INTERIM REPORT JANUARY – SEPTEMBER 2019

January-September 2019¹

• Rental income increased 16 percent mainly on the basis of a growing property portfolio. The increase for the comparable portfolio was just under 4 percent.
   
• Net operating income increased 19 percent, of which just under 5 percent in the comparable portfolio.
   
• The surplus ratio was strengthened by just over two percentage points. This was largely attributable to effects from acquired properties, but also to a higher surplus ratio in the comparable portfolio.
   
• Profit from property management increased 24 percent, primarily driven by higher rents from property acquisitions.
   
• Unrealised changes in value amounted to MSEK 814, which corresponds to an increase of 2.3 percent, of which 0.3 percent arose in the third quarter. Valuation yields for the quarter remained principally unchanged.
   
• Profit after tax decreased 5 percent due to unrealized changes in value being greater last year.
   
• The property value increased 10 percent.
   
• Net asset value (EPRA NAV) increased to just under SEK 84 per share.
   
• On the balance-sheet date, earnings capacity amounted to MSEK 1,465, compared with MSEK 1,360 at year-end.

¹ Comparative figures for income items refer to values for the period January-September 2018 and for balance sheet items as of December 31, 2018

SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER

• Acquisitions were completed in Sweden and Finland:
  • In Espoo and Helsinki, Finland, possession was taken of a portfolio with public-sector offices in July with an underlying property value of MSEK 465.
  • In Nacka, Sweden, possession was taken in July of a retirement home with an underlying property value of MSEK 156. This acquisition was paid in its entirety through a non-cash issue of 1,760,000 ordinary shares.
     
• A three-year green bond loan in an amount of MSEK 800 was issued at a margin of 210 bps.
   
• The fixed-rate period was extended by nearly six months without impacting the average interest rate, through raising interest-rate swaps.

COMMENTS FROM THE CEO

-FASTER THAN PLANNED

Hemfosa is growing and developing in a very positive manner. After several acquisitions in the spring and summer, our property portfolio to date has increased by nearly SEK 4 billion. This was faster than we expected when we set the new growth targets at the beginning of the year. And we are achieving this with healthy profitability as well. Of course our aim is to maintain a fast tempo going forward as well, and I think we have every opportunity of doing so with a strong pipeline in terms of acquisitions and projects. Moreover, we have a solid amount of cash in hand from an additional green bond.

When in January we set a target of achieving a property portfolio of SEK 50 billion within five years, we were counting on a certain start-up phase in order to get both our organization and our business up to speed. Instead, our start has been surprisingly robust, which of course is gratifying. In the first nine months of the year, we grew rapidly and have now attained a property value of approximately SEK 40 billion. This was primarily driven by the acquisitions we carried out in all three markets. During the quarter, we completed two additional first-rate transactions: a healthcare property in Nacka and a public-sector office portfolio in the Helsinki area. With the acquisition of the healthcare property in Nacka, we also had the possibility of paying with newly issued shares, which indicates our strength in doing business using various types of financing.

The growth in our property portfolio must always be matched by healthy profitability. Our goal is an increase in distributable earnings of more than 10 percent on average per year. Here as well, we are doing better than planned; for the first nine months of the year we exceeded this goal by far.

Investments for tenant needs
As part of our project business, we have several exciting projects in the planning phase, and negotiations are in progress that we hope to successfully conclude in the near future. In addition, we work continually on important investments, both large and small, in our existing property portfolio in order to meet our tenants’ changing needs. This facilitates lease extensions, increases in value – and, most importantly, satisfied tenants. One relevant example is the conversion and expansion of the Kunskapsskolan premises in Landskrona, which resulted in a new 15-year lease. After completion, Kunskapsskolan will be able to increase the number of students thanks to larger premises and a bigger schoolyard. We are also taking the opportunity to update the technical installations, with better indoor climates and lower energy use as a result.

Moving toward increased sustainability
Hemfosa’s ownership ambitions have an explicit long-term perspective, which goes hand in hand with a sustainable approach in our operations. To accelerate this work, we strengthened our organization this autumn with the addition of a new Sustainability Manager. With that, we are increasing our competence and bringing in a resource that will help drive and inspire our efforts as we develop our sustainability agenda. One important guidepost for us is that our properties must stand over time, which is something we keep in mind when choosing solutions for our properties.

Community service properties remain stable
This autumn is characterized by a business cycle that is difficult to assess, as well as an uncertain market situation. However, our community service properties are only impacted to a limited extent by the business cycle, the more important is the demographic trends in our markets. Regardless of the business cycle, municipalities and operators around the country need schools for larger age groups of children and healthcare facilities for increasing numbers of the elderly. Similarly, the needs of public authorities and judicial institutions remain, and here we are even seeing an increased demand for premises for the police and the courts. Hemfosa has a role to play in supporting community service operations where the needs exist, and these needs are – and will remain – great in our segments and markets. We are proud of playing this role and of being specialists in properties for vital community service operations.

Caroline Arehult, CEO

For further information, please contact:

Peter Anderson CFO
Tel: +46 70 690 65 75 E-mail: peter.anderson@hemfosa.se

Caroline Arehult CEO
Tel: +46 70 553 80 26 E-mail: caroline.arehult@hemfosa.se