Annual Report 2016 5 Operations
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Annual Report A part of something larger As a specialist in community service properties, Hemfosa is part of something larger. We are an experienced partner to central and local government agencies and to companies and organizations that pursue publicly financed operations. The heart of society, a cog in the wheel of daily life. We’re experts in properties – and we are driven by developing them, ourselves and our relations. We have a genuine corporate culture and a responsible organization, staffed by old foxes and young talent. We take a long-term approach to our partnership but are quick in completing transactions, with a focus on generating value as a specialist in community service properties in the Nordic region. A sustainable focus that benefits our owners, tenants and business partners alike. Contents 2 Hemfosa 2016 4 Comments from the CEO Operations 6 Business model 10 Market Review 12 Public service properties 15 Property management and development 17 Transactions Properties 19 Property portfolio 22 Sweden 24 Norway 26 Finland Sustainability 31 Hemfosa’s responsibility 34 Financial accountability 35 Environmental responsibility 38 Social responsibility 42 Financing 44 Risk management 48 Ordinary and preference shares 52 Corporate Governance Report 58 Board of Directors and Auditor 60 Management Financial information 62 Multi-year review 63 Key figures 64 Administration report 68 Profit/loss and other comprehensive income 69 Consolidated statement of financial position 70 Consolidated statement of changes in equity 71 Consolidated statement of cash flows 72 Income statement for the Parent Company 73 Balance sheet for the Parent Company 74 Statement of changes in equity for the Parent Company 75 Cash-flow statement for the Parent Company 76 Notes to the financial statements 103 Auditors’ Report 107 Glossary 108 Property listing 121 Information to shareholders Hemfosa’s formal and audited annual accounts are on pages 52–57 and 64–102. Finland Hemfosa 2016 4% Norway 13% Sweden 83% From Swedish to Nordic property company During 2016, Hemfosa strengthened its position as a Nordic specialist in community service properties through a number of acquisitions in all of its three markets: Sweden, Norway and Finland. At the same time, the ongoing process of developing 65% Percentage of community the property portfolio continued, as did efforts to strengthen service properties in relation to total property value, the organization to satisfy the needs of a growing business. excl. joint ventures Community service properties Other properties SEK 34.7 billion SEK 3.6 billion Property value, excl. shares Properties acquired Geographic segments in joint ventures during the year and type of property QUARTER 1 QUARTER 2 Establishment in Finland Successful new share issue • The first acquisition in Finland in December 2015 was followed • A new share issue, with pre-emptive rights for Hemfosa’s in January 2016 by an additional acquisition in the country; ordinary shareholders, contributes about SEK 1.8 billion to three community service properties at a value of MSEK 500. strengthen potential to grow within community service • The acquisition of nine community service properties at properties. Statens Park in Tønsberg, Norway, was completed at an • The acquisition of 13 school properties in Sweden at a underlying property value approximately MSEK 420. value of MSEK 444. • A rental agreement signed with the If Skadeförsäkring • Additional community service properties acquired in insurance company for previously vacant space in prem- Sweden and Norway for MSEK 279. ises in Södra Porten in Mölndal – Hemfosa’s largest leasing of new premises, amounting to 11,000 sqm. • The Board clarifies Hemfosa’s strategy – community ser- vice properties are to ultimately account for at least 75 percent of the total property value. From 0 to SEK 34.7 2009 2010 2011 Number of properties: 13 Number of properties: 164 Number of properties: 279 Property value: MSEK 220 Property value: SEK 7.9 billion Property value: SEK 15.1 billion billion in eight years Rental income: MSEK 8 Rental income: MSEK 529 Rental income: MSEK 1,257 KEY FIGURES INCREASED EARNINGS CAPACITY 2016 2015 Hemfosa’s estimated earnings capacity increased 15 percent in 2016 primarily as a result of a substantially expanded portfolio Rental income, MSEK 2,642 2,443 mainly of high-yield community service properties, a stronger Profit from property management, financial position and advantageous credit terms. MSEK 1,812 1,363 Profit after tax, MSEK 3,583 2,339 Profit after tax per ordinary share, SEK 23.25 16.28 Equity per ordinary share, SEK 86.95 65.71 MSEK 1,147 Net asset value (EPRA NAV) per December 31, 2016 ordinary share, SEK 93.87 73.98 Investment properties, Fair value, SEK billion MSEK – excluding shares in joint ventures 34.7 29.6 1,367 – including shares in joint ventures 38.9 32.6 December 31, 2015 QUARTER 3 QUARTER 4 A stronger organization Continued acquisitions and investments • Organization in Norway is strengthened with a Head of • Acquisition of a property portfolio in