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Ladies and gentlemen, welcome to the Fabege AB Q1 Report 2019. Today, I am pleased to present CEO, Christian Hermelin; and CFO, Åsa Bergström. [Operator Instructions] Speakers, please begin your meeting.
Thank you. Christian speaking. The sun is still shining on our property market. The shortage of good office means that rents are still rising. Increasing rents means rising profits and values for us. But we have been spoiled for a long time. We don't just have strong rental market, we also have a very good financing market, which is also helping to increase profits and value growth.Please turn page. For example, if you look at our profit from Property Management, of course, the rising income and falling interest costs have contributed to the record strong profits from Property Management, which increased with impressive 33% compared to the last year. And if you look at our return on projects, we can see that the value growth continues to be at the high level. It was 142% of invested capital during the first quarter.Rent increases in our renegotiations are also continuing at the high level like recent years. The increase was 19% during the first quarter. And if we look at our long-term net asset value, EPRA NAV, it increased from SEK 125 per share to SEK 130 during the quarter. We are very pleased with these results. But there is a beauty spot, and it's our net letting, which I will return to. But first, will Ă…sa go through the quarter results in more details.
Thanks, Christian. The year started well with increased rental income, improved profit from Property Management and continued positive changes in value. Rental income amounted to SEK 718 million, an increase of more than SEK 100 million compared to the previous year. In an identical portfolio, income increased by 19% in total. Completed projects made the biggest contribution to the increase in income, but higher rental rates in agreements and index adjustments also contributed positively. The surplus ratio came in at 71%, which is okay for a first quarter, which, of course, was affected by costs for the winter. Now leasehold cost is not part of the net operating income. Meanwhile, the surplus ratio decreased as expected due to the new property taxation, which has implied a significant increase in property tax. This is largely passed on to tenants, but it has a negative impact in the calculation of the surplus ratio.Administrative costs are in line with expectations. Interest expenses are slightly lower than last year in absolute terms. Overall, we are borrowing more but at a lower average cost. The result in associated companies amounted to minus SEK 7 million and is related to the liquidity contributions to Arenabolaget during this period. In all, we reported a profit from Property Management of SEK 336 million (sic) [ SEK 366 million ], which was a total increase of 33% compared to the previous year.Before the end of the quarter, 46% of the portfolio was externally valued. The yield requirement fell slightly during the quarter from 4.13% to 4.11%. Overall, unrealized changes in value amounted to SEK 1.3 billion equivalent to a value growth of 2%. Values in the project portfolio rose by SEK 641 million, generating a return on invested capital of 142% During the first quarter, we increased the fixed term -- interest term through new swap agreements. Combined with falling long-term interest rates, this meant that the deficit value in the derivatives portfolio increased by SEK 238 million. And the tax expense amounted to minus SEK 310 million and was mainly just related to deferred tax.Current tax is calculated based on the tax rate of 21.4% while the deferred tax liability is mainly calculated using the future tax rate of 20.6%. Please turn page. In line with the strong earnings trend, our balance sheet has continued to strengthen. Reported equity now amounts to SEK 109 per share. And the long-term net asset value, the EPRA NAV, amounts to SEK 130 per share. The equity-asset ratio decreased from 51% to 50% due to the fact that since year-end, we increased our total assets with the leasing liability related to leaseholds. All other financial key ratios strengthened.Please turn to page Financing. The year started well with high -- with a high level of activity. After the capital markets stabilized and the margins declined significantly, we issued 2 new bonds for a total of SEK 650 million. We also signed a new 10-year facility and we are pleased about more signs that the banks can provide really long-term financing at competitive terms. During the quarter, we entered into total of SEK 1.4 billion in new interest rate swaps with maturities of between 7 and 10 years. The capital maturity now stands at just over 5 years, and the fixed interest term has increased to 4.3 years. We are continuing our persistent efforts towards achieving 100% green financing. This proportion is increasing in line with the ability of our financiers to provide green financing and the certification of our property portfolio. Now the proportion has increased to 66% of our outstanding loans. And finally, unutilized credit facilities amounted to SEK 4.3 billion, which means really reassuring. And now back to Christian.
Thank you, Åsa. And turn to page Rental Market. Net letting was strongly negative at minus SEK 107 million during this quarter. This was because the Swedish Tax Agency terminated its lease for the property, Nöten 4 in Solna Strand, which we already announced. Of course, we are not happy about this. We know that if customers chose to move, they normally move to where they think the quality is better. For this reason, we have to make sure that our existing portfolio meets our customers' demand out of standalone services. The net letting didn't get any help this quarter from any larger project lettings, which depends both on -- due to normal seasonal variations and some shortage of projects that are ready for construction, which I will come back to.The low vacancies means that the increase in rent is continuing in all our submarkets. During the period, we achieved an average rent increase of 19% in our renegotiations, which is in line with last year's increase at 20% in the first quarter. However, the non-negotiated rent is higher this year than last year. So I would consider that we continue to see rent increase between 5% to 10% per year as we have been seeing for the past 5 years.And now over to valuation. Here, you can see where our changes in values are coming from in the first quarter 2019. We see that all 3 parts contribute significantly, but that is in our project portfolio, we see the biggest contribution. And if you turn page, you can see a comparison with the former last 4 years. And in this outcome, we can see that the value growth of just over SEK 1.3 billion is in line with the average of SEK 1.4 billion, which we have had in average the last 4 years. And also, the split between the 3 explained factors is also relatively normal compared to the last 4 years, which all have been very good years.Let's move to -- on to our project portfolio. The positive part is that we have a fantastic position. Greater Stockholm is one of the regions in Europe with the best growth forecast. We have modern properties in attractive city districts, which are linked by train, and this is what customers want today. We also added to our development rights portfolio in this past year in Flemingsberg while our existing areas developed positively. We have many project opportunities, but as I said before, we have some shortage of zoning plans and new office projects that are ready for construction because some things have gone faster than planned. While we work on catching up with planning, we have several existing buildings that we can now modernize and start offering to the market.If you turn page, you can here see 4 of them. In these 4 buildings alone, we have a rental value without extension of more than SEK 300 million. But we still have some new building opportunities. If you turn page, you can here see 4 possibilities where the 2 on the top now are ready for construction and the 2 on the bottom ones are expected to be ready for construction by, at latest, the next year. Their combined rental values is about SEK 450 million. And 2020, at last, we will -- at last, we shall have several building opportunities in all part -- sorry, and in 2022, at latest, we shall have several building opportunities in all our 4 city district projects, which you can see on the next page. So the lack of ready-to-start project is temporary. And at last, if we go to future. Like I said earlier, we have a fantastic position. It is hardly possible to ask for more than a modern office portfolio indicators linked by rail in Stockholm region. This position fits perfectly with our value-creating business model where we develop areas with potential into lively and attractive city districts. Our position and business model gives us a good base, but it is what we do that matters. Without the world's best organization, we would not have such strong results quarter-after-quarter. And the world's best organization was developed through our corporate culture, which we call SPEAK. This is the basis for our employees' good teamwork. And I'm happy that the Board of Fabege has found a new CEO who understands SPEAK and our business model. It is a good basis for continued success. Stefan will also bring new energy and other experience that is positive for Fabege's future. Thank you. That was our presentation, and we are now ready for questions.
[Operator Instructions] And there are currently no questions registered, so I'll hand the call back to the speakers. Please go ahead.
Yes. Thank you for listening for us, and good afternoon. Thank you.
Thank you. And this now concludes your conference call. Thank you all for attending. You may now disconnect your lines.