Kungsleden conducts highly capital-intensive operations. Access to capital is a prerequisite for enabling the operation of a successful property business. The business model is based on properties being financed with equity and external borrowings to attain a good return on invested capital.
Raising capital and the composition of capital
The total asset mass is funded with equity, interest-bearing liabilities and non interest-bearing liabilities. The distribution between them depends on factors such as the cost of the different sources of funding, the risk in the property portfolio and the lenders’ pricing and risk appetite over time.
The most costly form of funding is equity, while borrowed capital is generally cheaper, which means Kungsleden endeavours to attain an optimal mix between these sources to achieve the desired return on equity.
Kungsleden's loan portfolio is based on agreements with banks, syndicated credit facilities and unsecured bond loans. Kungsleden’s finance policy stipulates the maximum share of the loan portfolio that may be held by a single lender. The policy also regulates the share of loans that may become due for re-financing within one year.
Kungsleden's finance function
Responsibility for the group’s financial transactions and risks is managed centrally by the group’s Finance function. The overall objectives of the Finance function are:
- to ensure the long and short-term access to capital
- to adapt Kungsleden’s funding strategy according to the company’s operations in order for a sustainable and stable capital structure to be achieved and maintained
- to achieve the optimal net financial position within established limits for risk exposure