Operator Welcome to Fabege Q2 2026 Conference Call. For the first part of the conference call, the participants will be in listen-only mode.

During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Bent Oustad and CFO Åsa Bergström.

Please go ahead. Bent Oustad Good morning, and welcome to Fabege's interim report to second quarter for 2026.

We have a well-known agenda, and we just kick off. We own and develop and also manage our own properties, and we have the focus on creating attractive working places and a good living in superb locations in Stockholm.

We have a model portfolio occupied by high-quality tenants. We'll get a little bit back to that later on.

The rental value is SEK 4.4 billion and is divided here into different segments. The square meter, 1.3 million sq m, also divided into the different segments.

The property value is SEK 79 billion at the end of the quarter, divided with 37% in inner city, close to 50% in Solna, 10% in Hammarby Sjöstad, and 3% in Flemingsberg. Also repeat from last quarter, it's important for us that we also are marketing our biggest strength is definitely our customers.

We have a high consumer satisfaction index, highlighted by a strong track record in serving our customer needs. 95% of our tenants say they would recommend Fabege as a landlord, and we are very proud of that.

We have long-term lease contracts as a foundation in the business. We have our own employees across the entire value chain, and we have clusters giving us advantages like economies of scale, and creating engaging meeting places.

Meaning we take the full responsibility for the ground floor, for the offices, for the living, et cetera. We also invest a little bit in the community for safety, et cetera.

We have an excellent capability when it comes to deliver large and complex projects from start to finish. We have done it before, and we will do it going forward.

Also strong capabilities and best-in-class practice within ESG initiatives and environmental results when it comes to CE, the CO2 pollutions, et cetera. If you just have a short summary of the second quarter standalone.

The rental income grew by 5.9%. The surplus ratio in Q2 was 74%, and we had a profit from residential development of SEK 39 million, meaning a margin of 21%, and we are very satisfied with that.

The net letting was SEK -86 million in the quarter. We have commented that also during Q1.

It's two large terminations when it comes to Max Matthiessen and Telenor represent this figure. Value changes, more or less flattish, +0.15%, SEK +120 million for the quarter.

We have improved our occupancy rate from 86% to 87%, we have some new large leases in Solna Business Park in the quarter. Get a little bit back to that also.

We finalized the acquisition of Gadden 1 in Sveaplan from the Municipality, Stockholm, we also press released this morning that we have signed a construction contract for Block 4 in Haga Norra. That's 132 residential units.

With that, I hand over to you, Åsa. Åsa Bergström Thank you, Bent.

The rental income came in at just under SEK 1.8 billion. Looking into rental development in identical portfolio, it was SEK -17 million or -1.1%, mainly due to terminations that were previously announced in the negative net lettings from previous years.

On the other hand, we had a net of SEK +100 million from finalized projects that have kicked in during the first six months of this year. The property's expenses were very much in line with last year, we saw an operating income from property management of just over SEK 1.3 billion, with a surplus ratio of 73%, 1% up from last year.

The residential part of the business was also contributing with SEK 79 million, as you can see here. We have finalized approximately 85, 86 apartments during the period and recognized the income from those finalized projects.

If we look at the net interest expense, it increased a little bit in comparison with last year. The STIBOR has gone up.

It has been, to some extent, not so much because we have seen also less margins, we have had some interest rates that have matured during the period. All in all, up from 2.82% to 2.89% during the first half year.

The share in profits from associated companies of SEK -42 million relates to contributions to Arenabolaget. We saw in total unrealized changes in the values of SEK -139 million, but as Bent just mentioned, it turned positive during the second quarter.

We saw a plus of SEK 120 million. The tax is a little bit also different from normal.

We have sold one property, which contributed to a positive tax of SEK 24 million. We also had a finalization of the outcome in the court that gave us another SEK 550 million in carry forward losses that we have now taken up to valuation, that meant a little bit more than SEK 100 million+ in the tax.

All in all, a profit of SEK 521 million during the first six months. During the quarter, we have externally valued 43% of the portfolio, we saw that the yield in the valuations have come down 2 bps from 4.59% to 4.57%.

Thus, we also saw, as I mentioned, the value change of SEK 120 million+ in the second quarter. We had an opening fair value of SEK 78.5 million.

