in Stockholm, it was nominated building of the year in Stockholm. But to manage to deliver this high-quality architecture, we also need to work with strong cost control. And we use 85% of the same components in each project. But by alternating the remaining 15%, we could offer a different design on the buildings. But we have a very strong knowledge of the total cost when we start the project. So this is example of 2 of our projects. The left one is Neptun, and it's a high energy -- with cutting-edge energy-efficient technology. So it's an energy-positive building where the solar panels on the roof generate more energy than the building consumes. And this was something we developed together with the municipality in Västerås. And it's been awarded the highest level of certification by the Swedish Green Building Council. And we also worked with Mälardalen University to track the energy consumption, but also to understand the CO2 emissions from the construction phase and from the management phase. And that knowledge, we are implementing in our upcoming developments. So when we start new projects today, we aim for a 30% reduction in CO2 emissions from the construction phase. On the right side, you can see more of how we work with social sustainability. This is a project in Hagsätra that we're currently in zoning phase. And we started by our data-driven approach and found a space in Hagsätra right to the subway station that was not used. And it was a very unsafe location. And we started working with the local community and interviewed people in Hagsätra to see what could we add to this space to make Hagsätra more attractive. And they said that they needed work spaces so you could work from home or from the building where you live. And they also needed somewhere for young people to be active, to be out and do something good. So we went to Stockholm municipality with this building and the concept. And we were awarded the land allocation for this project, so we will build 129 apartments. But the zoning process is very long. So I think from our first idea until we completed the building, it's probably 6 years. But already today, we are engaged in the location. So each week, we have set up training clinics for jobs in Hagsätra so that we build a presence from day 1 in this location. I'll talk a little bit about Hemvist, the joint venture between Kåpan Pensioner, the government employees pension fund, and SBB. And this joint venture was set up this year, and it's focused on managing rental residential in the Stockholm region produced by Sveafastigheter. And we focus on long-term ownership and the social -- and managing the social and environmental sustainability initiatives that we start in the production phase. It's all 50-50 between Sveafastigheter or SBB and Kåpan. And we currently have a portfolio worth about SEK 3 billion. And by the already signed projects that are under either production or in zoning, we will grow the portfolio to more than SEK 20 billion in 6 years' time.

Jenny?

Okay. I'm Jenny Asmundsson, and my area is public procurement. And I'll start with stressing that there is a strong demand for social infrastructure properties going forward, as Oscar also mentioned. And to give you a short overview, if you dive into the demographics of Sweden, we see that the age group of 10 to 19 years, they're in our schools, will increase by 10% until 2030. And our older population, 80 years and older, will increase with almost 50%. This sums up to a forecast, a total demand of 1.6 million square meters. And in round figures, we can say that there is a demand for at least 560 new elderly care homes, more than 1,000 schools and preschools. And there's also an assignment for the government, we need 30 new police stations by the end of 2024 in Sweden. This, together with the regions and the municipalities in Sweden, have an old stock of buildings with high maintenance needs and they're unmodern. There's a need for tenant upgrades. There's also an estimated deficit for the regions and municipalities with SEK 90 billion by 2026. And this gives us a strong possibility to support by providing social infrastructure properties. To the left corner, it's a little overview. It's a tricky process for the government. All the purchases needs to be advertised. And in Sweden, we have about 18,000 new procurements each year, and 13% gets canceled before they are finalized. We see a lot of reruns. It's a time-consuming process. Also, each procurement takes at least 6 months. And our mission is to be a long-term strategic partner. And we try to be active in these procurements. We seek out the best practice, and we use our own building rights to set the deals. And I'll give you a few examples. In Västerås in Sweden, we had a property with a large parking lot right in the city center. We used our own building rights here and entered the competition in January 2017. We won the evaluation by November same year. And 1 year later, we had a 15-year lease contract signed. In December 2019, the construction started. And we have a fresh picture. Our house is the one in the middle. It's getting ready, and we're looking forward to welcoming Västerås municipality to its new area by the end of this year. Another example from Västerås is Ångpannan. We had a property. We have own building rights. We pitched an idea and managed to add land and signed a contract with the Swedish state. Currently, in the design phase, we're here creating a new police station and the custody. It's 20,000 square meters and a 15-year lease contract. And at last, a good example of how we expand our portfolio by being a long-term partner, we have worked closely with the municipality of Haninge for the last 10 years. We've looked to support the growth and the demographic change in the community. So in cooperation with the municipality, it has resulted in, for example, a new elderly care unit, a new school. In this area, we also have a large parking lot, a parking garage where we're now seeking to develop a new sports hall. We're also aiming in the municipality to create more residential housing. We're in the zoning phase or starting the zoning phase and summing up to about 3,000 new apartments. And we're already under construction with 400, soon to be 800 new apartments. That was a quick look into my area.

