Annual Report 2014

CONTENTS Statement by the CEO 2 INTRODUCTION 5 Business concept, goals and strategy 6 ANNUAL REPORT Customers 11 MARKETS 13 The Swedish economy and the real estate market 14 VISION 14 Major transactions and events 16 Klövern creates environments for future enterprise. Stockholm Region 18 East Region 20 Central/North Region 22 South Region 24 REAL ESTATE OPERATIONS 26 Property portfolio 28 BUSINESS CONCEPT Transactions 32 Klövern shall, with closeness and commitment, offer Projects 34 customers efficient premises in selected growth regions. Building rights 36 The value of properties 40 RESPONSIBLE ENTREPRENEURSHIP 43 Sustainability 44 Personnel 45 Environment 47 MOTTO FINANCE 51 Making the customer’s day easier every day. Financing 52 Bonds 56 Shares 58 Tax 63 Risk and sensitivity 64 Investor relations 68 CORPORATE GOVERNANCE 69 Corporate Governance Report 2014 70 – Board of Directors 76 – Executive Management 78 Articles of association 82 FINANCIAL REPORTS 84 Consolidated Statement of Income 86 Consolidated Balance Sheet 87 Change in Group’s Shareholders Equity 88 Consolidated Statement of Cash Flow 89 Parent Company Statement of Income 90 Parent Company Balance Sheet 91 Change in Parent Company Shareholders 92 Equity and Statement of Cash Flow Notes 93 Appropriation of profits 112 Allocation of earnings 112 Audit Report 114 SPECIFICATION OF PROPERTIES AND REVIEW 115 Stockholm Region 116 East Region 121 Central/North Region 130 South Region 137 Five-year review and key ratios 142 Definitions 144 History 145 1 Introduction 14.indd 1-2 2015-04-01 12:48 THIS IS KLÖVERN KLÖVERN IS A REAL ESTATE COMPANY committed, with closeness and commit- Statement by the CEO position Stronger ment, to offering customers efficient premises in selected growth regions. A Stockholm company Our vision is to create environments for future enterprise. This requires active construction of city neighbourhoods, districts and other business clusters. with strong regional cities Klövern is one of the larger listed real estate companies in Sweden specializing in commercial premises. PROFIT FROM PROPERTY MANAGEMENT, SEKm p.2 Responsible entrepreneurship Projects and building rights Greater focus Exciting projects lead on sustainability to increase in value EQUITY RATIO, adjusted % Härnösand/Sollefteå p.44 CENTRAL/NORTH Falun/Säter Uppsala STOCKHOLM Transactions Västerås Kista Greater Stockholm Karlstad Globen Örebro Acquisitions in Nyköping PROPERTY VALUE, SEKm prioritized cities Norrköping p.32 p.34 , Linköping Borås , Gothenburg EAST 31.12.2014 30.09.2014 30.06.2014 31.03.2014 31.12.2013 30.09.2013 30.06.2013 31.03.2013 Halmstad KEY RATIOS Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 , Kalmar SOUTH Karlskrona Operating margin, % 62 69 67 63 61 66 65 59 Return on equity, % 3.0 2.8 7.8 1.2 2.5 2.7 3.5 2.8 Malmö Equity ratio, adjusted, % 35.9 29.7 28.8 31.1 31.4 31.5 31.4 33.2 Leverage, % 60 67 68 65 65 65 65 64 RENTAL VALUE BY TYPE OF CONTRACT VALUE BY CUSTOMER RENTAL VALUE Leverage, properties, % 51 57 57 55 57 57 57 57 PREMISES, % CATEGORY, % PER REGION, % Interest coverage ratio 2.0 2.1 2.0 1.9 1.9 2.0 2.0 1.9 Average interest, % 3.5 3.7 3.9 4.2 4.3 4.3 4.4 4.3 Offices 56 Private companies 54 Stockholm 42 Industrial/warehouse 20 Listed companies 27 East 24 Average, fixed-interest period, years 2.1 2.0 2.1 2.5 2.7 3.0 3.2 3.4 Education/ Public sector 19 Central/North22 Average period of tied-up capital, years 2.1 2.3 2.3 1.9 2.0 1.9 2.2 2.0 health care/other 13 South 12 Retail 11 Occupancy rate economic, % 90 90 90 90 90 89 88 88 Occupancy rate area, % 81 82 82 81 82 81 80 80 1 Introduction 14.indd 3-4 2015-04-01 12:48 2014 IN BRIEF > Income rose by 14 per cent to SEK 2,521 million and profit from property NUMBER OF management increased by 24 per cent to SEK 789 million. PROPERTIES > The property portfolio increased by 26 per cent to SEK 30,208 million. > 19 properties were acquired for SEK 4,452 million while 13 properties were sold for SEK 531 million. 408 > The acquisition of Globen City contributed to the Stockholm Region’s (including Uppsala) share of the portfolio increasing to 48 per cent. PROPERTY VALUE > A series of important lease contracts were signed, including with Tele2 SEK BILLION and IP-Only for new head offices. > With a view to creating prerequisites for further acquisitions as well as developing existing properties, preference shares were issued at the end of the year to a value of SEK 1,875 million. 