Bonava’s geographical­ markets­ With a geographical spread across 23 regions in eight countries, Bonava has a unique position as a residential ­developer. Through continuous knowledge exchange between our markets, we create affordable homes for more people. Operations | Bonava’s geographical markets

Sweden

Market ­complete and strong housing developer. During the autumn, we specified a number The Swedish housing market remained All Bonava projects in are devel- of projects that will fully pursue the VDC ­cautious during 2018 and average house oped with environmental certification, and strategy, and are operating pilot projects prices decreased slightly nationwide. How- we have gradually transferred to the aimed at identifying future digital working ever, demand for housing remains strong pan-Nordic certification Nordic Swan eco-­ methods, including at the production stage. and underlying macroeconomic conditions label. Nordic Swan is the environmental cer- We have implemented the digital tools in the are favorable to the housing market. The tification that is best suited to our focus on planning and production process and are National Board of Housing, Building and more industrialised processes, and which is seeing the results in the form of increased Planning (Boverket) estimates the average most stringent in terms of the requirements efficiency and quality. There is considerable number of new homes needed at 66,900 for sustainable and non-hazardous materials. potential in this area. In recent years, we have annually between 2018 and 2025. established an in-house design studio which  Read more about Nordic Swan allows us to assume full responsibility for, Our offering eco-labelling on page 27. and benefit fully from, our digital tools and the In Sweden, Bonava’s offering addresses changes to working methods they generate. both consumers and investors. Our con- Competitors During the year, we launched the Aronia sumer markets are located in , The market for housing development in project, which is the first project developed Gothenburg, Linköping, Uppsala and Umeå. Sweden is competitive. At a pace with rising in Bonava’s design studio alongside our own In the single-family home business, we house prices in recent years, competition in-house architects, HVAC engineers and base our offering on a number of house has also intensified. On the Swedish market, construction planning managers. This types which allow us to increase the indus- Bonava’s competitors include major opera- increases our efficiency, reduces costs and trialisation of our construction process. tors such as JM, Skanska, Peab and Veidekke, means that we can now control the entire For multi-family homes, we use a tried-­and- but also businesses such as Besqab and value chain from land acquisition to handing tested construction system, that is continu- Magnolia. In the single-family housing mar- over new homes to our customers. We are ously improved on the basis of our strategic ket, competitors include Älvsbyhus­ and also prioritising our work with the project priorities. Myresjöhus. portfolio on selected geographical markets, In our investor business, where we and growing the investor business for rental develop rental apartments for well-estab- Strategic priorities apartments, which comprises some 30 per lished housing companies with stable Bonava is carrying out a strategic initiative cent of our business. ­management organisations in a number in VDC (Virtual Design and Construction), of locations around Sweden, we are a read more about VDC on page 21.

2018 2017 2016 Net sales per segment 2018

Key performance indicators Net sales, SEK M 3,976 5,699 5,040 Operating profit, SEK M 761 1,230 920 Operating margin, % 19.1 21.6 18.3 Capital employed at period end, SEK M 5,164 4,986 4,350 28% Return on capital employed, % 14.8 24.7 19.3 Number of employees 189 167 141

Building rights Number of building rights at period end 7,400 7,500 7,200 Sweden, 28% , 41% of which off-balance sheet building rights 5,100 4,900 3,300 , 16% Housing development for consumers –, 9% St. Petersburg, 4% Number of housing units sold in the period 233 621 1,123 Baltics, 2% Number of housing starts in the period 269 965 1,108 Number of housing units recognised for profit in the period 775 1,245 1,013 Number of housing units in production at period end 1,342 2,009 2,304 Sales rate for ongoing production, % 39 55 75

Housing development for investors Number of housing units sold in the period 423 90 579 Number of housing starts in the period 423 90 448 Number of housing units recognised for profit in the period 322 158 132 Number of housing units in production at period end 639 538 606 Sales rate for ongoing production, % 100 100 100

