Tenants remain our top priority
D. Carnegie & Co AB (publ) reports for the first quarter of 2018 income from property management, SEK 1 million, compared to SEK 60 million for the first quarter of the previous year. Profit after tax amounts to SEK 156 million compared to SEK 229 million for the first quarter of the previous year.
Earnings per share after tax were SEK 1.98 (2.96). The adjusted equity (EPRA NAV) increased 18 percent compared to the corresponding quarter 2017 and amounted to SEK 125.35 per share (106.04) as of 31 March 2018.
January – Mars 2018
- Rental income increased to SEK 386 million (337)
- Net operating income of SEK 166 million (147)
- Income from property management amounted to SEK 1 million (60)
- Changes in the value of investment properties of SEK 222 million (238)
- Profit before tax amounted to SEK 190 million (297)
- Profit after tax amounted to SEK 156 million (229)
- Earnings per share amounted to SEK 1.98 (2.96) before dilution and amounted to 1.96 (2.91) after dilution
Significant events during the first quarter
- In the end of January D. Carnegie & Co divested two properties in Eskilstuna to a private housing cooperative.
- On 21 February D. Carnegie & Co announced that Svein Erik Lilleland has been appointed permanent CEO for the company.
- D. Carnegie & Co has carried out a rights issue of shares of series A and B of 11,254,538 shares in total. The subscription price was SEK 90 per share where the shareholders were entitled to subscribe for one new share for every seven shared held.
Significant events after the first quarter
- In the beginning of April, D. Carnegie & Co completed the acquisitions of 1,420 apartments in the Stockholm region and 749 apartments in Västerås that the company entered an agreement into during the fourth quarter in 2017.
- On 26 April D. Carnegie & Co completed the acquisition of 1,274 apartments in Stockholm. The agreement was entered into on 5 April 2018 with Byggmästare Anders J Ahlström Fastighets AB. As part of the purchase price of SEK 1,673 million, Byggmästare Ahlström subscribes for 1,016,000 series B-shares in D. Carnegie & Co at a subscription price of SEK 123 per share.
- D. Carnegie & Co has completed a SEK 4.8 billion refinancing, combined with a SEK 1.0 billion revolving capex facility. The SEK 1.0 billion 2015/18 senior unsecured bond has as a result been fully repaid. Proceeds after the refinancing and subsequent bond repayment amount to approximately SEK 1 billion.
D. Carnegie & Co AB (publ) revises its financial targets and dividend policy
D. Carnegie & Co AB’s ambition is to further strengthen its profile as a real estate company featuring low financial risk. The Board has therefore decided to adjusted its financial targets and dividend policy to be the following. The equity ratio shall amount to at least 30 percent, Loan-to-value ratio (LTV) on properties shall not exceed 65 percent and the Gross margin shall be at least 50 percent. The Company is in an expansive phase during which any surplus may be invested in the property portfolio, primarily in the form of refurbishments. Since investments in the existing properties is expected to provide a good return, the Board of Directors does not plan to suggest any dividend to the shareholders in the immediate future.
Statement from the CEO
During the quarter we have been preparing for the take over of the assets that we have agreed to acquire over the past months and after the first quarter we completed these acquisitions. This means that I want to welcome our new tenants in Västerås, Södertälje, Nynäshamn and Alby to our company. Now we own over 20,000 apartments in Stockholm and surrounding regions making us one of the largest long-term owners in the region. With size and strength comes responsibility for the well-being of our tenants, who are also our first priority.
Focus on the tenants
During this quarter I was also entrusted with continuing to lead D. Carnegie & Co going forward. I take this responsibility very seriously and see it as my duty to continue to develop the company along the current strategy as a residential company with a long-term view. This means setting the tenants as our highest priority and that we will continue to invest into our properties in order to keep making our areas better.
Refurbishment and renovations
We refurbished 373 apartments during the quarter and continued our mission to enhance the quality and the value of our properties to the benefit of the tenants, the communities in which we operate and to our share- and other stakeholders. We are proud to deliver what is a sustainable and large-scale renovation model well adapted to meet the needs and challenges of the Swedish housing market. Our refurbished apartments are completely adapted to a modern standard using high quality materials and we also upgrade features such as heating systems and piping. In addition to refurbishing apartments, we also invest significant resources in the improvement of the properties’ internal and external features such as stair-cases, facades as well as the exteriors to create more attractive neighborhoods. Our model of refurbishing apartments as they are naturally vacated ensures that our tenants remain in control of their housing situation and that no one is forced to move. The investments in our properties creates value through increased cash flows from justifiably higher rent levels and lower maintenance costs, which in turn enables us to continue to invest in our properties for the long term.
Relations with the municipalities and other real estate owners also have high priority and is an important part of our business model. We want to be a partner to the municipalities and other stakeholders in order to jointly develop the areas we are active in. We are continuing to strengthen this work through BID-projects (Business Development Districts) and real estate owners associations. This is also emphasized in the latest acquisition we have signed with the owners of Mitt Alby. As part of this transaction we will merge their social engagement with the work we do and develop this even further. We are looking forward to become a property owner in Botkyrka.
Due to cold weather during the first quarter of 2018, our heating and electricity costs increased by 17 percent, corresponding to SEK 12 million, compared to the same period last year. The increase was both driven by a 12 percent increase in residential area, as well as an increase in the average price per kWh. Despite increased costs and an unusually cold first quarter, our energy usage per sqm decreased by 5 percent driven by our investments into increasing the energy efficiency of our properties.
Optimization of the capital structure
In order to secure continued expansion of our property portfolio we completed a SEK 1 billion fully subscribed rights issue in March, below the SEK 1.5 billion we had received approval for from our shareholders. We elected to raise a lower amount as we fully realize how precious our shareholder’s equity capital is. As part of our ongoing efforts to optimize our capital structure we also completed a SEK 4.8 billion refinancing combined with a SEK 1 billion capex facility to secure investments in our property portfolio, during the first quarter. Following repayment of the SEK 1 billion 2015/18 bond on 23 April we have lower total interest rate costs even though we increased our loan volume by over SEK 1 billion compared to the previous quarter. The refinancing resulted in SEK 93 million non-recurring costs, SEK 49 million due to early prepayment of existing loans and SEK 44 million hedging breakage costs. However, we believe our lowered financing costs and strengthened capital structure justify these non-recurring expenditures.
Stockholm 27 April, 2018
Svein Erik Lilleland
CEO, D. Carnegie & Co
This information is information that D. Carnegie & Co AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 7.00 a.m. CEST on 27 April, 2018.
About D. Carnegie & Co
D. Carnegie & Co is a property company focusing on residential properties in the Greater Stockholm region and other growth areas. The company’s business concept is to own property portfolios slated for a gradual renovation of apartments in conjunction with the natural turnover of tenants. This can take place quickly and cost-efficiently thanks to extensive experience from the company's renovation method which, among other things, means that no evacuation needs to take place. In addition to this, the company creates value through the development of building rights in existing portfolios. The market value of the company’s properties amounted to SEK 21,952 million on 31 March 2018. The total rental value amounted to SEK 1,569 million annually on 31 March 2018. The economic occupancy rate is high – vacancies are virtually non-existent. D. Carnegie & Co is listed on Nasdaq Stockholm.