Interim report January-June 2018

Transcription

1 AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment.

2 The period in brief FIRST SIX MONTHS OF Rental revenue increased 2% to SEK 1,88 M (94). Profit from property management increased 24% to SEK 86 M (651). Profit from property management per Class A and B share after dilution rose 21% to SEK 4.36 (3.6). In total, property revaluation affected profit by SEK 1,59 M (619), of which joint ventures accounted for SEK 32 M (228). Revaluation of financial instruments impacted profit by SEK 115 M (429), of which joint ventures accounted for SEK 2 M (41). Profit after tax for the period was SEK 1,666 M (1,441). Cash flow from operating activities before changes in working capital amounted to SEK 87 M (612), corresponding to SEK 4.76 (3.35) per Class A and B share after dilution. During the period, Sagax invested SEK 1,72 M (861), of which acquisitions of properties accounted for SEK 1,617 M (712). During the quarter, Sagax completed a rights issue of 23,862,214 Class D common shares, a private placement of 9,574,617 Class D common shares and a new issue of 121,275 Class B shares linked to the Incentive Plan 215/. The share issues generated proceeds of SEK 961 M for Sagax. SECOND QUARTER OF Rental revenue increased 22% to SEK 559 M (46). Profit from property management increased 3% to SEK 452 M (349). Profit from property management per Class A and B share after dilution rose 23% to SEK 2.38 (1.94). In total, property revaluation affected profit by SEK 78 M (285), of which joint ventures accounted for SEK 253 M (78). Revaluation of financial instruments impacted profit by SEK 11 M (378), of which joint ventures accounted for SEK 7 M (21). Profit after tax for the period amounted to SEK 985 M (882). Cash flow from operating activities before changes in working capital amounted to SEK 591 M (377), corresponding to SEK 3.26 (2.2) per Class A and B share after dilution. Sagax invested a net amount of SEK 337 M (646), of which the acquisition of properties accounted for SEK 275 M (581). ADJUSTED FORECAST FOR Profit from property management for, meaning profit before revaluations and tax, based on the current property portfolio as well as announced acquisitions and divestments, is expected to amount to SEK 1,6 M. The previously submitted forecast was for profit of SEK 1,53 M and was presented when the interim report for January-March was published. Selected key performance indicators Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Profit from property management per Class A and B share after dilution, SEK Change compared with preceding year, % Earnings per Class A and B share after dilution, SEK Dividend per Class A and B share, SEK Interest coverage ratio, multiple Debt ratio, % Properties market value, SEK M 27,8 22,113 23,771 2,628 16,189 13,428 1,825 Property yield, %

3 During the second quarter, Sagax contracted to take possession of a property in Vantaa, north-west of central Helsinki and ten minutes from Helsinki Airport. The property includes a lettable area of 6,3 square metres and 17,3 square metres of land. The premises were fully refurbished in 216 and are fully let. 1

4 Business concept, goals and strategies BUSINESS CONCEPT AB Sagax is a property company whose business concept is to invest in commercial properties, primarily in the warehouse and light industry segment. COMPANY GOALS The overriding objective is the long-term generation of the maximum possible risk-adjusted return to the company s owners. To achieve this objective, Sagax has set the following business targets: Operations must generate a long-term sustainable return and strong cash flows. The company is to continue to grow through property acquisitions after taking into account the risk-adjusted return. Cash flows from the existing property portfolio are to rise more than inflation. FINANCIAL TARGETS The table and charts below illustrate the outcome for the past five years in relation to the financial targets. STRATEGIES Investment strategy Sagax invests primarily in warehouse and industrial properties. Properties designed as warehouses and for light industries are attractive investment opportunities, since they generate a high yield combined with a low rate of new production and stable occupancy rates. Sagax invests in add-on acquisitions and in existing properties. Property acquisitions and investments in the existing portfolio aim to increase cash flow and diversify rental revenue, thereby reducing the company s operational and financial risks. The chart on page 3 illustrates the trend in the properties market value and lettable area. Financing strategy The financial structure of Sagax is designed with a clear focus on operating cash flow and the interest coverage ratio. This is expected to create both excellent prerequisites for expansion and an attractive return on equity. The charts on page 3 show Sagax s profit from property management and cash flow from operating activities. As illustrated, cash flow corresponds closely to profit from property management. The deviation is due mainly to profit from joint ventures, which is not recognised as cash flow. Dividends received from joint ventures are recognised as cash flow from operating activities. Sagax endeavours to have well-balanced fixed-interest and capital maturity profiles to secure its operating cash flow. At the end of six months, the average fixed-interest period was 2.1 years (2.3) and the average maturity period was 2.8 (3.2) years. Financial targets Outcome Five-year average Return on equity, measured over a five-year period, should not fall below 15% per year 26% 23% Profit from property management per Class A and B share should increase by a minimum of 15% per year 18% 28% Profit from property management per Class A and B share Return on equity SEK 1 % 5 % Profit from property management per Class A and B share, rolling 12 months Annual percentage growth rate, rolling 12 months Objective for annual growth rate is not less than 15% Return on equity Return on equity, rolling 5 years Objective for return on equity is att leastr 15 % over a five-year period. 2

