Interim Report January - March 2018
• Rental income amounted to MSEK 815 (722) for the quarter
• Profit from property management excluding the share in profit from part-owned companies amounted to MSEK 371 (312) for the quarter. Profit from property management including the share in profit in part-owned companies totaled MSEK 439 (447) for the quarter, corresponding to SEK 2.61 per ordinary share (2.66). Profit from property management in the preceding year was impacted by a significant increase in value of part-owned properties, recognized in share in profit from joint ventures
• Profit after tax for the quarter totaled MSEK 701 (986), corresponding to SEK 4.19 per ordinary share before dilution (6.02). Profit in the preceding year was impacted by a significant increase in value of part-owned properties, recognized in share in profit from joint ventures
• The earnings capacity at March 31, 2018 amounted to MSEK 1,946
SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER
• In March, Hemfosa became sole owner of the specialist hospital and the local medical center in Gardermoen, Norway, when the property-owning companies that were previously held in a joint venture became wholly owned subsidiaries of Hemfosa
• At the end of March, the Hansagården property in Bergen, with a high proportion of tenants in the community services sector, was acquired. The total area amounts to 29,000 sqm and the rental value to MSEK 34.
• The process involving an in-depth analysis of the opportunities and structure for a split of the Hemfosa Group into two listed companies is progressing. The aim is to create greater shareholder value through defining a community services-focused property company and a transaction-based property company, which both are poised to capture favorable property transactions.
COMMENTS FROM THE CEO
Exciting acquisitions and future plans
Hemfosa started 2018 at a fast tempo. We acquired community service properties in Norway and developed our cooperation with established players in the community services sector and our other tentants. We are particularly proud that in March we became the long-term sole owner of the ultra-modern and fully leased healthcare and medical properties in Gardermoen near Oslo, that have now been completed and in which the Norwegian Heart and Lung Association (LHL) and other tenants now are moving in. During the quarter, we also took the next steps in the process of evaluating a demerger of Hemfosa into two companies.
Hemfosa is reporting favorable and stable profit from property management for the first quarter of the year. A snowy and cold winter led to slightly higher property expenses at the same time as we increased earnings by over MSEK 140 though a growing property portfolio. In total, we took possession of community service properties at a value of approximately SEK 2.7 billion during the quarter.
HEALTHCARE PROPERTIES COMPLETED ACCORDING TO PLAN
At the end of March, Hemfosa became the sole owner of two healthcare properties in Gardermoen’s new center of excellence for health services and medical care that was recently completed. This is a new build project that we started working with in 2015, in a joint venture together with property developer Aspelin Ramm of which we are both proud and pleased to have completed. When we entered into the project, we knew that project engineering and constructing a large, modern hospital would be a complex assignment. We shared a well-thought out concept and a clear strategy for the development of the entire area together with our partner Aspelin Ramm and the tenant the Norwegian Heart and Lung Association (LHL). The new specialist hospital was completed on schedule, on budget and with no observations in final inspection.
As an owner and manager of mainly community service properties, it feels particularly important to contribute toward a society that is sustainable in the long term. Therefore, we are also proud that the specialist hospital, besides setting a high standard for the operations, is one of the most climate and energy-friendly hospitals in Norway. For the long-term finance of the healthcare properties at Gardermoen, Hemfosa has raised a green loan from Swedbank for SEK 1.5 billion, which is clear evidence that the investment fulfills high demands for sustainability while also providing competitive terms and conditions.
BUILDING A NETWORK OF PARTNERSHIPS
We are continuing to build a network of partnerships in the community services sector and develop well-functioning premises for a growing number of community players. One of them is Emrahus, from which we acquired two additional LSS homes during the quarter. Others are the Swedish Migration Agency, which recently moved into newly renovated premises in Uppsala. Other projects are the planning of properties for a school in Järfälla and a government agency in Norway. We can also see that the need for new functional community service properties is continuing to rise in many areas of our markets.
NO NEGATIVE EFFECT OF NEW DEDUCTION RULES
In March, the Swedish government presented a proposal on new tax rules referred to the Council on Legislation for consideration, which includes limitation on companies’ right to make tax deduction on interest. We do not believe that this will have any material impact on Hemfosa. Looking at the industry as a whole, we believe that the new rules will lead to slight decrease in the indebtedness of companies.
We believe that the property market is rather cautious at the moment, probably affected by the uncertainty in the housing sector. Nevertheless, we see interesting opportunities for Hemfosa in terms of both acquisitions and new build projects in cooperation with property developers and tenants.
We are also looking forward to continuing the process of evaluating and planning for a demerger of Hemfosa into two new companies. We are convinced that a transaction-focused company, poised to capture favorable property transactions, and a community services-focused property company with development potential, which in addition to continued property transactions also will strengthen its project development operations, is the right way forward for the market we see before us.
Jens Engwall, CEO
For further information, please contact:
Jens Engwall, CEO, jens.engwall@hemfosa.se, phone +46 70 690 65 50
Karin Osslind, CFO, karin.osslind@hemfosa.se, phone +46 70 794 93 37
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