Thank you.

Over to Krister.

Okay. To sum up this property development chapter, I hope you have seen that we have the best project portfolio and building rights portfolio in Europe. We have a best-in-class management. We have a very strong balance sheet. And this, together with the extremely strong demand, makes me very, very confident that me and my team will deliver on our new goals year after year after year.

After year. Excellent. Thank you. So we're moving on in the business model and to the next value-add strategy, which is investments in the existing portfolio. And with me on this one is our Chief Technical Officer, Peter Olausson.

Thank you very much. Hi, everyone. I'm Peter, and I'm CTO at SBB. I want to talk about our investments in the existing property portfolio, which each year is generating about SEK 600 million in recurring earning effect. Our main strategies for this is, of course, when we do value-adding renovations throughout our community service properties, but of course, with our big renovation -- apartment renovation program. Our target is to renovate 600 apartments a year. We did it last year and the year before that. And now we have already been renovated 375 apartments during the first half of 2021. This renovation is managed by our experienced teams. You can see their name in the left corner, Karl-Anders, Erik, Ulf, Niclas and Peter. And new for this year is our project to create additional income stream the digital way, which I'm going to talk about a little later on. SBB has a unique renovation business model. And to understand that, you have to be familiar with the quite unique rent regulation system that we have in Sweden. Before we start the renovations, we always negotiate with the union of tenants to set a new normative rent level. And that rent level is depending on the standard of the apartment and how well the apartment is equipped. And that normative rent level is valid for an apartment, hypothetical apartment of 3-room and 77 square meters. And to calculate the rent level of a specific apartment, we use this formula in the upper left corner. And the input to this formula is, of course, the negotiated rent level and the number of rooms and square meters in that specific apartment. If you take a look at this illustrative example, you can see that we have 2-room and kitchen apartment of 62 square meters with a normative rent level before renovation of SEK 850. And as you can see, for a 2-room apartment, it gives us 40 apartment points that we put in the formula to calculate the rent level. And after agreed new normative rent level, in this example of SEK 1,250, we put net new normative rent level in the formula and we get the new rent level after renovation. But as you also can see, if we can rebuild the apartment and look over the layout of the apartment and create an additional room and we go from 2-room to 3-room apartments, it gives us 44 apartment points, so the rent level will increase even more. And we will always, before we start the renovation, look at the layout and see if there is potential to create an additional room. And I think an extra room is something that will be in demand more and more often, not least after this pandemic when people seem to be working from home more and more often. Here on this picture, you can see the standard that we are renovating to. It's a modern standard close to new renovated apartments or similar with new renovated apartments. And in the right corner, you can also see an example of an apartment that we -- where we created an additional room. And until now we have created more than 500 additional rooms in our portfolio. Here are some key considerations. Since 1997, the average rent increase has been between 1%, 2%, 3% or about 1% above inflation. You can also see -- look at the picture in the right lower corner, how the rent level has developed in relation to the inflation. And the renovations, they deem to have a higher utility value, which gives us potential to get a higher normative rent level. And our renovations, they take place while -- when the existing tenant is moving out so we don't affect our tenants so much. After a renovation that costs between SEK 5,000 and SEK 7,000, we normally can increase the rent by SEK 300 to SEK 400 per square meters. And of course, our cost per apartment will also be reduced due to lower operating and maintenance costs. We have also some figures in the upper right corner showing our average rent level in different cities and the yields. And as you can see, the average rent goes from approximately SEK 1,000 to SEK 1,500 after renovation. And it's still a very big gap between renovated apartment rent to new production, and the standard is similar. And you can also see the value potential of renovations in our portfolio. It's almost SEK 9 billion. Now very proud to talk about our digital projects, which is new for this year. We provide a housing app to all of our residential tenants. It's mainly used to communicate with our tenants and to handle booking of laundry rooms and common areas. We also offer different ways to pay the rent with the digital methods, which reduced the paper waste. And due to SBB's large size, we can negotiate favorable offers to the tenants, such as 100% renewable electricity, home insurance, security doors, charging stations for electrical cars and so on. And it's a win-win situation for us and for the tenants. To sum up this, Sweden has a unique rent regulation system, and we have still a large remaining stock of apartments that has this renovation potential. And with the digitalization, we can create additional income streams in the future on top of the income from rents. Thank you very much.

