Hemsö 2017 Annual Report 2017 Annual Report Welcome to hemso.se Contents Overview Financial statements and governance This is Hemsö 1 Directors’ Report 64 Hemsö in figures 2 Directors’ Report – Financing 68 Significant events in 2017 3 Directors’ Report – Risk management 74 Properties for public use 5 Chairman’s comments 80 CEO statement 6 Corporate governance 81 Strategy and business model 9 Board of Directors 85 Targets and frameworks 14 Management 86 Market overview 16 Multi-year overview 89 Financial statements 90 Operations Notes 96 Proposed appropriation of profits 113 Property portfolio 22 Audit report 115 Property portfolio – Nursing homes 30 List of properties 118 Property portfolio – Education 31 About the Sustainability Report 126 Property portfolio – Health care 32 GRI Content Index 127 Property portfolio – Justice system 33 Definitions 130 Property management 34 Reporting – Sustainable bonds 131 Development 46 Sustainable business 56 Employees 59 2017 Annual Report and Sustainability Report The statutory Annual Report, including the Directors’ Report, for Hemsö Fastighets AB (publ), Corp. Reg. No. 556779-8169 has been audited and comprises pages 64-114. The Directors’ Report comprises pages 64-79. Sustainability issues are integrated into Hemsö’s operating activities. The company’s sustainability efforts are therefore described in each operating area. The GRI Content Index is on page 127-129. Production and graphic design: Strateg Marknadsföring Text: Hemsö and Media Kontext Photo: Cultura Creative, Jennie Pettersson, Lars Clason, Hans Alm and Torbjörn Larsson Translation:The Bugli Company Mission Hemsö’s mission is to sus- tainably own, manage and develop public properties. Vision Hemsö’s vision is to be the best property company for public services. Hemsö’s core values Three core values permeate Hemsö’s operations: accessible, reliable and progressive. This is Hemsö Accessible. We are locally based and work closely with our customers. We Hemsö is one of the largest private owners of are responsive and always strive to public properties in Sweden. The business is promote positive dialogue. We are a dependable and accessible partner, based on sustainably owning, managing and with high availability. developing properties for nursing homes, edu- cation, health care and the justice system. Reliable. We take responsibility for the properties we manage and build confidence through financial stability The properties are located in Sweden, Germany and stable ownership. We contrib- and Finland. The tenants are mainly state, mu- ute to sustainable development and nicipalities and county councils, but also private our properties are part of the social infrastructure. companies with taxpayer-funded operations. The Third Swedish National Pension Fund is Progressive. We drive develop- Hemsö’s principal owner. ments in our industry. We develop offerings and premises based on the requirements and preferences of our customers. This is Hemsö 1 Hemsö in figures and significant events in 2017 Leasable area Properties 1,636 tsqm 346 Economic occupancy rate Property value 98.3 % SEK 38.9. billion Contracted annual rent Profit from property management SEK 2,492 million SEK 1,314 million 2 Hemsö in brief Q1 Hemsö acquired site leaseholds with related project commit- ments to construct Mälardalen University in Eskilstuna. The investment amounted to SEK 800 million. The City of Västerås allocated land to Hemsö to build Widénska gymnasiet (an upper secondary school). The school will accom- Q2 modate 480 pupils and the investment amounted to SEK 150 million. The vocational college in Pori, Hemsö acquired five properties Finland, was transferred when and received a land-use agree- construction was completed. The ment in Luleå for a nursing home investment amounted to SEK 550 with 144 beds. The investment million. amounted to SEK 370 million. In Germany, two nursing homes Luleå Municipality is the main with 211 beds were acquired for tenant of the premises, with a SEK 300 million. 20-year lease agreement. Hemsö was named “Investor of In Bremen, Germany, a nursing the Year” at the 2017 EXPO retire- home with 78 beds and 46 senior ment home congress in Berlin. apartments was acquired for SEK 210 million. The tenant is Bonds totalling EUR 385 million care provider Curanum. were issued, with 12-15 year maturities. Åsa Bergström was elected new Board member by the AGM. Hemsö in brief 3 Q4 Two nursing homes in Växjö with 116 beds were acquired for SEK 300 million. 15-year and 17-year lease agreements were signed Q3 with Attendo and Norlandia, respectively. Hemsö conducted a barter trans- An environmental and research action with Stenvalvet, in which centre was acquired in Duis- Hemsö acquired three properties burg, Germany. The investment in Gothenburg in the justice sys- amounted to SEK 1,100 million. tem segment and divested nine The building is under construc- properties in several locations tion and transfer will take place across Sweden. The transaction when the centre is completed in value was just over SEK 1 billion. 