André Gaden: Good morning, and welcome to Public Property Invest presentation of our results for Q3 2026. I am André Gaden, CEO of PPI. Together with me is our CFO, Ylva Göransson. Thank you for joining us this morning. Let us first look at the agenda. I will begin with the main development in the quarter, then take you through our portfolio and operations. Ylva will then present the financial results. Then I will return with a few concluding remarks before we move to Q&A.
André Gaden: Let us begin with the highlights from Q3. We have shown strong growth in income and financial results over the last year. As a consequence, net income from property management per share was 0.43 in Q3, representing an increase of 37%.
André Gaden: With the platform in place after H1, Q3 has been about execution and cash conversion. Cash flow from operations was SEK 734 million in the quarter, up from SEK 208 million in the same quarter of 2025. Our results show steady measurable operational improvement. Rental income was SEK 887 million, up 3% since Q1. The improvement is stronger further down the income statement.
André Gaden: Net operating income rose to SEK 761 million, up 12% since Q1. EBITDA was SEK 692 million, an increase of 19%, and net income from property management reached SEK 404 million, up 22% since Q1. On the operational side, we signed new and renegotiated leases representing SEK 35 million in annual rent. Net letting was positive with SEK 7.4 million, and we increased our WALT to seven years in the quarter.
André Gaden: We also completed the development of two care homes in Finland that will add another EUR 14.5 million to our yearly net operating income going forward. On capital allocation, our priority remains to grow cash earnings per share while maintaining a solid balance sheet. During the quarter, we agreed to acquire six social infrastructure properties from SBB, mainly paid in new shares issued at NAV.
André Gaden: We also started a share buyback program of up to SEK 400 million, and we have paid out quarterly dividend of SEK 0.25 per share, in line with our dividend policy. We have done all of this while maintaining a solid balance sheet, reflecting our BBB+ rating. 67% of our debt is at fixed rates, and our average interest rate is down 12 basis points since year end 2025. Let me put those results in the context of the portfolio.
André Gaden: At the end of September, PPI owned a diversified portfolio of 853 properties across the Nordic countries, covering 2.3 million square meters and with a gross asset value of SEK 52.8 billion. The portfolio mainly consists of social infrastructure assets, where government-backed tenants accounted for 84% of our annualized run rate rental income of SEK 3.6 billion. Occupancy stood at 93.5%.
André Gaden: Including our development projects, the average remaining lease term was seven years, which gives us good visibility into future rental income. Net yield in the portfolio was 5.7%, and as mentioned, we have maintained a strong balance sheet over time with an LTV below 50% and an adjusted net debt to EBITDA currently standing at 9.9 times. Now, let us look at some of the properties behind those numbers. PPI focus on social infrastructure properties, and in our portfolio, you will mainly find properties with government-backed tenants.
André Gaden: 50% of our portfolio is within healthcare and elderly care. On this slide, you can see examples of our elderly care homes in Ängelholm, in Gothenburg, in Stockholm, and Uppsala. You can also see a high school in Vänersborg, Sara Kulturhus in Skellefteå, and a high school under development in the city center of Helsinki. We are one of the largest landlords to the police and the court administration in Norway.
André Gaden: Here exemplified with a police station in Lillestrøm and a courthouse in Lillehammer. Each of these buildings provides an essential public service in its community. They are hard to replace, they are let on long leases, and the rent is backed by the public sector. That is what gives us stable and predictable cash flows, also in challenging economic downturns.
André Gaden: As mentioned, 84% of PPI's annual rental income is ultimately coming from Nordic government budgets, and around half of our portfolio is within elderly care and healthcare. Looking at the Nordic population, the people aged 65 and above are the fastest growing population group in the Nordics. This group is forecasted to grow by around 40% by 2060. That creates structural demand for care facilities that does not depend on the economic cycle, and we have built our portfolio to capture it.
André Gaden: Together with a high share of rental income from government-backed tenants, this underpins our long-term focus on social infrastructure. Let's turn to operational activities, starting with the leasing activity during the quarter. Our property management team provided solid letting in the quarter. We signed new and renewed leases covering 25,000 square meters with an annual rent of SEK 35 million.