We have disposed part of this at 31, construction for building rights to Besqab. We have bought Gadden 1, the SEK 211 million also includes the tax paid.

We have invested almost SEK 900 million. We had the value changes of SEK -139 million.

We have the reclassifications when we have reclassified Haga Norra Block 4 from property management portfolio into development properties that will be carried out by Birger Bostad. All in all, the positive value changes refer to city properties.

As you can see here, SEK +157 during the first six months. While we also saw positive from the residential part of the portfolio.

The key ratios came in SEK 119 per share, compared to the same figure last year. An EPRA NRV of SEK 145 per share.

Positive total return on the properties, 1.5%, and surplus ratio, as I mentioned, increased, and equity asset ratio and loan-to-value ratio in comparison with last year and also year-end. The debt ratio improved from previous over 14% to less than 13%, which also in line with our internal target for that.

The interest coverage ratio ended up at 2.6x for the full period and 2.7x if we look at the second quarter alone. Financing remains very strong for us.

We have very good access to financing, both from the banks and the capital market. The margins on the capital market have been a little bit volatile during the period but ended up in very good levels towards the end of May and the beginning of June.

We have refinanced everything that we are supposed to refinance during 2026 when it comes to bank loans. We are intending to refinance the SEK 2 billion remaining on the capital market with new bond issues during the autumn.

The last bond issue was done now in June, where we took in SEK 350 million in a five-year bond at a margin of 110 bps, which I think is a very good level. We have also increased the interest fixing by entering into new interest rate swaps of SEK 1.4 billion, five-year terminations and at levels between 2.5% and 2.6%.

We now have an average interest cost of 2.88% compared to 2.82% at the year-end. Approximately a little bit less than 50% of the portfolio is fixed, and the average interest fixation is 1.4 years.

If we also take into account the callable swaps, it increases to 2.1 years. All in all, I feel confident with the financial situation.

With that, I hand it back to Bent. Bent Oustad Thank you.

If you look at the occupancy rate in the management portfolio at end of Q2, it's up to 87%, sorry, up from 86%. That also includes the remaining vacancies in the previous project that has entered into the management portfolio.

In addition, we have the improvement portfolio, close to SEK 8 billion-SEK 9 billion. It's 127,000 sq m, of which 71,000 sq m is not let, but is let out to different customers.

The yield on that portfolio is it covers its own debt costs, the interest cost for the debt, 100% financed. That's how it works.

The net letting for the first half, SEK -62 million. New lettings of SEK 132 million and terminations of SEK 193 million.

The two large ones there, it accounts for more than SEK 80 million, as I mentioned in the beginning. Telenor is moving out in the third quarter 2028.

I think it's September 2028. They've given notice in very good advance.

We have the renegotiations. It was renegotiated SEK 230 million.

It was renegotiated with -1.7%. SEK 109 million is renegotiated, and SEK 121 million is prolonged on existing terms.

I think that's also what we see in the portfolio. A lot of the renegotiations are more or less companies now maybe sold off a subsidiary, selling of a division, et cetera.

In that sense, also putting on a new lease. SEK 156 million of the maturities in 2026 and onwards, I think it's 2026 and 2027, has already been renegotiated for the total portfolio.

If you just look at Q2 separately, it was a healthy mix among all markets, market areas that we have, and all segments, meaning from hotels, from restaurants to offices. Six contracts above 1,000 sq m during Q1 has been renegotiated.

All the new leases also a mix of all kind of categories from hotels and everything. One contract is above SEK 10 million in yearly rent.

We have divided here the renegotiations by area and also the new leases by areas. As you see, it's a healthy mix all over for us.

Just want to mention, since I also had that in the beginning, that a lot has happened in Solna Business Park this quarter. It's taken more than one year for the puzzle.

The Swedish National Agency and the Swedish Work Environment Authority have reduced some of their space just to have space for the Swedish Transport Agency. Everything finalized.

The Swedish Work Environment Authority leases approximately 4,000 sq m on a six-year lease, and the Swedish Transport Agency leases approximately 3,000 sq m, also on a six-year lease. Really, the governmental tenant has cooperated together and leased spaces in Solna Business Park.

With that finalized, our property Fräsaren 12 is more or less fully let. Nice mix of different tenants being active in the market.

