Samhallsbyggnadsbolaget I Norden AB

STO:SBB B

Earnings Call Transcript 2022-Q1

[Ilija Batljan, executive]

Thank you, and as said, my name is Ilija Batljan, and I will present SBB's Q1 report. And at the first slide, you see some of our properties, including European most sustainable building, Sara Cultural Center in the city of Skellefteå, which is 26,000 square meters building of wood with the highest possible environmental standards. And we -- actually, the building was finished at the end of the last year and finally, it is in our accounts from this quarter.

If you look at the quarter -- Slide 2, please. If you look at the quarter and the key ratios, you will see that we had strong performance, rental income for the period increased with 38%, landing at SEK 1.8 billion and like-for-like, 3.8% for the first quarter, which we think is strong and in line with our focus to deliver CPI plus 100 bps on increase -- on yearly increase of rental income. Net operating income strong, SEK 1.153 billion, despite cold quarter, despite that we have increased the share of rent regulated residential in portfolio. And profit for the period SEK 2.9 billion. And if you look at our profits from property management, excluding joint ventures, value changes and tax, we landed SEK 1.326 billion, which is also strong increase in relation to corresponding years. EPRA earnings, SEK 0.64 to be compared with SEK 0.25 last year.

We have a strong focus on deleveraging. Loan-to-value ratio, slightly up this quarter, mainly because of paying or taking in minority interest from Amasten, which had the double effect, SEK 1.8 billion in cash and also decreasing minority interest. However, we see the deleveraging continue this year with strong focus on higher rating and lower LTV. Interest coverage ratio 5.5x, very strong position there and particularly, given that we have average period of fixed interest of 3.7 years, which is giving us good opportunity to deliver strong income from property management also going forward, and being able to deal with the general trend of increasing interest rates, and given the fact that we have almost 4 years fixed interest rates, we will be able to let inflation do the job. And in that way, making sure so we can continue strong profits from property management and being able to deal with higher interest rates going forward.

Important point here is also that all of the profit from outside of the property management is almost coming from our property development, and we have unchanged valuation yield during the first quarter. We slightly continued to increase our average contract length of social infrastructure properties around -- it's 11 years, but it's slightly over 11 years.

Next slide, please. Another important message from the quarter is continuing increase in earnings capacity, and we are now seeing earnings capacity at property management level of SEK 3.71 per share. And if we look at adjusting profit from property management, including profit from our value-add strategies and also payments for dividends to these shares and the hybrids and also income or profit attributable to minority interest, we see that we should be able to deliver SEK 5.76 per share in adjusted operating profit to ordinary A and B shareholders. On top of that, we have additional SEK 1 billion in income coming from our current investments in project development and that is adding to SEK 6.47 per share. So strong continuing increase in earnings capacity.

Next slide, please. Trying to sum up with few lines. The first quarter, as I said, the business is focusing on stronger rating and lower loan-to-value ratio, which is key for taking next step to achieving BBB+ rating. And important point there is that we are continuing to deliver a strong ICR this quarter. ICR was 5.5x. And that has been supported by strong increase in like-for-like. Rental growth increased 3.8% and net operating income increased with 2.4%. And the difference there is mainly given the cold quarter, and this will be even up during the year.

Operating profit increased by SEK 831 million to SEK 1.446 billion and adjusted for value changes and tax joint ventures, the operating profit was SEK 1.326 billion, which is an increase of 115% to the last year. EPRA NRV increased to SEK 47.31 per A and B shares. And as I said, we continue to increase our WAULT in this -- at the end of this quarter, we have WAULT that is slightly longer than 11 years. I mentioned also the importance of -- that we have last year invested in having long bonds with fixed interest rates. And at the end of the first quarter, the interest maturity was 3.7 years, and we had average interest rate of 1.24%. Profit after tax landed at SEK 2.939 billion with unchanged valuation yields. As I mentioned before, EPRA earnings, strong increase from SEK 0.25 per share last year to SEK 0.64 per ordinary series A and B shares.