André Gaden: Net letting was positive at SEK 7.4 million, and occupancy ended the quarter at 93.5%, slightly down from 93.7% in Q2. Among the new agreements were two new leases with Toyota Material Handling in Sweden, covering 7,500 square meters in Falkenberg. In Finland, we signed a new lease with the Wellbeing Services County of South Ostrobothnia, as well as a healthcare lease in Vantaa.
André Gaden: We are also happy to see that our WALT increased from 6.6 to 6.8 years in the management portfolio, rising to seven years including projects. As the chart shows, lease expiries are well diversified, with 19% extending beyond 10 years. As mentioned on the highlights, we also announced an agreement to acquire six social infrastructure properties from SBB at an average net yield of 5.6%.
André Gaden: The portfolio includes a newly built care home in Stockholm and a police property in Espoo, alongside properties in Karlskrona and Gotland. It covers 63,400 square meters and has an average remaining lease term of 8.1 years. Upon completion of an ongoing tenant alteration, the portfolio will add an annual rental income of SEK 107 million.
André Gaden: Around 20% of the consideration will be settled in cash and around 80% in new PPI shares issued at NAV. The transaction adds long lease, public sector-backed assets in our core segment and strengthens our balance sheet. It is fully in line with our strategy of disciplined growth across the Nordics. The extraordinary general meeting on 23 October approved the transaction, and we expect closing in early November. Moving to development. Our development projects are now starting to be delivered.
André Gaden: In Finland, we completed two care homes from the Hartela Care portfolio, which we acquired in November last year. The property in the Helsinki region has 75 care places and is fully let to Attendo. The property in Turku has 60 places and is fully let to Kototiimi. Both have 15-year leases. Together, they add EUR 1.3 million in annual net operating income. These completions bring new care facilities into use and add long-term rental income to our operating portfolio.
André Gaden: Beyond those completions, we continued to invest operating cash flow in our development portfolio. Our ongoing projects are expected to add around EUR 8.8 million in annual net operating income on completion, and we also receive a return on invested capital during the construction period. All projects are fully let and without construction risk for PPI.
André Gaden: They are progressing according to plan, and we look forward to finalize more projects in Q4 and the beginning of 2027. With that, I will hand over to Ylva to take you through the financial results. Over to you, Ylva.
Ylva Göransson: Thank you, André. Let me start with the financial highlights for the quarter. On the left, rental income came in at SEK 887 million, up by SEK 3 million since Q2 and up from SEK 247 million a year ago. We are now three quarters into a stable, fully consolidated platform, and the focus has been on converting income into cash earnings. That is visible in the middle chart.
Ylva Göransson: Net income from property management was SEK 404 million, up 4% from Q2 and up from SEK 332 million in Q1. Importantly, net income from property management per share was 0.43, compared with 0.31 a year ago. A strong increase of 37%. On the right, EPRA NRV per share increased to 26.2 from 25.7 in Q2 and from 23.9 a year ago. As we buy back shares at a discount to NAV, the buybacks are accretive per share.
Ylva Göransson: Let us look into the income statement in more detail. Starting with net operating income, which came in at SEK 761 million, up 2.4% from Q2. This includes a one-off compensation of SEK 14 million from two tenants in Finland for early lease terminations, booked in other income. Excluding that, NOI was slightly up on Q2, mostly affected by the two acquired properties in the quarter. Net administration expenses were SEK 69 million, down from SEK 88 million in Q2.
Ylva Göransson: Part of that is structural, but most of all Q3 benefits from lower personnel costs due to holiday pay in July. Our normalized run rate level is estimated to be around SEK 300 million per year. Net realized financials were SEK 288 million in the quarter. Interest expenses increased to SEK 312 million, as the bonds issued in Q2 carried interest for the full quarter, and we started issuing commercial paper.
Ylva Göransson: Net income from property management came in at SEK 404 million, or SEK 0.43 per share, and as I mentioned, an increase of 37% from Q3 last year. Below that line, two items to mention. Net unrealized financials of -SEK 179 million are mainly an unrealized FX loss on NOK and EUR debt, as both currencies strengthened against the Swedish krona during the quarter.
