“ Our customers and locations are central in everything we do.” Annual Report 2009Ä P L Ä Ä G E N Contents Highlights of 2009 Introduction 2009 in brief 1 This is Fabege 2 Message from the CEO 4 Financial highlights The business Strategic focus 6 • Earnings after tax for the year increased by SEK The business 10 936m from SEK –511m to SEK +425m. The lower Property portfolio 15 net interest expenses added SEK +244m and re- Market valuation 18 duced negative value adjustments brought another The investment market 19 Market review 20 SEK +1,753m, while the effective tax rate increased Fabege markets by SEK – 1,084m. Stockholm inner city 23 • Earnings before tax were SEK 561m (–1,285) Solna 24 in Property Management and SEK 119m (–55) in Hammarby sjöstad and Other markets 27 Improvement Projects. List of properties 28 • The profit from property management increased to Responsible enterprise 34 SEK 838m (568) while rental income decreased Financial reports Directors’ report 42 to SEK 2,194m (2,214) due to sales of properties. The Group Profit and loss account 48 • The surplus ratio increased to 67 per cent (65%). Balance sheet 49 Statement of changes in equity 50 • Earnings per share were SEK 2.59 (–3.07) and Cash flow statement 51 equity per share was SEK 61 (60). The parent company Profit and loss account 52 • The Board proposes a dividend of SEK 2.00 per Balance sheet 52 share (2.00). Statement of changes in equity 53 Statement of Cash flows 53 Notes 54 Signing of the Annual Report 66 www.fabege.se Audit report 67 More information about Fabege and our operations Corporate governance report 68 is available on the Group’s website. Board of Directors 74 Senior management 75 Share price performance 76 Information to shareholders 79 Five-year summary 80 Definitions 81 History 81 The formal annual report, which has been audited, comprises pages 42–66. 2009 IN BRIEF Some figures From 40,000 to 5,000 Key figures 2009 2008 tonnes of carbon dioxide Rental income, SEKm 2,194 2,214 in seven years Net operating income, SEKm 1,465 1,438 Profit/loss for the year, SEKm 425 –511 Fabege’s climate work began in 2002 Return on equity, % 4.3 –4.8 with a project to replace old oil-fired Surplus ratio, % 67 65 boilers with district heating. After that Equity/assets ratio, % 32 32 Fabege initiated a systematic effort Interest coverage ratio, times 2.6 1.9 to optimise the use of energy, which to Earnings per share after dilution, SEK 2.59 –3.07 date has led to a reduction in energy Dividend per share, SEK 2.001) 2.00 consumption by about 30 per cent. Taken 1)Proposed cash dividend for 2009. together, the various measures have cut annual carbon dioxide emissions from Rental income and Net operating income about 40,000 tonnes to 5,000 tonnes. • SEKm 3,000 Read more on page 36. 2,500 2,000 1,500 1,000 500 0 05 06 07 08 09 Rental income Net operating income Surplus ratio % 68 Fabege is a partner of SOS Children’s Villages and is funding the building of a family house 66 in Burundi that is aimed at giving vulnerable children a dignified life. Read more on page 41. 64 62 60 Major deal with Vattenfall 58 56 In January 2009, Vattenfall signed an agreement with Fabege for the 00 01 02 03 04 05 06 07 08 09 lease of about 43,000 m² of office space in Arenastaden in Solna, where Vattenfall’s Nordic unit and its business areas will be moving as a tenant Equity/assets ratio into a brand new office building. The new building construction began in % February 2010, and is expected to be completed in 2012. In addition to 45 modern and flexible office premises with 2,000 workplaces, the property 40 will house garages, a restaurant, an auditorium, a gym and exhibition 35 rooms. 30 25 Environmental requirements and energy specifications for the building 20 are impressive. Energy use in the building will be well below what is 15 required for certification under the EU’s GreenBuilding programme, partly 10 thanks to the use of solar and wind power. • 5 0 00 01 02 03 04 05 06 07 08 09 Outcome Target: min. 30% 1 This is Fabege Fabege is one of Sweden’s Fabege’s leading property companies sub-markets focusing mainly on office prem- Stockholm inner city ises and property development. Most of Fabege’s inner city proper- ties are located in the area around Kungsgatan and Drottninggatan, Fabege offers attractive and efficient premises, in the Norrtull area and in western mainly offices but also retail and other and eastern Kungsholmen. The portfolio includes the DN-building premises. The company’s operations are and Wenner-Gren Center, two well- highly concentrated to a number of fast- known Stockholm landmarks. growing sub-markets in the Stockholm region, primarily the inner city of Stockholm, Solna and Hammarby