Great. So moving on then to the third value-add strategy, and Oscar will again join us on stage for the income that is generated from transactions.

Thank you, Adrian. Now I'm going to talk about our third income stream, transactions. Here, you can see the transaction team working in SBB. And as you can see, we have a local presence in all Nordic countries, which make us a fast mover in the market and the preferred buyer for both municipalities as well as other participants. And we try to work depending on where the market is, where we can find the best deals to be done. We try to -- if we can find good deals in Norway, we go to Norway. If we can find it in Denmark, we go to Denmark. And sometimes, it's portfolio discounts. Then we buy portfolios and sell single properties. Or maybe it's the opposite and then we buy single properties and sell assets. And as you can see here, we have been quite active on the market. On the first half of this year, we made a transaction for more than SEK 30 billion. But however, you can still see the chart on the bottom right side, where we see that of the entire social infrastructure market, SBB only holds 3%. So the opportunity to grow within the market is really large. And here you can see some of the transaction made during the last 3 years, where we have tried to focus more on social infrastructure properties and selling off public offices and office properties. You can see, for example, Riksbyggen where we bought residential properties in Swedish growth cities. Offentliga Hus made a public offer on the community service properties. And here you can see one of the transactions where we are really proud of. This is the largest elderly care transaction ever been made in the Nordics. And this is an off-market transaction done completely by ourselves. It's a portfolio of SEK 2.5 billion with an average lease time of 14.5 years. The majority of the property you see on these pictures are located in the Stockholm region and are newly constructed. Yes, this was the last of the free income stream transactions. But it's important to understand that during the transactions, we also work with the 2 other income streams. We try to identify the building rights during the transaction phase and identify the opportunity to do value-add investments within the existing properties. We also were active with our portfolio management to create additional values for our shareholders. We have a really strong track record, both with the municipalities and other market participants, which makes us the preferred buyer. We have probably the market's most experienced transaction team that has made the largest amount of transaction during the last 5 to 10 years. And we have a great network within the transaction market, which enables off-market transactions. And we also work with the same intensity. Either if the transaction can be SEK 10 million or it can be SEK 5 billion, we always work with the same procedures. And now to sum up, this was a picture we showed earlier in the presentation. And you have the foundation, which is our rental income. We have SEK 6.1 billion coming -- 98% from social infrastructure. Either rent-regulated residentials or directly or indirectly government backed from our community service properties. We have a great focus on sustainability throughout all of our different value-add strategies, and we have the vision of becoming climate positive before 2030. We have the largest building right portfolio in Europe, where we will earn recurring SEK 2 billion to SEK 2.5 billion every year. We are increasing investments within the existing portfolio, both with the sustainability and to help our tenants and where we estimate to earn an additional SEK 600 million in cases, as Carl described, in residential properties and in community service properties. And I think we were fairly active in the transaction market for the years to come as well. And we will earn at least SEK 400 million from these activities. And it's important to understand that this is with the standing portfolio without any joint ventures or associated companies.

Excellent. Thank you. So then we are in the third and last block before concluding and going into the Q&A session, and that is the balance sheet and treasury update. So we'll be joined by Eva-Lotta and Rosel. There you go.

