Equity Research - 04 December 2019 06:29 CET

Fastpartner Reason: In-depth research Company sponsored research In a club that has outperformed the sector Not rated

 One of the entrepreneur-led real estate success stories  ~19% 2020e EPRA NAVPS growth, adj. for dividends

 CEPS growth of 15% in ‘20e, sector at 6% Estimate changes (%) 2019e 2020e 2021e Above-sector average returns Rental income RE (%) 0.9% 5.9% 6.5% Our analysis concludes that entrepreneur-led real estate companies NOI (%) -0.1% 5.9% 6.7% have consistently outperformed the Carnegie Real Estate Index. In our CEPS adj (%) 3.7% 8.3% 11.5% view, Fastpartner and its CEO, Sven-Olof Johansson, belong in this Source: ABG Sundal Collier

group. What these entrepreneurial leaders have in common is that they Share price (SEK) 02/12/2019 9 1 .6 have large share ownership in their companies, have capital allocation strategies that can be unconventional and are more focused on long- Real Estate, Sweden term value than short-term gain. In the past five years, Fastpartner has FPAR.ST/FPAR SS generated a return of ~190%, which is 20pp better than the Carnegie Real Estate Index ~170%) and 170pp better than the OMXS30 ~22%). MCap (SEKm) 16,570 MCap (EURm) 1,568.7 Average EPRA NAV growth of ~20% p.a. over ’19-’21e Net debt (EURm) 1,269 We forecast CEPS growth of 17% in ’19e and 15% in ’20e (vs. sector growth of 10% and 6% based on ABGSC estimates). The main drivers No. of shares (m) 181 are rental income growth from announced acquisitions and projects, plus Free float (%) 30.0 a higher NOI margin. We forecast value uplifts of 7.6% in ’19e and 5.5% Av. daily volume (k) 87.5 in ’20e, coupled with a CEPS contribution of ~6% p.a., which takes EPRA NAVPS to SEK 72 and SEK 84 in ’19e and ’20e. These estimates Next event Q4 report: 13 Feb imply EPRA NAVPS growth (adjusted for dividends) of 23% and 19% in ’19e and ’20e, vs. sector growth of 15% and 12%. Performance

220 Fair equity value range of SEK 67-134 200 On our ’20 estimates with the stock trading at the current P/EPRA NAV 180 multiple of ~1.2x, we get an equity value of SEK 100. If the share were to 160 trade at its historical low of a P/EPRA NAV of ~0.8x, we get an equity value 140 of SEK 67, and at its historical high of ~1.6x, we get an equity value of SEK 120 134. This gives us a fair value range of SEK 67-134. Fastpartner’s current 100 80

EPRA NAV premium of ~24% is in line with the sector premium. On P/CEPS

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Aug 18 Aug Dec 18 Dec TTM multiples, Fastpartner’s ~24x multiple is 20% higher than the sector’s 19 Aug Fastpartner OMX STH PI ~20x. We note that both Fastpartner and the sector are trading at historically high multiples. 1m 3m 12m Absolute (%) 12.8 11.2 58.6

Lead analyst: Staffan Bulow OMX STH PI (%) 0.2 7.6 16.5 Tobias Kaj Source: FactSet

2019e 2020e 2021e SEKm 2017 2018 2019e 2020e 2021e P/CEPS Adj. 24.0 20.9 19.2 Rental Income 1,349 1,451 1,658 1,844 1,931 P/EPRANAV 1.27 1.10 0.95 Net operating income 936 982 1,144 1,288 1,356 Implicit yield (%) 3.6 3.8 4.0 NOI margin (%) 69.4 67.7 69.0 69.9 70.2 div.yield (%) 2.1 2.2 2.3 CEPS Adj 3.15 3.26 3.82 4.38 4.77 Net LTV (%) 50.0 50.4 48.7 DPS 1.43 1.60 1.90 2.00 2.10 Source: ABG Sundal Collier, Company data EPRA NAVPS 50.2 59.7 72.1 83.6 96.2 EPS 7.81 9.77 10.48 3.94 4.29 Rental growth (%) 6.2 7.5 14.3 11.2 4.7 CEPS Adj. growth (%) 5.5 3.5 17.2 14.7 8.9

Source: ABG Sundal Collier, Company data

Please refer to important disclosures at the end of this report This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to constitute an acceptable minor non-monetary benefit (i.e. not investment research) as defined in MiFID II. Fastpartner

Opportunities Risks Over the years, FastPartner has developed a portfolio of The main risk for a real estate company is the macro about 200,000 sqm residential building rights and development in the markets in which it operates. The approximately 200,000 sqm commercial building rights. demand situation should be more sustainable in Stockholm The untapped building rights are in different stages, i.e. given the growing population, but historically volatility has ranging from development of zoning plans, approved been higher in the downturns. Moreover, the major zoning plans to established construction. Presently, there shareholder and CEO of FastPartner, Sven-Olof are good opportunities to convert these into leasable Johansson, is very important to the company. areas.

Value distribution by region Occupancy rate and rental income/m2

90% 1,200 90.5% 80% 1,000 90.0% 70% 89.5% 60% 800 50% 89.0% 600 40% 88.5% 30% 400 88.0% 20% 200 10% 87.5% 0% 0 87.0% Greater Gävle Greater Norrköping 2011 2012 2013 2014 2015 2016 2017 2018 Stockholm Gothenburg and other Rental income/m² Value distribution/Region Occupancy rate R.H.S Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data CEPS adj., y-o-y change Growth in NOI and CEPS adj., y-o-y

5.0 35.0% 3.5 35.0% 4.5 30.0% 3.0 30.0% 4.0 3.5 25.0% 2.5 25.0% 3.0 20.0% 2.0 20.0% 2.5 2.0 15.0% 1.5 15.0% 1.5 10.0% 1.0 10.0% 1.0 5.0% 0.5 0.5 5.0% 0.0 0.0% 0.0 0.0% 2014 2015 2016 2017 2018 2019e 2020e 2011 2012 2013 2014 2015 2016 2017 2018 CEPS adj. CEPS adj y-o-y change R.H.S Growth in NOI R.H.S Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data EPRA NAV and share price Company description FastPartner owns, manages and develops primarily 120.0 commercial real estate. The portfolio consists mainly of warehouse and production properties, but also offices and 100.0 retail premises. Greater Stockholm is and remains 80.0 FastPartner's most prioritized investment area. About 80% of rental income comes from the Greater Stockholm area 60.0 and 20% from the rest of the country, with Gävle as the largest management unit. Moreover, FastPartner's property 40.0 portfolio includes five properties in Stockholm city. 20.0

