CAPITAL MARKET PRESENTATION JANUARY 24, 2019

Transcription

1 CAPITAL MARKET PRESENTATION JANUARY 24, 2019

2 TODAY S AGENDA Position, opportunities, objectives and strategies Financial conditions and financing Questions BREAK Property portfolio, value addition and projects Exciting opportunities for transactions Summary Questions CAROLINE AREHULT, CEO PETER ANDERSON, CFO ANNIKA EKSTRÖM, HEAD OF PROPERTY MANAGEMENT ANNA ALSBORGER, HEAD OF TRANSACTIONS CAROLINE AREHULT, CEO HEMFOSA 2.0

3 GROUP MANAGEMENT Caroline Arehult, CEO Peter Anderson, CFO Anna Alsborger, Head of Transactions Annika Ekström, Head of Property Management Linda Eriksson, Head of Finance

4 HEMFOSA 2.0 Caroline Arehult, CEO

5 REVOLUTION

6 VISION We will be there to serve the community and provide the best properties for the most important people. BUSINESS CONCEPT With its local presence, Hemfosa will acquire, own over the long term, develop and actively manage community service properties in the Nordic region.

7 LOCAL AND NORDIC FINLAND 5% NORWAY 26% 35.6 SEK billion SWEDEN 69% Property value, Sep 30,

8 SPECIALIZED AND DIVERSIFIED COMMUNITY SERVICE PROPERTIES Hemfosa s definition 70% Properties where, directly or indirectly, publicly financed tenants account for at least 70 percent of the rental income 8 Schools Judicial system Care services Public offices

9 STABLE AND EXCITING COMMUNITY SERVICE PROPERTIES ADVANTAGES Reliable yield Long leases Stable rent levels Low relocation level Low business cycle sensitivity Healthy financing opportunities

10 A BUSINESS MODEL WITH LOW RISK PROPERTY MANAGEMENT Renegotiation Operation and maintenance optimization Publicly financed tenants PROPERTY DEVELOPMENT New leases Project Portfolio optimization Tenants have long-term requirements secured long-term financing FINANCING Optimize capital structure TRANSACTION Acquisitions Divestments 10

11 HEMFOSA MARKET 11

12 DEMOGRAPHIC CHALLENGES SWEDEN POPULATION, MILLIONS NORGE POPULATION, MILLIONS FINLAND POPULATION, MILLIONS ,9 4,1 4,2 4,5 4,9 5,4 5,9 4,6 4,8 5,0 5,2 5,4 5,5 5, Source: SCB (Statistics Sweden) Source: SSB (Statistics Norway) Source: Tilastokeskus (Statistics Finland)

13 MAJOR REQUIREMENTS NUMBER OF PLANNED INVESTMENT OBJECTS IN 246 SWEDISH MUNICIPALITIES IN THE PERIOD Preschools Compulsory schools Upper-secondary schools Senior residences Group residential homes Leisure centers Sports facilities INVESTMENT NEEDS: INCREASE IN NUMBER OF UNITS BY 2026 Preschools Compulsory schools Upper-secondary schools Senior residences Health care centers Sourcec. From Offentliga fastigheter, May 2018 Source: Government Offices of Sweden Ministry of Finance: Det Ekonomiska Läget, June, From SCB. 13

14 A MARKET WITH MAJOR POTENTIAL Sweden Sweden Norway SEK billion Finland Norway 20% Finland Value of community service properties, approximately Percentage of community service properties owned by private players, approximately Source: The National Board of Housing, Building and Planning and Swedish Association of Local Authorities and Regions

15 HEMFOSA TARGETS AND STRATEGIES

16 GROW TO SEK 50 BILLION WITHIN 5 YEARS GROWTH PROPERTY PORTFOLIO 35.6 SEK BILLION NET ACQUISITIONS Approx. 70% PROJECTS Approx. 30% 50 SEK BILLION WITHIN 5 YEARS MINIMUM 10% INCREASE IN DISTRIBUTABLE EARNINGS PER YEAR ON AVERAGE GROWTH WITH RETAINED LOW RISK 16

17 GROWTH WITH PROFITABILITY PROPERTY PORTFOLIO 35.6 SEK BILLION NET AQUISITIONS Approx. 70% In line with earlier level Extra focus on Finland PROJECTS Approx. 30% Increased volume Own management and collaborations Based on tenancy agreements Development of existing portfolio Land allocation agreements Concepts 50 SEK BILLION WITHIN 5 YEARS A MARKET WITH POTENTIAL 17