2018. Hemsö’s two buildings in An adult education college Borstahusen received the City in Dortmund, Germany, was of Landskrona’s Urban Planning acquired for SEK 100 million. The Award. City of Dortmund is the tenant. Hemsö acquired land from Hemsö and Lantmännen formed Boden Municipality to build a a joint venture to develop and nursing home with 126 apart- own public properties. The initial ments. Norlandia signed a 15-year portfolio comprised four school lease agreement. and nursing home properties and The City of Västerås selected one nursing home project with a Hemsö to develop Södra Källtorp. total value of SEK 540 million. Hemsö will build a nursing home In Sandbyhov, Norrköping, with 120 beds, 60 senior living Hemsö is converting properties units and a preschool with 72 into schools to accommodate places. The investment amount- 800 pupils. The investment ed to SEK 490 million. amounted to SEK 260 million. In central Helsinki, Hemsö Norrköping Municipality signed a acquired an educational property 25-year lease agreement. for SEK 120 million. The tenants are Aalto University and the Han- ken School of Economics. Hemsö in brief 4 Properties for public use A property that is customized for special use for public serivces, and with tenants that are predominantly tax-funded. This asset class is also refered to as social infrastructure. Nursing homes Health care Education Justice system 5 Public properties CEO statement The best landlord for public services Hemsö’s proven business model tion of an adult education college more agile and customer-oriented. once again generated stable earn- in Dortmund and a newly built en- In 2017, we saw the positive effects ings in 2017. Profit from property vironmental and research centre in of a more decentralised Hemsö, management rose 18 per cent and Duisburg, with public-sector tenants where the key is greater under- the property value was nearly SEK and long-term lease agreements, will standing of our tenants’ operations, 40 billion. increase the stability of our portfo- combined with simpler and faster lio. Hemsö was named “Investor of decision-making. It also led to more Hemsö is Sweden’s largest private the Year” at the annual effective property management, owner of public properties. Due to with a lower cost base as an added our size, we are well-positioned to bonus. achieve our goal of being the best landlord for public services. To To meet the growing demands of our achieve our goal over time, we tenants and stay at the forefront, have chosen to focus on four we attach great importance to pillars. Hemsö aims to have a developing our specialised high-quality portfolio of pub- expertise in the development lic properties, customer- and management of public oriented asset and property properties. For example, we management, long-term launched an internal train- property development and, ing programme – the Public not least, a stable capital properties School – during structure. All areas are charac- the spring. The aim is to offer terised by a strong sustainability all employees an opportunity to focus and a long-term approach. deepen their knowledge in a range of areas that affect our specific seg- High-quality ment. A good understanding of our public properties tenants’ operations, and the specific During the year, we continued to demands that characterise public streamline and improve the quality EXPO retirement home congress in properties, is a basic requirement for of our portfolio, in which growth is Berlin. The award confirms that our all Hemsö employees. mainly derived from acquisitions and fokus on nursing homes has been development in growing cities. The successful, and that we are now an Long-term share of properties in major cities is established and respected player in property development 81 per cent. Combined with urban- Germany. The award is given to the Property development has become a isation, the demographic trend is investor that is financially successful, natural feature of Hemsö’s opera- creating long-term growth for public strategically effective, innovative tions, driven by the large need for services in major cities, and we want and forward-looking, and can be a newly constructed nursing homes to take advantage of these trends. role model for the segment. and schools, in particular. 2017 was an intensive year, when we com- In Germany, Hemsö acquired seven Customer-oriented asset pleted projects for public-sector nursing homes during the year and and property management tenants as well as private operators also broadened the company’s One year ago, we simplified conducting taxpayer-funded public portfolio to increase the share of Hemsö’s organisation in order to services. Seven new-construction public-sector tenants. The acquisi- make our property management projects were completed for a total 6 CEO statement investment amount of SEK 1.5 billion. A major focus during the year was efforts to strengthen our capital The projects were delivered within to broaden our investor base, and structure have reduced this risk for budget and with a rental duration to extend our loan maturity and Hemsö.