The strong delivery from our value-add strategies is continuing, and they are delivering over expectation, and this will be our main line for future organic growth in focus -- where we are focusing on deleveraging and strong organic growth, and profits from building rights development and new production landing at SEK 1.642 billion. We also continue to refurbish -- invest in our existing portfolio. In the first quarter, we refurbished 304 apartments and our investments in existing portfolio of SEK 2 billion are done at yield cost of 5.3%, which is strongly over valuations and delivering -- will deliver continuing increase in cash flows in the quarters to come.

Next slide, please. In our report, I also presented more detailed scenarios to other issue of expectations and increasing interest rates and also trying to connect that to the situation where we have our income CPI adjusted, and where we also are able, through investments in existing portfolio and through refurbishments, to deliver 100 bps over inflation. And on this slide, you can see that in scenarios where STIBOR that is today around 10 bps increased to 250 bps, which actually no one is still -- how to say, assuming it will happen. The most assumptions are around 150 to 200 bps, but given this scenario with 250 bps STIBOR, we will be able to continue to deliver strong profit and strong dividend base.

And we also performed the scenarios where we used actually nominal interest rates of 10%. And if you assume a real interest, 2% or 3%, even in that case, we will be able to manage to keep the dividend and raise it with inflation. If we lower our net debt with SEK 5 billion, which is part of the plan, in that case, we should be able to raise the dividend with inflation, even if the nominal interest rates rose to 10% and the real interest rate is like double, 4% to 5%. And that is an important message given strength in our income that inflation adjusted rental income and long-term fixed interest rates offers very stable cash flow and continuing increase in dividend.

Next slide, please. We are continuing to perform both on NAV. And as you can see, we have had CAGR of 54% last year's NAV per share, which is the strongest in the sector. And this is fueled by a strong increase in earnings and profit from property management, and you can see that for the last years, CAGR on earnings have been stronger than CAGR of NAV. There is a lot of talk about the valuations and NAV, but the important message that you can see from our report is that our CAGR on income has been stronger that -- our very strong CAGR of net asset value.

Next slide, please. Portfolio continuing to grow. At the end of the quarter, we had properties for SEK 159 billion, continuing to grow in all our markets. We are having strong teams in all 4 countries, Sweden, Norway, Finland and Denmark. I think that we also, in this quarter, we are successful to buy additional properties in Denmark with government tenants and at the same time, having strong underlying organic growth in Sweden. Passing rent, SEK 7.3 billion, continuing strong increase since last quarter, both, as I said, longer than 11 years. Net initial yield still relatively high given the low risk of the properties of 3.8%, and 79% of the portfolio are located in major cities and university towns in the Nordics and continuing strong focus on delivering new residential and community service properties within Stockholm region.

Next slide, please. Our income, as you already know, government backed by AAA-rated governments. This quarter rent-regulated residential are now at the level of 33%, publicly funded residential for elderly people and disabled people at 17% of income. So in total, residential are now 50% of the income and 53% of the value. And then on top of that, we have properties for education, 29% of the income and 28% of the values. So 80% of our income is core social infrastructure, which is very low risk assets.

And on top, the rest of 20% is hospitals and government infrastructure. The public offices are continuing to decrease despite very strong income, but -- government-backed income, but as we have said before, we do think that in SBB, we are focusing on core, and then we are selling public offices. And we also have strong joint venture with Kåpan that is investing in government infrastructure in Sweden. And in Norway, we are investing together with the Arctic Syndicate in government infrastructure. So that is giving us a very strong position in those markets. You can see that we do not have any larger leases that are expiring this year, but that actually it doesn't [ bother ] because we have like for elderly care homes, like 98%, 99% [indiscernible] and in the same line also for the indication of property. So the actual WAULT is much longer than the 11 years reported from -- within the community service properties part of social infrastructure.

Next slide, please. A few lines about our joint venture with Kåpan, which is Swedish government employee pension scheme, is continue to grow. There we have a property value of SEK 12.4 billion. We have a relatively low LTV in our joint ventures, and we see that all of those are developing well.