We also show this every quarter. This is just signed leases to date with no further activities in the future.

These are the development on the leases we have signed. I mentioned we have healthy and nice customers.

They are definitely one of our key strengths. We have approximately 700 customers.

The average lease contract is 5.5 years. The top 10 largest customers represent 29% of the contracted rent.

We have them on the right side there, all of them. One new is on the list is Tietoevry, moved into a 10th place.

They just signed a new seven-year lease contract with us. The top 10 largest customers represent 29%, and over, actually the real number is 38 largest customers is 50% of the contracted rent.

The duration on the 40 largest is 7.4 years. It's very stable revenue stream.

We've added one new slide this quarter. More or less Fabege's view on the market trends.

If you look at the rental market first, we see strong and continued activity in the CBD market, especially for larger leases. The alternatives are not that many.

We see rent levels slightly started to increase in areas with less alternatives for new production and low vacancies. We see stable rents level in Greater Stockholm.

As I mentioned, a handful of tenants reduce the square meter in existing leases. More or less, if you read in the press, sold a subsidiary, sold a division, doing some M&A.

There are always some renegotiations. We also see startups and AI companies coming to the leasing market, more or less in the city so far.

For the construction market, we see free capacity among almost all of the construction companies. Good demand to compete for potential building contracts, both in office and in residentials.

So far, we mentioned this morning that we have signed a new construction contract for residentials in Haga Norra, and we are happy with that. So far, I will say we see limited or close to no price implication from the disruptive world outside Sweden.

When it comes to transaction market, it is active, but it's not at the same level as in the more or less old days. Disposals made public during the quarter include both portfolios and individual assets.

Buyers, I will say, is dominated by pension funds and insurance companies, then I'm sure some of the listed companies and the private investors are not happy with me saying that. I mean it's dominated by pension funds, and investors are being pension funds.

All kind of companies are active in the market. Also commented on the financing market.

We see healthy activity and competition among investors, banks, everything in all kind of financing markets. It's been a very active financing market when you see the Nordic with all the data centers, massive financing, also in all kind of segments.

If we look at our ongoing projects, Farao/Kairo, investment of SEK 630 million. We are doing the ground and foundation work and construction work up to the ground floor level.

The decision for this investment was more or less taken 15 years ago when we went into the Arenastaden. We have to do this work now because Solna Municipality are trying to finalize their work with the roads and everything.

Just be prepared for the new opening of the metro station at the entrance of this building. The Wenner-Gren Center, investment of SEK 610 million.

Rental value approximately SEK 58 million. It's pre-let 30%, marketing to start more active in Q3 2026.

We have started shortly, and we see nice interest in this building coming to the market in the Q2 2027. Also, Mimer 5.

It's an investment of SEK 270 million. Rental value close to SEK 50 million.

It's 100% let on a long lease to AcadeMedia, and it will be finalized in August next year. For the next school year, it will be open.

Here you also see some of the growth in the top line the coming year. Completed and ongoing project in Birger Bostad, our residential builder.

Haga Norra Block 5 is right now under construction and is progressing according to plan. Total of 288 units.

We have completed 193 units, and during second half of 2026, the last 95 units will be completed. So far, of the total 288 units, 20% are unsold, meaning 59 units to be sold rest of the year.

It feels very comfortable from our side. With that, we also move on to the next phase.

The preparations are on the way. As we mentioned in the press release this morning, it will be 132 units in Block 4.

Estimated investment, approximately SEK 360 million. The move-in is planned to start in first half of 2028.

If we are lucky, it will also be the first half of the first half-year, meaning first quarter, I will say. After that, Block 3.

We have 360 rental apartments, an elderly care facility, and a preschool there. Approximately 20,000 gross leasable areas with an investment close to SEK 860 million.

Just to mention and show it for you. With those two last projects, we will finalize the quarter.

Block 7 and Block 6 are finalized. Block 5 to be finalized this year and sold out hopefully this year.

Ackordet 1, the offices are completed and part of the management portfolio. We have signed on the construction contract for Block 4 this morning.

The last one, Block 3, with both the elderly care facility and the preschool will come in the last phase. We will finalize Haga Norra.