5 The company has four classes of shares: Class A, B and D common shares, and preference shares. The aim of the Class D shares, like the preference shares, is to attract investor categories that value steady ongoing dividends. Management strategy Sagax pursues efficiency and sustainability in its management strategy. The management strategy includes working actively to achieve long leases. This applies equally to new leases and to the management of existing leases. The company s policy is to abstain from maximising rent levels at all points of time in favour of signing leases of a longer duration with solvent tenants. This is regarded as being advantageous since it reduces the risk of vacancies, while leading to lower costs for letting premises and adapting premises to tenant needs. On 3 June, the average remaining term under the company s leases was 6.5 years (6.8). cost of heating and hot water and that are thus only affected to a limited extent by changes in consumption or changed rates for such utilities as heating, electricity, property tax, water and sewage. Strategy for the rental market Sagax invests primarily in regions experiencing stable population growth and that have diversified business activities. Sagax s greatest exposure to the rental market occurs in Stockholm and Helsinki, which are the markets in the Nordic region regarded as offering the best potential for long-term growth. The risk of a decline in the occupancy rate and rent levels due to a weaker rental market is regarded as low due to the stable demographic growth and the diversified business operations in these regions. Read more about this in the Sagax Annual Report for. Strategy for tenants Sagax endeavours to attract reputable and creditworthy tenants. The company mainly enters into leases that exclude the Market value and area of properties s square metres 3, 2,4 1,8 1,2 6 SEK M 3, 24, 18, 12, 6, Profit from property management and cash flow SEK M 1,5 1, Lettable area Market value Profit from property management, rolling annual value Cash flow from operating activities before change in working capital, rolling annual value 3

6 Earnings, revenue and expenses The profit/loss and cash-flow items below refer to the January to June period. The comparative items refer to the year-earlier period. Amounts for the balance-sheet items and comparative figures refer to the position at the end of the current period and end of the year-earlier period. EARNINGS Profit from property management rose 24% to SEK 86 M (651), of which joint ventures and associated companies accounted for SEK 151 M (133). The increase was mainly attributable to property acquisitions. Profit from property management per Class A and B share after dilution rose 21% to SEK 4.36 (3.6). Changes in the value of properties increased profit by SEK 1,59 M (619), of which the revaluation of joint ventures accounted for SEK 32 M (228). The revaluation of financial instruments had an impact totalling SEK 115 M (429) on profit. The revaluation of listed shares accounted for SEK 53 M (3), while fixed-income derivatives accounted for SEK 41 M (12), of which joint ventures accounted for SEK 2 M (41). The time factor is the main reason for the changes in the value of the fixed-income derivatives and the lower reserve for the deficit values of the fixed-income derivatives. Profit after tax for the period was SEK 1,666 M (1,441). REVENUE Rental revenue rose 2% to SEK 1,88 M (94). Revenue was positively affected primarily by property acquisitions. Other revenue of SEK 24 M (1) primarily comprised compensation from tenants who prematurely vacated premises and insurance compensation. Profit from property management Economic leasing rate SEK M/Quarter SEK M/Year 1,6 1,2 8 4 % Profit from property management per quarter Rolling annual value Leasing rate Average, past 12 months Rental revenue SEK M/Quarter SEK M/Year 2,4 2, 1,6 1, Rental revenue per quarter Rolling annual value 4

7 CHANGE IN THE ECONOMIC OCCUPANCY RATE The economic occupancy rate amounted to 94%, unchanged compared with year-end. During the period, the vacancy value rose SEK 45 M (27) due to tenants vacating premises and declined SEK 43 M (42) due to new lettings. Discounts provided on a fixed-term basis amounted to SEK 23 M (19) on an annual basis at the end of the period, up SEK 7 M (1) during the period. The terms for the discounts are described in the table below. Stockholm and Helsinki accounted for 8% (83) of the vacancy value. The closing vacancy value increased SEK 13 M during the period to SEK 135 M (121). FUTURE VACANCY CHANGES Notice of termination had been served for leases with a rental value of SEK 54 M (53) at the end of the period, of which notice of vacating the premises accounted for SEK 51 M (52) and notice of renegotiation of the premises for SEK 3 M (1). Of the leases for which notice had been received, vacancies corresponding to SEK 14 M will occur in. The rate of vacating premises is described in the table below. New lettings that have not yet been occupied reduced the adjusted vacancy value by SEK 37 M (17). The adjusted closing vacancy value was SEK 151 M (157), a net decline of SEK 4 M since year end. The decrease was due to the vacancy value for new lettings that have not yet been occupied rising SEK 28 M in parallel with the vacancy value for notices of vacating premises increasing SEK 13 M, while the closing vacancy value increased SEK 12 M. Vacancy changes Amounts in SEK M Jan-Dec Opening vacancy for each year Vacancies 45 6 Lettings Change in discounts provided 7 5 Vacancy value, acquired properties 3 22 Vacancy value, sold properties 3 8 Demolition of buildings 5 Change in exchange rates 5 2 Closing vacancy value Terminated for renegotiation 3 Terminated lease, not vacated New letting, not occupied 37 9 Adjusted closing vacancy value Terms for discounts provided Year of expiry SEK M >222 1 Total 23 Leases terminated for vacancy Year of vacancy No. of leases Rental value, SEK M Total 4 5 Vacancies, 1 July Area Rental value, SEK M Vacancy value, SEK M 1) Economic vacancy rate 1) Lettable area, sqm Vacant area, sqm Vacancy rate by area Stockholm % 646, 33, 5% Helsinki % 57, 59, 12% Finland, university cities % 255, 8, 3% Paris % 22, 7, 4% Netherlands % 172, 9, 5% Rest of Sweden % 47, 2, % Rest of Finland % 343, 14, 4% Rest of Europe % 137, 2, 2% Total 2, % 2,67, 135, 5% 1) The vacancy value and vacancy rate take into account both vacancies and discounts provided. 5

