YEAR-END REPORT January – December 2018

• Rental income amounted to MSEK 683 (545) for the quarter and MSEK 2,525 (2,103) for the period. Net operating income amounted to MSEK 509 (378) for the quarter and MSEK 1,792 (1,484) for the period.
• Profit from property management amounted to MSEK 364 (277) for the quarter, up 31 percent, corresponding to SEK 2.00 per ordinary share (1.58), and to MSEK 1,204 (1,173) for the period, corresponding to SEK 6.52 per ordinary share (6.74). Profit from property management for the year-earlier period was impacted by a significant increase in value of part-owned properties, recognized in share in profit from joint ventures.
  
  
• Profit after tax amounted to MSEK 454 (250) for the quarter, corresponding to SEK 2.54 per ordinary share before dilution (1.41), and to MSEK 2,030 (1,949) for the period, corresponding to SEK 11.97 per ordinary share before dilution (11.66).
  
  
• Net asset value (EPRA NAV) per ordinary share was SEK 75.11 at December 31, 2018. The decrease is attributable to the demerger process of the Hemfosa group.
  
  
• The earnings capacity at December 31, 2018 amounted to MSEK 1,360.
  
  
• The Board proposes a dividend of SEK 2.40 per ordinary share. With quarterly payment of SEK 0.60 per share, as well as a dividend of SEK 10.00 per preference share with quarterly payment of SEK 2.50 per preference share.
  
  

SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER

• In October, possession was taken of a newly built property in Huddinge with Internationella Engelska Skolan as tenant. The underlying property value amounts to MSEK 160 with a rental value of MSEK 11.
  
  
• Hemfosa signed an agreement for the acquisition of four LSS homes from Emrahus in Borås, Uddevalla, Örebro and Lund. The underlying property value was MSEK 103 with a total rental value of slightly more than MSEK 6. Possession was taken of two of the properties in October and possession of the other two properties is scheduled to take place in March after the properties have been completed.
  
  
• In December, possession was taken of three modern healthcare properties in Vänersborg, Uddevalla and Stenungsund, with an underlying property value of MSEK 109 MSEK and a total rental value of MSEK 8. The largest tenants are the Västra Götaland region and the Vänersborg municipality.

• In Norway, possession was taken of two office properties in December, with an underlying property value of MNOK 350 and a total leasable area of 12,000 square meters. The largest tenant is the Norwegian Directorate for Civil Protection (DSB).
• The subsidiary Nyfosa AB was distributed to ordinary shareholders and listed on Nasdaq Stockholm Large Cap and its first day of trading was November 23, 2018.

• On January 24, 2019, Hemfosa presented an updated strategy and new financial targets for the Group. The growth target is for the property portfolio to grow to SEK 50 billion within five years and distributable earnings per share to increase on average by a minimum of 10 percent per year over these five years.

COMMENTS FROM THE CEO – Evolution

We started 2019 by presenting our business plan containing an updated strategy and new financial targets. We can also report a positive 2018 with increased profit from property management combined with a stable financial position. This is a solid platform for the work we have ahead of us now, when we aim to grow from SEK 36 to SEK 50 billion in property value within five years.

PROFITABLE GROWTH
With the distribution of Nyfosa, we have left the opportunistic approach behind us and are now setting our sights on structured growth with our first target set at SEK 50 billion in property value within five years, coupled with healthy profitability and continued low risk. We view our path ahead as an evolution, where we will preserve and develop the robust platform that already exists in Hemfosa while also adding many new elements. Together this will make us even stronger.

SPECIALIZING IN COMMUNITY SERVICE PROPERTIES
One of the new additions is an even clearer specialization in community service properties. But greater focus will also be directed to a long-term approach and sustainability as integrated parts of the business. We will also combine the entrepreneurial spirit of the organization with greater structure to upscale the operation while retaining agility. An example of this is packaging our expertise in such areas as schools and residential care facilities into concepts. These concepts will clarify our offering as a long-term property owner and manager, and be based on our experience of how buildings can best support the operations of our tenants.

We continuously see the positive effects of our long-term approach to working with our customer relationships. An example of this can be seen in the Karolinen property in Karlstad. The municipality initially leased about 500 sqm, but gradually increased this floor space with new municipal operations and it now leases about 7,000 sqm. We will soon welcome the upper-secondary school administration that will co-locate with the children and young people’s administration that is already a tenant in the building. Discussions are also being held on additional floor space that the municipality would like to lease.

As a result of the productive dialog with the Municipality of Karlstad, we also remodeled the adjacent property Mätaren from an office hotel into a municipal preschool. This type of property development is constantly under way in our regions where the property management organization is doing a fantastic job at building close relationships with our tenants.

ACQUISITIONS AND PROJECTS IN A GROWING MARKET
The need for community service properties is increasing in our markets, with a growing population and higher number of younger and older people. The number of preschools, schools and residential care facilities needs to increase sharply. It is a difficult situation for municipalities and county councils and this is where Hemfosa can be involved and contribute to resolving the growing needs by undertaking new construction, but also by taking over ownership when municipalities want to free up resources.

In light of this, we can see that Hemfosa has the conditions in place to achieve the ambitious growth in the property portfolio and the profitability that we have set as our targets. We believe that the vast majority of growth will take place through acquisitions of properties in all markets. We will focus intently on growing in Finland to approach the same strong position that we have in Norway and Sweden.

Project development will represent an increasing share of our growth. We expect about one-third of growth during the period to be linked to projects, from minor adjustments to large-scale expansions and new builds, always with leases signed before the project commences. We will carry out our strategic partnerships with established players but also increasingly by ourselves as we establish a larger in-house project organization.

WELL-POSITIONED
Targets and strategies are now in place and our market is filled with opportunities. We are already working hard on evaluating attractive transactions in all three markets and have several new projects ready to start. Our organization has highly dedicated employees who now want to build Hemfosa 2.0 with smart business, healthy relationships and attractive premises for the most important people in society. Hemfosa is well-positioned to capitalize on all of the exciting opportunities and I look forward, together with my colleagues, to realizing our plan going forward.

Caroline Arehult

CEO

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

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

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