Project Garden, it's in Sveaplan, Stockholm inner city. We bought it in June 2026.

Building rights, approximately 8,800 gross sq m. Purchase price SEK 202 million plus tax to buy it, so SEK 211 million also.

We have a planned move-in during late 2029, maybe early 2030, in that range. This is definitely one of Fabege's core areas.

Also, it's the entrance to Stockholm inner city. We will have approximately 90,000 sq m here.

Working places including co-working, ground floor activities, food and beverage, high-class conference center, et cetera. Will be everything in this area.

We have a lot of questions from you. What happened with the large Ericsson lease in this area?

Just try to put it on the map. The leases that Ericsson made was number one to number six as building to be constructed.

Maybe number two is already constructed or on the way, rest is to be constructed. Over Fabege's 90,000 sq m are number seven to number 12 in the same area.

We see good interest in this area and very happy that Ericsson showed the way and took the decision to move the business into Stockholm. When it comes to building rights, not much happened since last quarter.

Commercial building rights, approximately 500,000 sq m, with 65% legally binding and a book value of SEK 8,200/sq m. The residential building rights has decreased slightly since last quarter because we sold some building rights in Kungsholmen.

It's 435,000 sq m left and approximately 40% is legally binding. Book value is SEK 7,800/sq m for the building rights.

Other projects, opportunities in the near term. We have talked about it also several quarters now.

Tegelterrassen in Kungsholmen. 36,000 leasable square meters.

Partly demolition started in January, leasing activity is definitely ongoing in this building. Our ambitions are quite high.

It's the same in Haga Norra. We just went through that.

Already produced 611 units, 95 units in production. The last two quarters is another 390 units, including an elderly home and a preschool facility.

We're looking forward to complete these projects. These are, like Tegelterrassen, booked in improvement properties in our balance sheet, just so you are aware.

If you try to summarize, we have to conclude different leasing initiatives that's ongoing, decreased vacancy is always top priority. As I said, in Solna Business Park, it takes time.

Took us 12 months. In the old days, it would have taken two months, but that's how it is right now.

We want to continue to be the preferred partner for our customers. We have to be available, accessible, and solution-orientated, and I think we are, and have a very good feedback on that, and that makes me proud for whole Fabege.

We have to secure value creation in ongoing projects. I hope you see that we are working with the balance sheet, working with the projects that's ongoing, and we have to continue to do that.

Also analyze the value creation in our land bank, both commercial and residential, and continue to be active in the financing markets. I had some questions about that last quarter, but that's more or less, of course, I have to say, we are always that, and Åsa has already done different things in Q3 already.

With that, let's conclude our presentation. I hand it over to you, Fredrik.

Fredrik Stensved Thank you. Thank you for having me.

My name is Fredrik Stensved. I'm an Equity Analyst with ABG.

I will walk you through the Q&A of the day. I'll ask a couple of questions myself, but also let the audience in through the web conference.

If I may, before we jump into the Q2 numbers and the Q2 results, you started six, seven months ago. I think we're all aware that leasing, leasing, that's top priority.

If we think about portfolio composition and strategy and capital allocation, is there anything that you have learned during these six months that is different from what you thought when you took the CEO position? Bent Oustad Luckily, I learn something every day, so that's a good thing.

I think we have done quite a lot as well. We have looked through the balance sheet.

We have sold off different smaller plots that's been part of the balance sheet. We have also signed some LOIs on different plots we have across Sweden when it comes to elderly care facilities, et cetera.

You will see we do more of that. Just try to clean up the balance sheet and just focus on the core assets for us.

We have done some organizational changes when it comes to the market area. We have said that Flemingsberg and Hammarby Sjöstad being one market area for us, that will come into effect in Q3.

We are focusing on costs all the time. Luckily to see also the surplus ratio going up to 74%.

Yeah, you could be sure. I think about, and also think you are thinking about that every day.

I think we're on the right path. Still, of course, a lot of things to do, and it should be in a company like this.

When it comes to the capital allocation, we are a developer as well as an operator. Like I tried to say here in Arenastaden, the decision was taken when to do some investments when we entered the area 15 years ago.

More or less, we have to do what we need to do in our areas to comply with what we have promised to the municipality. We are hunting for new tenants, and I think the pipeline looks promising, I will say.