Hello. I'm Eva-Lotta Stridh, and I'm CFO of SBB. I will today talk about the balance sheet and the capital structure. SBB has a strong financial position and a solid platform for growth. As you can see in the balance sheet of Q2 on this slide, the asset side on the left mainly consist of investment properties and the value was SEK 117 billion by the end of June. And that is an increase of SEK 27 billion during 2021. And this increase mainly is connected to the acquisition of Offentliga Hus but also value changes. SBB has holdings in associated companies and joint ventures of SEK 7 billion, and that is an increase of SEK 4 billion in 2021. The main reason for the increase is the acquisition of the shares in JM. As Oscar mentioned before, some of these companies carry out property development projects, while others own and manage investment properties. The largest holdings are JM and Hemvist, which Viktor talked about earlier. In the balance sheet is also a goodwill item of SEK 6 billion, which is mainly connected to the acquisition of Hemfosa in 2019. The SEK 2 billion of the goodwill is deferred tax while the rest refers to synergies. We had a strong cash position, including cash investments by the end of June of SEK 16 billion. The assets are funded by diverse sources of funding, such as bonds, bank loans, commercial paper, shares, hybrid bonds, which you can see on the right side. The hybrid bonds are reported as 100% equity. About 70% of the financing is unsecured, meaning that SEK 104 billion of the investment properties are unencumbered. We are very pleased with our stable key ratios for Q2, which you can see on the bottom right side. Loan-to-value was 37%. And the average interest rate decreased from 1.13% -- from 1.31% in Q4. And that is despite inheriting some more expensive loans from acquired companies. ICR increased to 5.2x, and the weighted average maturity is stable. Let's now focus on the different types of shares. SBB has 3 different types of shares: A, B and D. The A shares are not listed but have a higher voting right. The B and D shares are listed. The D shares had the right to 5x the dividend paid to A and B shares, but a maximum of SEK 2 per share. The A and B shares have the same right to dividend, and that is at the moment SEK 1 per share. A, B and D shares are all ordinary shares and are 100% equity according to the rating agencies. SBB's goal is to steadily increase the dividend over time. And as we communicated yesterday, the ambition of the Board is to propose a dividend of SEK 1.32 per A and B share to be paid monthly at the Annual General Meeting in 2022. Let's now talk about rating. The rating has been in focus at SBB for a few years now. SBB has a BBB- rating with positive outlook from Standard & Poor's and Fitch. And Standard & Poor's revised SBB's rating outlook from stable to positive in March this year. As you can see on this slide and the graphs on the left, the credit rating has given a great impact on the finance costs since the first rating. Average interest rate has decreased, but also the cost for hybrid loans, 7% at the first issuance and down to 2.9% in the last issuance of the hybrid in June. We believe we have delivered the key ratios for BBB+ rating, but it's not yet reflected in the actual rating. SBB's goal is to get a BBB+ rating short term and an A- rating long term. Now my colleague, Rosel, will give you a treasury update.

Thank you, Eva-Lotta. My name is Rosel Ragnarsson, and I'm Head of Treasury. And I will today focus on our debt structure and our capital market activities and, of course, on sustainable finance. As you can see in the slide here we have on the left, we have a very diversified debt structure. We have 71% unsecured bonds. We have 18% other loans, which stands for liabilities to credit institutions. We have 10% commercial papers. And we have 1% secured bond left. And if we focus on the total capital structure, including equities and other financials, we have 41% equity. We have 34% bond loans. We have 9% liabilities to credit institutions. We have 5% commercial papers, 5% deferred tax and 7% is the rest. Our debt portfolio has a very long-dated maturity profile. As you can see on the -- in the chart up to the right, our -- about 50% -- or 50% of our loans and bonds mature beyond 5 years, and that is if you include commercial papers. And 45% matures beyond 5 years if you exclude them. And you can see we have a very flexible maturity profile. We have about [ 15.09% ] maturing within 1, 2, 3 or 4 years. And then we have a very low cost of debt, as Eva-Lotta already mentioned. Q2 2021, our interest rate were down to 1.13%. And if you compare to 2019, when we started this to measure this way, it was 1.76%. And we are very proud of having this low cost of debt, but still we have a weighted average maturity above 4 years. And we are now at 4.2 years. And just some words about our latest development. In May this year, we issued an unsecured bond with a maturity of 8.5 years. And the nominal amount was EUR 750 million and a fixed coupon of 1.125%. And we have also been working a lot with credit limits and RCFs and the amount is now SEK 10.1 billion. And this means that almost all loans maturing the coming 18 month is covered. And other things to mention here, there are a lot of things, but very important is that about 95% of our bond and loan portfolio is either fixed rate or it's hedged with interest rate swaps. On this slide, I will tell you something about our capital market activity. We have a very, very, very good access to funding. And that you can see in the vertical chart to the left, that 2017 and '18 was not so much, but it started 2019, and that was the time when we launched our EMTN program. Our EMTN program is revised last -- was revised last summer 2020 and it's now eligible for ECB because we have our company in Finland, SBB Treasury Oyj, that we can issue bonds from. And in that way, we are eligible to ECB so they can buy our bonds in their [ PPEP ] program. And 2019, we issued equities, hybrids and unsecured bonds for SEK 38.6 billion, 2020 for SEK 30.8 billion, and year-to-date, this year for SEK 25.5 billion. And some -- the other slide with horizontal charts show you our activity from the beginning. From 2017 to year-to-date, we have issued unsecured bonds for SEK 57.3 billion and equities for SEK 24.8 billion and hybrids for SEK 22.4 billion. So we have been working very hard on the finance side without helmet. The latest bond issuance was just before midsummer this year, and that was a very, very good one, the first social ever perpetual hybrid bond in the euro market of SEK 500 million. And again, we want to -- you can't say a lot of things -- you can say a lot of things about our progress in the interest rate cost, and it's now down to 113% and the maturity, weighted average maturity is 4.2 years. And we are focusing on sustainable finance. And this is possible since we launched our new framework in November 2020. And you can see on the slide to the right our sustainable bond issuance, and you can also see our green bond issuance. 2019, we issued green bonds for 6.4%, and we have a green bond framework from CICERO. So to now from 2020, we have issued sustainable bonds or social bonds for a large part. And you can see also in 2021, it was even larger. And this has been possible to do because this new framework in November. And we very often get questions on what is social assets in your portfolio, how can you issue these social bonds? And this is, of course, because we are aligned with United Nations Sustainable Development Goals. And this is shown in the pie chart down to the left. And there, you can see that 24% of our assets are affordable housing, and 17% is classified as medical facilities and 29% is access to social services, and 23% is other social assets that are not classified yet, but might be that in near future. And only 4% are other assets, which Krister and the team in his group will take care of in the future. And this means that 72% of the property portfolio is classified as social assets. And additional 23, as I said, percent of the portfolio might be classified in near future. And only 90% of the framework for social bonds has been utilized, so that means that we can issue even more social bonds coming in the future. And 9% of the portfolio is classified as green. And this number will increase as we will have more environmental certifications and new acquisitions and new construction with low CO emissions. And Page #71. We have a very strong financial position. We have lowered our financial costs with 53 basis points since Q4 2019. We have delivered on all metrics, key metrics for BBB rating, and we are on path to 100% sustainable financing. Thank you.