44 Bonava Annual Report 2018 Operations | Bonava’s geographical markets

Housing units in production at the end of the year 1,981

Number of housing units sold in 2018

Märtas Berså 656 Area: Sollentuna, Sweden Housing category: Multi-family housing,­ 104 homes Status: Moving in from 2020 Production starts In September, the spade hit the ground in in 2018 the final stage of Märtas Berså in Sollen- tuna. Since 2009, we have developed five quarters with a total of 387 housing units 692 along the road Sollentunavägen. We have involved the residents of Märtas Berså in the design of the neighbourhood, which has resulted in houses being built around what will be the greenest courtyard in the area. The courtyard will include BBQ areas and green rooms, where neighbours can social- ise. Residents also asked for a fully furnished overnight apartment that offers visitors a comfortable home away from home when they come to visit.

Significant events Financial results In 2018, we continued to offer affordable Net sales were down on the previous year homes. In three projects where sales started, due to fewer housing units for consumers Secure Homes – for better or for worse we have been able to offer terraced housing recognized for profit and decreased sales. since 2009 in the Greater Stockholm region for under Operating profit was down due to fewer Buying a new home is one of the biggest SEK 3 million. An important milestone that housing units for consumers recognized decisions you make in your life. With a shows that our work with developing pro- for profit and lower profit from land sales. Bonava Secure Home™, everyone who cesses and working methods can result in purchases a home from Bonava can affordable homes. We have also continued access some of the markets best insur- to digitalise our building system. In concrete ances and warranties. Bonava Secure terms, this means that the planning phase is Home™ includes cancellation insurance, significantly shorter and with fewer errors mortgage payment protection and neg- compared to traditional building projects. ative equity protection. Additionally, This makes us faster and more cost-efficient. Bonava undertakes to always compen- We can move quickly from acquisition to sate tenants’ associations for any unsold project start. There are multiple advantages housing units, including all deposits to a standardised and digitalised building paid, transfer charges and annual fees platform. In addition to increased speed, this for unsold properties. In hesitant market approach rationalises strategic purchasing conditions like the present, these insur- and other processes. This enables us to ance policies and guarantees add extra reach new customers quickly and increases security before and after the purchase cost efficiency. has been made.

Bonava Annual Report 2018 45 Operations | Bonava’s geographical markets

Germany

Markets Strategic priorities The company continued to construct housing­ The housing market in Germany remained Germany is now our largest market. One units in the affordable segment, for ­example, strong in 2018, with increasing house prices of our key strategic goals is to grow in Bonava acquired land in Märkische Allee in and good demand from consumers and inves- ­Germany. Since 2013, we have increased east Berlin for the creation of a residential tors. Calculations show good future demand the number of building rights in Germany by area of 500 new apartments. for housing. An estimated 230,000–290,000 118 per cent, to 7,400 at the end of 2018. We started work on Parkstadt Karlshorst new homes will need to be developed annually The number of housing units in production during the year, where the construction of over the next years. However, it will be chal- increased by 29 per cent, and totalled 4,636 1,000 new homes makes this our biggest proj- lenging for the market operators to produce at the end of the year. Based on the positive ect at present. The sale of 470 rental apart- the requested volumes due to limited assets. profitability and the scale of the German ments to an individual investor represented a market, Bonava sees further potential for strong start to this promising urban develop- Our offering organic growth through recruitment and ment where Bonava is creating a new district. Bonava operates in the regions of Berlin, purchasing land for future projects. In Bonn, we started construction of an inte- Hamburg, the Baltic coast, Saxony, Rhine­ In order to meet the needs of our custom- gration project over 28,000 m2, where resi- Ruhr, Cologne/Bonn, Rhine-Main and Rhine- ers, standardisation in the affordable segment dents with and without disabilities, families Neckar/Stuttgart. The offering encompasses is crucial. In Germany, we have been using with children and older people can interact single-family and multi-family housing and is our most important construction material, and share their lives in an area close to nature. aimed at both consumers and investors. In blocks of lime sandstones, since 1994. Germany, Bonava has developed a system ­Prefabricated sandstone blocks that are free Financial results that enables efficient production through from dust and waste are delivered directly to Net sales increased due to more housing acquisition, planning and construction all the construction site. We have continuously units for consumers and investors being the way to handover. This building system developed our block-by-block production ­recognized for profit, and positive exchange has been applied for over 25 years, and is method, which now comprises the founda- rate effects. Operating profit increased as improved continuously. tion of Bonava’s German building system. more housing units for consumers and Today, standardisation is widespread and investors were recognised for profit in year- Competitors includes the development and design phase on-year terms. 648 housing units for investors In Germany, Bonava meets competition from as well as production. were recognised for profit in the year, against larger developers and smaller local operators 611 housing units in the previous year. in the market’s eight regions. According to a Significant events property development survey carried out by With 1,563 housing units sold to consumers, bulwiengesa, the main competitors on this 2018 was the German consumer operations’ market are Instone (formerly Formart), BPD strongest year to date. and Pandion. The German market is region- For the sixth consecutive year, Bonava ally and locally fragmented with numerous was ranked as the most active residential operators, which creates positive growth developer in German urban areas by market potential for a larger company as Bonava research company bulwiengesa. which is active throughout Germany.