18 EVOLUTION Hemfosa 1.0 Cash-flow orientation Low risk Nordic market presence Agility Own local property management Focus on transactions Adding Structured growth of community service properties MORE Finland MORE projects MORE long-term approach and sustainability MORE structure e.g. concepts MORE collaborations HEMFOSA

19 HEMFOSA FINANCIAL OVERVIEW Peter Anderson, CFO

20 A PROPERTY COMPANY WITH LOW RISK Stable cash flows Reliable rental flows Tenant diversity Geographically diverse Financially diverse

21 STRONG BALANCE SHEET AND HEALTHY LIQUIDITY Strong balance sheet Healthy liquidity provides good preparedness and scope to maneuver Net asset value (EPRA NAV) per ordinary share SEK 73 BALANCE SHEET SEK billion Sep 30, 2018 Properties 35.6 Cash 1.5 Assets 37.1 Equity 13.0 Interest-bearing liabilities 22.4 Other liabilities 1.7 Equity and liabilities 37.1

22 HIGH AND STABLE EARNINGS CAPACITY 73% surplus ratio 5.4% yield Working constantly to improve earnings EARNINGS CAPACITY MSEK Sep 30, 2018 Rental income 2,605 Property expenses -630 Property administration -63 Net operating income 1,912 Central administration -129 Share in profit of associated companies 10 Net financial items -492 Profit from property management 1,300

23 TARGET: SEK 50 BILLION IN PROPERTY PORTFOLIO WITHIN FIVE YEARS SEK 15 billion increase in property value in five years SEK billion SEK billion from acquisitions (approx. 70%) SEK 4-5 billion from projects (approx. 30%) No value increases included SEK 35 billion Existing portfolio Acquisitions Project development SEK 50 billion Portfolio 2023

24 PROFITABLE GROWTH WITH LIMITED RISK The investments will enhance our profitability and have limited risk Projects With secured leases and long tenant agreements Acquisitions Opportunities where competition is not at its most intense Profitability grows faster than volume Distributable earnings Property value Year 1 Year 2 Year 3 Year 4 Year 5

25 GROWTH IN DISTRIBUTABLE EARNINGS PER SHARE New financial targets Shareholders perspective aspects that impact the dividend Focus on cash-flow generation Minimum 10% growth in distributable earnings per share (Cash earnings per share, CEPS) >10% PER YEAR ON AVERAGE Distributable earnings: Profit from property management, excluding the share in profit from joint ventures and after tax

26 NEW DIVIDEND POLICY The growth strategy is based on strong potential in the market and the possibility of healthy yield DIVIDEND POLICY approx. 40% of distributable earnings Distributable earnings: Profit from property management, excluding the share in profit from joint ventures and after tax 26

27 NEW LEVEL OF DIVIDENDS STILL COMPETITIVE Lower level of dividends Healthy growth opportunities Competitive yield 4 3,5 3 Yield, % 40% of distributable earnings, earnings capacity Q High growth in distributable earnings 2,5 2 1,5 1 0,5 0 Balder Sagax B Fabege Wallenstam Fastighetspartner Atrium Ljungberg Wihlborgs Castellum Hemfosa Kungsleden Dividend approved at 2018 AGMs divided by the share price on December 31, Data for Hemfosa is based on earnings capacity per Q3 2018

28 UNCHANGED RISK LIMITATIONS RISK LIMITATIONS Loan-to-value ratio approx. 60% An equity/assets ratio of at least 30% SEK billion Risk limitations Result Sep 30, 2018 Loan-to-value ratio Approx. 60% 59% Equity/assets ratio At least 30% 35% Interest-coverage ratio Multiple of Interest-coverage ratio of at least 2x 28

29 HEMFOSA FINANCING

30 DIVERSIFIED LOAN STRUCTURE Several sources of financing Possibility to grow within all forms of financing FINANCING STRUCTURE, SEP 30, %1% 9% 26% 13% Bank 1 Bank 2 Bank 3 Bank 4 18% 26% Bond Commercial papers Other

31 LOAN MATURITY AND MATURITY STRUCTURE At Sep 30, 2018 Average remaining loan maturity period, 3.0 years Healthy spread of maturity dates Bonds mature in 2019 Q4 and 2020 Q MATURITY STRUCTURE, INTEREST-BEARING LIABILITIES Nominal amount, MSEK Proportion, %

32 FIXED-RATE PERIODS AND INTEREST-RATE HEDGING At Sep 30, 2018 Average remaining fixed-rate period 1.6 years Interest-rate hedged portion of liabilities, 62%, mainly through interest-rate cap Average interest 2.05% [Image:

