KUNGSLEDEN. FIRST QUARTER REPORT April Biljana Pehrsson, CEO Anders Kvist, Deputy CEO and CFO

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1 KUNGSLEDEN FIRST QUARTER REPORT April 2015 Biljana Pehrsson, CEO Anders Kvist, Deputy CEO and CFO

2 AGENDA First quarter in summary Financial performance and key figures Business plan with growth targets 2015 outlook 2

3 Focus on active asset and property management as well as continued restructuring of the property portfolio 3

4 KUNGSLEDEN AT A GLANCE, 31 ST OF MARCH Business concept Mission Long-term owner, active manager and developer of commercial properties in growth regions in Sweden with a view to deliver attractive total return To offer customers attractive and functional premises at competitive rates, making our customers satisfied and always delivering that extra something No of properties 308 Property value SEK Rental value GLA, sqm SEK 21.7 billion SEK 2.5 billion 2.7 million No of employees 94 Company values Present Simplifying Innovative 4

5 KUNGSLEDEN AT A GLANCE, PRO FORMA JUNE 2015 Business concept Mission Long-term owner, active manager and developer of commercial properties in growth regions in Sweden with a view to deliver attractive total return To offer customers attractive and functional premises at competitive rates, making our customers satisfied and always delivering that extra something No of properties Property value SEK SEK 22.3 billion 1 Rental value SEK 2.6 billion 1 GLA, sqm 2.6 million 1 No of employees 94 Company values Present Simplifying Innovative 1) Proforma including all purchases and divestments 5

6 FIRST QUARTER IN SUMMARY During and directly after the quarter we expanded three of our clusters Kista Science City, Västerås City and Högsbo through strategic property acquisitions totalling SEK 1.3 billion Continued optimisation of the property portfolio Divested SEK 552 million worth of non-strategic properties and will leave 19 municipalities at closing in May Following two years of negotiation with our largest tenant ABB, we reached an agreement to replace the old Master Lease agreement with 17 lease agreements with a total GLA of 230,000 sqm Includes 40,000 sqm office in Västerås City and 190,000 industrial/ warehouse/ office onfinnslätten Average lease term 7,6 years lease term varies from 2 years up to 12 years Market adjusted rent for some of the premises on Finnslätten net rental decrease of approx 22 million in 2015 A quarterly valuation of all properties was conducted and indicates a value increase of SEK 243 million The value increase is a result of lower direct yield requirements; the average yield requirements has since year-end decreased from 7.4 per cent to 7.3 per cent 6

7 FIRST QUARTER IN SUMMARY Continued focus on an active asset and property portfolio Net operating income decreased by 9 per cent to SEK 333 million (366) due to a smaller property portfolio compared to the same period last year Profits from property management increased by 4 per cent to SEK 175 million (168) due to a reduced amount of loans and lower interest rate New lease agreements signed on a total GLA of 22,000 sqm, however net letting amounted to SEK 1 million due to large terminations such as Ö&B on Öland, Rörläggaren in Malmö Occupancy for the period amounted 88,9% - about 1% higher than same period last year Four acquired properties were assumed during the quarter with a total value of SEK 1,799 million and one property was disposed at a value of SEK 9 million Strengthened property management organisation in Kista, Västerås as well as hiring Leasing Managers in all regions Kungsleden s Flows has been launched internally a project on our structure, culture and processes Improve efficiency and quality as well as establish best practices 7

8 FINANCIAL PERFORMANCE AND KEY FIGURES 8

9 FIRST QUARTER RESULTS IN SUMMARY Key figures, SEKm Q1-15 Q Property portfolio value, beginning of period 19,612 20,410 Rental revenue ,193 Net operating income ,491 Profit from property management Changes in value of properties ,003 Profit on property sales Unrealised changes in value of properties Earnings before tax ,306 Net income incl. discontinued operations Earnings per share incl. discontinued operations Proposed dividend

