LET THE CITY GROW! ANNUAL REPORT 2016 WALLENSTAM 2016 Our business process is based on our business concept. We build, acquire and develop properties for people and companies based on the needs of our customers, the community and shareholders. The properties are developed and managed sustainably and profitably to generate value growth. Profits are reinvested and used to develop the business further. Shareholders receive a share of the profits in the form of dividends. INVESTMENT PROFIT SALES MANAGEMENT INCREASE IN VALUE SEK 2,691 MILLION SEK 3,348 MILLION DIVIDEND SEK 1.70*/SHARE *Proposed dividend – Q1 – – Q2 – – Q3 – – Q4 – 258 121 4,300 5 Construction starts of 258 apartments rental apartments were completed in square meters, spread across seven construction projects begin, which in Solberga, Stockholm and in Stall- the environmentally-designed Norra floors are let on Avenyn 21 − commer- combined involve 461 apartments, backen, Mölndal. The beginning of Djurgårdsstaden district in Stock- cial premises, which were renovated including the first phase of Umami the demolition phase in the old Arla holm. Wallenstam’s third phase in and developed during the year as part Park in Sundbyberg, and Ulfsparre- factory represented the starting shot Stallbacken, Mölndal, begins with 82 of the Mid Avenue Valand project. gatan in Lunden, Gothenburg. for Kallebäcks Terrasser, where about rental apartments, as well as con- In Umami Park, Sundbyberg, with In October, Wallenstam receives 2,000 apartments will be built. struction of 17 terraced houses with plans for about 900 apartments, celeb- the Swedish Renewable Energy Wallenstam signs agreement to ownership rights in Helsingborg. rity chef Marcus Samuelsson opens a Award 2016 for its comprehensive acquire Axesshuset in Haga, central In June, green bonds are issued for pop-up restaurant and a concert was investments in renewable energy − a Gothenburg. SEK 400 million, aimed at refinancing arranged with the artist Oskar Linnros. climate award presented every year by In February, Wallenstam received wind turbines in the subsidiary Svensk Wallenstam also wins an award Swedish Wind Energy. the Kundkristallen award (Customer NaturEnergi. for the best Annual Report in the Crystal) for the second time in the Karin Mattsson Weijber joins Large Cap segment. “biggest boost in the service index” Wallenstam’s Board of Directors as a category. new member. THIS IS WALLENSTAM WE ARE DEVELOPING THE CITY FOR THE HOUSING OF THE FUTURE Wallenstam is both a construction com- For us at Wallenstam, urban development properties in attractive inner city locations. pany and a property management com- is about taking economic, social and In close collaboration with the city, we are pany. A major housing shortage currently environmental responsibility. We set the also involved in plans to ensure the right exists in our metropolitan areas. With 70 goal in our business plan of achieving an mix of companies, stores and restaurants in years’ experience of property management average rate of net asset value growth, and around our properties. and construction of both residential and excluding dividends and repurchases, of at commercial properties, we offer a wealth of least 10 percent per year during the period We are self -sufficient in renewable energy, expertise in the development and densifi- 2014–2018. We will accomplish this by through our 64 wind turbines. cation of our cities. starting construction of at least 7,500 apartments up to and including 2018, while We are engaged in the areas we operate in We have been listed on the Stockholm decreasing our overall energy consumption through cooperation and support to vari- Stock Exchange since 1984. We are in- and increasing the proportion of customers ous youth activities and organizations. creasing the number of shareholders each every year that are willing to recommend year and now we have more than 13,000 us as a landlord. Being a leading urban developer is not for whom we are working every day to only about building and constructing create value through efficient management We currently own and build residential areas for different activities, but is first and and profitable new construction projects. properties in growth markets, mainly in foremost about creating new opportunities Stockholm, Uppsala and Gothenburg. In – for the people of the city. Gothenburg, we also have commercial PROPERTY VALUE 2016 HIGH EQUITY/ASSETS RATIO TOTAL OCCUPANCY RATE, AREA Non-interest-bearing Equity, liabilities, 13% 45% billion Interest-bearing percent 37 liabilities, 42% 98 Our 205 properties are found in attractive locations in A high equity/assets ratio and a low loan-to-value The occupancy rate in our residential holdings cities with high growth and strong demand. 