Interim Report January June 2020 Biljana Pehrsson, CEO & Ylva - PowerPoint PPT Presentation

Interim Report January – June 2020 Biljana Pehrsson, CEO & Ylva Sarby Westman, Deputy CEO/CFO Stockholm 8 July 2020 1

Agenda ● Interim period in summary ● Financial performance and key figures ● Outlook ● Questions are welcome 2

Highlights Q2: A strong first half-year and continued market improvements ● Increased profit from property management by 6 per cent to SEK 611 million mainly due to strong like-for-like performance and completed development projects ● Good new letting, positive net leasing and strong renegotiation results ● Moody’s confirms Kungsleden’s investment grade rating as Baa3 with a stable outlook ● Stable financial position with LTV of 45.3 per cent and debt/equity ratio of 44.1 per cent ● Divestment of vacant property, Fräsen, Täby, Stockholm to Hemsö ● In June, a bond of SEK 300 million was issued with a five-year maturity. In July, bonds of 250 million maturing in January 2021 were repurchased by extending a green bond maturing in June 2023 3

Continued very limited effects of Covid-19 Outcome rent relief agreements for Q2 slightly better than previously • communicated: Lower level of discounts – SEK 19 million (instead of SEK 21 - million) Lower level of deferrals SEK 11 million (instead of SEK 20 million) - Larger share of quarterly to monthly payments SEK 41 million - (instead of SEK 32 million) Payment of Q2 rents – 99% - Payment of Q3 rents in line with previous quarters • Rent relief agreements for Q3 softer than for Q2: • - Rental discounts of SEK 16 million against either extended leases or increased rent on the remaining lease term - Allowed rent deferral of SEK 4 million against 12-24 month repayment schedule - Individual agreements on monthly instead of quarterly rent payment corresponding to SEK 30 million 4

Almost 90 per cent of the property Right properties in the value in four priority growth right locations markets ● Stockholm ● Gothenburg ● Malmö ● Västerås VÄSTERÅS Book value SEK 39,397 m Book value SEK 39,397 m STOCKHOLM GOTHENBURG Stockholm 47% Office 75% Västerås 19% MALMÖ Industrial/Warehouse 15% Gothenburg 11% Retail 4% Malmö 11% Other 6% Other 12% 5

70 per cent of the property value in one of our twelve clusters Danderyd, Stockholm Kista, Stockholm Stockholm City East Stockholm City West 100,000 sq.m. 147,000 sq.m. 85,000 sq.m. 40,000 sq.m. Västberga, Stockholm Göteborg South Center Högsbo, Göteborg Hyllie, Malmö 38,000 sq.m. 40,000 sq.m. 109,000 sq.m. 48,000 sq.m. Fosie, Malmö Västerås City Finnslätten Östersund 52,000 sq.m. 154,000 sq.m. 237,000 sq.m. 82,000 sq.m.

Good leasing results and positive net leasing SEK m 125 New leasing, SEK million 100 73 75 50 (93) 25 0 -25 Net leasing, -50 SEK million 8 -75 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 (10) New leasing, investment properties New leasing, development properties Termination, investment properties Termination, development properties Net leasing 7

Double digit rent uplifts on renegotiations – average rent uplift 10% Maturity stucture Renegotiations Rental value, SEK m No. of lease contracts 1200 900 Rental value, SEK m Rent increase, % 400 16 800 1000 350 14 700 300 12 800 600 250 10 500 600 200 8 400 150 6 400 300 100 4 200 200 50 2 100 0 0 0 0 2018 2019 2020 jan-dec jan-dec jan-jun 2020 2021 2022 2023 2024- Office Industrial/Warehouse Retail Other No. of lease contracts Rental value, before renegotiation Rental value, after renegotiation Increase, % 8

Increasing surplus ratio and average rent per square meter Operating net per quarter Average rent - total properties - investment properties Surplus ratio 12 months rolling, Per quarter, SEK per sq.m SEK m Investment properties 450 1 500 69.1% 425 1 400 (68.7%) 400 1 300 375 1 200 +7% Average rent 350 1 100 Investment properties 1,487 SEK/sq.m. 325 1 000 300 900 (1,394) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Operating net - total properties Average rent - investment properties 9

We create sustainable places • Energy consumption Jan-Jun: minus 7 per cent Kungsleden’s target has been to reduce energy consumption by 3 per cent per year, or by 20 per cent, from 2014 to 2020. Outcome to date is 26 per cent • Green lease agreements signed: 63 In the long term, our goal is to always sign green lease agreements • Certified properties: 38 per cent Our goal is to certify all our properties according to LEED prior to end of 2025 10