0.0 2014 2015 2016 2017 2018 2019e 2020e 2021e EPRANAV/Share Share price Source: ABG Sundal Collier, Company data

4 December 2019 ABG Sundal Collier 2

Fastpartner

Table of contents

Summary ...... 4 Growth strategy ...... 6 Fastpartner vs. the sector ...... 9 Estimates ...... 19 Valuation ...... 22 Risks ...... 26 Appendix – Company Overview ...... 28 Appendix - Macro overview ...... 32 Appendix - Stockholm real estate fundamentals ...... 37 Appendix – Management ...... 43 Appendix – Ownership ...... 44 Appendix – preference and D-shares explained ...... 45 Appendix – Financial targets ...... 47

4 December 2019 ABG Sundal Collier 3

Fastpartner

Summary Our analysis concludes that entrepreneur-led real estate companies have consistently outperformed the Carnegie Real Estate Index. In our view Fastpartner and its CEO, Sven-Olof Johansson, belong in this group. On our ’20 estimates with the stock trading at the current P/EPRA NAV multiple of ~1.2x, we get an equity value of SEK 100. If the share were to trade at its historical low of a P/EPRA NAV of ~0.8x, we get an equity value of SEK 67, and at its historical high of ~1.6x, we get an equity value of SEK 134. This gives us a fair value range of SEK 67-134.

In our view, a key component for successful real estate companies, or any company, is management. We believe that Fastpartner’s CEO possesses a number of management characteristics that have proven successful. Historically, the Swedish real estate companies that have created the most shareholder value have been led by what we call entrepreneurial CEOs. Evaluating the shareholder value performance of entrepreneurial-driven companies vs. non-entrepreneurial shows that on average they have outperformed the sector.

In our analysis, we use the Carnegie Real Estate Index (CREX) as our benchmark index, which comprises Swedish real estate companies. The index, which dates back to 1994, is one of the most used indexes to compare returns in Sweden’s real estate sector.

On page 11, we outline the criteria that we have used to identify the group. In essence, we argue that a number of Swedish real estate entrepreneurs (such as Erik Selin - Balder, David Mindus - Sagax, Jens Engwall – Hemfosa and Nyfosa, Hans Wallenstam - Wallenstam, Rutger Arnhult – Corem and Klövern, and Sven- Olof Johansson – Fastpartner) share the following value-creating characteristics:

 Incentives: these entrepreneurs hold substantial ownership stakes in their companies.  Capital allocation: we conclude that when it comes to capital allocation, they can be pragmatic, unconventional, contrarian and sometimes pioneering.  Long-term investment horizon: they emphasise long-term investment horizons in their property portfolios and investments. However, as we discuss in our Risk section on page 27-28, aspects of the above could also be seen as risks, and we emphasise that past performance cannot be used as a guide for the future. Note that this report includes information on other companies in ABG Sundal Collier’s research coverage universe. The inclusion of a company in this report should not be construed or used as a basis on which to make an investment decision. Any recommendations ABG Sundal Collier gives on companies are based on a range of considerations and analytical tools not applied nor discussed in this report.

We believe Sven-Olof Johansson is incentivised to create shareholder value due to his ~70% ownership of Fastpartner. From a capital allocation perspective, we conclude Johansson has an opportunistic acquisition strategy, with a flexible mandate rather than a conventional annual investment budget. He uses preference shares and has a long-term perspective on real estate investments.

On our ’20 estimates with the stock trading at the current P/EPRA NAV multiple of ~1.2x, we get an equity value of SEK 100. If the share were to trade at its historical low of a P/EPRA NAV of ~0.8x, we get an equity value of SEK 67, and at its

4 December 2019 ABG Sundal Collier 4

Fastpartner

historical high of ~1.6x, we get an equity value of SEK 134. This gives us a fair value range of SEK 67-134. Fastpartner’s current EPRA NAV premium of ~24% is in line with the sector premium. On P/CEPS TTM multiples, Fastpartner’s ~24x multiple is 20% higher than the sector’s ~20x. We note that both Fastpartner and the sector are trading at historically high multiples.

Fastpartner P/EPRA NAV last reported, 5y Swe Sector P/EPRA NAV last reported, 5y

180% 130%

120% 160%

110% 140%

100% 120% 90%

100% 80%

80% 70%

60% 60% Q4 Q1 Q3 Q4 Q2 Q3 Q1 Q3 Q4 Q2 Q3 Q1 Q2 Q3 Q4 Q2 Q3 Q1 Q2 Q4 Q1 Q3 Q4 Q2 Q3 Q1 Q2 Q4 2014 2015 2015 2015 2016 2016 2017 2017 2017 2018 2018 2019 2019 2014 2014 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2019 2019 2019

Sector P/EPRA NAV last reported Source: ABG Sundal Collier, FactSet, Company data Source: ABG Sundal Collier, FactSet, Company data

4 December 2019 ABG Sundal Collier 5

Fastpartner

Growth strategy Growth from acquisitions Since 2014, Fastpartner’s property portfolio has grown from SEK 12.0bn to SEK 22.3bn (2018), corresponding to an increase of ~85% or a CAGR of ~18%. The growth in the property portfolio has mainly come from acquisitions. Between 2014 and 2018, the company invested SEK 5.7bn through net acquisitions and SEK 2.0bn through investments in its own properties.

Property portfolio, SEKm Investments through net acquisitions and investments in its own properties, SEKm

25,000 30% 3,000

25% 2,500 20,000

20% 2,000 15,000 15% 1,500 10,000 10% 1,000

5,000 5% 500

0 0% 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Property value, SEKm Y-o-y growth Net acquisitions, SEKm Investments in own properties, SEKm

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

As the numbers reveal, Fastpartner’s strategy is to grow through acquisitions. The first pillar of its acquisition strategy relates to location. Fastpartner states that it seeks acquisition opportunities in locations that will “become increasingly attractive over time”. The company owns properties in Sweden’s largest cities, with 83% of the property value (Q3’19) in Stockholm ̶ Fastpartner argues that Stockholm’s GDP accounts for roughly one-third of Sweden’s GDP. Meanwhile, Västra Götaland (which includes Sweden’s second-largest city, Gothenburg) accounts for one-fifth of Sweden’s GDP, and Skåne (which includes Sweden’s third-largest city, Malmö) accounts for ~10%. In total, these regions, which include Sweden’s three largest cities, account for three-fifths of Sweden’s GDP. Fastpartner finds exposure to the largest regions to be attractive, which is why it looks for acquisition opportunities in these areas.