Ylva Göransson: This is more than offset by a currency gain of SEK 670 million on our foreign assets, recognized directly in equity through OCI. The net effect on equity is positive. The value change on properties was -SEK 133 million, reflecting some small yield changes. To sum up, we are delivering strong operational performance while also having positive currency effects in the quarter, and we are continuing to grow.
Ylva Göransson: Our two acquisitions in Q3 are already contributing, and from next quarter, the two completed care homes in Finland will add around EUR 50 million in annual NOI. On the balance sheet, you can see investment properties amounted to SEK 52.8 billion, up SEK 1.5 billion from Q2. The increase is mainly currency translation, together with project investments and acquisitions in the quarter, partly offset by the negative value change of SEK 133 million.
Ylva Göransson: In other words, underlying valuations were broadly stable in local currency. The management portfolio's average net yield is 5.7%, which is relatively high for this kind of safe cash flow asset with average WALT of seven years. Interest-bearing debt increased by around SEK 1.1 billion to SEK 29.6 billion, mainly reflecting our new commercial paper program, with SEK 838 million outstanding, and some currency translation of our EUR and NOK debt. Net debt was SEK 27.7 billion.
Ylva Göransson: Our LTV was 49.1%. ICR on last 12 months basis stands at 2.3 times, and net debt to run rate EBITDA, including projects under construction, was 9.9 times. Turning to financing and liquidity. We have a strong liquidity position of SEK 7 billion, SEK 1.9 billion in cash, and SEK 5.1 billion in undrawn credit facilities. That covers our maturities over the next 12 months, around four times over. We also have a very strong cash flow conversion.
Ylva Göransson: Cash flow from operating activities before changes in working capital was SEK 678 million in the quarter, up from SEK 209 million a year ago, and was SEK 1.8 billion for the first nine months, compared to SEK 550 million for the same period last year. During the quarter, we established a commercial paper program with a SEK 5 billion framework.
Ylva Göransson: At quarter end, we had SEK 838 million outstanding at an average rate of about 2.9%, well below our average cost of debt. We also repaid a secured NOK bond of NOK 226 million at maturity. Today, 85% of our debt is unsecured. As you can see from the chart, the maturity profile is well-spread, with limited maturities before 2029. Average debt maturity is 4.7 years.
Ylva Göransson: The average interest rate came down slightly to 4.15%, and 67% of our debt is at fixed rates. We are rated BBB+ with a stable outlook from Fitch, and we have one of the strongest balance sheets in the Nordic real estate. Finally, our run rate, which shows our earnings capacity on a 12-month basis. Annualized rental income is just below SEK 3.6 billion, based on the portfolio at the end of the quarter.
Ylva Göransson: Property and administration cost levels are unchanged in local currency, and all items are translated at closing rates. Run rate EBITDA is SEK 2.65 billion, up SEK 51 billion from Q2. This is mainly a result of currency translation, but also supported by the acquisitions in Q3 and the completion of two care homes in Finland end of September.
Ylva Göransson: Net financial expenses are up SEK 54 million, reflecting the commercial paper issued in Q3 and the translation of EUR and NOK interest at closing rates. That gives a run rate net income from property management of SEK 1.48 billion or SEK 1.58 per share. However, this does not capture our projects currently under construction, which André presented earlier.
Ylva Göransson: Adjusting for the expected contribution from these projects and for three quarters of estimated CPI indexation from January next year, shown in the last three rows of the table, run rate EBITDA increases to SEK 2.8 billion, and net income from property management per share is SEK 1.74, and net debt to run rate EBITDA is 9.9 times. Just for the record, the adjusted run rate EBITDA does not include +SEK 76 million in NOI from SBB transaction that will close early in November. With that, I hand back to André for the summary.
André Gaden: Thank you, Ylva. Let me close with the main points I would like you to take away from this quarter. The third quarter was about execution, and we delivered another solid result. Net operating income was SEK 761 million in the third quarter, up by 208% since the same quarter last year, and by 2% since the second quarter. Very important, cash earnings or net income from property management per share was SEK 0.43, an increase of 37% since the third quarter last year, and by 4% since the second quarter of 2026.
André Gaden: On the operational side, we signed leases with an annual rent of SEK 35 million, and net letting was positive. We completed two care homes in our development portfolio, and another two major projects are on track for completion around year end. Moving to capital allocation. Our share buyback program of up to SEK 400 million is ongoing.