34 percent of ratio gives us a strong financial position and good amounts to 100 percent. In our commercial holdings, the floor space is found in the Stockholm business area conditions for our investment program with an it is 95 percent. We own 205 properties with a total and 66 percent is in the Gothenburg business area. investment plan of about SEK 2–3 billion annually. lettable area of about 1.1 million sq m. We have about 7,500 residential tenants and 1,000 commercial tenants. VALUE CREATED THROUGH NUMBER OF APARTMENTS NUMBER OF APARTMENTS IN OUR COST-EFFICIENT NEW CONSTRUCTION IN PRODUCTION DEC 31, 2016 PROJECT PORTFOLIO, ABOUT SEK 1,195 million 1,973 12,000 A large part of the properties’ unrealized changes Through good advance planning and many parallel Our major efforts in acquiring land and land in value comes from our own work with cost-efficient projects, we safeguard the production rate for our allocations for new construction have led to a new construction. housing construction large number of potential future apartments. CONTENTS This is Wallenstam see cover Wallenstam 2016 see cover STRATEGIC DIRECTION Vision, Business Concept and Goal 2 Goal 2014–2018 3 Guiding Principles 2014–2018 4 Comments by the CEO 6 Comments by the Chairman 10 Board of Directors 12 Group Management 14 The Wallenstam Share 16 Investing in Wallenstam 20 Our Strategies 21 Financial Strategy 22 Sustainable Enterprise 24 Opportunities and Risks 30 KEY RATIOS OPERATIONS AND MARKETS Organization and Employees 34 2016 2015 2014 Market Outlook 38 PROPERTY-RELATED KEY RATIOS Property Management 44 Rental income, SEK million 1,607 1,549 1,566 Valuation of Properties 50 Net operating income properties, SEK million 1,173 1,130 1,127 Property Overview 51 Surplus ratio property management, % 73 73 72 Value-creating Construction 52 Income from property management, 733 672 592 Energy Production 60 SEK millions Five-year Summary 62 Occupancy rate – lettable area, % 98 98 98 Value of investment properties, FINANCIAL REPORTS SEK million 36,555 32,090 28,481 How to Read our Income Statement 64 Administration Report 65 FINANCIAL KEY RATIOS Net asset value, SEK million 22,159 18,630 15,964 Consolidated Accounts 70 Equity/assets ratio, % 45 44 41 Group Accounting Principles Loan-to-value ratio, % 43 45 49 and Notes 76 Average interest rate Parent Company Accounts 109 on closing day, % 1.97 2.22 2.56 Parent Company Accounting Principles Income from natural energy manage- and Notes 113 ment, SEK million -61 -5 -25 Auditor’s Report 125 Profit before unrealized changes in value, SEK million 865 1,027 1,025 Corporate Governance Report 128 Profit after tax, SEK million 3,348 2,754 585 PROPERTY LIST Return on equity, % 20.9 19.6 4.6 Stockholm 134 PER-SHARE DATA Gothenburg 136 Profit after tax, SEK 10.1 8.3 1.7 Helsingborg 141 Equity, SEK 54 45 39 Uppsala 141 Dividend, SEK 1.70* 1.50 1.13 Wind Power 141 Completed New Construction, * Proposed dividend for the 2016 financial year. Acquisitions and Sales 142 A number of alternative performance measures (APM) are referred to in the OTHER Annual Report. For definitions and further information see page 63. Wallenstam’s Sustainability Reporting and GRI Index 143 Welcome to the AGM 145 Glossary 145 Definitions see cover Calendar see cover WALLENSTAM WORKS TO DEVELOP, BUILD AND MANAGE PROPERTIES IN A SUSTAINABLE MANNER VISION To be a leading urban developer and market-leading property owner in selected metropolitan areas. BUSINESS CONCEPT To develop, build, buy and sell properties that are sustainable in business and human terms in selected metropolitan areas. GOAL To achieve an average rate of net asset value growth, excluding dividends and repurchases, of at least 10 percent annually until the end of 2018. Goal 2014-2018 3 GOAL 2014–2018 NET ASSET VALUE GROWTH The growth rate in net asset value, excluding dividends and repurchases, must be at least 10 percent per year. TOTAL VALUE CREATED value and shows how much value we operational optimization. The prop- The Group’s net asset value amounted create in the entire business. erty value is also increasing thanks to to SEK 22,159 million (18,630) on The average net asset value growth our cost-efficient new construction closing day. Net asset value describes to date in the business plan amounts projects, which we are gradually add- the Group’s total value and includes to 16.4 percent. Estimated net asset ing to our property holdings. In 2016, equity and deferred tax liability. value growth in relation to the Group’s 34 percent of the change in value was Deferred tax liability refers mainly goal amounted to 22,6 percent in 2016. generated from our new construction to differences between carrying Net asset value growth during the projects. We strive for cost-efficiency amounts and residual values for tax year was mainly affected positively by in every part of our business, which purposes in Group properties, and more efficient property management also contributes to the strong net as- amounted to SEK 4,383 (3,540) in and changes in value of properties.