8 PROPERTY EXPENSES Operating and maintenance costs rose to a total of SEK 132 M (97). Property tax and site leaseholds amounted to a cost of SEK 59 M (46). Other property expenses amounted to SEK 17 M (14). All of these cost increases were mainly attributable to property acquisitions. CENTRAL ADMINISTRATION Costs for the Group s central administration amounted to SEK 49 M (35) and consisted of costs for executive management, financial risk management and credit procurement. The Parent Company, AB Sagax, is responsible for stock market issues, such as financial reporting and stock market information. Services between Group companies are charged on commercial terms and conditions and in accordance with market-based pricing. Intra-Group services comprise management services and internal interest charging. The Parent Company s management fees from Group companies for the period amounted to SEK 23 M (18). The Parent Company s income statement and balance sheet are shown on page 21. At the end of the period, the Group had 58 (45) employees, refer to the table below. Functions such as property care-taking and on-call operations are outsourced. The company has offices in Stockholm, Helsinki, Rotterdam, Paris and Jyväskylä. Number of employees Country Men Women Total Sweden Finland France Netherlands 4 4 Total PROFIT FROM JOINT VENTURES Profit from joint ventures pertained to Sagax s shares in the earnings of the company s joint ventures; refer also to page 13 for more information. Profit for the period amounted to SEK 433 M (351), of which profit from property management accounted for SEK 151 M (133), changes in the value of fixed-income derivatives for SEK 2 M (41) and changes in the value of properties for SEK 32 M (288). Profit was charged with deferred tax of SEK 58 M (51). NET FINANCIAL ITEMS Financial expenses amounted to SEK 231 M (213). The average interest rate was 2.9% (3.) at 3 June. Interest-bearing liabilities increased to SEK 14,337 M (13,327) due to financing of property acquisitions. For more information about financing at Sagax, see page 14. Financial income of SEK 31 M (18) primarily pertained to dividends received for listed shares. REVALUATION OF PROPERTIES The value trend for properties in Sweden was an increase of SEK 318 M (123) and the value trend for properties abroad was an increase of SEK 437 M (268). A total of SEK 756 M (392) was recognised in unrealised changes in value for the period, excluding currency effects. The change in the market value of the property portfolio is also described on page 12. New lettings and renegotiations of leases increased the market value of the properties by SEK 423 M (131). Vacancies and renegotiations reduced the value by SEK 127 M (7). The general change in market value for the company s properties amounted to SEK 46 M (33), primarily due to lower yield requirements. Of the unrealised change in value of SEK 437 M abroad, SEK 413 M was attributable to the operations in Finland. Unrealised changes in value Amounts in SEK M New lettings/renegotiations 157 Vacancies/Renegotiations 84 General change in market value 246 Sub-total, Sweden 318 New lettings/renegotiations 267 Vacancies/Renegotiations 43 General change in market value 214 Sub-total, International 437 Total unrealised changes in value 756 6

9 Realised changes in the value of properties amounted to SEK 17 M ( 1) for the period, see also page 11. The weighted yield requirement used in the valuations was 7.1% (7.4). The weighted cost of capital for the present value calculation of cash flows and residual values amounted to 7.9% (8.) and 8.5% (8.6), respectively. See also the section on analysis and general conditions on page 12. Earnings were also impacted by a revaluation of SEK 32 M (228) of properties in Sagax s joint ventures. REVALUATION OF FINANCIAL INSTRUMENTS Fixed-income derivatives, listed shares and financial instruments linked to holdings of joint ventures were revalued on 3 June. The fixed-income derivatives comprised interest-rate swaps and interest-rate caps. All fixed-income derivatives are recognised at market value and changes in market value are recognised in profit or loss. Changes in value for the period amounted to SEK 21 M (79), which comprised unrealised changes in value. The change in value was due primarily to the time factor. At the end of the period, the reserve for the deficit value of fixed-income derivatives was SEK 4 M (448); refer to the section on financing on page 15. Earnings were also impacted by SEK 2 M (41) from the revaluation of fixed-income derivatives in joint ventures. In its consolidated financial statements, Sagax continuously recognises the company s share of deficit values of the fixed-income derivatives of its joint ventures. Revaluation of listed shares resulted in an unrealised change in value of SEK 46 M (3). The divestment of shares resulted in a realised change in value of SEK 7 M ( 1) for the period. The revaluation of financial instruments attributable to joint ventures amounted to SEK 21 M (37) pursuant to IFRS 9. TAX Sagax recognised a current tax expense of SEK 68 M (35). The deferred tax expense for the period amounted to SEK 187 M (171). As a result of the new corporate taxation in Sweden, deferred tax liabilities pertaining to operations in Sweden are restated at the new tax rate of 2.6%, which is applicable from 221. The recalculation resulted in an SEK 46 M adjustment to the value of deferred tax liabilities. The Group s deferred tax liabilities at the end of the period amounted to SEK 1,362 M (916). Deferred tax liabilities by country Amounts in SEK M 3 June Sweden 677 Finland 588 Germany 82 Denmark 4 France Netherlands 11 Tax liabilities 1,362 CASH FLOW Cash flow from operating activities before changes in working capital amounted to SEK 87 M (612). Changes in working capital had an impact of SEK 57 M (57) on cash flow. Investing activities had an impact of SEK 1,835 M ( 959) on cash flow, while cash flow from financing activities contributed SEK 885 M (238) to Sagax. In total, cash and cash equivalents rose SEK 23 M (52) during the period. See page 18 for the statement of cash flows. 7

