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2016-11-22

Diös Fastigheter: Diös acquires property portfolio for SEK 4.5bn from Castellum and carries out a fully guaranteed rights issue of SEK 1.8bn

Diös has entered into an agreement to acquire a property portfolio
from Castellum for SEK 4.5bn, considered a valuation of deferred tax
liabilities of SEK 0.1bn. In order to partly finance the acquisition,
Diös' Board of Directors proposes to the extraordinary general
meeting to resolve on a rights issue with preferential rights for the
company's existing shareholders, and to authorise the Board of
Directors to resolve on the final terms of the issue. The fully
guaranteed rights issue will raise Diös approximately SEK 1.8bn
before issue costs. The remaining part of the consideration of
approximately SEK 2.7bn, is financed through new interest-bearing
credit facilities.

The transaction in brief

·
Diös acquires 32 centrally located properties in Umeå, Luleå and
Sundsvall with a leasable area of 216 thousand sq.m.

·
Through the acquisition Diös strengthens its position in prioritised
growth cities and adds a high quality property portfolio and stable
cash flows.

·
Diös' property value pro forma increases with SEK 4.5bn to SEK 17.9bn
and the rental value increases with approximately SEK 360m to SEK
1,829m, based on the current earnings capacity as of 30 September
2016.

·
The main shareholders; AB Persson Invest, Backahill Inter AB and
Bengtssons Tidnings Aktiebolag, which together represent
approximately 36 per cent of the capital and votes in the company,
have committed to subscribe for their respective pro-rata shares of
the rights issue. Nordea and Swedbank have agreed to underwrite,
subject to customary conditions, the remaining part of the rights
issue.

·
In addition to the three main shareholders, Pensionskassan SHB
Försäkringsförening, representing approximately 6 per cent of the
capital and votes in the company, has committed to vote in favour of
the rights issue at the extraordinary general meeting.

·
The final terms of the rights issue, including subscription price, are
expected to be announced no later than 28 December 2016.

·
The acquisition is subject to the extraordinary general meeting's
resolution on the rights issue. Assuming that the extraordinary
general meeting resolves on the rights issue, the subscription period
will run from, and including, 9 January 2017 up to, and including, 23
January 2017.

·
Diös will seek customary antitrust clearance from the Swedish
Competition Authority.

"To acquire this well-maintained and centrally located property
portfolio is a great opportunity for us. We are strengthening our
operations and presence in important growth cities, especially in
Umeå and Luleå where we have had an ambition to grow for a long
period of time. Many of the acquired properties are located in direct
connection to our current properties and, in a long-term perspective,
we see both revenue synergies as well as economies of scale through
the acquisition. We are becoming a larger and more stable company
with improved cash flow and even greater opportunities to create
value for our shareholders" says Knut Rost, CEO of Diös.

"The acquisition is completely in line with Diös' long-term strategy
and targets of owning and developing properties with proximity to
city centres. The Board of Directors has great confidence that the
management together with all the employees will incorporate these
properties into Diös in a manner that will strengthen the entire
company. It is also reassuring that Diös' three largest shareholders
are supporting the expansion and have committed to subscribe for
their pro-rata shares in the upcoming rights issue" says Bob Persson,
Chairman of the Board of Diös.

Background and reasons

Diös owns and develops commercial and residential properties in growth
cities in northern Sweden. The operations are organized into six
business areas: Dalarna, Gävleborg, Västernorrland, Jämtland,
Västerbotten and Norrbotten. The head office is located in Östersund.
The company has since the start in 2005 experienced a continuous
growth in the property portfolio, which has grown from approximately
SEK 1.7bn to approximately SEK 13.4bn as of 30 September 2016. The
company owned 313 properties as of 30 September 2016 with a total
leasable area of 1,351 thousand sq.m. Diös' vision is to be the most
active and sought-after landlord in its market.

The acquisition is an important strategic transaction for Diös'
further development. The main reasons are:

·
Diös adds a well-maintained property portfolio with focus on centrally
located commercial properties in Umeå, Luleå and Sundsvall, where
Diös already operates.

·
The acquisition complements the existing portfolio and increases the
potential to contribute to sustainable urban development.

·
Through the acquisition, the company adds an attractive and
diversified tenant base, from which a significant share of rental
income is generated by public sector tenants.

·
The average lease term of the acquired properties amounts to
approximately 4.4 years, which extends Diös' average lease term from
3.2 to 3.5 years.