The second pillar of Fastpartner’s strategy relates to its selection of properties. The strategy is to select properties that generate synergies from property management and acquire diverse type of commercial properties. First, the company maintains that there are synergies from acquiring properties in locations where it already has a functioning property management. There may be income synergies from operating in the same locations, as existing tenants tend to stay in properties longer. Second, the company is in diversified real estate segments, ranging from office to warehouses. Fastpartner management says that it reduces risk by generating a diversified rental income stream. This also gives the company flexibility to act rapidly in property segments that it finds most attractive.

Furthermore, its acquisition strategy is flexible in terms of investment budget. For example, in 2015 the company made net acquisitions of SEK 2,100m and the following year the corresponding figure was SEK 8m. Meanwhile, we see that most real estate companies tend to target an annual investment budget while Sven-Olof Johansson’s Fastpartner has an investment budget that is flexible and dependent on the current transaction opportunities.

Finally, the company has a perpetuity perspective on its investments. 4 December 2019 ABG Sundal Collier 6

Fastpartner

Growth from projects Project development Project development encompasses the redevelopment of existing properties and newbuilds. Fastpartner works continuously with redevelopments through investments in its own properties. Project development usually results in higher rents, reduced rentals cost and/or positive value revisions, according to the company.

We argue that projects (as opposed to acquisitions) are attractive given the current climate in the real estate market. With yields at all-time lows and the transaction market competitive, it is harder to close attractive deals. Moreover, newbuilds offer a number of benefits:

 They usually entail higher rents  It is easier to meet tenants’ demands  Development gains Below are some examples of Fastpartner’s current projects.

Fastpartner’s ongoing projects

Remaining Estimated Real estate Project type Area, sq m Investment, SEKm investments. SEKm Completion Aga 2, Diviatorn 1 Elderly care 12,200 179 8 Q319 Ladugårdsgärdet 1:48 Redevelopment 1,300 21 1 Q319 Bomullsspinneriet 3 School 5,300 33 5 Q319 Amerika 3 Redevelopment 3,050 17 15 Q419 Rånäs 1 Redevelopment 8,900 24 3 Q419 Veddesta 5:3 New Build 5,900 29 9 Q120 Pottegården 3 New Build 3,700 40 34 Q120 Syllen 4 Redevelopment 6,200 68 64 Q220 Ringpärmen 4 Redevelopment 4,700 48 47 Q320 Märsta 1:203 Residential 12,000 419 218 Q220 Total 63,250 878 404 Source: ABG Sundal Collier, Company data

Building rights The company holds building rights of 378,000 square metres of lettable area; 161,000 square metres are residential and 217,000 square metres are commercial properties (Q2’19). The building rights are valued at SEK 306m or, on average, SEK 1,136/square metre for residential and SEK 567/square metre for commercial.

Below we provide examples of larger building rights. The table illustrates that a majority of Fastpartner’s building rights are located in Stockholm within the segments commercial and residential. One advantage of working with a building rights portfolio is the potential value gains from the building rights.

4 December 2019 ABG Sundal Collier 7

Fastpartner

Examples of Fastpartner’s building rights

Potential Residential, Commercial Region Area Type Status building start area, sq m area, sq m Total Nr residentials Stockholm Sundbyberg Residential Preparing zoning plan 2023 12,000 - 12,000 185 Stockholm Spånga Residential Preparing zoning plan 2023 3,000 - 3,000 46 Stockholm Årsta Residential, School Ongoing zoning plan 2022 9,900 900 10,800 123 Stockholm Västberga Commercial Ongoing zoning plan 2020 - 33,000 33,000 - Stockholm Bredäng Residential Ongoing zoning plan 2022 13,200 8,800 22,000 165 Stockholm Liljeholmen Residential Preparing zoning plan 2022 4,200 5,400 9,600 140 Stockholm Lidingö Residential Preparing zoning plan 2022 9,000 - 9,000 113 Stockholm Lidingö Residential Preparing zoning plan 2025 3,100 - 3,100 78 Stockholm Bromma Residential, Commercial Preparing zoning plan 2022 42,000 30,000 72,000 420 Stockholm Märsta Commercial Building start 2020-21 - 16,800 16,800 - Stockholm Vallentuna Residential Ongoing zoning plan 2022 25,000 2,000 27,000 294 Stockholm Vallentuna Residential, Retail Preparing building start 2020 2,750 650 3,400 27 Stockholm Täby School Preparing building start 2020 - 2,000 2,000 - Göteborg Högsbo Residential Preparing zoning plan 2022 5,000 - 5,000 83 Gävle Gävle Residential, commercial Preparing zoning plan 2021 10,000 15,000 25,000 143 Total 139,150 114,550 253,700 1,817 Source: ABG Sundal Collier, Company data

4 December 2019 ABG Sundal Collier 8

Fastpartner

Fastpartner vs. the sector In our view, key component for successful real estate companies is sound management. We think that Sven-Olof Johansson, Fastpartner’s CEO, has a number of management characteristics that have proven successful historically.

Looking back, the real estate companies in the Swedish universe that have created most shareholder value, in relation to the sector, are entrepreneurial-driven companies. Evaluating the shareholder value performance of entrepreneurial-driven companies vs. non-entrepreneurial companies shows that the former group has on average outperformed the sector substantially.

We have identified a group of entrepreneurial CEOs in the Swedish real estate universe, the most notable are:

 Erik Selin, Balder  David Mindus, Sagax  Rutger Arnhult, Corem Property Group and Klövern  Jens Engwall, Hemfosa and Nyfosa  Hans Wallenstam, Wallenstam  Sven-Olof Johansson, Fastpartner We highlight the following common denominators for these entrepreneurs that we believe have created shareholder value:  Incentives: these entrepreneurs have substantial shareholdings in their companies.  Capital allocation: we conclude their capital allocation can be pragmatic, unconventional, contrarian and sometimes pioneering.  Long-term investment horizon: they emphasise long-term investment horizons in their strategy, property portfolios and investments. In the next section, we elaborate on the above followed by a short of each the entrepreneurs1. Common denominators These entrepreneurs all have ‘skin in the game,’ i.e. they hold substantial equity in the company. In other words, their compensation is linked to shareholder value creation. However, we acknowledge the risk with large equity ownership is that it may incentivize owners to create wealth for themselves rather than shareholder value.