Fredrik Stensved If we talk about that, you added some slides during this presentation showing the geographical split of the renegotiations and the new leases. My impression, and correct me if I'm wrong, but has been during the past couple of quarters that City has been working, Arenastaden has been working, but this graph shows a fairly broad picture.

Is that something new? Do you think the rental market recovery is spreading?

Bent Oustad It is recovering, but not in a dramatical way. Of course, when Ericsson say they will move 100,000 sq m into the area of Hagastaden area.

Of course, something happens. It's not a lot of available premises there going forward.

We see a better leasing market in that area immediately. Of course, it's a little bit more difficult maybe for Kista.

They will move out, probably move out in 2035 or something. I don't know.

It's a lot of time. Fredrik Stensved Yeah.

Bent Oustad I think that's also some reason why we took Flemingsberg and Hammarby Sjöstad into one market area. It's close to the same area, same size as Solna Business Park.

As soon as you have competition within the company? It's perfect.

We see activity both areas, and they shouldn't be in Arenastaden and look at city. They should try to fight for city looking at Arenastaden.

Fredrik Stensved Yeah. Speaking of Ericsson, you showed a picture of Hagastaden.

I think it's pretty obvious to everyone that this is a positive for Hagastaden. How do you think about Solna Business Park or Arenastaden for that quite dramatic change?

Bent Oustad It's in the same neighborhood. It's not far away.

The leases in Hagastaden and Sveaplan, it's at totally different levels than in Solna Business Park. I think also that's why you see all the municipalities, the governmental tenants, et cetera, moving to Solna Business Park.

When it comes to Arenastaden is another story. The largest lease last year ended in middle of Arenastaden.

A3 moving in there. You have all the activity, you have the Mall of Scandinavia, you have the arena.

A lot of things ongoing and happening. Right now we have a construction site in one end of the Arenastaden, Skanska is building on the other one.

Just have to finalize those, and I think it looks nice going forward. Fredrik Stensved Yeah.

One of your colleagues or peers, competitors, was out last week saying that there is maybe more so than in the past, a large amount of large tenants looking for quite significant space. We have seen in the media 5-10 different companies maybe searching for 6,000 to 15,000 sq m each.

Are those looking at all of your areas or any specifics? Bent Oustad It's difficult to say they're looking at all of our areas all the time.

As you saw the mix here. The mix was a quite nice mix between all the different market areas.

I follow that insight that a lot of. If you say that 6,000 to 15,000 sq m are large tenants a lot of activity in the market.

We are also part of the discussions. Fredrik Stensved Yeah.

All right. I will open up the telephone conference.

Also you have the opportunity to write questions, and I will try my best to read them. Operator If you wish to write a question, use the form below.

If you wish to ask a question at the phone, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.

The next question comes from Paul May from Barclays. Please go ahead.

Paul May Hi, guys. Thanks for taking the question.

Just a couple of quick ones. When you talk about the investments on the ongoing properties, I think you highlighted, I think it was on slide 17.

I assume the figures you're quoting is marginal investment, and don't include the existing value of the buildings. If you could give us a color on what is the kind of total cost, that would be great on that.

The second one, just around the like for like NOI and the renegotiated leases obviously getting slightly worse quarter-on-quarter. When do you see that changing?

You talk to a slightly more positive market. Just wonder when do you see that feeding through into your operational performance in the business?

Thanks. Bent Oustad When it comes to the investments, that's the remaining CapEx that we showed on the slides here.

I don't have the ingoing balance right now. We can come back to that.

Yeah. This quarter was slightly more negative on the renegotiations.

I think it's one or two leases. A little bit special leases, when it comes to that, so I don't think you should think of that as something ongoing in the market.

Åsa Bergström I'm not sure about your question about the investment, if you take the remaining investment and add it to the booked value or the market value, that's the value that is going to be recognized once the investments are finalized. We have the end value valuation, which includes also, hopefully some uplifts in valuation towards the end.

There will not be any negative valuations relating to ongoing projects. Paul May Director and Head of Real Estate Equity Research Okay.

Yeah, I was just trying to get a sense for the sort of return on investment, because obviously the numbers on remaining CapEx look very high in terms of rent versus remaining CapEx. Just wanted to get a sense of the total investment.