33 FINANCING OF GROWTH Self-generated funds SEK 6-7 billion (after dividends) SEK 35 billion SEK 50 billion SEK 8-9 billion through new financing and refinancing Unchanged loan-tovalue ratio No new share issues assumed 0 Equity Existing loans Net profit Dividends Portfolio 2023 New loans

34 LOAN-TO-VALUE RATIO UNCHANGED The target for the loan-to-value ratio remains approx. 60%. This is a balanced level given our low level of risk Net debt/ebitda approx. 12 times LOAN-TO-VALUE RATIO*, % Q earnings 14.3 NET DEBT/EBITDA**, times Q earnings * Including Nyfosa ** EBITDA = Profit from property management excl joint venture profit and net financial items

35 MORE GREEN FINANCING Green loan for the financing of the specialist hospital at Gardermoen Large demand for green financing more lenders and lower rates of interest Goal is for more properties to meet criteria for green financing

36 STEPS TOWARD THE GOALS To finance growth development SEK 8-9 billion must be borrowed in the next five years Mix of new bank loans, increase in volume in conjunction with refinancing and bonds Green financing

37 QUESTIONS

38 HEMFOSA PROPERTY PORTFOLIO AND PROJECT OPERATIONS Annika Ekström, Head of Property Management

39 A DIVERSIFIED AND SPECIALIZED PROPERTY PORTFOLIO TOTAL PROPERTY VALUE AND PER CATEGORY THE 20 LARGEST PROPERTIES ARE LOCATED 81% OF PROPERTY PORTFOLIO IN 15 LARGER CITIES Schools Care facilities Judicial system Public offices Commercial offices Other 29% 9% 3% 35.6 SEK billion 14% 24% 21% Stockholm Oslo Helsinki Gothenburg Norrköping Sundsvall Örebro Karlstad Kristianstad Oslo Stockholm Gothenburg Malmö Helsinki Karlstad Sundsvall Uppsala Västerås Norrköping Bergen Örebro Umeå Luleå Åbo At September 30, 2018 Corresponding to 37% of the property value

40 STABLE TENANTS RENTAL VALUE 2.8 SEK billion At September 30, 2018 AMONG THE LARGEST TENANTS Municipalities Police Swedish Employment Service The National Courts Administration Norwegian Labour and Welfare Administration Mid Sweden University Swedish Prison and Probation Service Swedish Migration Agency 40

41 LONG LEASES AND HIGH LEASING RATE Long-term leases remaining term 6.7 years Low level of vacancies total 94.4% leasing rate Gives long-term approach in operations LEASE MATURITY STRUCTURE, MSEK > % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% LEASING RATE* Q3 * Incl Nyfosa through Q2 2018, as of Q only Hemfosa

42 LOCAL PRESENCE AND STRONG RELATIONS Hemfosa s local presence leads to business opportunities 13 offices in Sweden 5 offices in Norway 1 office in Finland Hemfosa has a total of 19 local offices

43 PUBLIC OFFICES Hemfosa s largest category 75 properties of 605,000 sqm. 30% of rental value (MSEK 832) Leasing rate 95% and lease term of 4.3 years 10.3 SEK billion in property value Söderbymalm 3:486, Handen THREE LARGEST TENANTS September 30, 2018 Rental income NAV - Norwegian Labor and the Welfare Administration MSEK 67 Swedish Migration Agency MSEK 60 Swedish Employment Service MSEK 36

44 SCHOOLS FROM COMPULSORY SCHOOL TO UNIVERSITY Hemfosa s second largest category 88 properties of 475,000 sqm. 23% of rental value (MSEK 640) Leasing rate 94% and lease term of 8.5 years 8.5 SEK billion in property value Åkroken 1, Sundsvall THREE LARGEST TENANTS September 30, 2018 Rental income Municipality of Härnösand MSEK 68 Oslo University College MSEK 55 Pysslingen (AcadeMedia) MSEK 51

45 HEALTH AND CARE SERVICES FROM PRESCHOOL TO SPECIALIST HOSPITALS 124 properties of 315,000 sqm. 17% of total rental value (MSEK 470) Leasing rate 98% and lease term of 12.8 years 7.3 SEK billion in property value Gardermoen Campus, Oslo THREE LARGEST TENANTS September 30, 2018 Rental income LHL Eiendom AS (Gardermoen specialist hospital) MSEK 111 Municipality of Härnösand MSEK 43 Espira (preschools in Norway) MSEK 21