Next slide, please. Property development continuing, having the strongest position in property development in Europe. And at the end of this quarter, we had 4,900 apartments in production. We have decreased the number of apartments in project development because if we see strong increase in interest rate and if we see that the prices on the construction are increasing, that means, of course, that we will have lower investments. I mean we are focusing to deliver the best possible return to our shareholders, and at the same time, to be responsible community builder. And in that is also included that we have to follow how the prices are developing and to see how much we will invest in years that are coming. And the lower number apartments on the project development means that we think that we will be very cautious following price development on construction.

Next slide, please. The one part of our business where we are not cautious because you heard me today being very cautious, being -- focusing on deleveraging and decreasing LTV. However, the part where we are going to be very aggressive is sustainability. We have ambition to be climate positive in the entire value chain, and we are continuing to argue that the best properties are the properties -- from the sustainability perspective are the properties that are already built. And we are continuing to invest in our portfolio, and we are doing that with good profit to the society and to our business. And we are right now running one of the largest ever done certification efforts in real estate in Europe that we are planning to certify right now the certification of 500 buildings, and after that, we will start with additional 500 buildings.

Next slide, please. We do have strong ratings on sustainability, and we are industry leader in social sustainability. The important message there is that also in the times where the economy is having challenges, we are continuing to run our projects on social sustainability. We have announcement for summer jobs to young people to work in our company during the summer, and we are planning to have more than 200 people having summer jobs in our communities this summer. And also today at the General Meeting -- the General Assembly, we're working about sending SEK 50 million to support Ukraine because we think that is part of our core business and that is also part of our role as the industry leader in social sustainability in Europe.

To sum it up -- next slide, slide 13, please. To sum it up, SBB stands stronger than ever. We have inflation adjusted rental income and long-term fixed interest rates that offer stable cash flows backed by AAA countries. We will -- despite deleveraging, we will continue to have organic growth that is fueled by our unique investment platform combining property management with our 3 value-add strategies. We are also selling building rights, delivering extra cash to the business. We continue to be a strong dividend company and proposed dividend to today's Annual General Meeting, is SEK 1.32 per A and B shares that is proposed to be paid monthly and starting already this week. We are emphasizing even stronger focus on rating, and we will be delivering some sales where we are using cash to repay loans as very focused -- how to say, very focused approach to use our opportunities where we can sell the building rights and can sell public offices to continue to lower loan-to-value ratios.

And we do think that we have key ratios for BBB+ on the 12 months forward-looking and are fully focused to have all those fully reported by end of this year. And as I said before, despite a focus on deleveraging, there is one part of the business where we are -- we will continue to invest heavily and that is strategic sustainability. Sustainability is core of our business model, and we feel pretty comfortable to be able to deliver value for our shareholders and value for the society.

So to sum it up, strong quarter where all business lines are delivering according to plan, even better, both from property management and from property development. And SBB is stronger than ever, and we have a good position to take advantage of the market that is changing towards higher interest rate environment.

Thank you. We can stay, and I can take questions.

[Operator]

[Operator Instructions] And the first question we've received is from Niklas Wetterling, DNB Bank.

[Niklas Wetterling, analyst]

I have 2 questions. We can start with financial instruments, the result from those, because in Q1, sector peers has had positive value changes from financial instruments due to rising market values on interest rate swaps, while SBB reports a loss. So I wonder if you can tell us something about what's behind your result for financial instruments.

[Ilija Batljan, executive]

Our financial instruments are mainly shares in different companies. So that is the -- if peers are making money in this environment, then they are the best investors or better investors than us.

[Niklas Wetterling, analyst]

Yes, I believe it comes from rising market values on interest rate swaps. That's -- okay. But...

[Ilija Batljan, executive]

That is very good if they -- we are not making money from investing in financial instruments. And in our case, swaps are not financial instruments. Swaps are derivatives. Financial instruments are listed shares. But I said, again, if the peers are very successful investing in listed shares, then they are better investors than us, and that is okay.

