Delivering for our Tenants Highlights and key figures HIGHLIGHTS - - PowerPoint PPT Presentation

Q2 2019 Delivering for our Tenants

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HIGHLIGHTS RENTAL INCOME AND NOI MARGIN (SEKm) KEY FIGURES

SEKm H1 2019 H1 2018 Q2 2019 Q2 2018 FY 2018 Rental income 956 852 479 466 1,787 Net operating income (NOI) 488 431 271 265 931 Change in investment prop. 1,125 2,061 466 1,840 3,737 EPRA NAV per share (SEK) 181 146 181 146 167

Continued high pace of refurbishments

• 411 apartments refurbished in Q2 2019
• Continued reduced investment costs following renegotiation of

refurbishment contracts and better control of extras and material costs NOI increased to SEK 488 million for H1 2019

• Increase of 13.3% compared to same period last year
• Driven both by a larger property portfolio and apartment renovations

Like-for-like portfolio as of H1 2019

• NOI margin of 50.7%
• NOI increased by 4.7% compared to same period last year

Unrealized value of investment properties up by SEK 1,125 million in H1 2019

• During the quarter, unrealized value of investment properties increased by

SEK 466 million

• Primarily driven by NOI growth

0% 10% 20% 30% 40% 50% 60% 200 400 600 800 1 000 1 200 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 Rental income NOI margin

Highlights and key figures

SEKm H1 2019 H1 2018 % Growth Rental income 811 777 4.4% Net operating income (NOI) 411 393 4.7%

KEY FIGURES (Like-for-like)

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New service and maintenance organization launched

Improved service and professional development

• The new organization will enable us to deliver a better service to our tenants and will

also create better opportunities for professional development for our employees Four company-wide functions replacing regional structure

• The property management organization is now structured in four company-wide

functions working with common best practice methods, processes and routines: i) Customer service, ii) Customer management, iii) Technical property maintenance, iv) Business development property management Journey towards becoming the most tenant-focused company continues

• With the new organization, Hembla continues its journey towards becoming the most

customer-centric residential housing company in Sweden Centralized customer service a direct response to tenants’ wishes

• The set up of a centralized customer service function with extended opening hours and

the ability to handle requests and questions in multiple languages is one of the key components of the new organization and something that was clearly requested by tenants in our annual surveys Non-recurring costs of SEK 25 million and yearly savings in excess of SEK 10 million

• Non-recurring costs for the organizational change are estimated to be approximately

SEK 25 million and are expected to yield in excess of SEK 10 million in annual savings going forward

New organization launched to deliver better service to our tenants

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A holistic approach to community development

Hembla’s vision of creating vibrant communities requires coordinated efforts spanning many different areas including social sustainability, development of commercial offerings as well as investments in the properties and the outdoor environments New role created to coordinate all our efforts

• Newly appointed city district development manager will ensure that the long-

term development of our properties and communities is reflecting our vision and strategy Development of our communities is performed in dialogue with our tenants

• Hembla actively engages our tenants in our development plans through surveys

and forums where they can express their views on what they value most

Focus on the strategic development of our communities and districts

Development in close cooperation with municipalities ”I am convinced that municipalities and property owners have to cooperate closely to be able to improve entire

• districts. Hembla is a dedicated property owner which I have

a good dialogue with. The company’s investments in outdoor areas, in properties and in social sustainability initiatives all contribute into making Jordbro a better place to live” Meeri Wasberg, Mayor of Haninge

Developing entire districts

Jordbro Husby Vallsta

Area Pre capex project Post capex project Project description

• Refurbishment and upgrading of outdoor common areas for the benefit of

all tenants, including new playgrounds and outdoor gym

• Full refurbishment of historic façade and balconies, including additional

insulation and triple glazed windows to improve energy efficiency

• Refurbishment and upgrading of outdoor common areas for the benefit of

all tenants, including new playgrounds

• Full refurbishment of historic façade and balconies, including additional

insulation and triple glazed windows to improve energy efficiency

• Stairwells and lifts upgraded and refurbished
• Full refurbishment of historic façade, including additional insulation and

triple glazed windows to improve energy efficiency

• Refurbishment and upgrading of outdoor common areas for the benefit of

all tenants, including new playgrounds

• New recycling and waste management system

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THE ONGOING WORK – ONE STEP AT A TIME

Hembla is continuously focused on measures to reduce our environmental impact. During the first half of 2019 the following projects have been completed:

• Geothermal projects in Jordbro, Norrköping and Vårberg have been

completed and are now in full operation

• Installation of geothermal has been started in four new areas:

Husby, Ronna, Visättra and Uppsala

• Projects in Huddinge, Södertälje and Husby for additional insulation
• f façades and replacement of windows have been finalized
• Solar panels with an effect of 400 kW have been successfully

installed as a pilot and Hembla has decided to increase its rate of investment into solar panels materially Investments in energy solutions reduces carbon footprint

• In Katrineholm Hembla finalized several large projects with the goal

to reduce our environmental impact and save costs. Geothermal heating and upgraded ventilation systems with FTX (heat recovery) have been installed. Also, solar panels have been installed on the

