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2021-10-19

Kungsleden AB: Interim Report January - September 2021

Kungsleden's profit from property management increases by 7 per cent.

Interim Report January-September

  • Profit from property management increased by 7 per cent to SEK 1,004 million (940). The increase is mainly explained by higher rental revenue, lower selling and administration costs and improved net financial items.
  • New leasing was SEK 165 million (101), and net leasing was SEK 33 million (12).
  • 73 lease contracts (81) with total rental value of SEK 190 million (182) were renegotiated during the period. The rent increase on renegotiated lease contracts averaged 8 per cent (15).
  • After investments of SEK 869 million and positive unrealised changes in value of SEK 1,693 million, which corresponds to 4.2 per cent, property value at the end of the period was SEK 43,182 million compared to SEK 40,718 million at the beginning of the year.
  • Long-term net asset value (EPRA NRV) increased to SEK 109.10 per share (98.45).

Significant events during the third quarter

  • During the quarter, Castellum made a public offer to the shareholders of Kungsleden to acquire all the outstanding shares in Kungsleden. Kungsleden's Board of Directors unanimously recommends the shareholders of Kungsleden to accept Castellum's public offer.
  • A total credit facility of SEK 2.9 billion was extended and expanded. This facility is sustainability linked, and Sweden's first to include a target for diversity in the organisation and a target of reducing energy consumption and CO2 emissions in Kungsleden's property portfolio by at least 25 per cent by 2025 compared to 2020.
  • Several major leasings and renegotiations were completed during the quarter. Kungsleden signed a 15-year lease contract with Northvolt on approximately 15,000 sq.m. in Finnslätten, Västerås. In Alingsås, Kungsleden extended and expanded the lease contracts with ABB and NKT where a new warehouse and logistics facility totalling to approximately 20,000 sq.m. will be constructed, with an annual rental value of SEK 27 million. In Malmö, the tenant Malmö Padel is creating a new 4,000 sq.m. racquet sport facility with an annual rent of about SEK 4 million.
  • The office project a:place is starting up in Kista, Stockholm, after leasings to Quick Office and Infor, which means the property Borgarfjord 5 is now 40 per cent leased. This property will be developed into an ultra-modern office building with a full range of services.

CEO's statement - Biljana Pehrsson

Kungsleden is reporting progressively stronger profit from property management. Higher rental revenue thanks to positive net leasing since 2018 and renegotiations at higher rent, combined with lower finance and administration costs were the main drivers to profit from property management increasing by 7 per cent to SEK 1,004 million for the first nine months of the year.

Economic growth in Sweden this year is forecasted to be the strongest for several decades. This is creating good demand for commercial premises in our main markets of Stockholm, Gothenburg, Malmö and Västerås. The transaction market is still showing record strength. The outlook ahead is positive.

Sustainable lease contracts and rising occupancy rate

We signed 226 new lease contracts with a rental value of SEK 165 million during the first nine months of the year. Net leasing was SEK 33 million. I'm especially proud that we've been entrusted by one of our largest customers, Northvolt, to enter a 15-year lease contract in a new office in Finnslätten, Västerås, where we'll be building a climate-smart, timber-framed office building with a near-zero carbon footprint.

Another lease focused on sustainability is our first lease contract compliant with the "Climate-smart premises" concept, which we signed with Smart Psykiatri in Danderyd, Stockholm. Our own developed "Climate-smart premises" concept is based on a circular business model involving recycling, climate-smart material selections and matching the right tenant with the right premises to minimise conversion work and waste.

We are continuing to successfully renegotiate our current lease contracts. By September, we'd renegotiated 73 existing lease contracts with a rental value of SEK 190 million, and an increased rent by an average of 8 per cent. New leasings and renegotiations in our property portfolio resulted in the average rent increasing on a rolling 12-month basis by 4 per cent to SEK 1,548 per sq.m. as of 30 September. As tenants moved in in the third quarter, our occupancy rate increased to 92.7 per cent from 92.4 per cent as of the end of June.

Good value growth and major projects

The transaction market is very strong, with record demand for office, warehouse, industrial and logistics with historically low required yields. This combined with higher rents and higher operating net in our property portfolio, contributed to a positive increase in value of SEK 1,693 million.

This year, we are completing major new construction projects, as well as extensions and conversions of existing properties, while simultaneously building a pipeline of new future projects by securing tenants and high occupancy rates. We started the redevelopment of the office project a:place in Kista. We're also starting the new production of Northvolt's new office at Finnslätten, Västerås, in the fourth quarter. These two new projects have a total estimated investment volume of approximately SEK 610 million. After positive unrealised changes in value of SEK 1,693 million, and investments of SEK 869 million, Kungsleden's property value as of 30 September was SEK 43,182 million (40,718).

Sweden's first sustainability-linked financing with a diversity target

Kungsleden is actively working with increasing the company's diversity and make a positive contribution to the climate. These areas are two key focuses that we are convinced will result in better profitability. Proof came in a sustainability-linked SEK 2.9 billion credit facility agreement with Handelsbanken on favourable terms. We're Sweden's first company to incorporate the target of increasing diversity in our organisation, linked to financing. Additionally, this agreement stipulates us reducing energy consumption and CO2 emissions in our properties by at least 25 per cent each by 2025 compared to 2020, in consistency with our company-wide climate targets.

Positive outlook ahead

Sweden's recovery is strong. Since the summer, forecasts makers have been revising up their growth forecasts for this year to a growth of 4.6 per cent, and for 2022, growth is settled to be 3.6 per cent. We're seeing brisk activity on the rental market and have a good pipeline of new leasings and future projects. Eden, our office development and Symbiotic Building is being completed, and the first tenants have moved in. In our Symbiotic Concept, we have an attractive customer proposition, focusing on people, which is in demand by many customers, not least post-pandemic.

We offer an attractive property portfolio in the right locations on growth markets. In our latest CSI survey it's clear that our customers appreciate our focus on attractive and sustainable places where people get inspired. Our CSI increased from 73 to 76. One of the survey's highest scores is highlighting our customers' loyalty, which we are very grateful for. I'd like to thank my committed and dedicated colleagues, who also rate Kungsleden very highly-this year we achieved an employee satisfaction index of 8 out of 10, compared to 7.4 for our comparative index.

I look to the future with confidence!

Presentation of Interim Report

As of 9:00 a.m. (CEST) the slides from the presentation will be available from here (https://www.kungsleden.se/en/investors/reports-and-presentations/).

Watch the live webcast of the presentation of our report at 10:00 a.m. (CEST) via this link (https://kungsleden.creo.se/211019). The presentation will be in English. After our presentation, a recording of the webcast will be available at our website.

Following the presentation, there will be an opportunity to address questions to Biljana and Ylva. Analysts, investors and the press are welcome to call in to our teleconference. You can also write questions during the presentation in the webcast player.

The sound and image in a webcast may have a delay of a few seconds. We therefore recommend that participants first watch and listen to the presentation via the webcast. When it is time for questions, we recommend that participants who wish to ask questions live do so via the teleconference channel.

Telephone numbers for the teleconference:

Sweden: +46 8 50 558 369
United Kingdom: +44 333 300 92 63
United States: +1 646 722 49 57

For more information, please contact:

Biljana Pehrsson, CEO Kungsleden, +46(08) 503 052 04, biljana.pehrsson@kungsleden.se
Ylva Sarby Westman, Deputy CEO and CFO, Kungsleden, +46(08) 503 052 27, ylva.sarby.westman@kungsleden.se

Författare Cision