10 Forecast and current earnings capacity FORECAST FOR Profit from property management for, meaning profit before revaluations and tax, based on the current property portfolio and announced acquisitions and divestments, is expected to amount to SEK 1,6 M. The previously submitted forecast was for profit of SEK 1,53 M and was presented in conjunction with the publication of the interim report for January-March. CURRENT EARNINGS CAPACITY Current earnings capacity is reported in conjunction with interim reports and year-end reports. The table below shows the company s earnings capacity on a 12-month basis at 1 July. It is important to note that this capacity cannot be compared with a forecast for the forthcoming 12 months because it does not contain assessments about, for example, future vacancies, the interest rate scenario, currency effects, rent trends or changes in value. The rental value is based on contractual rental revenue on an annual basis, with supplements for estimated market rents for vacant premises. Property expenses are based on actual outcomes over the past 12 months adjusted for the holding period. Central administration costs are based on actual outcomes over the past 12 months. Net financial items are calculated based on interest-bearing liabilities and assets on the balance sheet date. Expenses for interest-bearing liabilities are based on the Group s estimated average interest rate, plus financing costs allocated over time. Dividends attributable to the company s holdings of listed shares were not taken into account in the earnings capacity. Tax is calculated at the standard tax rate of 22%. Shares in profit in joint ventures are calculated in accordance with the same assumptions as for Sagax, taking into account the size of the participations. Current earnings capacity Current earnings capacity before tax Amounts in SEK M 1 Jul 1 Jan Rental value 2,352 2,99 Vacancy Rental revenue 2,217 1,977 Property expenses Net operating income 1,824 1,644 Central administration Joint ventures Financial expenses Profit from property management 1,591 1,41 Tax Profit after tax 1,243 1,1 of which, holders of preference shares of which, holders of Class D shares of which, holders of Class A and B shares 1, SEK M 1,5 1,25 1, Profit from property management Yield and lending rate Difference between yield and lending rate % 1 % Yield of Sagax s properties Sagax s average lending rate Ten-year swap rate Difference between yield of Sagax s properties and ten-year swap rate Difference between yield of Sagax s properties and Sagax s average interest rate 8

11 Property portfolio At 3 June, the property portfolio comprised 498 (479) properties with a lettable area of 2,67, (2,399,) square metres. The average remaining lease term was 6.5 years (6.8). The two largest market areas are Stockholm and Helsinki, where 56% (59) of the market value and 52% (57) of the rental value is concentrated. At the end of the period, the total rental value and contractual annual rent amounted to SEK 2,352 M (1,991) and SEK 2,217 M (1,87), respectively. This corresponds to an economic occupancy rate of 94% (94). INVESTMENTS During the period, Sagax invested SEK 1,74 M (871), of which property acquisitions accounted for SEK 1,617 M (712). A total of SEK 1,42 M was invested abroad, corresponding to 81% of total investments during the period. Of the investments, the Netherlands accounted for 3%, Finland for 27%, France for 24% and Sweden for 19%. A total of 27 properties were acquired with a total lettable area of 218, square metres. The largest investment was 63 Grand Rue Survilliers in Paris with a lettable area of 39,8 square metres. Refer also to page 1. A total of SEK 123 M (159) was invested in the existing property portfolio. SEK 12 M of the investments for the period were made against rent supplements, SEK 45 M was invested in conjunction with new lettings, SEK 34 M in conjunction with new production and SEK 32 M pertained to property maintenance. At the end of the period, the Group agreed to acquire three properties for which possession will be taken in the third and fourth quarters. The total investment will amount to SEK 218 M. DIVESTMENTS During the period, 24 properties with a total lettable area of 38,7 square metres were divested for a total of SEK 21 M; see compilation on page 11. The largest divestment was Hillerstorp 3:16 in Gnosjö, with a lettable area of 23,4 square metres. Other divestments comprised smaller properties in Finland. YIELD The properties yield is a yield measurement whereby the net operating income for the period, adjusted for holdings, is compared with the properties carrying amounts at the end of the period. The yield provides an overview of earnings generation before financial expenses and central administration costs are taken into account. The yield reported by Sagax for the period was 6.8% (7.). Summary of property portfolio 1 July Segment No. of properties Lettable area, sqm Vacant area, sqm Market value Percentage of Economic Rental revenue Rental SEK M SEK per sqm value, SEK M rental value occupancy rate SEK M Share Stockholm , 33, 9,327 14, % 94% % Helsinki 69 57, 59, 5,784 11, % 89% 54 23% Finland, university cities , 8, 2,31 9, 234 1% 97% 227 1% Paris 44 22, 7, 1,819 9, 181 8% 97% 175 8% Netherlands , 9, 1,445 8, % 96% 13 6% Rest of Sweden 47 47, 2, 2,428 6, 28 9% 99% 26 9% Rest of Finland , 14, 2,37 6, % 97% 225 1% Rest of Europe , 2, 1,534 11,2 13 5% 99% 129 6% Total 498 2,67, 135, 27,8 1,1 2,352 1% 94% 2,217 1% Property investments January-June Amounts in SEK M Property acquisitions Existing portfolio Total Stockholm Helsinki Finland, university cities Paris Netherlands Rest of Sweden 2 2 Rest of Finland Rest of Europe Total 1, ,74 9