André Gaden: While our shares trade at a significant discount to NAV, we see buying back our own shares as one of the best investments available to us. The dividend of SEK one per share is paid quarterly and is in line with our policy of distributing up to 60% of cash earnings. We continue our strong focus on our balance sheet, which remains solid.
André Gaden: We have a BBB+ rating, a well-diversified debt maturity profile, 67% of our debt at fixed rates, and an average interest rate which was down 12 basis points since year-end of 2025. Market conditions remain challenging, and long-term interest rates have risen further. In this context, it is important to remember that PPI was established in a high-rate environment, which means that our capital structure and property values already reflect today's interest rate levels.
André Gaden: In closing, I would like to highlight the portfolio's long-term cash flows, where publicly funded tenants account for 84%. Combined with our large exposure to elderly care and healthcare, where we expect to see an increased structural demand as the elderly population grows, we believe PPI is well-positioned to keep delivering stable and growing returns going forward. That concludes the presentation. Ylva and I will now take your questions.
Moderator: André, the first question goes to you. How should we look at growth going forward, and in particular, can you comment on the offers for the three syndicates you have published?
André Gaden: Yes. As mentioned, we will close the acquisition of a portfolio of six properties from SBB. That will happen now early November. That will add another net operating income of SEK 76 million, and the transaction will be settled with 80% new equity issued at NAV, and the remaining 30% in cash. We have also announced offers for three syndicates that we believe are at reasonable market terms. But it's now up to the shareholders in the syndicates to evaluate the potential offers.
Moderator: Ylva, what is the intended use of the cash position?
Ylva Göransson: Yes. We ended the quarter with SEK 1.9 billion in cash, and in the near future, the cash will cover a couple of things. First, we will pay around SEK 250 million for the SBB portfolio closing in the beginning of November. We will repay a NOK bond of NOK 750 million, and then we have some remaining buybacks.
Moderator: How impacted would you say you are by increasing interest rates?
Ylva Göransson: Well, actually, 67% of our debt is at fixed rate. So the impact is not that huge. It is quite limited. PPI was, however, established in current interest rate environment, and we have some bonds outstanding at significantly higher margins. So we could issue that today at better margins. So, we are well-positioned.
Moderator: Have you captured all the synergies from the SocialCo acquisition, or is there more potential?
André Gaden: I think we can say that we have done the first structural part. We now have our own integrated Nordic organization in place, meaning that we can add properties such as the SBB portfolio and potentially the three public syndicates or the three syndicates, without the corresponding increase in the central administration cost.
André Gaden: With that said, we are continuously working on optimizing the organization and process efficiency, which also includes AI-supported processes. As Ylva said in the presentation, in our run rate, we estimate normalized administration expenses of around SEK 300 million.
Moderator: The occupancy has declined slightly during the quarter. What were the main drivers behind this?
André Gaden: The occupancy declined slightly in the quarter from approximately 93.7% to 93.5%. The decline was primarily due to two properties in Sweden, where tenants relocated to other PPI buildings, actually, leaving space vacant in their former premises. We are currently in discussions with prospective tenants for those spaces. We also lost a tenant in the Buckis property.
André Gaden: However, a new lease has already been signed. That is the lease with Toyota that was mentioned in the presentation. But overall, we continue to see growing demand for our premises, although leasing processes involving public sector tenants, they tend to take some time. Also to underline, our net letting was positive with over SEK 7 million in this quarter.
Moderator: The final question for you then, Ylva. Other financial expenses were -SEK 179 million in the quarter, mainly driven by currency. Can you explain it?
Ylva Göransson: Yes. That is actually very important to understand. Part of our debt is in NOK and EUR to match our Norwegian and Finnish assets. When those currencies strengthen against the Swedish krona, it gave an unrealized currency loss of SEK 147 million on debt over the P&L. But it is important to understand that the same currency move affected the value of our assets in Finland and Norway at the same time, and gave us a positive effect of SEK 617 million booked directly over equity. So the net effect on equity is positive.
Moderator: Thank you both. That concludes today's Q&A session.
André Gaden: Thank you so much. Thank you so much for listening, and see you again next quarter.
