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2016-10-19

Kungsleden AB: Strong leasing results and value of property portfolio still rising

INTERIM REPORT JANUARY-SEPTEMBER 2016

THE REPORT IN BRIEF

Third quarter (Jul - Sep)

· New leasing increased to SEK 45 (29) million and net leasing
increased to SEK 9 (-4) million.

· Rental revenue increased 7 per cent to SEK 603 (562) million and
operating net increased 5 per cent to SEK 428 (409) million.

· Profit from property management increased by 2 per cent to SEK
269 (264) million, not including profit from participation in
associates during 2015.

· The positive change in value of the property portfolio was SEK
273 (202) million, which is attributable to a higher operating net
and lower yield requirements.

· Profit for the period increased to SEK 400 (322) million, which
corresponds to SEK 2.20 (1.77) per share.

· Equity continued to increase and amounted to SEK 55.71 per share,
as compared to SEK 51.28 at the beginning of the year. EPRA NAV
amounted to SEK 65.50 per share, as compared to 56.76 at the
beginning of the year.

· LTV fell even further, to 57.9 per cent. At the start of the
year, LTV was 61.9 per cent.

Comments on events during and after the third quarter

· Eight non-strategic properties, worth SEK 186 million, were
divested. This increases the concentration of holdings even further
and once the properties have been vacated, Kungsleden will be present
in 59 municipalities.

· There was early redemption of a bond loan and Kungsleden has, for
the first time, issued commercial paper for SEK 1,080 million with
average interest rate of 0.37 per cent.

· Redevelopment of Tegnér shopping mall in Växjö entered the
implementation stage, and it is expected to open early in 2018. The
redevelopment of Tegnér will attract new and attractive tenants
within retail, restaurant and service. The investment amounts to SEK
150 million. Rental revenue in the property is expected to increase
by at least SEK 10 million after the investment has been made.

Comments from Biljana Pehrsson, CEO

I am very pleased to report that Kungsleden's performance remains
strong. New leasing increased with 55 percent compared to the same
period last year and was SEK 45 (29) million. We divested eight
non-strategic properties and we exited yet another municipality
during the quarter. We are now present in 59 municipalities - as
compared to 140 when we changed our strategy just over three years
ago - and 78 percent of the property value is now concentrated to
Stockholm, Gothenburg, Malmö and Västerås.

Rental revenue and operating net continued to increase in the third
quarter. This is attributable to the fact that we now have a higher
percentage of office properties in Stockholm compared to last year.
The value of property holdings rose by SEK 273 million in the third
quarter, which is equally attributable to improved operating net as
to lower yield requirements. Most of the increase in value has
occured in our office properties in clusters in Stockholm and
Västerås. The market yield used in the portfolio range from 4.40 per
cent (lowest) to 12.0 per cent (highest). The average yield valuation
is 6.2 per cent.

Profit from property management for the interim period was SEK 755
million, which is an improvement of 21 per cent compared to the
corresponding period in 2015 if profit from participation in
associates in 2015 is excluded.

GOOD LEASING RESULTS AND STRENGTHENING OF PROPERTY MANAGEMENT
ORGANISATION

The rental market continues to be strong in our priority growth
markets Stockholm, Gothenburg, Malmö and Västerås, with a healthy
rate of increase in new leasing. During the quarter, we signed more
than 50 lease agreements with both new customers and prior customers
who have returned to us. There was a high level of new leasing in
general, totalling SEK 45 million, where SEK 25 million is
attributable to properties in our clusters and SEK 20 million is
attributable to our other properties. For the interim period, new
leasing was SEK 149 million, which is an improvement of 60 per cent
compared to last year. Net leasing in the third quarter amounted to
SEK 9 (-4) million. For the interim period, net leasing was SEK 49
(-2) million.

Lease agreements valued at SEK 9 million were renegotiated during the
quarter, resulting in an increase in rent level by 18 per cent on
average. For the interim period, lease agreements with rental value
of SEK 53 million were renegotiated, resulting in an average rental
increase of 8.2 per cent.

In line with our continued efforts to focus on both customers and
operations, we opened two new offices during the quarter - a cluster
office in Danderyd and a local office in Norrköping. We have a new
asset and property management market area, Norrköping/Linköping with
a property portfolio of 164,000 sq. m. After year-end, it will become
part of the Mälardalen management region. At present, the properties
are spread across several regions.

NEW RESIDENTIAL STRATEGY
We have a new strategy on how to derive maximum benefits from our
existing and future residential building rights totalling 450,000 sq.
m. In summary, we will actively develop the value of our building
rights by working with the local authorities on zoning issues, with
the aim of creating attractive residential projects and then selling
the building rights as the zoning work progresses.

TEGNÉR ENTERS IMPLEMENTATION STAGE
During the quarter, renovation of the centrally located Tegnér
shopping mall in Växjö entered the implementation stage. An agreement
with a key tenant for 3,000 sq. m. of space was signed during the
quarter, which means that the outlook is very positive as regards the
future success of this property. The investment is estimated as SEK
150 million and once the redevelopment has been completed, rental
revenue at the property is expected to increase by at least SEK 10
million. Including Tegnér shopping mall, we now have four projects in
the implementation stage. The total investment volume is SEK 826
million, with a good return.

HIGH LEVEL OF INTEREST AND COMMITMENT
During recent months, we've been met by a high level of interest from
the property market, capital market and other important stakeholders.
This is certainly encouraging and important, but even more exciting
is the level of enthusiasm and commitment within the company. During
the quarter, we conducted an employee survey and the results were
quite satisfying. The response rate was 100 per cent and the results
for both job satisfaction and the Employee Satisfaction Index
exceeded our very high expectations and goals.

At Business Arena Stockholm in September, a team from Kungsleden
hosted visitors at our popular lounge. We presented some of our
vacant premises using the latest Virtual Reality technology. It's a
new way of showing and marketing our premises and just one of the
many examples of what we are doing to be on the cutting edge and
provide the highest possible level of service to our existing and
potential customers.

MANY WANT TO BE WHERE WE ARE
Our strategy is based on the increasing level urbanization and healthy
growth in metropolitan areas, which are mega trends that are
generating a high demand for office space. This provides us with an
excellent foundation for our operations. However, to achieve our goal
of becoming Sweden's most profitable property company, we are working
very diligently to maximise the full potential of our properties and
clusters, streamline our organisation and further increase the
concentration of our holdings.

Stockholm, 19 October 2016
Biljana Pehrsson, CEO

For more information, please contact:
Biljana Pehrsson, CEO, Kungsleden | +46 8 503 052 04 |
biljana.pehrsson@kungsleden.se

Anders Kvist, Deputy CEO and CFO, Kungsleden | +46 8 503 052 11 |
anders.kvist@kungsleden.se

This press release is available in English at www.kungsleden.se/press

----------------------------------------------------------------------

The information was provided for public release on 19/10, 2016 07.00
a.m

Kungsleden owns, manages, and develops offices and other commercial
properties in Stockholm and Sweden's other growth regions. We create
value by offering attractive and functional premises in the right
locations at the right price. A significant part of our properties
are gathered in clusters that enrich people's working day.
Kungsleden's goal is to deliver attractive total return on our
properties and to our shareholders.

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http://news.cision.com/kungsleden-ab/r/strong-leasing-results-and-value-...
http://mb.cision.com/Main/293/2103911/576828.pdf
http://mb.cision.com/Public/293/2103911/8098552d3504323f.pdf

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