• roofs. One of the sites also uses geothermal cooling.
• Through this, CO2 emissions are being reduced by 15 tonnes / year

Sustainable property ownership

Short introduction to Geothermal heating Sample projects from the Hembla portfolio

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Geothermal heating is an environmentally friendly energy solution where energy is extracted from the ground through geothermal wells drilled deep into the ground and a system of heating pumps converts the energy to heat

• The solution requires one-time initial investment,

but OPEX costs over time are reduced significantly

–

Large reduction in heating cost

–

Increased electricity costs as geothermal heating pumps are electrically driven

–

Net effect is a substantial reduction of energy usage

Geothermal heating projects reduce energy consumption and associated costs in Hembla’s portfolio significantly…

Topasen Södertälje Linden Katrineholm 286

2016

884

2018

53 529

2017 884 582 286

• 598
• 68%

Energy consumption (MWH) Project description

• Geothermal heating investment

project

• Total inv cost: SEKm 5.9
• Geothermal heating investment

project

• Total inv cost: SEKm 12.6

1,621 2,271 149

2016

703

2017 2018 2,271 1,770 704

• 1,567
• 69%

Net Savings Heating Electricity

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Solar panels are also a great investment for Hembla and the environment

Short introduction to solar panels

• Solar produces renewable electricity that Hembla can use or sell back to the electricity grid

Pilot project

Solar project data

Yearly production 50,000 547 Investment cost

Investment cost (kSEK) Yearly production (kWh)

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THE ONGOING WORK – ONE STEP AT A TIME

A home extends far beyond the apartment's walls. Therefore, a social commitment is an important, and obvious, part of our business. BID project participation

• Hembla is taking part in a BID (Business Improvement District) project

which involves adopting a holistic approach to issues such as security and stimulating entrepreneurship in association with other property

• wners, the police and the municipality

Outdoor environments

• Hembla has improved the physical outdoor environment at a number
• f locations based on tenant requests

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This has resulted in outdoor gyms, courtyard areas featuring terraces, playgrounds and barbecues, which have proved very popular with tenants. Collaboration with the Tenant Association

• Our collaboration with the Swedish union of tenants is very important

to us and we have 23 local tenant associations in our portfolio. Together with them, we conduct tenant meetings, activities, area days, markets, CPR education, neighbourhood safety survey and much

• more. This summer we collaborate in both Järva and Botkyrka with fun

and meaningful activities for kids in the ages of 7-15 years. “Clean and Safe” projects initiated in several areas

• In most of our areas we have started what we call “Clean and Safe projects”,

where we collaborate with local associations in the respective neighborhoods to keep them clean and tidy. This effort contributes to nicer, cleaner areas and increased safety and security. Summer jobs for youths

• Summer jobs provide both meaningful employment and valuable work-life
• experience. In some places, Hembla employs summer jobs for its own

account, in other places we cooperate with the municipality. Together with the municipality of Huddinge and three other property owners, we are, for example, involved in the initiative “Unga för orten”.

−

This summer, over 35 young people will be working at Hembla within the framework of the project.

Engagement with the local communities

Our goals for the project are:

• Increased wellbeing
• Prevent crime and increase security
• Create jobs
• Create collaborative networks between our

tenants, our employees, and other stakeholders

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STRONG FOOTHOLD IN STOCKHOLM

SEK

33.0bn

MARKET VALUE

1,690k

LETTABLE SQM

21,411

APARTMENTS

64% 10% 8% 5% 3% 10% Stockholm Norrköping Eskilstuna Uppsala Västerås Other

Overview property portfolio

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STOCKHOLM HOUSING QUEUE STATISTICS

0% 2% 4% 6% 8% 10% 100 000 200 000 300 000 400 000 500 000 600 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Number of people in rental queue Let apartments per year as share of total queue

• We remain focused on improving and increasing our portfolio to help

address the demand for rental housing

COMMENTS

The number of people in the Stockholm rental housing queue is still increasing

Source: Bostadsförmedlingen i Stockholm

0% 20% 40% 60% 80% 100% 100 200 300 400 500 600 Q2-18 Q2-19 Rental income Net operating income NOI - Margin

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KEY INCOME FIGURES DEVELOPMENT (SEKm) LIKE-FOR-LIKE KEY INCOME FIGURES DEVELOPMENT (SEKm)

0% 20% 40% 60% 80% 100% 100 200 300 400 500 600 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Rental income Net operating income NOI - Margin Surplus ratio - target

Like-for-like rental income and net operating income increased by 4.0% and 3.8% respectively in Q2 2019

COMMENTS

• Like-for-like rental income increased by 4.0% in Q2 2019 compared to same

quarter previous year

• Like-for-like Net operating income increased by 3.8% in Q2 2019 compared to

the same quarter last year

• Like-for-like Q2 2019 NOI margin amounting to 56.1%, compared to 56.2% in

the same quarter last year

4.0% 3.8%

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EPRA NAV DEVELOPMENT, Q2 2019 VS Q2 PREVIOUS YEARS COMMENTS

• Increase in EPRA NAV to 181.3 SEK per share as of Q2 2019
• Compared to the most recent quarter (Q1 2019), EPRA NAV increased by 3.4%, driven by NOI growth
• The slight drop in Q1 2018 is a result of the dilutive effect of the rights issue
• EPRA NAV per share development shows consistently strong growth over time
• Equity ratio of 38.6%, well above our financial target, underscoring Hembla's financial robustness