46 JUDICIAL SYSTEM POLICE AND COURTS Customized properties 41 properties of 278,000 sqm. 15% of total rental value (MSEK 415) Leasing rate 95% and lease term of 4.1 years 5.1 SEK billion in property value Nannylund 1, Eksjö THREE LARGEST TENANTS September 30, 2018 Rental income The Police Authority MSEK 138 The Courts of Sweden MSEK 103 Norwegian Police Service MSEK 35

47 COMMERCIAL OFFICES Primarily centrally located office properties in large high-growth municipalities 24 properties of 250,000 sqm. 11% of rental value (MSEK 299) 48% of rental income from community service operations Leasing rate 86% and lease term of 4.1 years 3.3 SEK billion in property value Gamlestaden 2:5, Gothenburg THREE LARGEST TENANTS September 30, 2018 Rental income Finnish Red Cross MSEK 31 Telia Sverige AB MSEK 30 Lantmännen MSEK 9

48 SUSTAINABILITY IN PROPERTY MANAGEMENT Working actively to continuously develop the property portfolio Energy efficiency in focus TARGET: Reduce total energy consumption (kwh) by 3% per year in comparative portfolio and climate-adjusted ENERGY PROJECT IN SUNDSVALL Geothermal well in the Åkroken 1 property in Sundsvall Saving of 2/3 of energy consumption, approx. MSEK 2 per year

49 A GROWING PROJECT Strengthen project organization Evaluate opportunities for each property Zoning plans/development rights The Orkestern 2 property in Norrköping

50 HEMFOSA IS BUILDING SOCIALTJÄNSTENS HUS IN VÄSTERÅS Hemfosa is building Socialtjänstens Hus on its own land in Västerås. Hemfosa s proposal won the assignment in a tender process with the citation: Function and design Expertise and customer orientation Sustainability perspective Tenant City of Västerås Lettable area 7,800 sqm Annual rental value Approx. MSEK 15 Contract duration 15 years after completion Project start Q2 2019

51 STEPS TOWARD THE GOALS Review of the entire property portfolio in 2019 Strengthen the project organization Develop type concepts

52 HEMFOSA TRANSACTIONS Anna Alsborger, Head of Transactions

53 THE TRANSACTION MARKET FOR COMMUNITY SERVICE PROPERTIES High level of activity in the transaction market in 2018 in Sweden, Norway and Finland Structural business contributes to high transaction volumes Historically large proportion of community service properties in Finland SEK billion TRANSACTIONS SWEDEN TRANSACTIONAL VOLUME, MORE THAN 40 MKR TRANSACTIONS FINLAND TRANSACTIONAL VOLUME NOK billion TRANSACTIONS NORWAY TRANSACTIONAL VOLUME Community service property Other 8 EUR billion

54 MUNICIPALITIES MUST RELEASE CAPITAL FOR NEW INVESTMENTS AND OPERATIONS Sweden Sweden Norway Finland Norway Finland 69% +10% Number of municipalities considering property sales Planned increase in the municipalities existing portfolios through construction in the period Source: NAI Svefa s Municipality questionnaire 2016 Source: Questionnaire SKL, according to SKL s Chief Economist Annika Wallenskog (podcast: Snåret)

55 HEMFOSA S STRENGTHS IN TRANSACTIONS Our categories of community service properties provides a wide range of business opportunities A long-term approach and stable financial position also enables investment in smaller cities Strong local organization identifies business at an early stage Flat organization with short and rapid lines of decision-making Hemfosa has acquired community service properties for SEK 2 4 billion per year in the past three years

56 OPPORTUNITIES SWEDEN Enormous need for community service properties Use our local, broad establishment for business generation Strategic cooperation with project developers

57 OPPORTUNITIES NORWAY One of the largest players in community service properties Relatively immature market Use our strong market presence and continue to grow

58 OPPORTUNITIES FINLAND Good growth opportunities in all categories Municipalities open up for sales Remodeling debt among municipalities and private owners SOTE reform

59 STEPS TOWARD THE GOALS Increase activity in Finland Develop collaboration with project developers Individual acquisitions and major portfolio transactions Continuous analysis of attractive locations for acquisitions Property management organization generates business

60 SUMMARY HEMFOSA 2.0

61 GROWTH WITH GROWING PROFITABILITY PROPERTY PORTFOLIO 35.6 SEK billion 50 SEK BILLION WITHIN 5 YEARS MINIMUM 10% INCREASE IN DISTRIBUTABLE EARNINGS PER YEAR ON AVERAGE GROWTH WITH RETAINED LOW RISK A MARKET WITH POTENTIAL 61

62 QUESTIONS