Interim Report January June 2020 Biljana Pehrsson, CEO & Ylva - - PowerPoint PPT Presentation

Interim Report January–June 2020

Biljana Pehrsson, CEO & Ylva Sarby Westman, Deputy CEO/CFO Stockholm 8 July 2020

1

Agenda

2

• Interim period in summary
• Financial performance and key figures
• Outlook
• Questions are welcome

• Increased profit from property management by 6 per cent to SEK

611 million mainly due to strong like-for-like performance and completed development projects

• Good new letting, positive net leasing and strong renegotiation

results

• Moody’s confirms Kungsleden’s investment grade rating as Baa3

with a stable outlook

• Stable financial position with LTV of 45.3 per cent and debt/equity

ratio of 44.1 per cent

• Divestment of vacant property, Fräsen, Täby, Stockholm to

Hemsö

• In June, a bond of SEK 300 million was issued with a five-year
• maturity. In July, bonds of 250 million maturing in January 2021

were repurchased by extending a green bond maturing in June 2023

3

Highlights Q2: A strong first half-year and continued market improvements

• Outcome rent relief agreements for Q2 slightly better than previously

communicated:

• Lower level of discounts – SEK 19 million (instead of SEK 21

million)

• Lower level of deferrals SEK 11 million (instead of SEK 20 million)
• Larger share of quarterly to monthly payments SEK 41 million

(instead of SEK 32 million)

• Payment of Q2 rents – 99%
• Payment of Q3 rents in line with previous quarters
• Rent relief agreements for Q3 softer than for Q2:
• Rental discounts of SEK 16 million against either extended leases
• r increased rent on the remaining lease term
• Allowed rent deferral of SEK 4 million against 12-24 month

repayment schedule

• Individual agreements on monthly instead of quarterly rent

payment corresponding to SEK 30 million

4

Continued very limited effects of Covid-19

Right properties in the right locations

5

Almost 90 per cent of the property value in four priority growth markets

• Stockholm
• Gothenburg
• Malmö
• Västerås

Book value SEK 39,397 m Book value SEK 39,397 m

VÄSTERÅS STOCKHOLM MALMÖ GOTHENBURG

Office 75% Industrial/Warehouse 15% Retail 4% Other 6% Stockholm 47% Västerås 19% Gothenburg 11% Malmö 11% Other 12%

Danderyd, Stockholm 100,000 sq.m. Kista, Stockholm 147,000 sq.m. Stockholm City East 85,000 sq.m. Stockholm City West 40,000 sq.m. Västberga, Stockholm 38,000 sq.m. Göteborg South Center 40,000 sq.m. Högsbo, Göteborg 109,000 sq.m. Hyllie, Malmö 48,000 sq.m. Fosie, Malmö 52,000 sq.m. Västerås City 154,000 sq.m. Finnslätten 237,000 sq.m. Östersund 82,000 sq.m.

70 per cent of the property value in one of our twelve clusters

7

Good leasing results and positive net leasing

New leasing, SEK million

73

(93) Net leasing, SEK million

8

(10)

• 75
• 50
• 25

25 50 75 100 125 Q1 2018 Q2 Q3 Q4 Q1 2019 Q2 Q3 Q4 Q1 2020 Q2 SEK m New leasing, investment properties New leasing, development properties Termination, investment properties Termination, development properties Net leasing

8

Double digit rent uplifts on renegotiations – average rent uplift 10%

2 4 6 8 10 12 14 16 50 100 150 200 250 300 350 400 2018 jan-dec 2019 jan-dec 2020 jan-jun Rental value, before renegotiation Rental value, after renegotiation Increase, %

Rent increase, % Rental value, SEK m Maturity stucture Renegotiations

100 200 300 400 500 600 700 800 900 200 400 600 800 1000 1200 2020 2021 2022 2023 2024-

Office Industrial/Warehouse Retail Other

• No. of lease contracts

Rental value, SEK m

• No. of lease contracts

9

Increasing surplus ratio and average rent per square meter

Surplus ratio Investment properties

69.1%

(68.7%) Average rent Investment properties

1,487 SEK/sq.m.

(1,394)

+7%

900 1 000 1 100 1 200 1 300 1 400 1 500 300 325 350 375 400 425 450 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Operating net - total properties Average rent - investment properties Operating net per quarter

• total properties

Per quarter, SEK m Average rent

• investment properties

12 months rolling, SEK per sq.m

We create sustainable places

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• Energy consumption Jan-Jun: minus 7 per cent

Kungsleden’s target has been to reduce energy consumption by 3 per cent per year, or by 20 per cent, from 2014 to 2020. Outcome to date is 26 per cent

• Green lease agreements signed: 63

In the long term, our goal is to always sign green lease agreements

• Certified properties: 38 per cent

Our goal is to certify all our properties according to LEED prior to end of 2025

Unrealised changes in values Jan-Jun 2020, SEK m Total

Change in yield requirements 164 Change in operating net 251 Changed assumptions of investments and other factors affecting the value

