Interim report January - September 2023
- Income amounted to SEK 3,228 million (3,306)
- Operating surplus increased to SEK 2,250 million (2,233)
- Net financial income amounted to SEK –1,098 million (–747)
- Profit from property management amounted to SEK 1,016 million (1,346)
- Changes in value of properties amounted to SEK –5,823 million (176)
- Changes in value of derivatives amounted to SEK –81 million (1,458)
- Profit shares in associated companies amounted to SEK 1,076 million (–139)
- Net profit for the period amounted to SEK –4,934 million (1,605), corresponding to SEK
–4.91 (1.11) per ordinary share of class A and B
- Net letting was positive and amounted to SEK 90 million for the period
- The value of investment properties amounted to SEK 66,242 million (78,387)
- Net asset value (NAV) per ordinary share of class A and B amounted to SEK 20.37
(26.42)
SIGNIFICANT EVENTS DURING THE THIRD QUARTER
- During the quarter, five properties were divested at an underlying property value of SEK 1,105 million. During the nine-month period, a total of 97 properties were divested at an underlying property value of SEK 9,190 million. Effect on profit, including dissolved deferred tax, amounts to approximately SEK 572 million.
- In August, Corem divested a part of the shares in Klövern to Nrep and received a settlement of SEK 1.4 billion. The holding has, with the partial divestment in the quarter, been reclassified from Shares in associated companies to Financial assets valued at fair value.
- In September, Corem redeemed one maturing outstanding bond of SEK 739 million at maturity.
- In August, Corem divested a part of the shares in Klövern to Nrep and received a settlement of SEK 1.4 billion. The holding has, with the partial divestment in the quarter, been reclassified from Shares in associated companies to Financial assets valued at fair value.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD
- In October, Corem redeemed a bond loan of SEK 900 million, of which SEK 796 million was outstanding.
- In October, it was communicated that Corem has four letters of intent regarding divestment of properties at total underlying property values of just over SEK 12 billion. The letters of intent have been considered in the interim report.
- In October, an agreement was signed regarding one of the four letters of intent, regarding the divestment of 24 properties in Stockholm, Jönköping, Malmö and Norrköping, at an underlying property value of SEK 1,160 million.
- In October, it was communicated that Corem has four letters of intent regarding divestment of properties at total underlying property values of just over SEK 12 billion. The letters of intent have been considered in the interim report.
Comment by the CEO
Strong core business and high transaction activity with focus on strenghtened finances
We are continuing to strengthened finances by reduce debt, mainly through proactive property transactions. At the same time, our core business delivers fine results and among other things we can report a positive net letting of entire SEK 40 million for the quarter.
Corem´s year so far has been marked by efforts to improve our future financial position, combined with very good progress within property management and completion of projects. We can therefore sum up a good quarter, despite concerns about the development within the market around us.
Strong core business
Our core business is strong, with a number of fine lettings during the quarter. These include Bahnhof who establish new premises with us in Kista, something which also adds to the profile of the area as a technology cluster. We have also been able to communicate lettings in Västberga with its strong logistic location, and in Västerås, agreements have been signed with Aspia and Knightec. Besides new lettings, it is generally the case that most choose to extend their leases as they expire. Also in New York we continue to add new tenants, most recently, with 1 RoundTable Partners in the property 28&7.
Overall we can report a strong net letting of SEK 90 million since the year-end and an entire SEK 40 million for the quarter. Behind the net figure are over 700 signed agreements with a breadth of tenants, and an annual income amounting to SEK 368 million for contracts signed contracts during the year.
Even within our project development activity remains high even if the volumes are significantly lower than last year. To name a few, we have completed new premises for, among others Coop, Systembolaget and Apoteket, and we are working to complete premises for, among others, Riksbanken, Länsstyrelsen, Trafikverket, Academedia and Statens Service Center.