1 Note that this report includes information on other companies in ABG Sundal Collier’s research coverage universe. The inclusion of a company in this report should not be construed or used as a basis on which to make an investment decision. Any recommendations ABG Sundal Collier gives on companies are based on a range of considerations and analytical tools not applied nor discussed in this report. 4 December 2019 ABG Sundal Collier 9

Fastpartner

Other common denominators include know-how and expertise in capital allocation. The CEOs can be pragmatic, unconventional, contrarian and sometimes pioneering in their business decisions. Examples of capital allocation strategies include:

 Not paying dividends to shareholders (Erik Selin, Balder).  Relaunching preference shares,2 and launching a new equity instrument called D-shares (David Mindus, Sagax).  An acquisition strategy with a flexible acquisition mandate instead of a conventional annual investment budget (Sven-Olof Johansson, Fastpartner).  Reducing a company’s size by spinning-off assets (Jens Engwall, Nyfosa/Hemfosa) and frequent use of buy-backs (Wallenstam).  Most CEOs aspire to build big real estate empires and therefore a spin-off can be seen as a shareholder-friendly contrarian capital allocation operation.

Alternative equity instruments used by entrepreneurs3

Hybrid Preference instruments D-shares shares Balder Y N Y Sagax N Y Y Corem/Klövern Y N Y Hemfosa/Nyfosa N N Y Wallenstam N N N Fastpartner N N Y Source: ABG Sundal Collier, Company data

Another key characteristic of the entrepreneurial CEOs is their long-term perspective. Hans Wallenstam has been CEO of Wallenstam since 1991, Sven-Olof Johannson (Fastpartner) since 1997, David Mindus (Sagax) since 2004, Erik Selin (Balder) since 2005, and Rutger Arnhult (Klövern) since 2012. Having this long-term perspective creates more strategic opportunities for value creation, compared with having a short-term CEO, we believe. We note also that these CEOs advocate a long-term investment horizon on their real estate portfolio and investments.

From a strategic standpoint, the entrepreneurial CEOs have a varied approach to asset allocation. Some are concentrated and others are opportunistic in their real estate segment exposure. Regarding the geographic focus, the CEOs have a tendency to penetrate other markets than Sweden. Balder (Denmark, Finland, Norway, Germany, United Kingdom), Sagax (Finland, Denmark, Netherlands, France and Spain), Klövern (Denmark and the United States), and Hemfosa (Finland and Norway) have an international presence. For comparison, there are only four non-entrepreneurial real estate companies under our coverage with international exposure.

In summary, the common denominators for these entrepreneurs are the following shareholder value-creating characteristics: 1) incentives, 2) capital allocation and 3) a long-term investment horizon. However, the entrepreneurial CEOs do not share a strategic view on how to manage their real estate exposures, which are both concentrated and opportunistic.

2 Regarding preference shares, the companies that were quick to use this equity instrument were the entrepreneurial-driven companies: Balder, Fastpartner, Corem, Klövern, and Hemfosa. 3 Fastpartner has announced that it is planning to issue D-shares. If the issuance is successful, the company will issue 7-8.5m D-shares at a price range of SEK 84-88, which implies that the company may raise SEK 588-748m. 4 December 2019 ABG Sundal Collier 10

Fastpartner

Overview of entrepreneur-driven companies

Entrepreneur Company Entrepreneur period TR TR CREX Diff Strategy Capital allocation Balder Erik Selin 2005 - present 3016% 375% 2641% Opportunistic No dividend Sagax David Mindus 2004 - present 13556% 812% 12744% Concentrated Equity instruments Klövern Rutger Arnhult 2012 - present 254% 338% -84% Concentrated High risk Corem Rutger Arnhult 2007 - present 445% 375% 70% Opportunistic High risk Hemfosa Jens Engw all 2014 - 2018 160% 103% 58% Opportunistic Spin-off Nyfosa Jens Engw all 2018 - present 61% 47% 13% Opportunistic Spin-off Wallenstam Hans Wallenstam 1991 - present 8092% 2353% 5739% Concentrated Buy-backs Fastpartner Sven-Olof Johansson 1997 - present 3111% 1912% 1199% Opportunistic Flexible investment budget Source: ABG Sundal Collier

Entrepreneurial stories Erik Selin: Balder Erik Selin founded Balder when the company was listed though a reverse merger in 2005.4 Fourteen years later, Balder is Sweden’s largest listed real estate company, measured in terms of market cap (SEK ~61bn) and property value (SEK ~127bn in Q2’19). In terms of geographical exposure, Erik Selin’s strategy has been opportunistic. He said for a long time that he would never invest outside of Sweden but today the company holds properties in Finland, Denmark, Germany and United Kingdom. Moreover, Balder is one of few real estate companies which does not provide shareholders with dividends, since Selin argues that more value is created by reinvesting earnings. Selin owns 36.4% of Balder’s shares, with 49.9% of the votes. His salary of SEK 0.9m is much lower than the average salary for a CEO of a company with a market cap above SEK 60bn. Since its listing in 2005, Balder has generated a return of ~3,000%, which is 2,600% more than the Carnegie Real Estate Index performance of ~400% for the same period. Balder vs. Carnegie Real Estate Index, 2005-present Balder vs. Carnegie Real Estate Index, 2017-present

3,000 220

2,500 200 180 2,000 160 1,500 140 1,000 120

500 100

0 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 01/2017 05/2017 09/2017 01/2018 05/2018 09/2018 01/2019 05/2019 09/2019 CREX Balder CREX Balder Source: ABG Sundal Collier, Thomson Reuters Datastream Source: ABG Sundal Collier, Thomson Reuters Datastream

David Mindus: Sagax David Mindus (CEO), Staffan Salén (chairman of the board) and Johan Thorell (board member) founded Sagax and listed the company in 2004. At that time, the property portfolio was valued at SEK ~1bn and is now worth SEK ~30bn (Q3’19).5 David Mindus’s strategic model is simplistic and straightforward – Sagax invests in properties that generate stable NOI, and it maintains a long-term perspective on its investments. The company focuses on logistics, warehouses and light industrials.