[Niklas Wetterling, analyst]

Okay. And the other question is on rent increases for regulatory or residential apartment. At Wallenstam's earnings call yesterday, they said that the rent is not raised automatically and that residential rents historically, during times with high inflation, has lagged behind CPI by a few years. So what's your view and expectation for rental growth for regulatory residential rents?

[Ilija Batljan, executive]

We don't have any other view concerning SBB's rental income than the one that we are always been delivering, and that is inflation plus 100 bps. So that is our focus. And how Wallenstam runs their business, that is their focus.

[Niklas Wetterling, analyst]

Okay. Yes. So you believe it can kick in like the year after?

[Ilija Batljan, executive]

No. But we are not -- how to say, negotiated through the calls or newspapers. We are just delivering the numbers, and we have always been able to deliver 100 bps over inflation, and that is because 70% of our income is more so automatically adjusted from social infrastructure from elderly care homes, from schools and 30% is coming from residential. And that is -- I don't think that Wallenstam has -- how to say, discovered anything new. It's -- in residential sector, you have to negotiate with tenant association, and we have a large portfolio. So we will have different negotiations depending on the local condition, but in -- all in all, our deliverables that we are guiding on is 100 bps our CPI, and there is nothing change for this year and that is what our like-for-like numbers shows this morning.

[Operator]

The next question is from Fredrik Stensved, ABG.

[Fredrik Stensved, analyst]

During the transaction, I understand you closed the transaction in Kalmar. Did you also manage to -- or did the transactions in Stockholm with SISAB and the acquisition in Halmstad close in Q1?

[Ilija Batljan, executive]

Kalmar and Halmstad closed in Q1 and Stockholm is -- will be in Q2 because of municipal accounts, they will decide about the transaction in Stockholm after the Q1 is closed.

[Fredrik Stensved, analyst]

Okay. Perfect. And then the residential CPI indexation, if you will, is that included in the Q1 earnings capacity, rental income figure?

[Ilija Batljan, executive]

Not all of that. There are still some negotiation ongoing. So we will probably have higher than 3.8 when that is closed.

[Fredrik Stensved, analyst]

Perfect. And then final question on the financing side. You -- during the quarter, the share of commercial papers decreased a lot, and you went from 12% to 18% in terms of secured financing. I know you have a target to stay below 30%, but should we expect sort of this trend to continue? Will you increase the share of bilateral bank loans in the coming quarters?

[Ilija Batljan, executive]

No, Fredrik. That is -- we have the target to have secured the loans below 30%, and this quarter, we are slightly higher. That is also partly connected to our acquisition of Amasten and the job that we are doing there on refinancing and also partly by working to prolong our -- both debt maturity and fixed interest rates. So that is probably peaking at this quarter.

[Operator]

The next question is from Stefan Andersson, SEB.

[Stefan Andersson, analyst]

Just a couple of questions from me. Could you -- if we look at the SEK 768 million in liquidity that is stocks, could you maybe mention -- and I think that's where we had this impact on the financial net negative that you talked about earlier. Could you possibly help us with the biggest positions that you have in there to understand how to look at that going forward?

[Ilija Batljan, executive]

Biggest position in where?

[Stefan Andersson, analyst]

Sorry, in the -- in your liquidity. Liquidity of [indiscernible] in your Swedish line, SEK 768 million.

[Ilija Batljan, executive]

We are not commenting that because if those are there, that means that they can be sold within a year. So we will not comment that.

[Stefan Andersson, analyst]

Okay. Can I put it this way then, are there some bigger ones in there? Or could we more look into the stock market index to understand what impact it could have on your P&L going forward?

[Ilija Batljan, executive]

They don't have any impact on our P&L.

[Stefan Andersson, analyst]

Well -- sorry, I misunderstood then, because I thought this was the 3 -- the -- on your financial net, as we talked about before, you had the value changes on financial instruments, SEK 341 million. I thought that was related to the stocks you had in your liquidity. So maybe I misunderstood it then.

[Ilija Batljan, executive]

No, not at all. That is related to financial assets.