2018 2017 2016 Net sales per segment 2018

Key performance indicators Net sales, SEK M 5,736 5,049 3,907 Operating profit, SEK M 796 668 477 Operating margin, % 13.9 13.2 12.2 Capital employed at period end, SEK M 3,985 3,037 2,163 41% Return on capital employed, % 21.8 23.0 25.4 Number of employees 914 886 809

Building rights Number of building rights at period end 7,400 8,300 6,400 Sweden, 28% Germany, 41% of which off-balance sheet building rights 2,700 3,700 2,700 Finland, 16% Housing development for consumers Denmark–Norway, 9% Number of housing units sold in the period 1,563 1,506 1,288 St. Petersburg, 4% Baltics, 2% Number of housing starts in the period 2,061 1,455 1,455 Number of housing units recognised for profit in the period 1,246 1,135 1,057 Number of housing units in production at period end 2,932 2,105 1,785 Sales rate for ongoing production, % 59 68 59

Housing development for investors Number of housing units sold in the period 873 906 645 Number of housing starts in the period 873 906 645 Number of housing units recognised for profit in the period 648 611 201 Number of housing units in production at period end 1,704 1,479 1,184 Sales rate for ongoing production, % 100 100 100

46 Bonava Annual Report 2018 Operations | Bonava’s geographical markets

Housing units in production at the end of the year 4,636

Number of housing units sold in 2018 2,436

Production starts in 2018 2,934

Regions in Germany: EXPO REAL Hamburg region In October, Bonava attended EXPO REAL, Hamburg one of Europe’s most important real estate and investor fairs. EXPO REAL is one of Rhine-Ruhr region ­Bonava’s best opportunities in the year to Düsseldorf develop its relationships with local authori- ties, connect with landowners, survey poten- Cologne/Bonn region Baltic region tial locations, meet with investors, discuss Cologne Rostock/Stralsund trends and market Bonava as an employer.

Rhine-Main region Berlin region Neu-Isenburg Berlin

Rhine-Neckar/Stuttgart region Saxony region Mannheim/Ludwigsburg Leipzig/Dresden

Am Entenfang Area: Cologne/Bonn Housing category: 142 terraced houses Status: First residents moving in towards the end of 2019

Despite the location close to the motorway and an industrial estate, Bonava saw great potential in the 44,000 m2 plot in Wesseling in the Cologne/Bonn region. With around 15 km to the city centres of both Cologne and Bonn, good train and road links, large green spaces directly adjacent to the neigh- bourhood, good public transport and schools and shops nearby, Bonava decided to build 142 terraced and semi-detached housing in the area, creating affordable homes for the many.

