A transactions-intensive year
The fourth quarter, similarly to the rest of the year, was a very transaction-intensive period for us. In 27 separate transactions, we divested an entire 132 properties during the year, with a total transaction volume of nearly SEK 15 billion. This enabled us to reduce interest-bearing liabilities by SEK 14 billion during the year, while we have also invested nearly SEK 2 billion in ongoing projects and tenant improvements in order to develop the portfolio in the long term.
During the fourth quarter, we completed two major deals whereby we divested 24 properties to Blackstone and two office properties in Copenhagen to AP Pension. Together, these two deals amounted to a combined property value of around SEK 5 billion. To strengthen the balance sheet in the long term, our strategy also includes reducing the future volume of development projects, which is why we are prioritising the completion of ongoing projects over starting new projects. In the fourth quarter, we chose to divest one of our planned projects in the US. The property on 118 10th Avenue in New York, with a building right of around 13,000 square metres, was sold to a local project developer that will carry on developing the project.
The transactions market is not as deep nor as strong as a few years ago, but exhibits a stability and a reasonably high activity in spite of high interest rates. We therefore feel secure in our continued ability to complete attractive transactions as a tool to strengthen our balance sheet.
Satisfied customers and value-generating management
Corem’s core business is in letting, managing and developing our properties. Net letting was positive in 2023 and landed at SEK 83 million. During the fourth quarter, we signed a number of fine new leases in Sweden and in the US, such as with Tieto Evry in Örebro and with the investment company 1 Round Table in New York. In Copenhagen, we have signed a contract to let nearly 5,200 square metres across three floors to SOS International.
In total, we signed around 950 lease contracts during the year, for a combined value of nearly SEK 470 million. We are particularly pleased about contracts that are extended, as tenants that know us opt to extend their leases and develop within our portfolio. Thanks to continued good work by our locally based management organisation, we have satisfied customers and customers that stay with us.
Net operating income in a comparable portfolio increased by 10 per cent during the year, even though the net operating income in real numbers fell apace with divestments. Profit from property management is held back by increased financial expenses as a consequence of rising market interest rates, as well as by the reduction in volume of the portfolio, and amounted to SEK 1,239 million for the full year.
For many years, we have been able to present good results on the energy side, having gradually reduced energy consumption. In 2023, we ended up with an average energy consumption of just over 78 kWh per square metre. This is good, and a bit better than the target of 80 kWh per square metre.
As for project development, we have continued to complete our ongoing projects, contributing positively to net operating income. During the fourth quarter, the property Orgelpipan 4 on Klarabergsgatan in central Stockholm was completed, and was then fully let to the Swedish Riksbank and the restaurant AMI. The property was sold in the first quarter of 2024.
Pressure on property values
As many other real estate companies, we have had to adjust the value of our properties to reflect current market conditions. In total, the adjustments amounted to 11 per cent during the year and to 14 per cent compared to when the values were at their highest, in the spring of 2022. These value changes are primarily driven by changing yield requirements, as a consequence of financing becoming more expensive. The average yield requirement increased in both 2022 and 2023, amounting at year-end to 5.8 per cent. The corresponding figure in Q1 2022 was 4.9 per cent.