kungsleden presents financial statement 2011

Welcome to Kungsleden

Facilitating opportunities

Fourth quarter 2011

Chief ExecutiveThomas Erséus

Deputy Chief Executive Johan Risberg

Owning and managing properties with satisfied customers

Always open to new opportunities

– regardless of property type or geography

High and stable returns for the long term with

risk diversification as a key ingredient

A quality portfolio with good geographical risk spread

636 properties, portfolio total over SEK 26 bn

Commercial

properties:

Industrial,

warehouse,

retail, office

Public properties:

retirement homes,

care, schools,

preschools and

judicial system

Modules for

schools, pre-

schools, offices and

portable units

Kungsleden,

SEK 14,143 m.

50% of Hemsö

= SEK 10,429 m.

Nordic Modular

Group, SEK 1,550 m.

Profit better than estimate and a stronger organisation

■ Profit for calculating dividends increased by SEK 173 m year on

year to SEK 703 m

■ Gross profit increased by 21% to SEK 1,877 m

■ Profit from property management increased by 29% to SEK 690 m

■ 60 properties purchased for SEK 4 798 m at a property yield of

10.2%

■ 20 properties sold for SEK 1,224 m at a property yield of 5%

■ Average property yield (earnings capacity) from 6.4 to 7.2%

■ Property values +SEK 690 m, financial instruments - SEK 609 m

■ Best workplace of property companies

Fourth quarter the best historically

■ Gross profits increased by 28%

■ Profit from property management of SEK 192 m the best historical

quarterly figure

■ Ten-year Green Lease signed with Westinghouse in Västerås, total

rental value approx. SEK 160 m

■ 11 properties purchased for SEK 305 m at a property yield of 7.4%

■ 16 properties sold despite a difficult market for SEK 1,044 m at a

property yield of 5.1%

After the fourth quarter

■ Syndicated loan rearranged in January 2012, which means that half

of Kungsleden’s maturities for 2012 are now refinanced

A good start to the year

Increased profit for calculating dividends and a higher dividend

2011 2010

SEK m Jan-Dec Jan-Dec

Gross profit 1,877 1,545

Sales and administration costs -319* -260

Net financial position -868 -749

Profit from property management 690 536

Realised items

Trading net on sale 56 33

Realised value changes, properties 66 21

Deduction for deferred tax on sale -8 -

Realised value changes, financial instruments -66 -8

Realised items 48 46

Taxes payable -35 -52

Profit for calculating dividends 703 530

* Of which Hemsö SEK 75 SEK m and Nordic Modular SEK 61 m.

