The market that we operate on has been affected for a number of years now by the effects of a pandemic, a challenging geopolitical climate and a financial situation with increased interest rates and rising inflation. If we also take into account a bond market which for a period was more or less completely closed, we can quickly draw the conclusion that the business climate has been extremely challenging. All real estate companies have struggled with depressed values and increased financial expenses and those with a high exposure to the bond market have had to divest parts of their portfolios to deal with their maturities, including ourselves.
New Corem
Corem has navigated through these years with a clear sense of direction and therefore we are now a smaller company. We have shrunk our assets and our project commitments considerably. We give priority to tenant adaptation over major investments and even though around SEK 500 million remains to invest in our major ongoing projects, they contribute at the same time SEK 322 million in annual rental value.
We have sold over 220 properties during a two-and-a-half-year period and in this way almost halved our bond debt. During the first six months of 2024, a total of 33 properties were divested, or agreement was reached to divest, at an underlying property value of SEK 2.7 billion. Among other things, we divested our entire portfolio in Jönköping. This is a continuing process but it is nice to feel that it probably won’t continue to get worse before it gets better.
Now we are again seeing inflation of a more controlled nature, with in the long run more favorable interest rates and a bond market that has opened up again. Even the yield requirements have now probably reached their peak level and the transaction market, which in Sweden never became completely inactive, has stabilized. Overall, this is of course incredibly positive and we can fully focus on our new, slightly smaller Corem, to take on the future.
Stable core operations
The rental market generally shows relatively good demand. We can forget about the post-pandemic concern that the heydays of offices was over. Attendance at offices is increasing even if there are expectations of continuing possibilities of hybrid work. Our tenants are, of course, also positively affected by our having passed the peak of interest rates, which is reflected in dialogue with new and existing customers and in the number of enquiries about premises. Negotiation processes are still relatively long although the rental market is active, which is reflected in our letting statistics. Net letting amounted to SEK 37 million in the quarter and to SEK 87 million for the first half year.
To date this year, Corem has signed over 400 lease contracts at a value of approximately SEK 300 million. It is particularly gratifying that we have let around 3,500 square metres to the Swedish Coast Guard and around 1,500 square metres to Freemelt, at the property Majorna 219:7 in the Fiskhamn area of Gothenburg. This area is undergoing an exciting transformation from industrial and port activities to modern offices close to the city. We have also signed five new lease contracts in New York during the quarter corresponding to a total of approximately 2,350 square meters, including restaurant space at 1245 Broadway to JKS Restaurants and the other week a contract for 380 square metres at 28&7 to Garden Intelligence.