30.2 > The business center and self-storage operations were launched under separate brand names: First Office and Big Pink. RENTAL VALUE > The Board of Directors is proposing to the Annual General Meeting that SEK BILLION a dividend of SEK 0.30 per ordinary share and SEK 20.00 per preference share be paid for the 2014 financial year. 3.0 Q1 Q2 Q3 Q4 A solid beginning to the A large lease contract was Acquisitions, net moving- A strong conclusion to the year at the same time as signed with Tele2. Globen in and good cost control year at the same time as ad- the decision was made to City was taken possession of. contribute to a record- ditional capital for expansion acquire Globen City. strong quarter. was raised through a new issue of preference shares. 1 Introduction 14.indd 1 2015-04-01 11:29 2 STATEMENT BY THE CEO ’’ Over 40 per cent of the portfolio is in the Stockholm area”. KLÖVERN – A STOCKHOLM COMPANY WITH STRONG REGIONAL CITIES 2014 was a year characterised by strategic acquisitions and Klövern achieved this acquisition in tough competition with a strengthening of the capital structure. In the space of a other players and the timing was good. Since the transac- few years, Klövern has moved from being a company with tion took place in early 2014, required yields have steadily its main focus on regional cities to now having over 40 per decreased, mainly in areas outside Stockholm’s CBD. cent of its portfolio in the Stockholm area. Our position in the capital is complemented by well concentrated holdings THE TARGET FOR NET-MOVING-IN WAS ACHIEVED in major regional cities in Sweden. In all, Klövern has 408 Klövern’s letting work was successful during 2014 and the properties with a property value of over SEK 30 billion. aim of net moving-in corresponding to one per cent of the rental value was achieved. Intensive letting efforts were THE ACQUISITION OF GLOBEN CITY made in connection with IP-Only which will rent the two The first half of the year was marked by the acquisition of Glo- top floors of office space in the former post office building ben City. Both the financing of the transaction and process of in Uppsala, where Klövern is carrying out a major project taking over the management required extra work. Globen City’s adjacent to the central station. Klövern will also build a 200- geographical location, in the developing Söderstaden with major room hotel on the same property operated by Elite Hotels planned investments, in the Slakthus area, among others, will on a 20-year lease. Another very important letting was the make this one of the most attractive growth areas in Stockholm. twelve-year lease signed with Tele2 for office premises in KLÖVERN – ANNUAL REPORT 2014 1 Introduction 14.indd 2 2015-04-01 11:29 STATEMENT BY THE CEO 3 Kista. This lease is for around 20,000 sq.m. and entails new enables us to offer premises adapted to tenants´ requirements production of approximately 27,000 sq.m. on the neighbour- within our own portfolio, instead of risking losing a tenant if ing property to Ericsson’s head office on Torshamnsgatan, needs change. which Klövern also owns. Stockholm continues to be a strong market with a historically low vacancy rate of around nine MAIN FOCUS ON OFFICES per cent but Linköping and Norrköping also stand out with Klövern is a company that focuses on offices and similar substantial net moving-in during the year. properties. Viewed in terms of property value, pure office space accounts for two-thirds of the property value. Adding CLEARER FOCUS ON MAJOR CITIES retail outlets and restaurants, as well as health care and edu- The great change that Klövern has made in recent years is cational premises, which are often located in such properties, that the Stockholm area has risen in importance, it now the aggregated value amounts to 81 per cent of the total prop- accounts for 42 per cent of the company’s property portfolio. erty value. Only the remaining 19 per cent of the portfolio In parallel with this, Gothenburg and Malmö have been value is attributable to industrial/warehouse premises. added to our prioritized locations, at the same time as we have continued to reinforce our position in selected regional STRONG AND STABLE REVENUE BASE cities. Together with Stockholm, over 90 per cent of the One-fifth of income comes from central or local government. property value is in strong locations such as Gothenburg, These are normally long-term leases with a secure payment Malmö, Linköping, Norrköping, Västerås, Uppsala, Örebro, capacity. In addition to this, 27 per cent of income derives Karlstad and Nyköping. We have our own dedicated person- from listed companies with access to the capital market with nel at all of these locations with the aim of living up to our a great capacity to survive tougher periods as well.

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