Highlights of 2011

• Purchase from NRP better than

expected

• Hemsö has grown

• Nordic Modular returning good

profitability

• Focus on vacancies

Purchase from NRP—better than expected

Office and industrial properties

36 properties for SEK 3.6 bn

10% property yield

ABB in Västerås makes up

39% of areas

Stable returns and stable

tenants

Vacancy level of 5%

Yearly impact on profit for

calculating dividends of

approx. SEK 200 m

Hemsö has grown by SEK 1 billion

■ Hemsö is an independent

organisation

■ 312 properties in 86

municipalities

■ Larger property portfolio, to

approx. SEK 21 bn

■ Purchased at a yield of 6.9%

Nordic Modular is a profitable investment

■ Marked increase in order

bookings in the first half-year

■ Rental revenues and gross

profit increased year on year

■ Leased modules made up

12% of consolidated gross

profit and only 6% of property

value

■ Average return on equity well

over 20% since acquisition in

2007

Focusing on large vacancies has paid off

■ Three different lettings

totalling 10,000 sq.m. in

Arlöv, Malmö

■ 15,000 sq.m. let in Slagsta

Strand, south of Stockholm

■ Sale or five properties with

leasable area of

50,000 sq.m. in Slagsta

Strand

Increased occupancy and green partnerships

■ New agreements with annual rental value of SEK 118 m

■ Economic occupancy levels of 91.6 (90.3)%

■ Average remaining lease term 6.4 years, commercial 5.1 years,

public 7.4 years

■ Partnering with tenants to mitigate environmental impact through

reduced energy consumption

■ Westinghouse signs 10-year Green Lease

■ Two Green Building-accredited properties

Building awareness externally and pride internally

Very high job satisfaction offers stimulation

Source: Ennova

Portfolio growth of SEK 16 billion since 2002

More offices and less retail in the portfolio

Geographical spread limits risk

2011 in figures

Multiple profit streams

2011, SEK m

Kungsleden

excl. Hemsö and

Nordic Modular Hemsö, 50% Nordic Modular

Total

Kungsleden

Rental revenues 1,515 835 244 2,594

Sales revenue, modules 0 288 288

Net sales 1,515 835 532 2,882

Property costs -463 -235 -49 -747

Production costs, modules 0 -258 -258

Gross profit 1,052 600 225 1,877

Trading net 56 0 0 56

Sales and administration costs -183 -75 -61 -319

Net financial position -507 -309 -52 -868

Unrealised value changes -154 331 -96 81

Profit before tax 264 547 17 828

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec

Rental revenues 2,594 2,120

Sales revenues, modular buildings 288 184

Net sales 2,882 2,304


Trading net 56 33

Sales and administration costs –319 -260

Net financial position –868 -749

Unrealised value changes 81 617

Profit before tax 828 1,186

Tax –190 –345

Profit after tax for the period 638 841

• The increase is primarily

sourced from a larger

property portfolio and

good property

management

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Sharp increase in

order bookings in the

first half-year with

deliveries in arrears

through 2011

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Net sales increased

by 25%

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Gross profit increased

by 21% due to new

acquisitions

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• If sales proceeds are

compared to acquisition cost,

the effect of sales on profit for

calculating dividends is

obtained, which amounts to

SEK 114 m.

• SEK 66 m of value changes

and deductions for deferred

tax of SEK -8 m are additional

to the trading net of SEK 56

m.

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Of this total, SEK 75

SEK m is from

Hemsö, SEK 61 m

from Nordic Modular

and SEK 183 m from

commercial

properties, business

development and

central administration

• The increase is

mainly explained by

Hemsö being an

independent

organisation and a

larger property

portfolio.