For a comparable portfolio, the net operating income increased by 9 per cent in the period, even though the net operating income on a total level decreased in volume, for natural reasons, as a result of completed divestments. Profit from property management was restrained due to increased market interest rates and amounted, for the period, to SEK 1,016 million.
Transactions which strengthen us
Our transaction activities have been an important tool in freeing up capital. Overall, since year-end, we have divested or signed agreements on divestment of assets with an aggregate underlying market value of over SEK 13 billion, including transactions to date. These consist mainly of properties for approximately 10.5 billion, including the divestment of 24 properties which was finalised yesterday, but also the divestment of our holding in Castellum and part of our holding in Klövern.
During the third quarter we divested properties with an underlying property value of SEK 1.1 billion, and to date we have signed agreements which have closing after the end of the period of another SEK 1.5 billion.
We still see a functioning market for transactions. In addition to agreed divestments we have also recently been able to communicate letters of intent with serious parties. Included agreed transactions as well as the mentioned letters of intent, we have so far during the year signed more than 25 different deals, with a wide range of buyers and property types.
Altogether, these divestments strengthen our ability to manage the interest rate development and to redeem bonds with maturity in 2024.
Reduced ownership in Klövern
During the quarter, the transaction where we divested part of our holding in the housing development company Klövern to Nrep was completed. This is positive in many ways. The deal ensures Klövern’s future development, which is positive also for Corem as we remain a large owner. At the same time, we have freed up liquidity amounting to SEK 1.4 billion through the deal.
The interest rate situation affects values
Like other real estate companies, we see a continued negative trend in the development of value of our properties, where values have decreased by 7 per cent since year-end. We have in total, since the values were at their highest during spring 2022, written down the value of our portfolio by 12 per cent. The changes in value are mainly driven by changed yield requirement linked to more expensive financing, although positive net letting and a strong development of net operating income holds the negative change in value back to some extent. The average yield requirement has, since the year-end, increased and amounted to 5.5 per cent at the end of the quarter, which is 0.6 per centage points higher than when the values were at their highest, at the end of Q1 2022.
Financial position and future prospects
We continue to strengthen our balance sheet by amortizing bank debt and redeeming bonds. Through the divestments we have made since the turn of the year, we have been able to redeem all bonds maturing in 2023. We have thus been able to reduce the interest-bearing debt from SEK 47,6 billion at the turn of the year to SEK 39,0 billion at the end of the period, among other things by redeeming or repurchasing bonds for SEK 2,3 billion. If we look at the same figure up until today, it is SEK 3,1 billion. We are gradually increasing the proportion of bank financing and have a strong focus on limiting both interest rate risk as well as liquidity risk. Lowering our loan-to-value ratio will continue to be a high priority.
We will continue to reduce the portfolio until we reach a volume which provides us with good stability both in the current market and looking forward. With a somewhat smaller, but still well diversified and attractive portfolio both as regards properties and tenants, a strong organization with competent and driven staff, our position is strong even in challenging times.
Rutger Arnhult, CEO
Stockholm 26 October 2023
Corem Property Group AB (publ)
FOR FURTHER INFORMATION, PLEASE CONTACT
Rutger Arnhult, CEO, +46 70 458 24 70, rutger.arnhult@corem.se
Eva Landén, Deputy CEO, +46 10 482 76 50, eva.landen@corem.se
Corem Property Group AB (publ)
Address: P.O. Box 56085, SE-102 17 Stockholm
Visitors: Riddargatan 13 C
Reg.no: 556463-9440
www.corem.se
This information is information that Corem Property Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication through the agency of the contact persons set out above, at 08.00 CEST on 26 October 2023.
This interim report is in all respects a translation of the Swedish original. In the event of any discrepancies between this translation and the Swedish original, the latter shall prevail.
Corem Property Group is a real estate company that in a sustainable way owns, manages and develops commercial properties in urban and growth areas. Corem Property Group is listed on Nasdaq Stockholm, Large Cap.