[Stefan Andersson, analyst]

Okay. Okay. So let me talk about another item then. On your joint ventures, you have the -- your 27.8% holding in JM. At what valuation do you have that in the balance sheet? Is that, that you -- would you pay for it? Or have you done any adjustments to that value?

[Ilija Batljan, executive]

The value has not been -- the value is -- JM is our joint venture and the value there is according to IFRS. So it does -- it is not connected to the share price.

[Stefan Andersson, analyst]

Okay. Good. I guess it could be -- I mean there could be a situation where you might actually under IFRS also change, if the change in valuation is substantial and for long term and all that. But I fully understand, it's the acquisition play. What -- when you think a lot about...

[Ilija Batljan, executive]

I mean the -- it's -- at least for us, it could not be a situation because that has to be done according to IFRS. And I mean, concerning JM, we are long investors there. So that is not an issue for us.

[Stefan Andersson, analyst]

Yes. Okay. Good. And I mean connected to all that, I guess, the stocks as well that you talked about before, are you talking about taking down LTV and maybe divesting some properties? Could you also see yourself actually divesting some of these shares? Okay, JM, of course, not because you just said it's long term. But if you look at the other ones, I guess, those are also part of what you could divest to get your LTV down a little.

[Ilija Batljan, executive]

We can divest whatever we want, but we are trying to be very -- how to say, very clear on our long-term focus. And if our long-term focus is Social infrastructure and residential, that means that the assets connected to that are long-term investments for us. So that is -- and we're selling divestments, we do not need to divest anything if we don't plan. But as we have said before, we are -- we made the large amount of money last year of selling building rights and selling some public offices. And we think that, that strategy has worked well, and we will continue on that line.

[Stefan Andersson, analyst]

My last question is regarding EPRA, which you have -- you follow and include some of their recommendations. I'm thinking about LTV there. Is that something that you might follow as well and disclose the LTV according to their new recommendation?

[Ilija Batljan, executive]

Yes, we will look during this year because we will have actually lower LTV using EPRA because we have a relative low LTV in our joint ventures. But Stefan, as you know joint ventures, those guys are not working so fast and not -- so it's always getting the numbers. But we will look towards the end of the year to also add the LTV measure because I understand that you and the others are very interesting in that. So we're very happy to do that.

[Operator]

The next question is from Fredric Cyon, Carnegie.

[Fredric Cyon, analyst]

Four questions from me, starting off with acquisitions and divestments. So yesterday, you announced SEK 4.8 billion in acquisitions -- net acquisitions. Are you going to be a net seller for the remainder of the year?

[Ilija Batljan, executive]

Yes, we will probably be net seller for this year.

[Fredric Cyon, analyst]

That's clear. And what kind of assets, if any, are. You looking at selling? Is it more related to building rights? Is it community services or residential?

[Ilija Batljan, executive]

It is building rights and public offices mainly, but it can be that someone give us very good bid at some [indiscernible] smaller cities and then we may look to sell, but it is mainly building rights and public office.

[Fredric Cyon, analyst]

That's clear. And then third question. It has been a long journey for SBB to reach the BBB+ trust rating compared to when you initially talked about it. When should we expect it to be reached?

[Ilija Batljan, executive]

I mean we actually got a rating from BBB flat from Scope, and we have now BBB+ outlook, both from S&P and Fitch. And we have a focus to report the numbers for BBB+. Rating should normally be done on forward looking. However, given that we have been growing very fast, I think agencies are probably expecting us to see the reported numbers, and our ambition is to have reported numbers placed then this year.

[Fredric Cyon, analyst]

Okay. So you're expecting it to be reached during 2022?

[Ilija Batljan, executive]

That is our focus, absolutely.

[Fredric Cyon, analyst]

Okay. And then my final question, anything materially that might impact your cost of debt during the second quarter, i.e., for instance, prolonging loan duration or changing your hedging? Or should we expect the 1.24 to be approximately the same when you report second quarter numbers?

[Ilija Batljan, executive]

We will probably be in -- if you think evolutionary happens, it's if -- I don't know if STIBOR moves to 10% tomorrow, then it can be changes. But in a normal environment, we should be almost unchanged.