Thank you. Yes. So now Ilija will enter and provide a summary, and then we will go into the Q&A session.

Great. Thank you, Eva-Lotta and Rosel, for thorough explanation behind our strong financial position. And now I will summarize, giving you some thoughts so you can have with you continuing to follow SBB's fast growth and strong operational performance. And let me first start with the goals, with the new targets that we announced yesterday evening after Board's strategic revision. As I said before, Board announced a new target that we will, by 2026, have SEK 300 billion in property value, which is strong continuing growth and also that is supporting our relationship with municipalities. Because many municipalities in Sweden, in Stockholm, in Gothenburg, in Malmö, in Skellefteå need a large number of community service properties, new elderly care homes, new schools, new special apartments for people with disabilities and new residentials. In this way, by Board supporting the ambitions and being very clear on the target going forward is also creating an environment that is, how to say, making sure that municipalities around the Nordics and also outside of the Nordic countries understand that here we have a long-term partner that is going to support our development in our societies and also being able to deliver the infrastructure needed. The other goal that has been revised at yesterday's meeting was recurring profit from property development. And you have heard our colleagues before showing that this is not something that is put in PowerPoint presentation. This is the profit that is delivered every day. At the latest this morning where we started to build 161 apartments. Then being in this house and feeling this environment, being in the most sustainable building in Europe, 26,000 square meters, building the timber, at the same time, having the most ambitious environmentally certification for the inside of the house is, of course, challenging. And we are meeting that challenge by being very clear and communicated the Board's mission to -- for SBB to become climate positive by 2030. And you heard some of my colleague explaining before exactly how this road map has been developing. On top of that, I can tell you that we have also within the company being enabling digital investments in order to support our journey to being climate positive. Finally, as all of you know, SBB is a dividend company. And we want to be very clear on this. I said when I founded SBB that SBB is a share for you that will buy the shares, give to your grandchildren and forget about it. Always know that they will always get higher dividend, at least in the next 100 years. That is why we are excited that the Board has chosen to express their ambition, that given the circumstances known today, that they want -- they have ambition to propose increasing dividend with 32% to SEK 1.32 per share, and the dividends going forward will be paid in monthly installments. Being able to pay dividend in monthly installments is also a message. It is a message that our company is always stable to make sure so investors get the dividend for the money that they have invested in the company. To summarize our messages today, SBB is a strong dividend company. The Board has expressed its ambition to propose dividend of SEK 1.32 per share per ordinary A and B shares divided into 12 monthly installments. And the Board also approved the new target, new property target of SEK 300 billion for the size of SBB's property portfolio by the end of 2026. As you have been experienced today, we have a unique operational platform with more than 300 employees. You have met some of our colleagues today that are able to grow the business and that are able to both deliver profit from property management, and on top of that, using our unique business model, delivering profit from 3 value-add strategies. You also heard my colleagues from finance department showing both clear messaging, but also achievements at our current position where we can show that we have matrix for BBB+ in place. This is important message also for our continuing growth. SBB is a growth company, but growing from the strong financial position. And that is also why the Board is very clear when they're expressing that the target of SEK 300 billion is connected to having BBB+ rating. Finally, as I said many times today, being and having this presentation in Europe's most sustainable building, it is honor to present our full commitment to become climate positive 2030. And this will, of course, support the transition towards a more sustainable world. And we have a clear road map to achieve this. So if you're not a shareholder in SBB, don't be afraid, we are here to stay. And please join so we can continue to build the largest real estate business in Europe. Thank you very much for listening. And now we will have Q&A section, and I would like to welcome all of my colleagues on stage. Please come.