On the operational side, you mentioned it's not something to be concerned about. I appreciate it's just one quarter, but occupancy is still relatively low.

The market still remains weaker, despite the commentary that it's going to be better. I just wondered when do you see that actually feeding through into positive numbers?

Bent Oustad We are not guiding on that, what I try to comment on is that this quarter, the renegotiations were a little bit more negative than it had been the last quarters. It's one or two contracts, a little bit special contracts, just this time.

That was my comment. When it will turn to be positive, it's another question.

As I commented on in the CEO letter as well, if the new leases and renegotiations are in the CBD, it will be more positive and some other spaces can be more flattish. Paul May Cool.

Perfect. Thank you.

Operator As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. Bent Oustad Fredrik?

Fredrik Stensved All right. No more questions from the telephone.

We have a couple of written questions. You comment in the report on older and less sort of well-positioned properties attracting lower rents.

What is the strategy for these properties? Is it just a refurbishment that is needed, or is it more material redevelopment to sort of close the gap to prime assets?

Bent Oustad It's both, actually. I think you saw in the project you showed up here that we are doing some major refurbishment of some of the buildings.

The development and the lease when we do that is very nice. We are looking at our portfolio and see what are the potentials.

We are always looking at our properties to see should we divest something or should we do something special with them. That's also a question about returns we could receive, and I think was the question here as well.

When it comes to Stratsys, I think you should account for approximately 20% margin on those. When it comes to new construction, we have a target of yield on cost around 6%.

Sometimes we get much higher, and sometimes we get slightly below that. That are the targets we are trying to achieve.

Fredrik Stensved Yep. Then there is a follow-up on that question from the same person.

Would you be able to sort of quantify the share of your assets that you think is to be considered as sort of older and less well-positioned? Any sub-markets where they are particularly concentrated?

Bent Oustad No. I think we do that every quarter, that's what we call the improvement portfolio.

It's approximately SEK 9 billion in the balance sheet. SEK 2 billion of that are the Wenner-Gren Center and the Mimer, as we just showed here.

I think we have quite good control of that portfolio. That's including the land bank we have is SEK 9 billion.

If some properties should be in that portfolio, we put it there, we see what to do. Fredrik Stensved Yep.

That's clear. One just dropped in.

Given the improving demand, but also buildings being vacated, where do you see occupancy at year-end 2027 or year-end this year and going into 2027? Bent Oustad It's a lag on the occupancy rates of the last quarters.

Previous quarters, we had positive net lease. That means they are moving in after we do the lease.

We have negative net lease this quarter. As I comment on Telenor moving out in September 2028, it's more than two years ahead.

I also commented on Q1 that Max Matthiessen is moving out during 2027. We have high ambitions for that space, it should go in the right direction.

Fredrik Stensved All right. Very good.

That's it for the written questions as well. I think we are sort of running out of time, maybe if I can just finalize with one last one.

Also, I think in the last conference call in the Q1 or in conjunction with the Q1 report, you talked about Fabege taking a sort of hit to property values in Q1. You sounded quite optimistic on leasing those in the upcoming quarters, and that would translate into positive property value changes.

Did we see any of that sort of materialize in this quarter, or is that potential still remaining for the second half? Åsa Bergström I think most of that potential is still remaining for the coming quarters.

The value uplift that we saw this quarter was mainly related to city properties and to lower yields. Fredrik Stensved If you manage to lease those, is that sort of the normal move in a year from now, or can they move more quicker than?

Åsa Bergström Normally somewhere between nine months and upwards. It depends very much on what kind of premises and what company.

Fredrik Stensved Yeah. Bent Oustad The latest one in Solna Business Park they took over premises there.

That happens quite fast because they were nice and easy to just move right into. As Åsa said, 6-12 months is more and more normal, I would say.

Fredrik Stensved Yeah. All right.

Thanks for having me. Thanks for listening.

Any closing remarks? Bent Oustad Just want to wish everyone a good summer.

Hope to see you in Boston. Those of you not being in Boston, probably see you in Miami in the quarterfinals in the world championship next weekend.

Would be great. Have a nice summer.

Operator This concludes today's conference call. Thank you for attending.

You may now disconnect.