4 https://www.balder.se/om-balder/historik 5 Bloomberg, November 2019 4 December 2019 ABG Sundal Collier 11

Fastpartner

Sagax was a pioneer within capital structure, which we believe has encouraged other companies in the industry to follow. Sagax was the first to relaunch preference shares in 2006, which at the time was an ignored equity instrument. Several real estate companies followed, and preference shares are now utilised by Akelius, Corem, Amasten, NP3, Klövern, Fastpartner, SBB, and Hemfosa, among others. In 2016, David Mindus introduced a new equity instrument called D-shares (which are like an eternal preference share). The creation of D-shares was a direct consequence of credit institutions changing their view on preference shares from equity to hybrid. The advantage with preference shares and D-shares is that they create another tool for accessing capital, and create a leverage effect on ROE (for a more thorough explanation of preference shares and D-shares, see Appendix – Preference and D-shares explained).

David Mindus holds 19.7% of the capital and 26.6% of the votes. In summary, Sagax value creation amounts to a return of ~13,600% since 2004, which is substantially better than the Carnegie Real Estate Index, the sector benchmark, of ~800%. Sagax vs. Carnegie Real Estate Index, 2004-present Sagax vs. Carnegie Real Estate Index, 2017-present

14,000 350

12,000 300 10,000

8,000 250

6,000 200 4,000 150 2,000

0 100 2004 2006 2008 2010 2012 2014 2016 2018 01/2017 05/2017 09/2017 01/2018 05/2018 09/2018 01/2019 05/2019 09/2019 CREX Sagax CREX Sagax

Source: ABG Sundal Collier, Thomson Reuters Datastream Source: ABG Sundal Collier, Thomson Reuters Datastream

Rutger Arnhult: Corem Property Group and Klövern Rutger Arnhult was the CEO of Corem between 2007 and 2012, and remains a board member and major owner. Arnhult took Corem public through a reverse merger in 2007. After the CEO position at Corem he continued his career as CEO of Klövern in 2012. Arnhult was appointed in a rather unconventional manner. He gradually bought shares in Klövern, eventually becoming the largest shareholder. According to an article in Dagens Industri, Arnhult made sure that Erik Paulsson (a board member and large owner at the time) and Gustaf Hermlin (the CEO and board member) had to leave their positions after the annual general meeting in 2012.6 The common denominator for Corem and Klövern is risk. Arnhult has accepted a high level of financial risk, in terms of a levered balance sheet compared with sector peers. Arnhult owns 15.1% of the shares and 15.8% of the votes in Klövern, and his stake in Corem amounts to 41.8% of the shares and 42.3% of the votes.7 Klövern’s and Corem’s strategies have not been as successful as the other companies we describe. However, since 2012, Klövern has returned 250% vs. the Carnegie Real Estate Index return of 340%. However, Corem’s return of 450% is 70% better than the Carnegie Real Estate Index return of 380%.

6 https://www.di.se/di/artiklar/2015/10/21/paulssons-hamnd-pa-arnhult/ 7 Holdings, November 2019 4 December 2019 ABG Sundal Collier 12

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Klövern vs. Carnegie Real Estate Index, 2011-present Corem vs. Carnegie Real Estate Index, 2007-present

450 600

400 500 350 400 300

250 300

200 200 150 100 100

50 0 2011 2012 2013 2014 2015 2016 2017 2018 2007 2009 2011 2013 2015 2017 CREX Klövern CREX Corem Property Group

Source: ABG Sundal Collier, Thomson Reuters Datastream Source: ABG Sundal Collier, Thomson Reuters Datastream

Jens Engwall: Hemfosa and Nyfosa Jens Engwall listed Hemfosa in 2014, and served as CEO until late 2018.8 He initiated the idea to spin-off the company’s assets that were not social infrastructure properties. Engwall left Hemfosa to become CEO of the spun-off company, Nyfosa, which started trading as a separate entity in November 2018. We argue that the Nyfosa spin-off was a prudent capital allocation strategy, since it reignited the entrepreneurial spirit of the company. Moreover, we view it as contrarian, since most real estate CEOs strive to build a big real estate empire, which is the opposite of a spin-off.

Jens Engwall’s strategy has been opportunistic at both Hemfosa and Nyfosa. At Hemfosa, he focused on the social infrastructure segment. For Nyfosa, his focus ranges from “box” retail to offices in geographic regions from Lund to Kiruna. In summary, Engwall has a preference for buying assets which are out of favour.

While Jens Engwall was CEO of Hemfosa, between 2014 and 2018, the stock yielded a return of 160% (58% better than the Carnegie Real Estate Index performance of 103%). Moreover, since he embarked as CEO of the spun-off entity Nyfosa in November 2018, the stock has returned 61%, which is 13% better than the Carnegie Real Estate index. Jens Engwall holds 2.8% of the shares in Nyfosa.

Hemfosa vs. Carnegie Real Estate Index, 2014-2018 Nyfosa vs. Carnegie Real Estate Index, 2018-present

280 170 260 160

240 150 220 140 200 130 180 120 160 110 140 120 100 100 90 80 80 2014 2015 2016 2017 2018 11/2018 01/2019 03/2019 05/2019 07/2019 09/2019 CREX Hemfosa CREX Nyfosa

Source: ABG Sundal Collier, Thomson Reuters Datastream Source: ABG Sundal Collier, Thomson Reuters Datastream

8 https://nyfosa.se/om-nyfosa/verksamhetshistoria/ and Bloomberg November 2019 4 December 2019 ABG Sundal Collier 13

Fastpartner

Hans Wallenstam: Wallenstam Hans Wallenstam has been the CEO of Wallenstam since 1991. His father, Lennart Wallenstam, founded the company in Gothenburg in 1944.9 The company has maintained a strategy of owning and managing mainly residential properties in Gothenburg and Stockholm. Hans Wallenstam has been CEO for 28 years, which makes him the longest-serving CEO in the Swedish real estate sector.10 From a capital allocation perspective, the company stands out due to its use of buy- backs, which it has utilised several times since 2000. Hans Wallenstam owns 24.4% of the shares and 61.1% of the votes. Since 1994 the company’s return amounts to 8,100% which can be compared with the Carnegie Real Estate Index return of 2,400%.11

Wallenstam vs. Carnegie Real Estate Index, Wallenstam vs. Carnegie Real Estate Index, 1994-present 2017-present