• 111

Total 304

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Rising property values – driven by operating net improvement & yield contraction

Valuation yield on average 5.2% (5.2%) Valuation yield contraction 3 bps (Q4 2019 to Q2 2020) no effects of divestments and acquisions

Ten largest customers Rental value, SEK m Share of total rental revenue, % Average lease duration, years ABB 250 10 4.8 Försäkringskassan 53 2 4.6 Hitachi (ABB Power Grids) 39 2 4.3 Västerås kommun 39 2 4.9 ICA 39 2 1.9 Blique by Nobis 31 1 20.5 AFRY 28 1 4.2 Stockholms stad 27 1 4.1 Biz Apartments 23 1 10.0 Tullverket 22 1 3.2 10 largest tenants 511 21 5.6 Total 2,387 100 4.2

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Strong and well-known customers

28% of rental value of ten largest customers from public tenants

Investment programme

Actual Target SEK million 2017 2018 2019 Jan-Jun 2020 2020 2021- 2023

Development projects 312 578 598 324 600 1,800 Tenant improvements and other value creating investments 499 596 799 389 700 2,100 Maintenance investments 114 126 112 61 100 300 Total investments 925 1,300 1,509 774 1,400 4,200

Return targets on development projects, tenant improvements and other value- creating investments

• IRR in excess of 9 per cent
• Yield on cost in excess of

6 per cent

• Tenant improvements pay

back time less than half of the leasing contract duration

13

Profitable investment programme – Target 2020-2023

Property designation Category Municipality Completed Leasable area, sq.m. Estimated rental value, SEK m Pre-letting rate Book value, SEK m Estimated investment SEK m Of which completed SEK m The Rotterdam District Office Stockholm 2021 21,300 61 69 1,045 225 84 Stettin 6 Office Stockholm 2021 25,000 57 77 1,252 230 96 Eden by Kungsleden Office, new construction Malmö 2021 7,900 25 54 138 384 88 Oxel – part of Oxelbergen 1:2 Office Norrköping 2021 6,000 12 27 78 91 53 Taktpinnen 1 Office Norrköping 2022 16,000 25 100 270 136 51 Finnslätten 1 – part of Office, Industry Västerås 2024 21,000 28 13 173 250 71 Total 97,200 208 68 2,955 1,316 443

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Large ongoing development projects – total investment of SEK 1.3 bn

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Development under construction

Stettin 6 – Redevelopment of office building with among

• thers Swedish Performing Art Agency as tenant

Blästern 14 – Blique by Nobis design hotel with 249 rooms finalized 2019. Office space leased out to Convendum

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Property Blästern 14

Category Office/Hotel Municipality Stockholm Leasable area, sq.m 17 200 Total investment, SEK m 595 Rental value, SEK m 62 Project profit, SEK m 327 IRR, % 11

Follow-up Successfully completed project

B26, Västerås – A creative arena for co- working for over 550 co-workers in shared and owned office spaces

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B26 – part of property Mimer 5

Category Office Municipality Västerås Leasable area, sq.m 4 600 Total investment, SEK m 147 Rental value, SEK m 12 Project profit, SEK m 27 IRR, % 9

Follow-up Successfully completed project

City Custody of Östersund – Inauguration 24th of April

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City Custody of Östersund – part of property Karlslund 5:2

Category Social services (custody) Municipality Östersund Leasable area, sq.m 2 700 Total investment, SEK m 137 Rental value, SEK m 11 Project profit, SEK m 61 IRR, % 9

Source: Kriminalvården

Follow-up Successfully completed project

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Financial performance and key figures

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Good profit from property management

Jan-Jun 2020 (Jan-Jun 2019) SEK million

611

(579)

+6%

200 400 600 800 1 000 1 200 1 400 50 100 150 200 250 300 350 Q1 2018 Q2 Q3 Q4 Q1 2019 Q2 Q3 Q4 Q1 2020 Q2 Per quarter Rolling 12 months Per quarter, SEK m 12 months rolling, SEK m

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Good funding mix and low LTV

LTV

45.3%

(46.6) Green funding

28%

Loan portfolio

1 500 3 000 4 500 6 000 7 500 9 000 Bank loans Mortgage loans Life company loans Bond loans Commercial papers 31 Dec 2019 31 Mar 2020 Green share Green share SEK m

34% 15% 6% 42% 3%

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No loan or bond maturities in 2020 - even maturity structure onwards

2.8 bn in cash and credit facilities, net 2.1 bn RCF (outstanding CP deducted) 0.25 bn Credit line 0.45 bn Cash 498 1368 2440 2466 630 1594 1701 2400 2500 1100 1000 300 300 500 1000 1500 2000 2500 3000 3500 4000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

SEK million

Commercial paper Bank loans and other borrowings Bonds

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Maturity structure of bonds 2020-2022

550 500 1350 2500 500 1000 1500 2000 2500 3000 Q3 2020 Q4 Q1 2021 Q2 Q3 Q4 Q1 2022 Q2 Q3 Q4

SEK million

Bonds

*

* 300 SEK million maturing in Q1 2021 after issue in July 2020

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Long average debt maturity & average fixed interest term