10 INCOME STATEMENT 1 JANUARY 31 MARCH

11 STATEMENT OF FINANCIAL POSITION Equity ratio: 42% (40%) Loan/value ratio: 51% (58%) 11

12 EQUITY AND FINANCIAL POSITION As per 31 March 2015, Kungsleden s equity amounted to MSEK 9,398 (9,102) or SEK 52 (50) per share. This corresponds to an equity ratio of 42 (40) per cent. The equity ratio target is > 30 per cent. 12

13 NET DEBT 13

14 CONTINUED IMPROVEMENT IN FUNDING COSTS The loan portfolio amounted to SEK 11,111 million at the end of the quarter, compared with SEK 11,675 million at the beginning of the quarter The average interest rate as per 31 March was 5.1 per cent, slightly above the 5.0 per cent at the beginning of the quarter Excluding swaps, the average interest rate has come down from 2.7 per cent to 2.5 per cent during the first quarter Interest coverage ratio has remained at 2.2 times (2.2) during the quarter 14

15 BUSINESS PLAN WITH GROWTH TARGETS 15

16 KUNGSLEDEN S STRATEGY AND LONG TERM TARGETS To be Sweden s most profitable and successful real estate company Q from 141 to 71 municipalities (pro forma) Concentration to regions with good economic growth and local demand Focus on the customers needs Attractive locations in local markets with good accessibility Concentration to less than 70 municipalities in the medium term Efficient management of clusters in each property segment Three focus segments of commercial space Offices Industrial and warehouses Retail Quality and size Modern and effective premises Stable earnings Aim to grow the property portfolio to around SEK 30 billion over time and to significantly increase the profits from property management Book value: 22,344 MSEK > MSEK MSEK MSEK MSEK MSEK < 100 MSEK 16

17 A MORE FOCUSED PROPERTY PORTFOLIO 17

18 EARNINGS CAPACITY PER PROPERTY CATEGORY 18

19 CLUSTERS A KEY PART OF OUR STRATEGY Effective from both a customer and management perspective Concentration to regions with good economic growth and local demand Tenants with changing needs can be offered new efficient alternatives More efficient management and lower operating costs Local presence and knowledge provides lower vacancies in the long term Clustered activities in order to increase the attractiveness of the area: marketing, strategic investments for better service and supply, etc Close dialogue with the municipality and other community stakeholders 19

20 STOCKHOLM Danderyd kontor 99,000 sqm office The Kista Cluster 105,000 sqm office The City Cluster 35,000 sqm office The Västberga Cluster 39,000 sqm office, industrial/warehouse 20

21 GOTHENBURG The Högsbo Cluster 107,000 sqm office, industrial/warehouse 21

22 MALMÖ The Hyllie Cluster 21,000 sqm office, exhibition and conference centre 22

23 VÄSTERÅS The Västerås City Cluster 127,000 sqm office The Finnslätten Cluster 238,000 sqm office, industrial/warehouse 23

24 KUNGSLEDEN S LARGEST TENANTS The company s 10 largest tenants account for 28 per cent of the rental income Average contract length of 5.7 years 1. ABB 2. Bring Frigoscandia 3. Överskottsbolaget 4. ICA 5. Försvarsmakten (Armed Forces) 6. V-TAB 7. Försäkringskassan 8. BYGGmax 9. Westinghouse Electric 10. Axfood 24

25 2015 OUTLOOK 25

26 DEVELOPMENT PIPELINE: SEK 700 MILLION 1 BILLION TOTAL INVESTMENT VOLUME 26

27 2015 OUTLOOK AND GROWTH TARGETS Good market conditions Positive rental market Strong transactional market and good liquidity Opportunities to enhance the earnings capacity of the existing portfolio Opportunity to acquire good properties with a yield of around 6 per cent and with a low marginal cost of funding (large yield spread) Continued implementation of Kungsleden's new strategy maximizing NOI, creating value and growing Active management Build project portfolio Refinement of the current property portfolio and acquisition of strategic properties SEK 25 billion in medium term and SEK 30 billion over time Balanced financial growth Return on equity target of per cent Equity ratio of at least 30 per cent Continued control of central administrative costs Dividend policy of 50 per cent on profits from property management after tax cases 27

28 QUESTIONS WELCOME! 28

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