·
Diös believes that the acquisition enables revenue synergies and
economies of scale, inter alia through a strengthened tenant
offering, increased diversification of the tenant base, improved
position in city centre retail trade as well as with regards to
central and property administration.

·
Through the acquisition, Diös strengthens its position as northern
Sweden's largest private real estate company.

Overall, the acquisition is expected to increase the interest in Diös
from a number of perspectives; Diös becomes a more interesting and
stronger partner to, among others, tenants, suppliers and
municipalities and a higher market capitalisation may lead to
increased interest from a capital markets perspective. The
acquisition will not lead to any changes in the financial targets or
dividend policy of Diös. The acquisition

Diös acquires 32 properties in Umeå, Luleå and Sundsvall for SEK 4.5bn
considered a valuation of deferred tax liabilities of SEK 0.1bn.
Through the acquisition, the number of properties of Diös increases
from 313 to 345 properties and the annual rental value increases from
SEK 1,469m to approximately SEK 1,829m. In addition, the company's
property value will increase from SEK 13.4bn to SEK 17.9bn and
leasable area from 1,351 thousand sq.m to 1,567 thousand sq.m. During
2016, a number of major investments in the property portfolio have
been performed or initiated. The deal is based on Castellum's
completion of the remaining investments during 2017. The acquisition
is structured as a company acquisition and the change of possession
is preliminary scheduled to 1 February 2017. In connection with the
transfer of title to the properties, Diös takes over personnel from
Castellum. The acquisition is subject to the extraordinary general
meeting's resolution on the rights issue. Diös will seek customary
antitrust clearance from the Swedish Competition Authority.

The initial yield on the acquired properties amounts to approximately
5.3[1] (http://#_ftn1) per cent. The economic occupancy rate amounts
to 93 per cent. The largest tenants are Swedish courts,
Livförsäkringsbolaget Skandia, Swedish Transport Administration,
County Administrative Board of Västerbotten, and Trygg Hansa which
together represent 19 per cent of the total rental income. The
distribution of the leasable area per location is 40 per cent in Umeå
35 per cent in Luleå and the remaining 25 per cent in Sundsvall.

SUNDSVALL

LULEÅ

UMEÅ

Acquired property portfolio as of 30 September 2016

Pro forma balance sheet

In order to describe the financial position before and after the
acquisition, a preliminary pro forma balance sheet as of 30 September
2016 is presented below. The pro forma balance sheet is only intended
to describe a hypothetical situation and has been prepared for
illustrative purposes to inform and is not intended to report the
financial position of Diös if the acquisition had been completed on
30 September 2016.

The acquisition of SEK 4.5bn is partly financed by the proceeds of the
rights issue of approximately SEK 1.8bn as well as through new credit
facilities of approximately SEK 2.7bn. After the acquisition and the
proposed rights issue, pro forma as of 30 September 2016, Diös'
long-term interest-bearing liabilities will amount to approximately
SEK 10.7bn, corresponding to a loan-to-value ratio of 59.7 per cent
and an equity ratio of 32.3 per cent.

The acquisition is made through takeover of property owning company
with preliminary transfer of title 1 February 2017. The acquisition
is considered an asset purchase, meaning, inter alia, that no
deferred tax attributable to the acquired assets should be reported.
Transaction or issue costs were not taken into consideration in the
preliminary pro forma balance sheet.

Preliminary pro forma balance sheet as of 30 September 2016

SEKm Diös before Acquired Pro forma Diös
the property after the
acquisition portfolio acquisition
Investment 13,357 4,500 17,857
properties
Other assets 46 2 48
Current assets 190 19 209
Total assets 13,593 4,521 18,114
Equity 4,047 1,800 5,847
Deferred tax 957 957
liabilities
Non-current 7,969 2,700 10,669
liabilities
Overdraft 118 118
facilities
Current 502 21 523
liabilities
Total 13,593 4,521 18,114
liabilities
and equity

Loan-to-value 59.6% 59.7%
ratio
Equity ratio 29.8% 32.3%

Pro forma earnings capacity Presented below is the estimated current
earnings capacity pro forma on a 12-month basis as of 30 September
2016 for Diös before and after the acquisition.

Current earnings capacity as of 30 September 2016

SEKm Diös before Acquired Diös after the acquisition
the property
acquisition portfolio
Rental value 1,469 360 1,829
Vacancies and -148 -25 -173
discounts
Rental income 1,321 335 1,656
Other income 17 0 17
Property costs -525 -99 -624
Operating 813 236 1,049
surplus
Central -60 -5 -65
administration
Net financial -148 -42 -190
items
Property 605 189 794
management
income
...

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