9,000 190 8,000 180 7,000 170 6,000 160 5,000 150 4,000 140 3,000 130 2,000 120 1,000 110 0 100 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 01/2017 07/2017 01/2018 07/2018 01/2019 07/2019 CREX Wallenstam CREX Wallenstam

Source: ABG Sundal Collier, Thomson Reuters Datastream Source: ABG Sundal Collier, Thomson Reuters Datastream

Sven-Olof Johanson: Fastpartner Sven-Olof Johanson has been the CEO of Fastpartner since 1997. At that time it was a small real estate company, but Fastpartner now has a property value of SEK ~26bn.12 Johansson’s 22 years as CEO makes him the third longest-serving CEO in the Swedish real estate sector.13 Fastpartner evaluates acquisitions from a perpetuity perspective, according to the company’s annual report. Moreover, the acquisition strategy is opportunistic, which can be seen in its investment budget. For example, in 2015, the company made net acquisitions of SEK 2,100m. The following year the figure was SEK 8m. Most real estate companies tend to set an annual investment budget, but Fastpartner has an opportunistic investment budget that is flexible and dependent on the current transaction opportunities.

The company has a diverse property portfolio across segments, but it is concentrated in Sweden’s large city regions. Johansson owns 69.9% of shares and 71.8% of votes. This makes him the largest owner, in relative terms, among the real estate entrepreneurs we mention in this report. Since 1997, Fastpartner has generated a return of ~3,100% which is ~1,200%% better than the Carnegie Real Estate Index return of ~1,900%.

9 https://www.wallenstam.se/sv/wallenstam/om-oss/var-historia/ 10 https://www.fastighetsvarlden.se/notiser/lista-se-vilka-som-suttit-i-vd-stolen-langst/ 11 We compare from 1994 due to data availability for the benchmark Carnegie Real Estate Index. 12 https://fastpartner.se/om-fastpartner/organisation/ledning/ 13 https://www.fastighetsvarlden.se/notiser/lista-se-vilka-som-suttit-i-vd-stolen-langst/ 4 December 2019 ABG Sundal Collier 14

Fastpartner

Fastpartner vs. Carnegie Real Estate Index, Fastpartner vs. Carnegie Real Estate Index, 1994-present 2017-present

3,500 220

3,000 200

2,500 180

2,000 160

1,500 140

1,000 120

500 100

0 80 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 01/2017 06/2017 11/2017 04/2018 09/2018 02/2019 07/2019 CREX Fastpartner CREX Fastpartner

Source: ABG Sundal Collier, Thomson Reuters Datastream Source: ABG Sundal Collier, Thomson Reuters Datastream

’14-’18 avg. ROE of ~26%, vs. sector of ~20% The strong ~18% CAGR in the property portfolio has been achieved along with high profitability. In 2018, total ROE amounted to 22.5%, above the sector average of 21.6% (the 5y average total ROE is 25.8% for Fastpartner and 19.7% for the sector). Especially noteworthy is that Fastpartner’s total ROE has outperformed the sector in five of the last five years.

When we break down Fastpartner’s total ROE into (1) cash earnings (CE) and (2) value revisions + other, we find that the most important component of the strong total ROE is the latter. In 2018, the ROE from CE was 6.7% vs. the Swedish sector at 6.3%, while the ROE from value revisions + other was 15.8% vs. the Swedish sector at 15.3%. The five-year average figures support the same pattern. Fastpartner’s five-year average ROE from CE for 2014-2018 was 9.4% vs. the sector at 6.8%, while its five-year average from value revisions + other was 16.3% vs. the sector at 12.9%. Consequently, the five-year average total ROE for 2014- 2018 was 25.8% for Fastpartner and 19.7% for the sector. Moreover, when evaluating the company’s ROE from CE and ROE from value revisions + other, we find that over each individual year between 2014 and 2018 the company outperformed the sector every year.

Fastpartner: ROE from CE and value revisions, 2014- ROE from CE: Fastpartner vs. Swe sector, 2014- 2020e 2020e

40% 14%

35% 12% 30% 10% 25% 8% 20% 6% 15% 4% 10%

5% 2%

0% 0% 2014 2015 2016 2017 2018 2019e 2020e 2021e 2014 2015 2016 2017 2018 2019e 2020e ROE from CE Total ROE (CE + Value revisions + Other) Fastpartner, ROE from CE Swe sector average

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

4 December 2019 ABG Sundal Collier 15

Fastpartner

Total ROE: Fastpartner vs. Swe sector, 2014-2020e Total ROE: Fastpartner vs. Swe sector, 5y average

40% 30% 25.8% 35% 25% 30% 19.7% 20% 25% 16.3% 20% 15% 12.9%

15% 9.4% 10% 10% 6.8%

5% 5%

0% 0% 2014 2015 2016 2017 2018 2019e 2020e ROE from CE ROE from value revisions Total ROE Fastpartner, Total ROE Swe sector average + other Fastpartner, 5y average Swe sector average, 5y average

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

CEPS CAGR in 2014-2018 of 13% vs. Swedish sector at 14% Between 2014 and 2018, Fastpartner on average has increased CEPS by a CAGR of 12.6%, while the corresponding figure for the Swedish sector has been 13.5%. However, evaluating the CEPS growth over the individual years reveals that the company only reported better y-o-y CEPS growth in 2014 and 2016 for the period from 2014 to 2018.

Fastpartner: CEPS, 2014-2020e CEPS growth: Fastpartner vs. Swe sector

5.0 40% 40%

4.5 35% 35% 4.0 30% 30% 3.5 3.0 25% 25% 2.5 20% 20%

2.0 15% 15% 1.5 10% 10% 1.0 0.5 5% 5% 0.0 0% 0% 2014 2015 2016 2017 2018 2019e 2020e 2014 2015 2016 2017 2018 2019e 2020e CEPS, SEK Growth CEPS (rhs) Fastpartner, CEPS growth Swe sector average, CEPS growth

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

5y EPRA NAVPS growth of ~32% p.a. vs. sector at ~21% Between 2014 and 2018, the company on average increased EPRA NAVPS (adj. for dividends) by 31.7% p.a., while the corresponding figure for the Swedish sector was 20.8%. Evaluating the performance over the individual years shows that Fastpartner outperformed the sector across all years between 2014 and 2018.

