Interim report January – September 2020
Kungsleden continues delivering good results
• Profit from property management increased by 6 per cent to SEK 940 million (889). The increase is due to higher revenue and operating net in like-for-like portfolio terms.
• New leasing was SEK 101 million (142), and net leasing was SEK 12 million (21).
• 81 contracts (86) with rental value of SEK 182 million (180) were renegotiated in the period, resulting in average rental value increases of 15 per cent (7).
• After investments of SEK 1,019 million, transactions and positive value changes, total property value was SEK 39,872 million, compared to SEK 38,310 million at the beginning of the year.
• Unrealised value changes on properties amounted to SEK 479 million (1,266), which corresponds to an uplift of 1.3 per cent. The value increase is mainly due to higher rental revenue, but also to some extent a reduction in the required yield.
• Current net asset value increased to SEK 96.34 per share (87.07).
Significant events during and after the third quarter
• Kungsleden remained active in the Nordic capital markets in the third quarter, issuing a total of SEK 1,700 million, the majority on maturities of 5 and 6 years. These issues have attracted high interest, and pricing was favourable, even on longer maturities.
• The Board of Directors has proposed to reinstate a dividend of SEK 2.60 per share to shareholders for the financial year 2019, and an Extraordinary General Meeting (EGM) has approved the Board’s proposal.
• The Västerås City cluster expanded through the acquisition of the property Mimer 6, consisting of a parking facility and building rights on just over 40,000 sq.m. gross total area (GTA).
• Lease contracts on a total of approximately 10,000 sq.m. were signed in Nyköping. The Gumsbacken retail park is now fully leased and PDL Group will open the city's first padel racquet sport centre in the property Ribban 5 in central Nyköping.
• Kungsleden is Sweden’s first real estate company to set the goal of being climate positive in the entire value chain by 2035, and an interim target is to become climate positive in property and facility management by 2025.
CEO´s statement Biljana Pehrsson
“Kungsleden continued to deliver good results in the first nine months of the year, with profit from property management increasing by 6 per cent to SEK 940 million. We have good new leasing, positive net leasing, and good outcomes from renegotiations, securing 15 per cent higher rental revenue on average. Going forward, we've set one of the sector’s most ambitious climate targets - to be climate positive in the whole value chain by 2035.
We’re seeing healthy activity on the rental market with good demand for offices, warehouses and business premises on all of our four main markets, and we have a strong pipeline. In the first nine months of the year, new leasing was SEK 101 million, and net leasing was SEK 12 million. We successfully renegotiated lease contracts worth SEK 182 million, increasing the rent by SEK 26 million, equating to an average increase of 15 per cent. In like-for-like portfolio terms, our rental revenue and operating net increased by 5 and 7 per cent respectively. On a rolling 12-month basis, the average rent in the investment property portfolio as of 30 September increased by 5 per cent on the corresponding period of the previous year.
Satisfied customers in challenging times, effects of Covid-19 remain limited
In recent years we've been working actively on delivering on our customer promise - of always centring on customers by being welcoming, contributing to their business and making their everyday lives easier with us. We maintain positive and close dialogues with our customers, and if anything, this pandemic has brought us even closer together.
Payment of fourth-quarter rents has been good, and consistent with previous quarters. For the fourth-quarter rent, agreed rent relief reduced compared to the previous two quarters. We granted rent discounts of SEK 9 million, and in return, have extended lease contracts and/or increased rents for the remaining lease term. We have allowed deferrals on SEK 7 million of fourth-quarter rent, against 12 to 24-month repayment plans.
We have a well-diversified tenant portfolio, and our customers represent a cross-section of Sweden’s business community. For our 10 largest tenants, the average remaining lease contract term is 5.4 years. For our whole portfolio, public sector tenants represent about 18 per cent of rental value, and the average remaining lease term is 4.1 years.
Several successful bond issues and strong investor demand
We remained active on the capital markets in the third quarter, successfully issuing a total of SEK 1.7 billion of green bond loans. This further improves our already good liquidity reserves. Kungsleden is financially stable. Our loan-to-value (LTV) ratio continues to decrease and is now at 45.0 per cent.
After a hesitant phase in the spring, we’re noting increased activity on the transaction market, and high investor interest on the market for our properties. 74 per cent of our portfolio consists of Offices, and 16 per cent of Logistics, Warehouse and Industrial. Some 4 per cent of property value is Retail, the majority being food, discount retail, as well as “do it yourself” and furniture retailing.
The value of Kungsleden’s property portfolio has increased to approximately SEK 39.9 billion, mainly due to investments and increased rental revenue, and to some extent, a lower required yield.
Ambitious climate target
Operating sustainably is very important to us as a company, to our customers and shareholders. We’re Sweden’s first real estate company to set the goal of being climate positive end to end in the value chain by 2035, with the milestone of being climate positive in property and facility management by 2025. Our intention with this goal is to raise the tempo of our climate work significantly. We’re part of an ecosystem with limited resources, and this is one way to assume more responsibility for reducing ongoing climate change.
Gradual market recovery
We’re seeing a gradual recovery on the market, which so far, has gone faster than expected, but may also prove more inconsistent with the risk of setbacks along the way. This is because of the second wave of Covid-19 with local or regional outbreaks across several European countries, including Sweden. Meanwhile, we have an improved outlook for GDP growth and unemployment so far. We share the opinion of several commentators of somewhat less negative GDP growth in Sweden of between 3 and 4 per cent in 2020, followed by positive GDP growth of some 3 per cent in 2021 and beyond.
Our focus is on creating growth in cash flow and value. We are continuing to make profitable investments in our projects and investment properties as they are leased at good rent levels. I'd like to thank all my colleagues, who in our most recent employee satisfaction survey, have demonstrated the highest-ever employee commitment and very good leadership in these troubling times.”
Presentation of interim report
Kungsleden presents the interim report on 21 October 2020 at 08.45. The presentation is available from 08.00 at: https://www.kungsleden.se/en/investors/reports-and-presentations/
The presentation will be held in English and is available on: https://www.kungsleden.se/en/investors/calendar/2020/kungsleden-presents-its-third-quarter-2020/
Phone number to the conference:
This information is mandatory for Kungsleden AB to publish pursuant to the Swedish Securities Markets Act.This information was submitted for publication at 7:00 a.m. CET on 21 October 2020.
About Kungsleden. We are people that create places and experiences for people. By developing and managing attractive and sustainable places, we offer people better and more inspiring work experience. We are a long-term property owner focused on commercial properties in Sweden’s growth regions. As of 30 September 2020, we owned 211 properties with total value of SEK 39,872 m. Kungsleden (KLED) is listed on the Nasdaq Stockholm Large Cap. Read more at www.kungsleden.se