sjöstad. Solna Fabege manages a well positioned property portfolio that is continually being Arenastaden and Solna Business Park are Fabege’s main sub-markets developed through improvement projects, in Solna. Fabege is one of the sales and acquisitions. The concentration of initiators and part-owners of the properties to well contained clusters brings new Arenastaden district, which will the company closer to its customers, which, be home, not only to a large part coupled with Fabege’s extensive local exper- of office buildings, but also to the tise, creates a solid foundation for efficient spectacular new Swedbank Arena, property management and high occupancy. an extensive retail complex, hotels At year-end 2009, Fabege owned 148 and residential buildings. properties with a total market value of SEK 29.2bn. Rental revenues in 2009 were SEK 2.2bn. Hammarby sjöstad Fabege’s vision is to be the most proac- Fabege owns the majority of com- tive, innovative and competent commercial mercial properties in Hammarby property company in Stockholm as well as an sjöstad, the largest being the Luma important partner for its clients and society building. The district is one of in general. Stockholm’s most exciting develop- ment areas, and it has become a highly attractive residential and office location area. Other markets Outside its three priority markets, Fabege owns a number of com- mercial properties in the suburbs of www.fabege.se Stockholm, including Täby, Nacka, Bromma and Järla Sjö. In 2009, More information about Fabege and Fabege also owned residential our operations is available on the properties in Tensta/Rinkeby. These Group’s website. were sold in early 2010. 2 Fabege 2009 THIS IS fabege Stockholm inner city Breakdown of rental value No. of properties 45 Office 84% Lettable area, ‘000 m² 547 Retail 8% Market value, SEKbn 16.417 Industrial/ warehouse 2% Rental value, SEKbn 1.248 Residential 1% Financial occupancy rate, % 91 Other 5% Solna Breakdown of rental value No. of properties 36 Office 82% Lettable area, ‘000 m² 494 Retail 5% Market value, SEKbn 8.502 Industrial/ warehouse 6% Rental value, SEKbn 0.735 Residential 0% Financial occupancy rate, % 91 Other 7% Hammarby sjöstad Breakdown of rental value The Business No. of properties 13 Office 70% Fabege operates in three business areas; Property Management, Improvement Projects, Business Development. Lettable area, ‘000 m² 146 Retail 7% Market value, SEKbn 1.943 Industrial/ warehouse 20% Rental value, SEKbn 0.184 FABEGE Residential 1% Financial occupancy rate, % 81 Other 2% PROPERTY IMPROVEMENT BUSINESS MANAGEMENT PROJECTS DEVELOPMENT Other markets Breakdown of rental value Operational Key Figures 2009 2008 No. of properties 54 Office 36% Property value, Management, SEKbn 23.3 23.8 Lettable area, ‘000 m² 242 Retail 21% Property value, Improvement projects, SEKbn 5.9 5.7 Market value, SEKbn 2.331 Industrial/ warehouse 15% Invested in the company property Rental value, SEKbn 0.244 portfolio, SEKbn 1.1 2.0 Residential 28% Aquisitions, SEKbn 0 0.2 Financial occupancy rate, % 89 Other 1% Sales, SEKbn 1.2 2.1 3 Message from the CEO We are creating values Against all odds, 2009 proved to be a good year for the property market. Fabege managed to increase its net operating income as well as its surplus ratio. Net lettings were positive, and we strengthened our balance sheet. The attractive growth locations of the property portfolio supports our busi- ness model in creating value through management as well as improvement projects and transactions. With the economy growing again in 2010, the winds are favourable. 2009 was a good year for those of us who like chal- The 2009 property market saw a significantly lenges. World trade fell by over ten per cent. Never smaller number of transactions than in recent years. before have we experienced a sharper contraction Yield requirements for properties have generally in times of peace. One thing that we have all learnt increased, while the spread between attractive and from 2009 is that events are unfolding ever faster less attractive locations and products has widened. and becoming harder to predict. Therefore, it is more It is, therefore, nice to see, in a year like this, that the important than ever before to build your business in average yield requirement in our property portfolio a proactive and adaptable manner. The winner is the has remained unchanged compared with the year one who is most skilled at adapting his business and before. The write-downs made have been offset by does so faster than the others. Our company culture, gains from improvements to project properties and expressed by our core values, is based precisely on stronger cash flows in our investment properties.