4 December 2019 ABG Sundal Collier 16

Fastpartner

Fastpartner: EPRA NAVPS, 2014-2020e EPRA NAVPS growth (adj. for dividend): Fastpartner vs. Swe sector, 2014-2020e

40% 50%

35% 45% 40% 30% 35% 25% 30% 20% 25%

15% 20% 15% 10% 10% 5% 5% 0% 0% 2014 2015 2016 2017 2018 2019e 2020e 2014 2015 2016 2017 2018 2019e 2020e Fastpartner, CEPS growth Swe sector average, CEPS growth Fastpartner, EPRA NAV growth adj. for dividend Swe sector average

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

Between Q1 2014 and Q3 2019 Fastpartner performed value revisions of 37.5% which is 2% better than the sector at 35.5%.

Fastpartner vs. sector: Accumulated value revisions, Fastpartner vs. sector: Quarterly value revisions, Q1 2014 – Q3 2019 Q1 2017- Q3 2019

40% 3.50%

35% 3.00% 30% 2.50% 25% 2.00% 20%

15% 1.50%

10% 1.00%

5% 0.50% 0% 0.00% Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219 Q319 Fastpartner, value revisions Sector, value revisions Fastpartner, value revisions Sector

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

NIBD/EBIT and net LTV Although the property portfolio saw CAGR of ~18% over the last five years, the company strengthened its balance sheet over the same period. The NIBD//EBIT decreased to 12.1x in 2018 from 13x in 2009, while net LTV fell from 63.4% to 51.4%. The 2019e net LTV of 53% is higher than the sector average of 48%. Moreover, the 2019e NIBD/EBIT of 12.8x is higher than the sector average of 12.3x. In addition, the 2019e interest coverage ratio (ICR) of 361% is lower than the sector average of 454%. Given the values of net LTV, NIBD/EBIT and ICR, we argue that Fastpartner has strengthened its balance sheet over time but the company is still more levered than the sector.

4 December 2019 ABG Sundal Collier 17

Fastpartner

Fastpartner: NIBD/EBIT, 2014-2018 Sector: NIBD/EBIT, 2014-2018

13.5 13.0

13.0 12.5 12.0 12.5 11.5 12.0 11.0 11.5 10.5 11.0 10.0

10.5 9.5

10.0 9.0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 NIBD/EBIT NIBD/EBIT

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

Fastpartner: Net LTV, 2014-2018 Sector: Net LTV, 2014-2018

65% 51%

50% 60% 49%

48% 55% 47%

50% 46%

45% 45% 44%

40% 43% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Net LTV Net LTV

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

4 December 2019 ABG Sundal Collier 18

Fastpartner

Estimates We base our estimates on the following pillars:

 Inclusion of announced acquisitions  Inclusion of announced projects  CPI revisions on rental income of 2%  NOI margin improvement from ~68% in 2018 to 70.2% in 2021e  Excluding the Oscar properties JV  No additional acquisitions in our forecasts  No profit from building rights or divestments We see a significant estimate potential from acquisitions since we only include them as they are announced. Moreover, we see estimate potential from additional projects and value appreciation from the building rights portfolio.

NOI from SEK 982m in 2018 to SEK 1,356m in 2021e Based on our estimate pillars, we forecast rental income of SEK 1,658m for 2019e, SEK 1,844m for 2020e and SEK 1,931 for 2021e, corresponding to a CAGR of ~10%.

Meanwhile, we forecast NOI to grow by a CAGR of ~11% from SEK 982m to SEK 1,356m between 2018 and 2021e, which is somewhat faster than the rental income growth. This is driven by an improved NOI margin. We pencil in an NOI margin of 69.0% for 2019e, growing to 69.9% in 2020e and to 70.2% in 2021e. In the last five years, Fastpartner has targeted an NOI margin of 70%, which it has not achieved. However, the NOI margin has improved from 66.3% in 2014 to 67.7% in 2018. In addition, the R12m margin for the last quarters is trending upwards. We think this trend is likely to continue due further potential to reduce vacancy rates. We thus pencil in an annual NOI margin improvement of 30-130bp between 2019e-2021e.

NOI and NOI margin, 2014-2021e R12m NOI and NOI margin, 2014-2021e

1,600 71% 1,600 71%

1,400 70% 1,400 70% 1,200 69% 69% 1,200 68% 1,000 1,000 68% 67% 800 800 67% 66% 600 600 65% 66% 400 400 64% 65% 200 200 63% 0 64% 0 62% 2014 2015 2016 2017 2018 2019e 2020e 2021e Q114 Q115 Q116 Q117 Q118 Q119 Q120e Q121e NOI, SEKm NOI margin NOI, SEKm R12m NOI margin

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

We estimate that CEPS will grow by a CAGR of ~14% We expect CEPS to grow by a CAGR of ~14% in ‘19e-‘21e. The growth is driven by 1) NOI growing faster than rental income from NOI margin improvement, 2) lower central administration costs from scalability in the cost item, and 3) lower net financials costs from refinancing.

4 December 2019 ABG Sundal Collier 19

Fastpartner

Central administration cost is a relatively fixed cost element, independent of rental income. It includes personnel expenses, fees to auditors and other administration cost items. Fastpartner’s organisation comprised of 72 employees in Q3’19 (69 in Q3’18). We see no need for scaling up the organisation to more employees. Fastpartner’s central administration costs have remained at stable levels of ~SEK 30m-32m over the last three years. The cost item decreased by 20bp from 2.4% to 2.2% of rental income between 2016 and 2018. This illustrates the fixed element of the item and scalability. We assume this trend will continue and that central cost administration as a percentage of rental income will decrease by 20bp from 2.2% to 2.0% in ’18-’21e, implying a cost inflation of ~7% p.a. We estimate net financials of ~SEK 300m in ’19e-’21e, corresponding to net interest rates of 2.2-2.0%. We assume that Fastpartner will lower its net interest rate costs of 20bp in ’21e compared to the last few quarters. We argue that the trend in long-term interest rates will enable Fastpartner to refinance some of its debt with a lower funding cost. For example, the Swedish 10y govt. bond is down 45bp YTD, from 46bp to 1bp. The company has SEK ~13.5bn of debt, of which ~SEK 7.9bn (59%) is bank debt, ~SEK 1.7bn (13%) is commercial paper and SEK 3.8bn (28%) is bonds (Q2’19). Interest-bearing financing, Q2’19 Net interest cost, Q1’14-Q3’19

