Interim report January - March 2016

Strong start to the year

JANUARY – MARCH 2016 QUARTER

Rental income amounted to MSEK 650 (589)

Profit from property management totaled MSEK 340 (265), corresponding to SEK 2.40 per ordinary share (1.84)

Profit after tax amounted to MSEK 654 (506), corresponding to SEK 4.78 per ordinary share (3,72)

Recognized property value of SEK 31.3 billion (27.6) pertains to 416 (361) directly owned properties

Net asset value (EPRA NAV) per ordinary share was SEK 83.50 (66.46)

• Cash flow from operating activities was MSEK 294 (420), corresponding to SEK 2.04 per ordinary share (3.01)

SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER

The Board clarified the strategy for the proportion of community service properties, which are to ultimately account for at least 75 percent of the total property value. The financial objective for the interest-coverage ratio was adjusted to a target of a multiple of at least two.

The Board proposes that the AGM resolve on a new issue of ordinary shares of MSEK 1 800 with preferential rights for Hemfosas ordinary shareholders at a subscription ratio of 1: 5 and issue price of SEK 69.00 per ordinary share.

Hemfosa acquired three community service properties in Finland at an underlying property value of approximately MSEK 500.

Hemfosa acquired nine community service properties in Norway through the acquisition of Statens Park in the municipality of Tønsberg at an underlying property value of approximately MSEK 420.

Hemfosa acquired three community service properties in Sweden – in Växjö, Uppsala and Gävle – at an underlying property value of approximately MSEK 470.

Streamlining of the property portfolio continued and five residential properties in Gävle were divested during the quarter at an underlying property value of approximately MSEK 170. In addition, five nonpriority properties were sold individually at an underlying property value of about MSEK 160.

Hemfosa signed a ten-year lease with If Skadeförsäkring for 11,000 square meters of previously vacant floor space in the Södra Porten area of Mölndal.

Comments from the CEO

During the first quarter, we took possession of properties at a value of SEK 1.4 billion in Sweden, Norway and Finland and Hemfosa reported increased earnings capacity and stronger earnings from property management. The proportion of community service properties continued to rise, in line with our strategy of achieving further growth in this type of property. In view of our strong development and continued growth ambitions, we have proposed to the shareholders that we implement a proactive rights issue, which will strengthen our opportunities to continue to grow while maintaining a high and stable return.

PROPERTY MANAGEMENT

We now put another strong and eventful quarter behind us. Our earnings capacity increased after acquiring properties worth approximately SEK 1.4 billion in all of our three markets, including our second acquisition in Finland, as well as a number of fully leased, newly built healthcare and personal care properties in Sweden. We also divested non-priority properties at a total value MSEK 324 as a feature of our efforts to streamline the property portfolio towards an increased share of community service properties. Viewed as a whole, this meant that the community service properties’ share of the total property value increased to 61 percent while the Group’s net operating income rose 17 percent to MSEK 428. The upward trend during the quarter strengthens us in our conviction that we have chosen the right direction: that by focusing on community service properties, we can achieve increased earnings combined with a lower risk.

PROPERTY DEVELOPMENT

Hemfosa is currently the only listed company in Sweden focusing on community service properties. Our clear focus combined with stable cash flows and a position as a reputable and knowledgeable counterparty in the community property sector constitutes a solid platform for acquisitions and continued growth. During spring 2016, the Hemfosa Board decided to additionally underscore the company’s focus on community service properties by adopting a strategy aimed at expanding the share of community service properties so that it represents at least 75 percent of the total property portfolio. The geographic expansion to Norway and Finland is important to our efforts to reach this goal. By broadening the geographic selection base, we enhance our potential to identify advantageous business opportunities that are suitable to us, even in the currently competitive transaction market. The active market also provides us with opportunities to streamline the portfolio and continue to divest non-priority properties.

GROWTH

By combining long-term property management and development with successful transaction work, Hemfosa has generated strong growth and a high return for its shareholders since its inception seven years ago. The early part of 2016 continued in the same vein, and we see favorable prospects to continue to grow while achieving high and stable earnings. This boosts our confidence ahead of the proactive rights issue of ordinary shares that we are proposing to our shareholders. With greater access to capital, we can act more swiftly when we identify the right acquisitions. Our aim is to get this money working as soon as possible by implementing wise acquisitions. We are evaluating attractive transactions in all of our three markets. Strong cash assets also increase our opportunities to invest in and develop our existing properties. We consider this beneficial to both Hemfosa and our shareholders. We hope to receive the confidence of the shareholders at the Annual General Meeting being held today – and we look forward to continuing delivering the highest return among listed property companies in Sweden.

Jens Engwall, CEO

For further information, please contact:

Jens Engwall, CEO
Phone: +46 70 690 65 50, Email: jens.engwall@hemfosa.se

Karin Osslind, CFOPhone: +46 70 794 93 37, Email: karin.osslind@hemfosa.se

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About Us

Hemfosa is a Swedish property company focusing on community service properties in the Nordic region with its largest tenants being the Swedish state and municipalities. This provides stable cash flows and a healthy yield. In order to create value, Hemfosa also aims to actively participate in the transaction market. As per June 30, 2016, Hemfosa owned properties with a total property value of approximately SEK 33.2 billion, including the company’s share of the property value in joint ventures. Hemfosa’s common share has been listed since March 2014 and its preference share since December 2014, both on Nasdaq Stockholm. Read more at www.hemfosa.se.

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