Rising property values – driven by operating net improvement & yield contraction Unrealised changes in values Jan-Jun 2020, SEK m Total Change in yield requirements 164 Change in operating net 251 Changed assumptions of investments and other factors affecting the value -111 Total 304 Valuation yield on average 5.2% (5.2%) Valuation yield contraction 3 bps (Q4 2019 to Q2 2020) no effects of divestments and acquisions 11

Strong and well-known customers Share of total rental Average lease duration, Ten largest customers Rental value, SEK m revenue, % years ABB 250 10 4.8 Försäkringskassan 53 2 4.6 Hitachi (ABB Power Grids) 39 2 4.3 Västerås kommun 39 2 4.9 ICA 39 2 1.9 Blique by Nobis 31 1 20.5 AFRY 28 1 4.2 Stockholms stad 27 1 4.1 Biz Apartments 23 1 10.0 Tullverket 22 1 3.2 10 largest tenants 511 21 5.6 Total 2,387 100 4.2 28% of rental value of ten largest customers from public tenants 12

Profitable investment programme – Target 2020-2023 Investment programme Return targets on development projects, Actual Target tenant improvements and other value- Jan-Jun 2021- SEK million 2017 2018 2019 2020 2020 2023 creating investments Development projects 312 578 598 324 600 1,800 ● IRR in excess of 9 per cent ● Yield on cost in excess of Tenant improvements and other 499 596 799 389 700 2,100 value creating investments 6 per cent ● Tenant improvements pay Maintenance investments 114 126 112 61 100 300 back time less than half of the leasing contract Total investments 925 1,300 1,509 774 1,400 4,200 duration 13

Large ongoing development projects – total investment of SEK 1.3 bn Estimated Estimated Of which Property Leasable rental value, Pre-letting Book value, investment completed designation Category Municipality Completed area, sq.m. SEK m rate SEK m SEK m SEK m The Rotterdam Office Stockholm 2021 21,300 61 69 1,045 225 84 District Stettin 6 Office Stockholm 2021 25,000 57 77 1,252 230 96 Eden by Office, new Malmö 2021 7,900 25 54 138 384 88 Kungsleden construction Oxel – part of Office Norrköping 2021 6,000 12 27 78 91 53 Oxelbergen 1:2 Taktpinnen 1 Office Norrköping 2022 16,000 25 100 270 136 51 Finnslätten 1 Office, Industry Västerås 2024 21,000 28 13 173 250 71 – part of Total 97,200 208 68 2,955 1,316 443 14

Stettin 6 – Redevelopment of office building with among others Swedish Performing Art Agency as tenant Development under construction 15

Follow-up Successfully completed project Blästern 14 – Blique by Nobis design hotel with 249 rooms finalized 2019. Office space leased out to Convendum Property Blästern 14 Category Office/Hotel Municipality Stockholm Leasable area, sq.m 17 200 Total investment, SEK m 595 Rental value, SEK m 62 Project profit, SEK m 327 IRR, % 11 16

Follow-up Successfully completed project B26, Västerås – A creative arena for co- working for over 550 co-workers in shared and owned office spaces B26 – part of property Mimer 5 Category Office Municipality Västerås Leasable area, sq.m 4 600 Total investment, SEK m 147 Rental value, SEK m 12 Project profit, SEK m 27 IRR, % 9 17

Follow-up Successfully completed project City Custody of Östersund – Inauguration 24th of April City Custody of Östersund – part of property Karlslund 5:2 Social services Category (custody) Municipality Östersund Leasable area, sq.m 2 700 Total investment, SEK m 137 Rental value, SEK m 11 Project profit, SEK m 61 IRR, % 9 Source: Kriminalvården 18

Financial performance and key figures 19

Good profit from property management +6% Per quarter, 12 months rolling, SEK m SEK m Jan-Jun 2020 (Jan-Jun 2019) 350 1 400 SEK million 611 1 200 300 1 000 250 (579) 800 200 600 150 400 100 200 50 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 Per quarter Rolling 12 months 20

Good funding mix and low LTV Loan portfolio SEK m LTV 45.3% 9 000 42% 7 500 34% (46.6) 6 000 4 500 Green funding 15% 28% 3 000 6% 1 500 3% 0 Bank loans Mortgage loans Life company Bond loans Commercial loans papers 31 Dec 2019 31 Mar 2020 Green share Green share 21

No loan or bond maturities in 2020 - even maturity structure onwards 2.8 bn in cash and credit facilities, net 2.1 bn RCF (outstanding CP deducted) 0.25 bn Credit line 4000 0.45 bn Cash 3500 3000 1000 300 2500 SEK million 2000 1100 1500 2500 2440 2466 2400 1000 1701 1594 300 1368 500 630 498 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Commercial paper Bank loans and other borrowings Bonds 22