12 Property acquisitions January-June Property/address Municipality Segment Lettable area, sqm Murmästare-Ämbetet 2 Stockholm Stockholm 7,937 Konsumenten 1 Stockholm Stockholm 7,896 Klingan 3 Huddinge Stockholm 1,83 Råfilmen 1 Stockholm Stockholm 1,41 Veddesta 2:42 Järfälla Stockholm 4,38 Mänkimiehentie 4 Espoo Helsinki 18,44 63 Grande rue Survilliers Paris 39,753 Rue de la Prairie Villebon-Sur-Yvette Paris 6,3 Chroomstraat 14 Zoetermeer Netherlands 7,24 Huis ter Heideweg Zeist Netherlands 2,258 Innovatieweg 12 Terneuzen Netherlands 2,626 Kwartelweg 1 Moerdijk Netherlands 6,458 Innovatieweg 6 Terneuzen Netherlands 6,425 Hallitie 2 Oulu Finland, university cities 3,578 Lumijoentie 2 Oulu Finland, university cities 6,778 Mittarikuja 5 Oulu Finland, university cities 7,2 Moreenikuja 2 Oulu Finland, university cities 6,18 Vihikari 1 Kempele Finland, university cities 18,87 1 Rue de Reckem Neuville-en-Ferrain Rest of Europe 17,397 First quarter 19,11 Ahjokatu 26 Jyväskylä Finland, university cities 2,252 Het Zuiderkruis 11 Den Bosch Netherlands 4,27 Admiraal de Ruyterstraat 2 Schiedam Netherlands 1,683 Grasbeemd 12 Helmond Netherlands 2,711 Innovatieweg 1 Terneuzen Netherlands 3,745 Lieudit La Fosse Montalbot - 26 Chemin du Port Brun Vigneux-sur-Seine Paris 2,76 56 Boulevard de Beaubourg Emerainville Paris rue Galvani Massy Paris 83 Second quarter 27,539 Total 217,55 Lease terms Contractual annual rent Year of expiry No. of leases Area, sqm SEK M Share , 95 4% , 218 1% , % , 25 9% , 226 1% > ,476, 1,232 56% Total 1,48 2,539, 2,217 1% Year of maturity of annual rent Annual value (SEK M) Leases (no.) Annual value (SEK M) Leases (no.)

13 Property divested January-June Property/address Municipality Segment Lettable area, sqm Hillerstorp 3:16 Gnosjö Rest of Sweden 23,45 Pertuntie 1 Tuusula Helsinki 21 Helsingintie 1 Karkkila Rest of Finland 32 Helsingintie 25 Karkkila Rest of Finland 588 Jousitie 29 Joutsa Rest of Finland 846 Keskustie 7 Lohja Rest of Finland 17 Naarkoskentie 1 Pukkila Rest of Finland 235 Oklaholmankatu 1 Kemi Rest of Finland 658 Perttulantie 5 Ypäjä Rest of Finland 45 Savontie 21 Rautavaara Rest of Finland 793 Turuntie 1 Aura Rest of Finland 1,115 Hauhontie 11 Hämeenlinna Rest of Finland 868 Kurkelankatu 2 Forssa Rest of Finland 52 First quarter 3,25 Keskuskatu 7 Mänttä-Vilppula Rest of Finland 1,22 Rautatienkatu 19 Iitti Rest of Finland 78 Iisvedentie 2 Suonenjoki Rest of Finland 68 Jämsänkoskentie 8 Jämsä Rest of Finland 24 Savontie 2 Mäntyharju Rest of Finland 92 Nallenpolku 2 Kotka Rest of Finland 557 Kauppakuja 2 Kolari Rest of Finland 1,18 Rautjärventie 92 Rautjärvi Rest of Finland 585 Tehtaantie 21 Mänttä-Vilppula Rest of Finland 85 Jukolantie 6 Kouvola Rest of Finland 381 Kitkantie 17 Kuusamo Rest of Finland 1,375 Second quarter 8,462 Total 38,667 11

14 Market value of property portfolio Sagax prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The company has chosen to recognise its properties at fair value in accordance with the Fair Value Method. At 3 June, the total market value of Sagax s 498 (479) properties was SEK 27,8 M (22,113). The depreciation of the SEK against the EUR during the period led to property values abroad increasing SEK 779 M (233). The total unrealised change in value recognised during the period was SEK 756 M (392). Refer also to the table Unrealised changes in value on page 6. VALUATION METHOD AND IMPLEMENTATION The valuations were carried out in accordance with generally accepted international valuation methods. As of 3 June, all valuation objects had been valued separately by authorised property appraisers from independent valuation agencies, except for the five German properties which, as a result of high valuation costs in Germany, were most recently valued externally at year end. The principle method of appraisal used was cash flow calculations in which the present value of net operating income, investments and residual values was calculated. The calculation period was adjusted to the remaining term of existing leases and varies between five and 2 years. As a rule, the calculation period is ten years. All properties have been inspected over the past three-year period. These inspections include public areas and a selection of premises with specific emphasis on major tenants and vacant premises. The purpose of the inspections is to assess the properties overall standard, maintenance requirements, market position and the attractiveness of the premises. ANALYSIS AND GENERAL CONDITIONS The cost of capital for the present value calculation of cash flows (4. 16.%), the cost of capital for the present value calculation of residual values (4. 16.%) and the yield requirement for the residual value calculations ( %) are based on analyses of transactions carried out and on individual assessments of the risk level and market position of each property. The weighted cost of capital for the present value calculation of cash flows and residual values for the property portfolio was 7.9% (8.) and 8.5% (8.6), respectively. The weighted yield requirement was 7.1% (7.4) at 3 June. By comparison, the yield reported by Sagax for the period was 6.8% (7.). A comparison of the yield reported over time and the yield requirement used in valuations is provided below. A sensitivity analysis for changes in assumptions in property valuations is presented on page 27. Change in carrying amount of properties Yield compared with yield requirement Number SEK M of shares Property portfolio, 31 December 23, Acquisition of properties 1, Investments in the current portfolio 123 Property sales Translation effect, currencies 779 Unrealised changes in value 756 Property portfolio, 3 June 27,8 498 % Reported yield Yield requirement used in valuations 216 Yield on 1-year government bonds Group s rental value Market value of properties Rest of Finland 1% (SEK 229 M) Rest of Sweden 9% (SEK 28 M) Netherlands 6% (SEK 136 M) Paris 8% (SEK 18 M) Rest of Europe 5% (SEK 129 M) Stockholm 28% (SEK 664 M) Helsinki 24% (SEK 565 M) Finland, university cities 1% (SEK 232 M) Rest of Finland 9% (SEK 2,37 M) Rest of Sweden 9% (SEK2 428 M) Netherlands 5% (SEK 1,445 M) Paris 7% (SEK 1,819 M) Rest of Europe 6% (SEK1,534 M) Stockholm 35% (SEK 9,327 M) Helsinki 21% (SEK 5,784 M) Finland, university cities 9% (SEK 2,31 M) 12