• A non-recurring item

of SEK 5 m is

sourced from the

relocation and

demerger of Hemsö

and Kungsleden

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• The net financial

position changed

negatively mainly

because of a higher

loan volume and

newly arranged bond

loan with a higher

interest margin than

bank borrowings

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Value changes on

properties amounted

to SEK 690 m,

corresponding to 3%

of book value

• Mainly relating to

Hemsö and

properties in the NR

portfolio

• Value changes on

financial instruments

amount to SEK -609

m

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Tax is slightly less

than 26.3% of profit

before tax because

property sales were

conducted via

companies

Income Statement

SEK m

2011

Jan-Dec

2010

Jan-Dec



Net sales 2,882 2,304


Trading net 56 33





Tax –190 –345


• Lower number due to

unrealised value

changes on financial

instruments, which

were negative due to

sharply falling market

interest rates

Total assets increase by nearly SEK 4 bn

SEK m 2011 2010

Assets 31 Dec 31 Dec

Goodwill 201 201

Properties 26,122 21,501

Receivables, etc. 1,146 2,045

Cash and cash equivalents 816 747

Total assets 28,286 24,494

Equity and liabilities

Equity 7,719 7,357

Interest-bearing liabilities 17,315 13,949

Non-interest-bearing liabilities 3,252 3,188

Total equity and liabilities 28,257 24,494

Transfer to new accounting method

■ The way Hemsö is consolidated is changing from 1 January 2012

from the proportional method to the equity method

■ Half of Hemsö’s profit/loss is being reported on a line in the Income

Statement as profit/loss from participations in joint ventures

■ Half of the value of Hemsö’s equity is reported as an asset on a

separate line in the Statement of Financial Position

■ This change does not affect equity, net profit or profit for calculating

dividends

■ Property values and loans become lower, which reduces total assets

and increases the equity/assets ratio

Profit/loss, proportional and equity method, pro forma

SEK m

Proportional

method

Equity

method



Net sales 2,882 2,047


Trading net 56 56

Sales and administration costs -319 -244

Net financial position -868 -131

Unrealised value changes 81 -250

Profit before tax 828 708

Tax -190 -70

Profit after tax for the year 638 638

Statement of Financial Position, proportional and

equity methods, pro forma

SEK m

Proportional

method

Equity

method

ASSETS

Goodwill 201 201

Properties 26,122 15,693

Participations in joint ventures - 1,085

Receivables from joint ventures - 1,500

Receivables, etc. 1,147 988

Cash and cash equivalents 816 684

TOTAL ASSETS 28,286 20,151

EQUITY AND LIABILITIES

Equity 7,719 7,719

Interest-bearing liabilities 17,315 10,654

Non interest-bearing liabilities 3,252 1,778

TOTAL EQUITY AND LIABILITIES 28,286 20,151

Restructuring of derivative portfolio provides lower

average interest rate

As of 31 December 2011

Loan, SEK

m

Interest

derivatives,

SEK m

Ave.

interest,

%

Ave. interest,

loans and

derivatives, years

Average fixed

interest term,

years

2012 17,326 200 4.3

2013 1,100 3.7

2014 2,400 3.8

2015 2,700 4.0

2016 950 3.3

2017 700 3.7

2018 3,850 4.1

2019 1,400 3.1

2020 1,200 3.4

2021 800 3.3

Total derivatives 17,326 15,300 4.8 4.7

Market value of loans and

derivatives 1,255

Total 18,581

Approx. half of maturities in 2012 are refinanced

As of 31 December 2011

Utilised

credits,

SEK m

Un-utilised

credits, SEK

m

Total credits,

SEK m

2012 8,510 3,110 11,620

2013 2,725 50 2,775

2014 2,573 - 2,573

2015 999 - 999

2016 2,044 - 2,044

2017 - - -

2018 303 - 303

2019 172 - 172

Summa 17,326 3,160 20,486

Average conversion term, years 1.8 1.5

Equity/assets ratio

31 Dec 11

27%

31 Dec 10

30%

30 Jun 11

27%

Equity method

38%

LTV ratio 66% 65% 68% 67%

Property management is the foundation of earnings

Big differences in results for financial targets in

2007-11 Interest cover RoE

2007 2.7 25.6

2008 1.6 -11.9

2009 1.6 3.5

2010 1.8 11.7

2011 1.9 8.1

Average 1.9 7.4

The share to mid-February 2012

Total yield until mid-February 2012

10 largest shareholders represent 25% of votes & capital

■ Nordea fonder 4.8

■ Pensioenfonds PGGM (NL) 3.4

■ Länsförsäkringar fonder 2.9

■ SHB fonder 2.6

■ Norska staten 2.4

■ Olle Florén and companies 2.3

■ Danske Invest fonder 2.3

■ AP4 1.7

■ AP2 1.3

■ Swedbank Robur Fonder 1.1

24.8

Source: SIS Ägarservice, 31 Dec 2011

Stable portfolio but hesitant market conditions

■ Kungsleden’s lettings market

– Stable lettings market but businesses generally more cautious

– Limited vacancies

■ Financial market

– Market driven by shorter credits

– Higher funding costs

■ Transaction market

– Activity down in the fourth quarter

– Property market remains liquid and transparent

Property management and portfolio enhancement in focus

in 2012 ■ Fairly strong Swedish economy

■ Quality portfolio with good geographical risk-spread ensures stable

cash flow

■ As always, focus on customer care and portfolio enhancement

■ Extending the base of alternative types of funding

■ Continue to look for good transaction opportunities

■ Work to reduce vacancies in a small number of large properties

■ High employee commitment offers good prospects for positive

profits from property management and business development

■ The Board’s estimate of profit for calculating dividends for 2012 is

SEK 600 m

Questions?

kungsleden presents financial statement 2011

Real Estate