“Our customers appreciate the new neigh- bourhood, which mixes nature with an urban feel,” commented Development Manager Simon Thönes, who noted strong interest even before launch.

Bonava Annual Report 2018 47 Operations | Bonava’s geographical markets

Finland

Market During the year, we developed the standard- Bonava Finland also participated in a design The housing market in Finland remained isation of our bathroom and kitchen solu- competition for design and art students, good throughout the year with stable house tions. The design packages for the kitchens where we made a keynote speech on “What prices and positive demand. simplify the process and enable Bonava to design means to Bonava” where we avoid variations between different projects. explained how design can be used in the Our offering Customers are able to choose between dif- ­residential neighbourhoods of the future. In Bonava offers multi-family housing for ferent design concepts and benefit from November, Bonava hosted the third Bo&Nav ­consumers and investors in Helsinki, high quality materials and equipment. Pre- round table talks, where we gathered a large Espoo, Vantaa, Turku, Tampere and Oulu. fabricated bathrooms are designed using number of housing market decision-makers technical expertise from several sources, and politicians to discuss and share our Competitors and our innovative technical solutions views on the limitations and opportunities The main competitors in Finland are con- ensure increased cost-efficiency and shorter applying to affordable housing in Finland. struction companies also active in residen- lead times. Our customers appreciate the tial development, such as YIT, SRV and high quality, functionality, modern design Financial results Skanska, but also fast-growing small and and the opportunity to choose from a range Net sales in Finland increased due to more medium-sized operators such as Lehto, of concepts. housing units for consumers and investors Pohjola-Rakennus and Lapti. At the begin- being recognized for profit. Operating profit ning of 2018, the Finnish company YIT Significant events in Finland improved in the year, but was bur- merged with Lemminkäinen. 2018 was an active year for Bonava Finland. dened by low margins in three projects rec- In January, Bonava Finland arranged a ognised for profit in the first quarter. Strategic priorities well-received meeting of private investors in In 2018, we continued to expand our design Helsinki, where more than 150 private inves- and production competencies through tors participated. The event was co-hosted active recruiting. At the end of the year, with Suomen Vuokranantajat ry (the Finnish Bonava managed some 20 ongoing projects Landlord Association). Bonava also arranged with our own proprietary site management. similar events in Tampere and OULO. In July, Our building system solutions were devel- Bonava participated in a public debate on oped according to plan, and will reduce the opportunities and challenges of afford- ­production costs and improve quality. able housing in Suomi Areena in Pori.

2018 2017 2016 Net sales per segment 2018

Key performance indicators Net sales, SEK M 2,257 1,290 1,516 Operating profit, SEK M 65 1 92 Operating margin, % 2.9 0.0 6.1 Capital employed at period end, SEK M 1,708 1,284 1,092 16% Return on capital employed, % 4.1 –0.2 7.1 Number of employees 230 146 104

Building rights Number of building rights at period end 7,300 7,100 7,300 Sweden, 28% Germany, 41% of which off-balance sheet building rights 4,800 4,300 4,200 Finland, 16% Housing development for consumers Denmark–Norway, 9% St. Petersburg, 4% Number of housing units sold in the period 627 579 637 Baltics, 2% Number of housing starts in the period 908 702 522 Number of housing units recognised for profit in the period 595 398 658 Number of housing units in production at period end 1,142 865 567 Sales rate for ongoing production, % 44 54 50

Housing development for investors Number of housing units sold in the period 466 628 624 Number of housing starts in the period 466 628 624 Number of housing units recognised for profit in the period 716 327 Number of housing units in production at period end 675 925 1,091 Sales rate for ongoing production, % 100 100 100

48 Bonava Annual Report 2018 Operations | Bonava’s geographical markets

Housing units in production at the end of the year 1,817

Number of housing units sold in 2018 1,093

Production starts in 2018 1,374

Tapiolan Steniuksenkumpu Area: Espoo Housing category: 38 apartments Status: Moving in from 2019

Bonava is building 38 new homes in Espoo-Tapiola. Fortum’s SmartLiving Plus is one of the special services in the project offering intelligent lightning as well as moni- toring electricity and water consumption.

