Today’s acquisition of 72% of Bokbacken Fastigheter AB will confer Kungsleden with market leadership in retirement homes in Sweden. This initiative—named Hemsö— now encompasses properties with aggregate market value of some SEK 2.4 bn and an estimated property yield of 8.1%.
Kungsleden today signed an agreement on the acquisition of 72% of the shares in Bokbacken Fastigheter AB, with its holding of 19 properties with a total property value of SEK 765 m. Two-thirds of aggregate property value is located in Greater Stockholm and the remainder in Linköping, Gothenburg and Malmo. The deal also includes two properties under construction in Skarpnäck and Vallentuna, near Stockholm, whose total project cost is SEK 96 m, scheduled for completion in autumn 2003.
After completion of the two units currently under construction, Bokbacken’s properties are expected to generate a property yield of 7.8%. All properties are fully let, with Actica Omsorg generating 50% of rental revenues; municipalities and county councils provide 37%. On average, rental contracts have a remaining term of some six years.
Retirement homes generate sustainable high property yields
Retirement homes—with their long-term rental contracts to stable tenants such as municipalities and with good mortgaging potential—are well suited to Kungsleden’s strategy of generating high, stable, sustainable returns. Kungsleden began its retirement homes initiative in late 2001 through the acquisition of 15 properties with an aggregate value of some SEK 1.1 bn and has acquired a further 18 properties since, with an aggregate property value of approximately SEK 460 m, through an enterprise jointly owned with Catella.
Kungsleden’s retirement homes initiative is managed by a separate organisation within its subsidiary Hemsö AB.
Jens Engwall, Kungsleden’s Chief Executive, commented on the acquisition:
"You seldom find the attractive combination of high returns, long rental contracts and stable tenants in segments other than retirement homes. Moreover, we anticipate robust growth here, and foresee substantial opportunities for a player like Hemsö to secure its position as a specialised, skilled and long-term retirement homes landlord. At Kungsleden, we still perceive opportunities for growth within retirement homes, either on our own, or alongside other players."
Municipalities as tenants
Retirement homes is the collective term for the Swedish reform popularly entitled "your own room in sheltered accommodation", i.e. the type of housing that municipalities are obliged to offer the elderly who need specific support through special forms of housing stipulated in Swedish social services legislation. Mainly, Hemsö’s tenants are various municipalities that subsequently rent the majority of floor-space to various care operators and private individuals.
The market leader with SEK 2.4 bn-worth of property
Subsequent to the acquisition of 72% of Bokbacken and including the holding jointly held with Catella, Hemsö is responsible for 52 properties in growth regions with an aggregate property value of over SEK 2.4 bn.
In total, the market for retirement home properties is estimated at approx. SEK 100 bn. Hemsö’s estimated market share is some 2%, which makes it easily Sweden’s market leader, conferring a secure position for enhancing its collaboration with the country’s municipalities and other care operators in existing and new facilities.
Some 45% of the aggregate portfolio is located in greater Stockholm, with 20% in Malmo and Lund. All properties are fully let to stable tenants, three-quarters of which are municipalities and county councils. On average, rental contracts have a remaining term of some 7.8 years. Overall, Hemsö’s portfolio will generate estimated rental revenues of approximately SEK 240 m and SEK 10 m interest subsidies in 2003, with a property yield of some 8.1%.
Geographical split Split of rental revenues
For more information, please contact:
Jens Engwall, Kungsleden’s Chief Executive, tel: +46 (0)8 503 05204, mobile +46 (0)70 690 6550
Johan Risberg, Kungsleden’s COO, tel: +46 (0)8 503 05206, mobile +46 (0)70 690 6565