Interim Report January–March 2021
A good start to the year – positive outlook ahead
Interim period January – March
- Profit from property management increased by 3 per cent to SEK 318 million (310). The increase is mainly due to higher rental revenue, and decreased selling and administration costs.
- New leasing was SEK 50 million (38), and net leasing was SEK 9 million (3).
- Kungsleden renegotiated 17 lease contracts (31) with total rental value of SEK 75 million (52) in the period. The average rent increase on the renegotiated lease contracts was 9 per cent (13).
- After investments of SEK 231 million, transactions and positive value changes, property value was SEK 41,814 million, compared to SEK 40,718 million at the beginning of the year.
- Unrealised value changes on properties amounted to SEK 932 million (243), which corresponds to an uplift of 2.3 per cent. The continued very strong demand for warehousing, industry and logistics at historically low return requirements as well as increased rental potential has had a positive effect on the property portfolio.
- Current net asset value increased to SEK 102.73 per share (92.58).
Significant events during and after first quarter
- Several major new leasings and renegotiations were conducted in the quarter. These included the leasing of a total of 5,700 sq.m. in our Stockholm City East cluster.
- In the first quarter, the planning programme based on the ideas of Vision Finnslätten were approved by the Västerås building committee.
- Kungsleden signed an agreement with JM AB in January to divest the property Isolatorn 12 in Västerås, with future residential building rights, at a price of SEK 4,100 per sq.m. GTA before deductions.
- Kungsleden vacated the properties Tändstiftet 2 and Fräsen 1 in Täby, near Stockholm, during and after the first quarter.
- Generation permit sales at Finnslätten to Mälarenergi in Västerås were completed in the period, as part of further concentration of real estate operations. The price amounted to SEK 34 million and the capital gain to SEK 16 million.
- A total of SEK 1 billion of green bonds have been issued on six- and seven years maturities and attractive pricing.
- In April, an agreement was signed with K-Fastigheter AB to sell the property
Veddesta 2:65 in Järfälla with a future residential building right of 32,000 sq.m. at a price of SEK 8,000 / sq.m.
“Kungsleden reported stable results for the first quarter 2021, and the outlook ahead is positive. We achieved positive net leasing for the tenth consecutive quarter, and the outcome of our renegotiations remains strong. Positive changes in value, especially in our warehouse, industrial and logistics portfolio, coupled with investments, have increased the value of our property portfolio by just over SEK 1.1 billion, to SEK 41.8 billion since year-end.
Profit from property management increased to SEK 318 million, a 3 per cent increase compared to the first quarter 2020. 2021 has got off to a good start, with a higher demand, and increased activity on the leasing market, for offices, as well as warehouse, industrial and logistics. The transaction market remains brisk. Economic growth forecasts for this year and coming years have been upgraded, creating a positive outlook ahead.
Kungsleden’s strategic direction
Kungsleden’s strategy rests on geographical diversification in our four main markets of Stockholm, Gothenburg, Malmö and Västerås, and selected regional cities with growth. The second cornerstone of our strategy is focusing on two main categories in our customer proposition - offices, as well as industrial, warehouse and logistics. Having good market and customer knowledge, a local presence and strong customer offer in our clusters, is the third cornerstone of our strategy. Our strategic direction has paid off, not least in us reporting positive net leasing and strong renegotiation outcomes since 2018. Since 2018, we have increased the average rent of our portfolio by 25 per cent, which has helped our rental revenues, operating net, and property values grow.
The demand on our markets and for our properties remains healthy. We signed 66 new lease contracts with rental value of SEK 50 million in the quarter. Net leasing was good at SEK 9 million. We also successfully renegotiated 17 lease contracts worth SEK 75 million, increasing rent by an average of 9 per cent. We signed three major lease contracts on a total of 5,700 sq.m. in our Stockholm City East cluster at Gärdet, increasing the occupancy rate in this cluster by 5 per cent. Our revenues in like-for-like portfolio terms increased by 2 per cent, a positive outcome given lower indexation, discounts related to Covid-19, as well as there being more tenants moving out than moving in in the period. For Kungsleden, any impact of the pandemic remains very limited. Granted rent relief continued to reduce and was SEK 3 million in the first quarter.
On the transaction market, the year has started briskly. Pricing on completed transactions indicates that required yields are continuing to decline, especially in warehouse, industry and logistics. Combined with improved rental revenue and operating net, this contributed to unrealised changes in value of SEK 932 million in the quarter. The warehouse, industrial and logistics segment currently comprises 17 per cent of our portfolio. Our goal is to increase this share to some 20 per cent of total property value.
Investor interest on the capital markets remains high, especially for Kungsleden’s green bonds. In the first quarter, we issued SEK 1 billion of green bonds on long maturities at attractive pricing levels, which are some 30 basis points lower than our current average interest rate. Our financial position has strengthened further, and our LTV ratio is now at 44.5 per cent. This sets us up for lower financing costs ahead and offers more potential for a higher rating.
A brighter future and focus on sustainable growth
The year has started well, and the outlook ahead is progressively brighter. Recently, Sweden’s government upgraded its forecast growth for this year to 3.2 per cent, and to 3.8 per cent for 2022. Assuming the vaccination roll-out continues, and countries gradually ease restrictions, we also anticipate a broader-based recovery of economies, and stronger growth for Sweden.
Looking ahead, we have a big pipeline of development projects, in our Finnslätten cluster in Västerås for example. The planning programme based on the ideas of Vision Finnslätten was approved in March this year. Vision Finnslätten is a partnership with several participants that Kungsleden started jointly with ABB in 2018 to develop an estate of modern industrial properties, warehousing and logistics premises, as well as offices, with good communications including a railway station, international school and campus.
We have an attractive property portfolio in the right locations in growth markets, creditworthy customers, committed staff and a sharper focus on sustainability. Our financial position keeps getting stronger. Since 2011, we have achieved average yearly growth of profit from property management of 13 per cent. Looking ahead, we see good potential to continue on our growth journey."
Presentation of Q1
Follow our live webcast presentation toaday at 08:45 a.m. (CET) here for investors, asset managers, financial analysts and the media. The presentation will be held in English.
As of 8:00 a.m., the presentation slides will be available here. After the live webcast, a recording of the webcast will be available at our website.
Please send us your questions through our question box during our webcast. Your questions will be posed stating your name and company and Biljana and Ylva will answer during the Q & A session.
For more information, please contact:
Biljana Pehrsson, CEO Kungsleden, +46(0)8 503 052 04, firstname.lastname@example.org
Ylva Sarby Westman, Deputy CEO/CFO, Kungsleden, +46(0)8 503 052 27, email@example.com
This information is mandatory for Kungsleden AB to publish pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 06.55 a.m CET on 22 April 2021.
About Kungsleden. We are people that create places and experiences for people. By developing and managing attractive and sustainable places, we offer people a better and more inspiring work experience. Kungsleden is a long-term property owner focused on commercial properties in Sweden’s growth regions. As of 31 December 2020, we owned 211 properties with total value of SEK 40,718 m. Kungsleden (KLED) is listed on the Nasdaq Stockholm Large Cap. Read more at www.kungsleden.se