[Operator]

The next question comes from Clark McPherson, Clearance Capital.

[Clark McPherson, analyst]

Actually, just a follow up on the last question, talking about all-in cost of debt. I see on the interest rate scenario, you seem to be using a spread of 130 bps. If I look at one of your peers who fund in the Swedish market in the last 2 weeks with a similar rating, the spread on their 5-year paper was 190 bps. So I'm wondering if I just get an idea from you, if you had to access the Swedish krona market now, say, for 5-year paper, where do you think your spreads would be?

[Ilija Batljan, executive]

I did 10 years at 130 bps just last of March. But if you look at my scenario, then you can see that I also used 350 bps on STIBOR, which in total is 3.8%.

[Clark McPherson, analyst]

Okay. So the 10 year, that was the bank funding that you did?

[Ilija Batljan, executive]

Yes, it was 130 bps on 10 years.

[Clark McPherson, analyst]

Was it secured or unsecured?

[Ilija Batljan, executive]

This -- that one was secured.

[Clark McPherson, analyst]

Okay. So for unsecured funding, where do you think, like we're hearing now the spread would be on -- over STIBOR?

[Ilija Batljan, executive]

I do think that when we do it the next time, it will be around 130, 140 bps, which on average will be below 130 bps, if you look at all our portfolio.

[Clark McPherson, analyst]

Okay. Great. Understood. And just going back to the previous question, highlighting the shift in secured versus unsecured funding and the -- which seems to be -- there seems to be a shift from CP and increased utilization of bank funding. Given the current market environment, would -- do you feel that bank funding and secured funding is probably, I wouldn't say the only option, but the best option in terms of managing your interest rate costs at the moment?

[Ilija Batljan, executive]

No, not at all. We have a broad financing base. So it is mainly choice of moving and taking into account that we acquired, a must then with the large part of rent-regulated residential that historically have been financed in the banks. So as I said before, the -- our secure funding has peaked at the end of Q1 and will continue to decrease towards where it was mid last year.

[Clark McPherson, analyst]

So we should assume that the CP usage remains at sort of the current levels that we're seeing now. then?

[Ilija Batljan, executive]

Yes, I think so. That is the level that we have had historically then when -- because historically, we have been paying a large amount of money when repaying the loans and the bonds. And we used CP's -- the part of bridging when completing the Amasten acquisition before placing some of the loans, and those loans have been placed in the secured market because that is where traditionally the business have been funded.

[Clark McPherson, analyst]

Okay. And just one last question from me. You've done a small bond buyback and you have alluded to doing more. First question is like what was the amount...

[Ilija Batljan, executive]

Those are just small because no one wanted to sell to me.

[Clark McPherson, analyst]

Okay. Soon enough.

[Ilija Batljan, executive]

I would have to do more.

[Clark McPherson, analyst]

Right. And I guess that's certainly a positive. Just going...

[Ilija Batljan, executive]

[ I don't talk ] -- that is the past.

[Clark McPherson, analyst]

Yes. Well, going forward, I mean, where would you target the future buybacks? Would it be on the euro debt structure? Or on the SEK or NOK? And what about floating versus fixed? I mean any guidance where you would target the buybacks in the future?

[Ilija Batljan, executive]

We will probably target the floating given how the interest rates are moving. So -- but we are -- I mean we will do what we perceive is the best for our investors. So that is, we don't have any ideological or -- how to say, any political intentions with this. It's just focusing on to make sure so that our investors can make the best possible profit.

[Operator]

The next question comes from Jan Ihrfelt, Kepler Cheuvreux.

[Jan Ihrfelt, analyst]

Okay. And I have 3 questions. First one is, as you earlier stated that you're going to be a net seller this year, could we expect your cash position, which is currently at SEK 9 billion, to come down during the year?

[Ilija Batljan, executive]

That is not -- Jan, I'm a very cautious guy. I like cash. So I'm not -- that is -- cash is good to have, particularly in those times. So I'm not sure of that. It is depending how the market and opportunities, but we will, as I said before, target some floating bonds. We will repay some other loans. We will decrease part of our secured funding. So -- but we think it is good to -- I mean you never know how long the war will last in Ukraine or what may happen. So it's good to have some cash because there may be opportunities, too.