15 Joint ventures Sagax s joint ventures contributed a total of SEK 151 M (133) to profit from property management during the period. Sagax s share of changes in the value of properties amounted to SEK 32 M (228) and the share of changes in the value of fixed-income derivatives was SEK 2 M (41) during the period. The total value of the commitment associated with ownership of joint ventures amounted to SEK 2,836 M (2,186), of which SEK 2,442 M (1,879) was recognised as participations in accordance with the equity method and associated financial instruments were recognised at SEK 394 M (37) following market valuation according to IFRS 9 Financial Instruments: Recognition and Measurement. Sagax owns 5% of Söderport Holding AB, with the remaining share owned by the Hemfosa Group. Via Hemsö Intressenter AB, Sagax indirectly owns 15% of Hemsö Fastighets AB, with the remaining share owned by the Third Swedish National Pension Fund. SÖDERPORT HOLDING AB On behalf of Söderport, Sagax handles the financial administration and most of the property management of the Söderport Group. Hemfosa is responsible for property management at certain locations. A corresponding 68% of Söderport s rental value of SEK 617 M was located in Stockholm as of 3 June. Söderport s economic vacancies amounted to SEK 23 M (4) at the end of the period, corresponding to a vacancy rate of 4% (7). Of the economic vacancies, SEK 7 M (5) comprised fixed-term rent discounts provided for new lettings. At the end of the period, Stockholm accounted for 89% of the economic vacancies. One property in Gothenburg with a total lettable area of 8,3 square metres was acquired during the period. HEMSÖ INTRESSENTER AB Hemsö Fastighets AB conducts operations in Sweden, Germany and Finland. Operations consist of owning, managing and developing public properties. The property portfolio encompasses 349 properties with a total property value of SEK 42 billion at 3 June. Of the total property value, Sweden accounts for 75%, Germany 13% and Finland 12%. A corresponding 82% of the property value comprises properties located in metropolitan regions in Sweden, Germany and Finland. Of Hemsö s properties, 172 are residences for the elderly, 13 school premises, 62 healthcare premises and 12 properties for the justice and legal sector. Of Hemsö s contractual rents, 59% derives from municipalities, county councils or the state. An average remaining lease term of 9.1 years (8.7) combined with financially stable tenants and a low vacancy rate ensure stable rental revenue. Approximately 94% of rental revenue derives from tax-financed operations. More information on Hemsö Fastighets AB is available on the company s website, hemso.se. Sagax s joint ventures Söderport Hemsö Sagax s participating interest, % Rental revenue, SEK M ,28 1,156 Profit from property management, SEK M Profit for the period, SEK M ,455 1,32 Sagax s share of profit from property management, SEK M No. of properties Rental value, SEK M ,64 2,351 Properties market value, SEK M 7,37 6,66 41,597 35,969 Lettable area, sqm 659, 643, 1,651, 1,56, Lease term, years Economic vacancy rate, % Interest-bearing liabilities, SEK M 3,89 3,77 27,786 25,863 Loan maturity, years Fixed interest, years Market value of fixed-income derivatives, SEK M Jun 3 Jun 3 Jun 3 Jun 13

16 Financing EQUITY During the period, Sagax completed a rights issue of Class D common shares totalling SEK 656 M. Each existing share (regardless of whether it was a Class A, Class B or Class D common share or a preference share) provided entitlement to one subscription right. Ten subscription rights provided entitlement to one new Class D common share. The subscription price was set at SEK 27.5 per share. The rights issue was oversubscribed. Furthermore, Sagax completed a private placement of Class D common shares through an accelerated book building process. The subscription price was set at SEK 31.5 per share. The private placement generated equity of SEK 32 M for Sagax. During the period, the company also completed a new issue of Class B common shares linked to the Incentive Plan 215/ for a total of SEK 1 M. The Group s equity amounted to SEK 13,846 M (9,764) at 3 June. Changes in equity during the period were attributable to comprehensive income for the period of SEK 2,43 M, new share issues totalling SEK 961 M after transaction costs and a share dividend of SEK 512 M. Refer also to page 19. INTEREST-BEARING LIABILITIES Sagax s interest-bearing liabilities at the end of the period amounted to SEK 14,337 M (13,327). An amount corresponding to SEK 6,612 M (6,114) of loans was recognised in EUR. Interest-bearing net debt amounted to SEK 13,673 M (12,745). Interest-bearing gross debt to banks totalled SEK 7,885 M. The remaining gross interest-bearing debt comprised listed bond loans of SEK 4,772 M (3,411) and commercial paper of SEK 1,68 M (1,269). The main covenants for bond loans are presented on page 15. At 3 June, secured liabilities comprised 31% (39) of the total assets. Unsecured liabilities corresponded to 15% (14). Following its application for an official rating, the company was awarded a rating of Ba1 with a positive outlook by Moody s Investors Service in August. The received rating is only one grade below investment grade (Baa3). The proceeds from the completed share issues for a total of SEK 961 M have been used mainly to repay interest-bearing liabilities, which has helped strengthen the company s credit profile. The chart on page 14 shows how the debt ratio has decreased over time at the same time as financial expenses have Fixed-interest period and debt maturity 3 June Fixed interest Interest bearing debt by year of maturity Interest-rate swaps Year of expiry SEK M Interest rate Share SEK M Share SEK M Interest rate 5, % 4% 88 1% 219 1, % 12% 2,362 16% 1,211.7% % 6% 3,241 22% % 221 2,47 3.6% 17% 2,872 2% 1,88 3.7% 222 1, % 12% 4,817 34% % >222 1, % 13% 956 7% 1,58 2.4% Total/average 14, % 1% 14,337 1% 5, % Interest-bearing net debt 3 June 3 June Interest-bearing liabilities 14,337 13,327 Interest-bearing assets 7 4 Cash and cash equivalents Listed shares Net debt 13,673 12,745 Debt ratio and interest-coverage ratio Interest-coverage ratio, % Debt ratio, % Net debt/ebitda, rolling 12 month Multiple Interest-coverage ratio Debt ratio