EPRA NAV DEVELOPMENT QUARTER ON QUARTER

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 20 40 60 80 100 120 140 160 180 200 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Equity (EPRA NAV) per share Equity ratio 0% 10% 20% 30% 40% 50% 60% 20 40 60 80 100 120 140 160 180 200 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Equity (EPRA NAV) per share Equity ratio Equity ratio - target

Continued strong growth in EPRA NAV per share

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CENTRAL ADMINISTRATION COST DEVELOPMENT, LTM COMMENTS

• Central administration has increased to SEK 201 million for the period July

2018 – June 2019 compared to SEK 138 million for the same period in the previous year

̶

The increase is partly driven by non-recurring costs amounting to SEK 27 million for the LTM period relating to costs for digitalization and rebranding incurred in Q3 2018

• A strengthened organization resulting in increased personnel costs, further

improved IT- system and consultancy costs are other drivers of the increased central administration during the period. We expect this to increase the performance at the asset-level when fully implemented

20 40 60 80 100 120 140 50 100 150 200 250 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 CA (LTM) CA per sqm (LTM)

Investing in a strengthened organization

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OVERVIEW LOAN VOLUME AND AVERAGE INTEREST RATE (SEKbn)

• Hembla is continuously focused on optimizing its capital structure
• 100% of the debt is non-recourse, following refinancing

closed in Q2, improving financial resilience

• Maturity on senior secured debt of 5.9 years (5.7)
• Average interest rate on total debt 2.0% (2.1%)
• Financings and capex drawdowns amounted to

SEK 850 million in Q2, in the quarter Hembla also repaid the un- secured SEK 1,000m bond

• Total LTV1 at 54.0%.
• Focus on financings in line with Hembla’s
• verall financing strategy
• Long-term loans combined with

capex top-up facilities

• Non-recourse

100% Non-Recourse strengthening financial resiliance

PROPERTY VALUE AND LOAN-TO-VALUE (SEKbn)

Continuously optimizing capital structure, 100% of bank debt now non- recourse

Note: 1) Including building rights

8.8% 8.5% 7.9% 7.3% 11.1% 10.9% 10.4% 9.8%

Q2 2018 Q3 2018 Q4 2018 Q1 2019

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NUMBER OF REFURBISHED APARTMENTS, LTM1 COMMENTS

• Hembla renovated 411 apartments during Q2 2019
• The total number of renovated apartments in the portfolio amount to 6,377

units

• The number of non-refurbished apartments in the portfolio amounts to 15,034,

corresponding to 70% of the total stock

• Aside from apartment refurbishments, Hembla has also invested ~ SEK 174

million during Q2 2019 in the properties’ exterior and surroundings such as façades, common areas, outdoor environments, geothermal heating etc.

• Significant development potential and asset-level upside remains

200 400 600 800 1000 1200 1400 1600 1800 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Refurbished apts (LTM)

7.2%

Refurbished apts as % of average apt stock:

9.9%

% of avg.

• unrefurb. stock:

Q2 2019

Improving living environments for tenants through refurbishments

Note: 1) Figures include all apartments refurbished by Hembla, i.e. numbers exclude acquired renovated apartments and include divested renovated apartments

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RENTAL INCOME TO INCOME FROM PROPERTY MANAGEMENT BRIDGE JAN – JUN 2019

Financial performance

% of rental income:

100%

• 41%
• 6%
• 2%

51%

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INCOME FROM PROPERTY MANAGEMENT JAN – JUN 2018 to JAN – JUN 2019

• The notable increase in rental income is mainly a result of the

increased property portfolio in Q2 2018 and the continuous pace of apartment renovations increasing rental income

• The increased operating costs are mainly driven by the increased

property portfolio but also increased fees due to snow removal / sanding, mandatory ventilation controls and regulatory inspections. The costs are also effected by increased security cost due to new initiatives in Järva region and Visättra.

• The increase in maintenance costs are mainly relating to water

damage, plumbing, locks and corrective actions following mandatory ventilation control

Operating development

COMMENTS COMMENTS

• Continued strengthening of Central administration
• The restructuring reserve of SEK 25 million relates to the
• rganizational change
• Breakage fees of SEK 49 million, connected to the refinancing of

SEK 4.8bn performed in Q1 2018

Breakage fees in connection to refinancing in Q1 2018

CLOSING REMARKS

• Listening to and responding to the views of our tenants
• Being a long-term residential owner
• Creating value by renovating and enhancing living environments for our

tenants

• Continuing to focus on improving and growing our portfolio
• Providing good service to make our tenants’ life easier

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Closing

Thank you!

Svein Erik Lilleland CEO SEL@hembla.se Jonas Andersson CFO Jonas.Andersson@hembla.se hembla.se