Thank you, Ilija. [Operator Instructions] And we have received several questions throughout the presentations that we will try to convey to the speakers. But I think that we'll start actually with the audience. And if there are any questions in the room. Yes, please.

So Rikard Engberg of Erik Penser Bank. Can you please briefly discuss the transaction market? What sort of valuations do you see in the different Nordic countries? And also how do they compare to Continental Europe?

Oscar, please?

I believe that compared to Continental Europe, we are still seeing higher yields in the Nordic countries. You will see some of the strongest European market, we are seeing residential is well above -- below 2.5%. And as you can see, Rikard, our average yield is 4.1%. And as we can see in the recent transactions in the market, we are seeing communities' properties going for around 3% as well as residential properties.

My name is Fredrik from ABG. So first of all, the target of SEK 300 billion by 2026, does that figure include an expansion to other regions outside of the Nordics? Or do you think it's achievable to grow within the Nordics to reach that target?

It's fully achievable to reach the target through growth within the Nordics. However, as we have expressed in our Q2 report, we are building infrastructure to grow our business also outside of the Nordics. We are Europe's champion in social infrastructure, and that, of course, requires that we broaden our business outside of the Nordics.

And which countries are of interest and why?

We have said before that the closest country to us is Germany. And it is, among others, if you look at elderly care homes in Germany, you will see that the system is moving to strong backing by government. In Germany, it's financed through social, you can say, social insurance tax. But it's, at the end of the day, government backed. And our focus is on government-backed income and regulated residentials.

All right. So final question on the SEK 300 billion. I think you showed in the presentation a bridge from the current portfolio of SEK 200 billion to SEK 300 billion, which included a yield contraction for the existing portfolio. And you talked about 100 bps below the current yield of the portfolio. When -- so first of all, should we interpret that figure or that bridge as you include a value change of some SEK 30 billion, SEK 40 billion to reach the target? And if so, when do you expect that figure to come through?

No, that has been just illustration showing that we see the clear road map achieving SEK 300 billion without taking in new equity. And I have said before and I've been clear on that, and if you follow the market, it is very easy to understand that our assets should not be valued at valuation yield of 4.34%. At least, you cannot buy them at that level. And I should not even sell to you with those 100 bps that I just illustrate the value of. So we see that we have a strong potential for continuing value increase. But another point that I think it is important, it is that you can always discuss the yields. But on the top of the day, if you look that we have been able to deliver more than 100 bps over inflation in income growth, and if you just do the math on SEK 6.1 billion, SEK 6.2 billion in income, that -- if inflation is, for example, 2% and add to that 100 bps, you will see that also that is a very strong force that will support achieving SEK 300 billion growth.

Should we then take a question from the online audience? So we have received quite a few questions on the SEK 300 billion target. So I'll try to take some of them. In your path to the SEK 300 billion portfolio, what percentage of the SEK 180 billion will rise, will relate to property revaluation and development guidance? And what percentage will relate to capital spend by SBB?

We have illustrated, as I mentioned before, just to show how we can achieve the target without issuing new equity. And just as a part of that illustration, if you do the math at our Page 24 equity report, you will see coming in an NOI of almost SEK 1 billion. And if you just give that at market yields, that means that, that is more than SEK 30 billion in value. And this is currently in the process and this is ongoing. So we will not go in more in details because we don't have that kind of guiding. We're happy to be able to show how we see that the target is achievable.

Yes. And still following up on that one then, and it might be a pretty similar answer to it. But how do you see the split between residential and community service properties for the targeted SEK 300 billion?