Sweden comprising Property Management and the first step is taken to estab- 11 properties, including six community service properties, lish a proprietary organization in Finland through the valued at MSEK 875. recruitment of a COO. • Decision made to invest approximately MSEK 450 in • Continued streamlining of the property portfolio through properties for Internationella Engelska Skolan. the divestment of three properties valued at MSEK 126. • Two properties acquired in Finland for about MSEK 420. • High activity in terms of investment in and development of • Bonds issued in an amount of MSEK 750. existing properties – remodeling projects in such areas as Mölndal and Haninge. • Hemfosa establishes a commercial paper program with a limit of MSEK 2,000. In this connection, the company issued a further MSEK 895 with terms of between three and 12 months. 2012 2013 2014 2015 2016 Number of properties: 204 Number of properties: 195 Number of properties: 353 Number of properties: 411 Number of properties: 432 Property value: SEK 16.0 billion Property value: SEK 16.3 billion Property value: SEK 24.7 billion Property value: SEK 29.6 billion Property value: SEK 34.7 billion Rental income: MSEK 1,573 Rental income: MSEK 1,584 Rental income: MSEK 1,612 Rental income: MSEK 2,443 Rental income: MSEK 2,642 COMMENTS FROM THE CEO Comments from the CEO Another strong year Hemfosa continued its strong growth in 2016 – in terms of property value, prof- it from property management and earnings capacity. And we achieved this in a highly competitive Nordic market, where we believe that prices have risen to chal- lenging levels in many cases. We also strengthened and broadened the financing base in order to safeguard our potential for further growth in community service properties by means of acquisitions and investments. As a result, we are ready to capitalize on interesting future opportunities that may arise in a market that is more unpredictable than ever. Hemfosa’s first eight years went quickly. After our first nantly properties for schools, health and care services, year in operation, we had seven employees and 13 proper- public authorities and judicial institutions. At the same ties worth MSEK 220. In the final accounts for 2016, we time, non-priority properties were divested for SEK 1.3 had a property portfolio in Sweden, Norway and Finland billion. I am satisfied that we succeeded in achieving so worth SEK 34.7 billion. During the year, we increased our much during the year in the challenging market condi- profit from property management by 33 percent to MSEK tions that prevail, particularly in our niche, community 1,812 and, when all factors are combined, this led to a service properties. We have looked for and found ways 32-percent increase in equity per ordinary share. to close good deals, in part through a sizeable number of individual acquisitions, since in many cases the price of CONTINUED STREAMLINING property portfolios has been too high in our estimation. Hemfosa is a specialist in community service properties and its organization has unparalleled collective expe- ACQUISITIONS AND INVESTMENTS rience and expertise in this growing property segment. We still managed to seal a couple of major acquisitions, During the year, we continued to streamline the port- notable among which was one implemented in the folio in line with our strategy. The share of the property fourth quarter – a mixed Swedish portfolio that we value accounted for by community service properties acquired for MSEK 875 from Kaupthing ehf., mainly rose from 59 percent to 65 percent following continued comprising community service properties. This was a acquisitions totaling some SEK 3.6 billion, predomi- typical Hemfosa deal, whereby we could leverage our extensive knowledge and experience of complex trans- actions. The acquired properties also offer potential for additional value generation via increased leasing and development or alternatively through the sale of properties that are not compatible with our portfolio in the long term. Early in the year, we finalized another major transaction, when we acquired 13 school and preschool properties in Sweden, all with stable tenants and long COMMENTS FROM THE CEO leases. During the autumn, we took another step towards New builds and expansion projects give us an opportu- strengthening our position in school properties through nity to ensure that the properties are built in an envi- a decision to invest in properties for Internationella ronmentally sustainable manner right from the start. Engelska Skolan, one of a number of established long-term In 2016, we initiated more systematic sustainability operators of community service operations with which efforts, also in a broader perspective, for which a dialog Hemfosa cooperates. with Hemfosa’s stakeholders served as a starting point. The significant areas that arose from this process are NEED OF COMMUNITY SERVICE PROPERTIES the foundation upon which we now continue gradually Hemfosa is also growing through investments in the to work for Hemfosa’s long-term and increasingly sus- existing property portfolio and by developing new tainable development.