5,0 5,6 5,5 5,2 4,8 4,5 4,3 4,1 2,9 2,7 3,5 3,2 3,3 3,7 3,6 3,4 0,0 1,0 2,0 3,0 4,0 5,0 6,0 Q3 2018 Q4 Q1 2019 Q2 Q3 Q4 Q1 2020 Q2 Average debt maturity Average fixed interest term

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Continued strong average interest coverage & low average interest rate

3,9 4,1 4,3 4,6 4,6 4,6 4,7 4,5 1,9 1,8 1,8 1,8 1,8 1,9 1,9 1,9

0,5 1 1,5 2 2,5 3 3,5 4 4,5 5 Q3 2018 Q4 Q1 2019 Q2 Q3 Q4 Q1 2020 Q2 Average interest coverage, times Average interest rate, %

2020 Jan–Jun 2019 Jan–Jun EPRA EPS (profit from property management after tax), SEK per share 2.65 2.65 EPRA NRV (long-term net asset value), SEK per share 96.13 85.05 EPRA NTA (current net asset value), SEK per share 94.18 83.89 Interest Coverage Ratio 4.5 4.6 LTV (Loan-to-value) Ratio, % 45.3 46.6

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Key financial ratios

+12%

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Outlook

Slightly slower office rental market from a strong level

0% 1% 2% 3% 4% 5% 6% 7% 8%

• 1 000

2 000 3 000 4 000 5 000 6 000 7 000 8 000 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2020 Q2 2020E Stockholm CBD Göteborg CBD Malmö CBD Central Västerås Stockholm CBD Göteborg CBD Malmö CBD Central Västerås RENTAL VALUE, CBD/SQ.M. (BARS) VACANCY RATE %, (LINES) Source: Newsec

50 100 150 200 250 300 350 400 50 100 150 200 250 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1 Domestic buyers Foreign Investors Estimate 2020

• No. of deals

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Strong Swedish transaction market in the first half of 2020

Bn, SEK

• No. of deals

Source: Newsec Slightly decreased transaction volume in Q2 2020, however a strong H1 result due to the all-time high transaction volume in Q1 Still a strong international presence, with 32% foreign investors in Q2 2020

30

Good rent potential in our clusters

Stockholm Current base rent incl. index

• ffices, SEK/sq.m.

Tendered level of rent SEK/sq.m. Danderyd Office 2,000 2,200 – 2,500 Kista City 2,100 2,000 – 2,700 Stockholm City West 3,200 3,800 – 4,100 Stockholm City East 2,500 3,000 – 3,500 Västberga 1,070 1,000 – 1,600 Gothenburg Gothenburg South Central 2,200 2,400 – 2,600 Högsbo 1,100 1,000 – 1,500 Malmö Hyllie 2,500 2,650 – 2,850 Fosie 1,100 1,250 – 1,350 Västerås Västerås City 1,600 2,300 – 3,000 Finnslätten 900 1,000

Investment programme

Target SEK m 2020 2021- 2023

Development projects 600 1,800 Tenant improvements and other value creating investments 700 2,100 Maintenance investments 100 300 Total investments 1,400 4,200

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Investment programme – Target 2020-2023

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Development pipeline and potential building rights

Commercial building rights, s.qm Residential building rights, s.qm Stockholm Göteborg/ Malmö Västerås/ Mälardalen Total Stockholm Göteborg/ Malmö Västerås/ Mälardalen Total Building rights in place 3,000 19,000 37,000 59,000

• 3,000

4,000 7,000 Zooning plan process

• ngoing

15,000 43,500 23,000 81,500 50,000 33,000 90,000 173,000 Feasibility study-ongoing 51,500 82,500 134,000 268,000 34,500 37,000 14,000 85,500 Future building rights 104,000

• 15,000

119,000 3,000 11,000 5,000 19,000 Total, s.qm 173,500 145,000 209,000 527,500 87,500 84,000 113,000 284,500

At present the future development pipeline is approximately SEK 12 billion

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Development in pipeline

a:place – Redevelopment of

• ffice building of 10,000 sq.m. in

Kista.

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Development in pipeline

Verkstaden 7 – New Offices and hotel 13,000 sq.m. in Västerås

Jan–Jun 2020 in figures (Jan–Jun 2019)

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No of properties

210

(208) Profit fr. prop. mgmt SEK million

611

(579) Gross leasable area, th sq m

2,000

(1,985) Property value, SEK million

39,387

(36,131) Total revenues SEK million

1,265

(1,192) Unrealised value changes properties, SEK million and % uplift

304

New and net leasing SEK million Renegotiated leases, SEK million and % rent uplift

94 (144) +10% (7%)

• Ec. occup. rate, %

investm. properties

92.5

(93.4) +0.8% +6%

73

(93)

8

(10)

Rental growth, like for like, %

5.1

(4.3)

36

Questions are welcome

37

Thank you!