[Jan Ihrfelt, analyst]

Okay. And going to your residential production, do you have 100% flexibility to stop that? Or are there any projects that you had promised more or less forced to start them? Or could you just decide yourself on what -- yes.

[Ilija Batljan, executive]

We have great flexibility and that is -- we will, of course, build because we feel that it's -- the society needs more rent-regulated residential. But if the interest rates are high, we will stop the buildings. I mean if the -- how to say, if the Central Bank and the government don't want anything to be built, we will not build.

That is relatively -- that is how economy here works. I mean usually, interest rates are increased in order to decrease activity in the economy, and we will be very following on that. So if interest rates increase then we will just put the foot on the brake.

[Jan Ihrfelt, analyst]

Okay. And could you just help us on what kind of parameters are you looking at then when you decide this is a -- is it the return on investment? If you could just guide us, what it has been in the past? Or do see you see right now...

[Ilija Batljan, executive]

Yes, hopefully, that is done. Yes that is the only parameter we are looking at. We -- the only focus we have is to deliver the best possible profit to our shareholders, and that is -- we think that is the best way to run the business. So we don't have any like predecided numbers or we have to -- in every moment to wait the risk and the cost of the capital and the deliverables, and then decide if that is delivering the best profit for our shareholders.

[Jan Ihrfelt, analyst]

Okay. And my final question regards your building rights. You said that if you were to sell something, which is actually like you'd probably go for, among other things, your building rights. And due to raised construction cost and so on, do you still think you could -- you will be able to sell this building right with above booked values?

[Ilija Batljan, executive]

Yes. Yes. Our books and values are very low. So we are always making money from the building rights. Then we will see -- I mean, if we don't get good pay, we will not sell. That is -- but we have been able to sell at good prices in Q1. I think we sold for like SEK 150 million, something like that. So we look forward to see how the market develop because, Jan, you should know that -- well, they used to say, buy land, they don't make it anymore. And particularly in the large cities like Stockholm, there is still demand also for building rights.

[Operator]

The next question is from Bertil Nilsson, Carlsquare.

[Bertil Nilsson, analyst]

My question related to what was announced before, what did you feel about the rent -- the construction of residential and decrease. And as I understood it, you referred to construction costs because construction cost it -- has it not something to do with [indiscernible] which has gone now and so on. Or what kind of...

[Ilija Batljan, executive]

No, not at all. I mean construction costs have been increasing, that is -- that you can see that everyone and however we are running the projects. As I said before, we have 4,500 apartments that are currently built, and we don't see any problems with those projects. But I said that we are decreasing the amount of the apartments that we are preparing for -- to be built going forward because in a situation where interest rates increased heavily, then it's not wise to build new apartments. So that is the only -- how to say, the only how to say, the only view on that we have, but we don't have any problems with how the situation is right now.

[Operator]

We have a follow-up question from Fredric Cyon, Carnegie.

[Fredric Cyon, analyst]

Just one follow-up question. So you're trading now at a 35% discount to your reported EPRA NAV. If you believe in your book values and argue your balance sheet is strong, why are you not doing buybacks?

[Ilija Batljan, executive]

Maybe do not comment where and if we should do buybacks. We have chosen historically to pay dividend to our shareholders instead of buybacks, but we are actually asking a general assembly today to give us a mandate for the buybacks.

[Operator]

There are no further questions at this time. I hand back to you, speakers.

[Marika Dimming, executive]

Right. We have had a few questions by e-mail, but they have all been answered by other speakers today. So with that, I hand over to Ilija to sum up the talk. Thank you.

[Ilija Batljan, executive]

Thanks, Marika, and thank you all for listening. As I said, we delivered a strong quarter on property management and property development. We stand stronger than ever and will have focus on stronger rating and lower loan-to-value ratio and part of that will be fueled by our organic growth.

Thank you very much, and thank you for interest in SBB.