I mean that is it is not the [ SEK ] that we have a very large building rights portfolio for residential properties. And the residential space is the space where we are growing very fast and will continue. But if those additional SEK 180 billion, SEK 190 billion will be split 50-50 or 60-40, that is more of semantic character. All of this will be social infrastructure in terms of rent-regulated residentials and community service properties in terms of elderly care homes, schools, special apartments for people with disabilities and that kind of assets.

Great. And we have also received a few questions whether the SEK 300 billion target requires that you issue new equity.

No, there is no requirement on new equity. And I mean, my illustration showed that we don't need to issue new equity to achieve SEK 300 billion.

Any additional questions from the audience? Yes, if we hand the microphone.

Yes, Rikard Engberg here again. You said no new equity, but what about hybrid issues? Would that be a path to reach the targets?

We like the hybrids. But actually, we do not need not either to issue the hybrids in order to support achieving SEK 300 billion. It is fully possible without either new equity or without hybrids. However, hybrids have always sometimes historically been used from us as bridge to equity. I mean just to give you an example, if we have this -- if you have this portfolio that is currently in production and that portfolio is delivering total equity to us when it's finished of SEK 15 billion, and we issued hybrid before the summer as a part of bridging our pathway to the equity. So we do not see direct needs for hybrids either to achieve SEK 300 billion.

Markus Henriksson from ABG. What about the road map for the government infrastructure that was launched a year ago?

We are working very hard within that space. And we have -- I think, Annika, you can comment how many police station right now we are working with.

Yes. We have about 32 in the Nordic region. And in Sweden, we have 27. So it's ongoing work.

And we have -- we are building right now 4 or 5 police stations and also rebuilding a police station in Helsinki. And we are working close with government agencies to provide some additional investments. We have, however, not done more communication -- more communications on that because we think that we will put some more volume in that before giving more guidelines going forward.

So we should view it as the police station is the big potential until we get some more news? Because if I imagine correct -- remember correctly, it was also prisons and other institutions.

We are working -- we are without -- this is also many times, how to say, issues of related to government interest and safety and securities. So we will not maybe comment more in detail on that. But we can assure you that we are working both with prisons and with some other government properties. We will be back when it's time.

Fair enough. And then a follow-up to Krister, I think. You talked about the new target. And you also you also mentioned that you had already reached the target for the first half. And if we look at how the building right portfolio looked like when you had the last target, do you feel that this new goal is more aggressive? Or how should we view the target compared to when you just quite recently launched the last target?

Okay. Thank you for the question. I think I hope my sum up did some guidance, that looking into our portfolio with 59,000 apartments all in all, and then looking into the extremely big demand, I'm very confident that we will deliver on our goals on the new targets.

So are you more confident now than you were when you're saying the last target last year?

Actually, I'm quite confident always.

Perfect. We'll take a few more questions from the webcast audience. I think this one will be for Peter. Could you highlight how the housing app adds additional revenue streams?

Well, in this app that we are providing for our tenants, we have a couple of offers to them. One of them is the electricity and one is home insurance. So we have deals with the different companies that we, yes, that we put in the app and offer to the tenants. So that is one way to create additional income streams. But one big thing for us right now is cost reduce -- reduction also. And when we go to digital invoices for the rent, we reduce our paper waste. And except from these type of offers, we also can display offers that the tenants can add to their apartment, like safety doors and glass for the balconies, which is -- increased the rent and also creating value on the properties.

This is a very important question because in the Nordics and particularly in Sweden, we have not been good in selling additional services. So if you compare, for example, with Vonovia, they are making a large amount of money from additional services. And we have, in Sweden, been just starting with this. And the work that Peter is doing together with Viktor is pioneering to deliver additional services and additional income to SBB. So that is, how to say, the potential that today is not either valued or put in our earnings capacity coming from this service income side.

Back to the audience for another question.

So I have a follow-up on the -- or going over to the financing terms. A couple of quarters back, you guided for a BBB+ rating would give some 20 to 30 bps lower interest costs. And now you have a lot [ and it also ] showed that we're already down 20 bps since year-end without a rating. How do you view, going forward, if or when the rating is cleared, what will be the impact on the financing terms?

That is very good comparison. And that is because we have very safe assets. We already have pricing in bond markets in line -- even better than our BBB flat-rated peers. So of those like 40 bps, we have, as Rosel and Eva-Lotta showed, we have taken home 20 bps. And with the BBB+, we should be able to get additional 20 bps. Even more important that they emphasized is that we have long both interest rate -- fixed interest rates and debt maturity. And that is in a way that we are, at the same time, when having low interest rate also having insurance to have -- to box in interest rate, in our case, around 4, 5 years, which is adding on this total boxing in cash flows. And that is, of course, supporting Board's ambition with increasing dividend because the cash flows are already boxed in, and there is additional upside coming from everything, from digital investments and those kind of services from property development, from investments additional, refurbishments and from transaction.