17 declined in relation to Group revenues. The debt ratio at the end of the six month period amounted to 46% and the interest coverage ratio to 493%. Interest-bearing net debt for the past 12 months has averaged 7.1 (8.7) times EBITDA; see chart below. A total of SEK 1,53 M (1,142) in loans was raised, of which SEK 389 M (96) in the form of issued commercial paper. Repayments during the period totalled SEK 1,28 M (57). Interest-bearing liabilities rose SEK 351 M (12) due to exchange-rate fluctuations. In accordance with IFRS 9, allocated borrowing costs of SEK 75 M (64) reduced interest-bearing liabilities in the balance sheet. Interest-bearing liabilities of SEK 14,261 M (13,263) were recognised. The average remaining fixed-interest and loan maturity terms were 2.1 years (2.3) and 2.8 years (3.2), respectively, at the end of the period. The average interest rate on the company s interest-bearing liabilities was 2.9% (3.), including the effect of derivatives. The average interest rate decreased as a consequence of new borrowing at lower interest rates. To limit interest-rate risk and increase the predictability of the company s profit from property management, interest-rate caps and interest-rate swaps are utilised with a total nominal value of SEK 8,338 M (7,241), of which interest-rate swaps with an average interest rate of 2.2% (2.5) accounted for SEK 5,173 M (4,488); see table on page 14. The reserve for the market value of fixed-income derivatives declined by SEK 21 M (79) during the period. The total market value of Sagax s fixed-income derivatives was SEK 4 M ( 448). The reserve will be gradually dissolved and recognised in profit and loss by the expiry date of the derivative contracts, regardless of the interest rate scenario. All other things being equal, the time factor alone entails that reserves for the deficit value of fixed-income derivatives in Sagax will be dissolved in a total amount of SEK 18 M over the next year. Over a five-year period, based on the time factor alone and assuming unchanged market interest rates, a total of SEK 374 M would be recognised as revenue in the consolidated financial statements. WORKING CAPITAL AND LIQUIDITY Sagax s working capital, excluding current interest-bearing liabilities, amounted to SEK 77 M (122) at 3 June. On the same date, Sagax s available access to funds was SEK 3,77 M (642), of which SEK 37 M (231) was in the form of cash and cash equivalents and SEK 3,4 M (412) in the form of unutilised lines of credit. Lines of credit corresponding to outstanding commercial paper are not included in available liquidity. No additional collateral needs to be pledged to utilise these lines of credit. In addition to the liquidity described above, Sagax has investments in listed shares totalling SEK 62 M (347), primarily shares in NP3 Fastigheter AB. Listed bond loans, 3 June Maturity SEK M Current interest Interest terms Base interest rates floor 1) Maturity date ISIN code % Stibor 3M+2.9% Yes 18 Jun 219 SE % Stibor 3M+3.2% Yes 18 Jun 22 SE % Stibor 3M+4.75% No 27 Apr 221 SE % Stibor 3M+2.25% No 1 Feb 221 SE ,25 1.8% Stibor 3M+2.15% No 15 Feb 222 SE Total/average 3, 2.42% Maturity EUR M Current interest Interest terms Base interest rates floor 1) Maturity date ISIN code % Euribor 6M+3.2% Yes 11 Mar 219 SE % Euribor 6M+3.5% Yes 9 Sep 22 SE % Euribor 6M+4.7% No 15 Jun 221 SE Total/average % 1) Stibor and Euribor are not to fall below % when calculating interest. Derivative contracts, 3 June Amounts in SEK M Nominal amount Years to maturity Market value 3 Jun Market value 31 Dec Change for the period Nominal interest-rate swaps 5, Interest-rate caps 3, Total 8,

18 Statement of comprehensive income Amounts in SEK M Apr-Jun Apr-Jun Jan-Dec Rolling 12 months Rental revenue 1, ,87 2,54 Other revenue Operating expenses Maintenance costs Site leaseholds Property tax Other property expenses Net operating income ,558 1,714 Central administration Profit from joint ventures of which, profit from property management of which, changes in value of which, tax Financial income Financial expenses Profit including changes in value of joint ventures 1, ,783 2,2 of which, profit from property management ,334 1,489 Changes in value: Properties, realised Properties, unrealised ,113 1,478 Financial instruments, realised Financial instruments, unrealised Profit before tax 1,921 1,648 1, ,45 3,678 Deferred tax Current tax Profit for the period 1,666 1, ,965 3,189 Other comprehensive income items that may be reversed to profit and loss: Translation differences for foreign operations Share of other comprehensive income for joint ventures Translation differences pertaining to hedge accounting Tax on items that may be reversed to profit and loss Comprehensive income for the period 2,43 1,535 1, ,126 3,632 Earnings per Class A and B share, SEK Earnings per Class A and B share after dilution, SEK Earnings per Class D share, SEK Average no. of Class A and B shares, millions Average no. of Class A and B shares after dilution, millions Average no. of Class D shares, millions