Investor transactions Area: Tampere Housing category: Rental apartments Status: Moving in from 2019

In June 2018, Bonava completed an investor transaction in Tampere. The buyer was ­Tampere Student Housing Association (TOAS) and involved 112 rental apartments.

Bonava Annual Report 2018 49 Operations | Bonava’s geographical markets

Denmark–Norway

Market Strategic priorities ments in Køge Kyst. The buyer was PFA The market in Denmark was stable in 2018 The strategic priorities in Denmark and Ejendomme, the PFA pension fund’s with minor changes in house prices in the ­Norway focus on developing production ­property company. During the year, Torben Copenhagen region where Bonava is active. capacity and managing construction costs. Modvig resigned as Business Unit President In Bergen in Norway, the market was positive As part of this strategy, many projects are of Bonava ­Denmark–Norway and Head of with stable house prices. subject to divided contracts, with the focus Sales and Marketing Kristina Olsen and on controlling and tools. Bonava also priori- Head of Finance Morten Jacobsen share Our offering tizes ­differentiating its products and ser- the role since October 8th. Bonava is active in Copenhagen in Denmark vices in order to focus on strategic seg- and Bergen in Norway. The offering includes ments, which increases relevance and effi- Financial results multi-family and single-family housing tar- ciency. For example, Bonava produces Net sales in Denmark–Norway decreased geting consumers and investors. affordable apartments on an identical and year-on-year due to fewer housing units repeatable construction platform, which ­recognized for profit. Operating profit for Competitors provides flexibility that meets customer Denmark–Norway decreased year-on-year The Danish market is fragmented with many needs. as no projects for investors were recognized residential developers such as Arkitekt­ for profit in the year. gruppen, ELF Development, NPV and the Significant events FB Group. During the year, Ikano Bolig In January, Bonava Denmark–Norway joined the housing market. launched Bonava Construction Campus, In Norway, Bonava meets competition a 2.5-year program. The campus provides from larger construction companies such as a unique tailor-made training program for Skanska and Veidekke, as well as specialised production and design staff in Norway and residential developers such as Obos, ­Denmark. In September, Bonava completed ­Selvaag Bolig and JM. an investor transaction comprising 137 apart-

2018 2017 2016 Net sales per segment 2018

Key performance indicators Net sales, SEK M 1,232 1,454 1,931 Operating profit, SEK M 131 141 194 Operating margin, % 10.7 9.7 10.0 Capital employed at period end, SEK M 1,278 857 736 9% Return on capital employed, % 10.8 15.3 16.0 Number of employees 108 79 53

Building rights Number of building rights at period end 2,700 2,000 900 Sweden, 28% Germany, 41% of which off-balance sheet building rights 1,800 800 300 Finland, 16% Housing development for consumers Denmark–Norway, 9% St. Petersburg, 4% Number of housing units sold in the period 257 362 299 Baltics, 2% Number of housing starts in the period 200 507 249 Number of housing units recognised for profit in the period 292 312 396 Number of housing units in production at period end 389 517 316 Sales rate for ongoing production, % 51 46 58

Housing development for investors Number of housing units sold in the period 257 94 74 Number of housing starts in the period 257 94 74 Number of housing units recognised for profit in the period 74 Number of housing units in production at period end 351 94 74 Sales rate for ongoing production, % 100 100 100

50 Bonava Annual Report 2018 Operations | Bonava’s geographical markets

Housing units in production at the end of the year 740

Number of housing units sold in 2018 514

Production starts in 2018 457

Nordic Swan eco-labelled terraced housing The 100 Nordic Swan eco-labelled terraced houses in Filmhusene in Værløse have bike sheds and one of the former hangars on the airfield has been converted to a community facility for all residents in the area. In Denmark, Bonava has almost 650 eco-labelled­ homes at the hand-over stage, in production or in the pre-sales phase.