Great. I think we will run a few minutes past 12 here because there are still some questions in the stream that I think need to be asked. First one, are you going to develop the wind farms in-house? Or will you find a partnership for this? And are they included in your growth target?

Wind farms are not included in our growth target. We have, for example, here in Skellefteå, a very strong relationship with municipal company Skellefteå Kraft that is today delivering 100% renewable energy to us. So we will have a good opportunity to have great backing from our partners when doing wind farms. And we have come relatively long on that pathway. We are actually also developing solar plants. So I hope that we should be able to launch one of the first large installations in a few weeks from now.

Great. Then how large portion of your residential properties are renovated? And do you think you could renovate 100% of it with the current rent levels?

We have relatively, I think Oscar showed before, comparisons showing that we -- throughout our portfolio, we have rents that are like half of the price or half of the replacement cost. And that means that our rents are lower and we have a very good upside potential. I think, Peter, do you want to comment more detail on the -- on our potential concerning the portfolio? I mean we have today renovated just 20%, 25%, so...

Yes. I think I don't have anything to add there.

Okay. Then, we have received a few questions on the allegedly for sale Akelius portfolio, so whether they would be of interest to SBB? And another question, maybe how does corporate M&A fit into SBB's portfolio growth strategy? So it's a split question.

We cannot comment other companies. Akelius is well-known Swedish residential company that has done a great job, but it's -- it will be strange if we comment other companies. Concerning doing corporate deals, I think, Oscar, you can repeat once how we do it.

Yes. I can repeat it. But for us, it's -- we buy properties. And if the way to do it is by buying companies, public offers, or is it buying asset by asset, we will do whatever it takes.

And we can buy EUR 1 million and we can buy EUR 10 billion.

Yes. Yes.

That is not an issue. It is -- and this is very important and I think also for our audience. We are real estate people. We are focusing on assets. We want to see that we have assets that are yielding, that we have assets that we can develop. We are not having some kind of financial play game. It is just issue of delivering the best possible returns to our shareholders by taking care and developing real estate assets.

Great. So I think we'll take the last one from the online here now, and it's -- given your stake in JM and Solon, how will you develop your rentals, i.e., Sveafastigheter and homes for sale, [ bostadsrättslägenheter ] in Sweden and other markets? And what are the reasons behind buying into JM as they are more focused on tenant-owner apartments, i.e., [ bostadsrättslägenheter ].

I think Oscar commented that and you could also -- when you listen on Krister, Viktor, Erik and Jenny understand that we have everything in place to run full in-house property development from developing and zoning land to delivering fully functional apartments and fully functional properties for elderly care homes or schools, or whatever it is within community service portfolio. However, we like JM, we think that is -- and it is on the same line as Annika and Oscar, and also Henrik pointed out before, and I think also, Carl, when he was talking about our development. We focus on the assets. And we like JM not because the share price is x or zeta. We like it because that is the best old developer in Stockholm, having an amazing land bank and that is why we are happy to be long-term owner, and we are looking forward to support JM so they can continue to develop well.

Excellent. Any other questions from the audience? Yes.

Hi, I'm Joel, a private investor. I have a question about the scalability. Let's say the property value increases, will the earnings per share typically increase the same? Or do you see extra value with bigger assets?

Yes. We are always focusing in everything that we do to deliver increased earnings per share, no matter if we are doing large acquisitions like Hemfosa. I don't know if you remember, but we could show that we had very strong increase in earnings per share from that acquisition, or in the work that has been done without our property development team. So that is a very important message that we want to send to our shareholders that we are having earnings per share as a very important and clear target, whatever kind of investments we are doing.

Great. Anything more from the audience? If not, I think that question concludes the Q&A session. We have a few outstanding questions online, but we have covered most of them, and we will get back on e-mail to you if you have not been answered -- if your questions have not been answered. You are always welcome to send an e-mail to [email protected] if there are any additional questions, and we will get back to you on that one. Ilija, would you like to say some concluding remarks before leaving the space.

No. I think actually, this picture is the best conclude. Look at those people, those are the best real estate people in Europe. And I'm sure they are going to deliver strong performance to our shareholders. So I want to give them big hand, and thank you for working for SBB shareholders. Thank you very much. Thank you all.