19 Condensed statement of financial position Amounts in SEK M 3 Jun 3 Jun 31 Dec Investment properties 27,8 22,98 23,755 Investment properties for sale Participations in joint ventures 2,442 1,88 2,259 Financial instruments Other fixed assets Total fixed assets 29,858 24,317 26,426 Cash and bank balances Listed shares Other current assets Total current assets 1, Total assets 3,858 25,195 27,24 Equity 13,846 9,764 11,356 Non-current interest-bearing liabilities 1,643 1,864 11,937 Deferred tax liabilities 1, ,141 Fixed-income derivatives Other non-current liabilities Total non-current liabilities 12,471 12,275 13,553 Commercial paper 1,68 1,269 1,275 Other current interest-bearing liabilities 1,938 1, Other current liabilities Total current liabilities 4,541 3,155 2,331 Total equity and liabilities 3,858 25,195 27,24 17

20 Statement of cash flows Amounts in SEK M Apr-Jun Apr-Jun Jan-Dec Rolling 12 months Profit before tax 1,921 1,648 1, ,45 3,678 Change in value of financial instruments Change in value of properties ,112 1,46 Result from ownership of joint ventures Dividend from joint ventures Dissolution of allocated borrowing costs Tax paid Other items not included in cash flow Cash flow from operating activities before changes in working capital ,194 1,452 Cash flow from changes in current receivables Cash flow from changes in current liabilities Cash flow from operating activities ,168 1,426 Acquisition of properties 1, ,382 2,287 Property sales Investments in existing properties Acquisition of listed shares Sales of listed shares Increase in other fixed assets 1 2 Decrease in other fixed assets Cash flow from investing activities 1, ,855 2,731 Issue of Class D and B shares Redemption offer regarding preference shares Dividend paid to shareholders Incentive Plan Borrowings 1,487 1, ,322 3,67 Repayment of loans 1, , ,395 3,96 Deposits from tenants Change in other non-current liabilities Cash flow from financing activities ,111 Cash flow for the period Change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at the end of period

21 Statement of changes in equity Amounts in SEK M Share capital Other contributed capital Reserves, translation differences Profit earned incl. net profit for the period Total equity 1) Equity, 31 December , ,17 8,79 Dividends Redemption of preference shares 73 1,28 1,353 Offset issue of Class D shares 79 1,21 1,289 Transaction costs 3 3 Redemption of Incentive Plan Incentive Plan 2 2 Comprehensive income, January-June 94 1,441 1,535 Equity, 3 June 419 2, ,46 9,764 Comprehensive income, July-December 67 1,524 1,591 Equity, 31 December 419 2, ,57 11,356 Issue of Class D shares Transaction costs 7 7 Issue of Class B shares, Incentive Plan 1 1 Dividends Redemption of Incentive Plan 4 4 Incentive Plan 3 3 Comprehensive income, January-June 377 1,666 2,43 Equity, 3 June 478 2, ,723 13,846 1) Equity is attributable in its entirety to the Parent Company s shareholders. Segment information Profit items Profit from property per segment Rental revenue 1) management Changes in value, properties Unrealised Realised Income before tax Amounts in SEK M Stockholm Helsinki Paris Netherlands Rest of Sweden Finland, university cities Rest of Finland Rest of Europe Sub-total 1, , Financial instruments Joint ventures Other, non-specified Total 1, , ,921 1,648 Asset items per segment Amounts in SEK M Market value properties 3 Jun 3 Jun Investment properties Acquisition properties Divestment properties Stockholm 9,327 8, Helsinki 5,784 4, Paris 1,819 1, Netherlands 1, Rest of Sweden 2,428 2, Finland, university cities 2,31 1, Rest of Finland 2,37 2, Rest of Europe 1,534 1, Total 27,8 22, , ) All rental revenue pertains to external tenants. 19

22 Key performance indicators Jan-Dec Jan-Dec 216 Jan-Dec 215 Jan-Dec 214 Jan-Dec 213 Property-related key figures Yield, % Surplus ratio, % Occupancy rate by area, % Economic occupancy rate, % Lease term at the end of the period, years Lettable area at the end of the period, sqm 2,67 2,399 2,489 2,312 1,86 1,634 1,336 No. of properties at the end of the period Financial key figures Return on total capital, % Return on equity, % Average interest rate, % Fixed-interest period incl. derivatives, years Loan maturity, years Equity/assets ratio, % Debt ratio, % Net debt/ebitda, multiple Interest coverage ratio, multiple Data per Class A and B share 1) Price of Class B share at the end of the period, SEK EPRA NAV, SEK Equity, SEK Equity after dilution, SEK Earnings, SEK Profit after dilution, SEK Profit from property management, SEK Profit from property management after dilution, SEK Cash flow, SEK Cash flow after dilution, SEK Dividend per share, SEK No. at end of period, millions No. at end of period after dilution, millions Average no., millions Average number after dilution, millions Data per Class D share Share price at the end of period, SEK Equity, SEK Earnings, SEK Dividend per share, SEK No. at end of period, millions Average no., millions Data per preference share Share price at the end of period, SEK Equity, SEK Earnings, SEK Dividend per share, SEK No. at end of period, millions Average no., millions ) Excluding 1,, Class B shares bought back by AB Sagax. 2