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2020-11-11

K-Fast Holding AB: Interim report January-September 2020

Financial ratios for the period 1 January-30 September 2020

+----------------+---------+---------+---------+---------+---------+
|  Financial |    2020 |    2019 |   2020 |    2019 |   2019 |
|ratios | Jul-Sep | Jul-Sep | Jan-Sep | Jan-Sep | Jan-Dec |
+----------------+---------+---------+---------+---------+---------+
|  Rental income,|  51.0 |  40.5 |  147.7 |  112.1 |  156.8 |
|SEK million | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Profit from |  21.2 |  16.5 | 56.2 |  44.3 |  52.9 |
|property | | | | | |
|management, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Profit for the|  99.5 | 64.0 |  303.5 |  197.4 |  365.3 |
|period, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Net | 271.1 |  141.3 | 1,355.8 |  709.6 | 1,061.1 |
|investments in | | | | | |
|investment | | | | | |
|properties, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Investment | 6,128.2 | 3,919.4 | 6,128.2 | 3,919.4 | 4,396.7 |
|properties, SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Long-term net | 3,444.8 | 1,501.5 | 3,444.8 | 1,501.5 | 2,540.2 |
|asset value | | | | | |
|(NAV), SEK | | | | | |
|million | | | | | |
+----------------+---------+---------+---------+---------+---------+
| | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Number of |  2,043 |  1,562 |  2,043 |  1,562 |  1,711 |
|apartments under| | | | | |
|management | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Number of |  1,284 |  678 |  1,284 |  678 |  700 |
|apartments under| | | | | |
|construction | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Number of |  3,356 |  1,095 |  3,356 |  1,095 |  1,340 |
|apartments under| | | | | |
|project | | | | | |
|development | | | | | |
+----------------+---------+---------+---------+---------+---------+
| | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Interest |  2.7 |  2.8 |  2.6 |  2.8 |  2.6 |
|coverage ratio, | | | | | |
|multiple | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Equity/assets |  42.5% |  28.9% |  42.5% |  28.9% |  41.7% |
|ratio, % | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Loan-to-value |  42.2% |  61.5% |  42.2% |  61.5% |  40.2% |
|ratio, % | | | | | |
+----------------+---------+---------+---------+---------+---------+
| | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Profit from |  0.61 |  0.66 |  1.65 |  1.77 |  2.05 |
|property | | | | | |
|management, SEK | | | | | |
|per share | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Growth in |  -7.3% |  4.6% |  -7.1% |  30.4% |  24.6% |
|profit from | | | | | |
|property | | | | | |
|management per | | | | | |
|share, % | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Long-term net | 95.99 |  59.43 |  95.99 |  59.43 |  74.96 |
|asset value | | | | | |
|(NAV), SEK per | | | | | |
|share | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Growth in long|  15.4% |  6.6% |  28.1% |  22.5% |  54.4% |
|-term net asset | | | | | |
|value (NAV), per| | | | | |
|share, % | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Earnings per |  2.88 |  2.56 |  8.89 |  7.89 |   14.14 |
|share, SEK | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Number of |  35,889 |  25,264 |  35,889 |  25,264 |  33,889 |
|shares | | | | | |
|outstanding at | | | | | |
|the end of the | | | | | |
|period, | | | | | |
|thousands | | | | | |
+----------------+---------+---------+---------+---------+---------+
|  Average number|  34,649 |  25,028 |  34,144 |  25,010 |  25,830 |
|of shares | | | | | |
|outstanding | | | | | |
|during the | | | | | |
|period, | | | | | |
|thousands | | | | | |
+----------------+---------+---------+---------+---------+---------+
 

A Message from the CEO - Capital raised enables faster expansion

A large part of the year was affected by the uncertainty relating to the continuing Covid-19 pandemic. Fortunately, many property managers have experienced limited or no negative impact from the pandemic. This also applies to K-Fastigheter's operations, apart from slightly longer processing times for planning permission in some of the municipalities where we operate. In my CEO's Comments for the first six month of the year, I outlined a transaction market for residential building rights characterized by less competition and shorter processes. This was because many property developers focusing on tenant-owner apartments and property rights chose to put the brakes on. This may well have been wise, as sales of new-build tenant-owner apartments had slowed by 29 percent at the end of the second quarter 2020.

For K-Fastigheter's part, residential building rights are a key asset for our future growth, and we have chosen to accelerate rather than slow down to get ourselves out of the current crisis, and aim to acquire as many building rights as possible in locations with strong demand for rental apartments. So far this year, our building rights portfolio has grown by 150 percent on the opening balance 2020. In order to shift up a gear, and following authorization by the AGM in May, we decided to issue 2,000,000 new Class B shares in August to Swedish and institutional investors, raising SEK 504 million before issue expenses.The proceeds give us the opportunity to expand our project portfolio further with strategic acquisitions of building rights.

In the third quarter, K-Fastigheter completed five acquisitions of building rights for a total purchase price of SEK 163 million, which may appear to be minor acquisitions at first glance. And this is where K-Fastigheter stands out from the crowd. In these apparently minor acquisitions of building rights, we intend to invest a total of some SEK 1.5 billion to develop the properties into attractive HOMES for our long-term management. Given the current market conditions, external independent property assessor Newsec has estimated the market value at some SEK 2.1 billion upon completion. This means that we consider it is possible to generate some SEK 600 million in unrealized values. In addition, the properties will, upon completion, be able to generate annual rental values of some SEK 100 million and provide some 763 new HOMES.

We are also maintaining a high pace of project development and construction, with 1,284 apartments in construction at the end of the period. The total acquisition cost in relation to market value corresponded to 72.4 percent, based on including the profit margin in our construction operations for these projects. Our gradual revenue recognition approach means that ongoing construction projects generate stable value growth month by month. Upon completion, these will generate an annual rental value of SEK 163.4 million. Including ongoing construction projects, our project portfolio comprised 4,640 apartments at the end of the period.

On 30 September, we took possession of the final phase of Folkparken in Växjö, Örnen 33 & 34, which we acquired from the Borohus Group. Although the project, which comprises 171 apartments, was originally planned as a tenant-owner project, we reached an agreement to buy out the project on completion, and change the access rights to rental apartments. In this project, we're experiencing a short-term high vacancy rate due to the delay in letting resulting from the buy-out process, as well as the fact that the property was a construction site up until September this year. This large project burdens our financial letting ratio in the short term, which amounted to 92.4 percent at the end of the period. Excluding the Folkparken project, the financial letting ratio was 98.4 percent. The project has now been completed and we're maintaining the high pace to increase the letting ratio with a steady inflow of new tenants. In the long term, I'm very confident that the area will become one of our more attractive ones as the property standard is very high, and the property is in a central and attractive location. The ugly duckling will become a swan, you can be sure of it.

Apart from the short-term vacancies in Folkparken in Växjö, the KPIs for the Property Management business area are positive, and we are reporting our strongest quarter to date this year, both in terms of profit from property management of SEK 21.2 million and a surplus ratio of 72.4 percent. Profit from property management per share was negatively affected by a directed new share ...

Författare K-Fast Holding AB

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