Final project in LonaParken Bonava handed over apartments in the final phase of the project LonaParken. The neigh- bourhood north of Bergen consists of 364 homes and includes Norway’s first Nordic Swan eco-labelled apartments.

“LonaParken is an excellent example of a neighbourhood that is been developed for diversity, where young families and older residents can enjoy a car-free environment together,” commented Jørgen Madsen, Development Manager.­

Bonava Annual Report 2018 51 Operations | Bonava’s geographical markets

St. Petersburg

Market Strategic priorities Financial results The housing market in St. Petersburg Bonava is continuing to develop its cus- In St. Petersburg, net sales decreased year- remained positive, with slightly higher house tomer offering focusing on industrialisation on-year as fewer housing units for consum- prices and stable demand from consumers. and repetition in its solutions and opera- ers were handed over. Operating profit was tions. This allows Bonava to reduce costs down on the previous year due to fewer Our offering and rationalise procurement. housing units handed over to consumers. In Russia, Bonava is only active in St. Peters- Higher average prices resulted in increased burg and focuses on multi-family housing Significant events margins. for consumers and investors. In the year, Bonava launched new phases of Magnifika Lifestyle and Gröna Lund, and Competitors entered the final phase of Skandi Klubb. The The housing market in St. Petersburg is redevelopment of the riverside neighbour- competitive, with operators such as YIT, hood Magnifika has started, and attracted Setl City and LSR. attention from journalists as an innovative example of collaboration between property developers and public authorities. Two proj- ects – Magnifika Lifestyle and Skandi Klubb – received the prestigious Urban Awards prize for best project in the main segment in St. Petersburg.

2018 2017 2016 Net sales per segment 2018

Key performance indicators Net sales, SEK M 578 727 915 Operating profit, SEK M 95 104 178 Operating margin, % 16.4 14.3 19.4 Capital employed at period end, SEK M 696 1,108 1,277 4% Return on capital employed, % 10.4 8.4 16.5 Number of employees 270 266 276

Building rights Number of building rights at period end 2,600 3,500 4,400 Sweden, 28% Germany, 41% Housing development for consumers Finland, 16% Number of housing units sold in the period 756 516 653 Denmark–Norway, 9% St. Petersburg, 4% Number of housing starts in the period 634 813 363 Baltics, 2% Number of housing units recognised for profit in the period 383 833 1,026 Number of housing units in production at period end 1,010 813 800 Sales rate for ongoing production, % 56 33 61

Housing development for investors Number of housing units sold in the period Number of housing starts in the period Number of housing units recognised for profit in the period 74 Number of housing units in production at period end Sales rate for ongoing production, %

52 Bonava Annual Report 2018 Operations | Bonava’s geographical markets

Housing units in production at the end of the year 1,010

Number of housing units sold in 2018 756

Production starts in 2018 634

The first phase of the Magnifika milestone project in St. Petersburg, consisting of 2,500 apartments, has almost been completed.­ “We are pleased that the first phase of the project with 376 housing units was com- pleted very quickly from land acquisition to handover. We have sold more than 95 per cent of the apartments in the first phase before completion” commented Michael Björklund, Business Unit President in St. Petersburg.

Sharp focus on industrialisation and repetition Bonava’s modern industrialised con- struction system has been continuously developed towards a high degree of rep- etition, including 90 per cent of all blue- prints, 70 per cent of façades and balco- nies and 30 per cent of basements and garages. Our focus on industrialisation and repetition allows us to work faster and more efficiently, which in turn makes us more capital-efficient.

Because we repeat well-established solutions, we are able to guarantee high quality in our housing units to consum- ers. Our solutions are based on tried- and-tested successes, which makes us an attractive partner for public authori- ties, both at the planning and commis- sioning phase.

Bonava Annual Report 2018 53