4.0%

3.5% 13% 3.0%

2.5%

2.0% 28% 59% 1.5% 1.0%

0.5%

0.0% Q114 Q314 Q115 Q315 Q116 Q316 Q117 Q317 Q118 Q318 Q119 Q319 Bank loans Bonds Commpecial papers Net interest cost

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

Given these income and cost estimates, we forecast income from property management of SEK 803m, SEK 942m and SEK 1,022m in ’19e-’21e, corresponding to a CAGR of ~13%. We estimate the company tax rate for paid tax at ~12.5% and a total tax rate of 22.5%, in line with historical figures. However, the tax rate is volatile by quarter. Given these tax estimates (and adjusted for the dividend to preference shares) we estimate CEPS to grow by a CAGR of ~14%, from SEK 3.1 in 2018 to SEK 4.8 in 2021e. 18-21e EPRA NAVPS to grow by a CAGR of ~17% We do not include any value revisions in the P&L, but we do include them in the balance sheet and EPRA NAV estimates. We expect that Fastpartner can generate value increases of ~5.5% p.a. on the back of higher rents, reduced vacancies, improved NOI, transactions and project development. Fastpartner has reported an average value increase of 6.2% in the last five years. This means that our value revision estimates are slightly conservative compared with historical outcomes.

Based on the above-mentioned assumptions, as well as a 6% annual contribution from the cash earnings yield in 2019e-2021e, we forecast an EPRA NAVPS of SEK 72 for 2019e, growing by ~17% annually or ~20% adjusted for dividends.

4 December 2019 ABG Sundal Collier 20

Fastpartner

Estimate summary table

Fastpartner SEKm 2016 2017 2018 2019e 2020e 2021e Rental income 1,271 1,349 1,451 1,658 1,844 1,931 NOI 853 936 982 1,144 1,288 1,356 NOI margin 67% 69% 68% 69.0% 69.9% 70.2% Cental admin -30 -29 -32 -35 -38 -39 Recurring EBIT 852 923 973 1,133 1,250 1,317 Interest net -244 -225 -235 -305 -308 -295 Recurring PTP 608 699 738 828 942 1,022 y-o-y growth 18% 15% 6% 12% 14% 8% Value revisions 1,392 1,029 1,373 1,499 0 0 Pre tax profit 2,000 1,728 2,111 2,327 942 1,022 Net profit 1,599 1,451 1,806 1,934 750 814 CEPS 3.0 3.1 3.3 3.8 4.4 4.8 EPS 9.6 8.0 10.0 10.7 4.1 4.5

EPRA NAVPS 43 50 60 72 84 96 y-o-y growth 32% 17% 19% 21% 16% 15%

CEPS 3.0 3.1 3.3 3.8 4.4 4.8 y-o-y growth 16% 5% 3% 17% 15% 9%

DPS 1.3 1.4 1.6 1.9 2.0 2.1

ROE from CE 9.4% 8.2% 7.0% 6.6% 6.3% 6.1% ROE 32.0% 21.7% 22.5% 23.8% 18.8% 18.3%

Property value growth 9.2% 5.4% 5.8% 7.6% 5.5% 5.5% Source: ABG Sundal Collier

Our estimates imply better CEPS & EPRA NAV growth vs. sector In the section above (Fastpartner vs. the sector), we illustrated how Fastpartner has outperformed the sector on EPRA NAV CAGR, and profitability measured as ROE, over the last five years. Meanwhile, CEPS growth has been slightly below sector growth. Our estimates imply that Fastpartner will outperform the sector on EPRA NAV growth and CEPS growth.

Fastpartner vs. the sector: Key estimates Fastpartner vs. Sector SEKm 2016 2017 2018 2019e 2020e CEPS growth 15.6% 5.5% 3.5% 17.2% 14.7% Sector 9.3% 13.3% 16.0% 10.1% 6.2% Difference 6.3% -7.8% -12.5% 7.1% 8.5%

EPRA NAVPS growth adj. for dividends 36% 20% 22% 23% 19% Sector 26% 17% 18% 15% 12% Difference 10% 4% 4% 8% 7% Source: ABG Sundal Collier

4 December 2019 ABG Sundal Collier 21

Fastpartner

Valuation On our ’20 estimates with the stock trading at the current P/EPRA NAV multiple of ~1.2x, we get an equity value of SEK 100. If the share were to trade at its historical low of a P/EPRA NAV of ~0.8x, we get an equity value of SEK 67, and at its historical high of ~1.6x, we get an equity value of SEK 134. This gives us a fair value range of SEK 67-134.

Historical valuation Share prices for the Swedish real estate sector (Carnegie Real Estate Index) are up ~45% YTD and the valuation multiples have expanded to all-time highs. The strong performance has been driven by both macro and company fundamentals. The real estate sector companies delivered solid reports in 2019, when a majority of them delivered results in line with or above expectations. Moreover, long-term interest rates have continued to hit new lows, which may affect both cash earnings in terms of net financials and property values in terms of yield compression. Consequently, the yield spread between real estate yields and long-term bonds yields has widened, which may mean that property prices will continue to rise and yields drop.

Fastpartner’s valuation multiples have expanded in line with the sector and are currently close to all-time highs in terms of P/CEPS TTM and P/EPRA NAV on last reported figures. Fastpartner’s five-year P/EPRA NAV average is 111%, while the current figure is ~124% (i.e. a 12% premium to the historical average). Meanwhile, the current P/CEPS TTM is ~24x vs. the five-year average of ~19x, implying a premium of ~30% to the historical average.

The company has higher leverage than the sector, with a net LTV value of 50% on ’19e, and the sector average amounts to 48%. Peers with a similar leverage (measured as net LTV) are Wihlborgs, Hemfosa and Nyfosa, which are trading at a P/CEPS TTM of ~15x.

Fastpartner P/EPRA NAV last reported, 5y Swe Sector P/EPRA NAV last reported, 5y

180% 130%

120% 160%

110% 140% 100% 120% 90%

100% 80%

80% 70%

60% 60% Q3 Q4 Q2 Q3 Q1 Q2 Q4 Q1 Q3 Q4 Q2 Q3 Q1 Q2 Q4 Q4 Q2 Q3 Q1 Q3 Q4 Q2 Q3 Q1 Q2 Q4 Q1 Q3 2014 2014 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2019 2019 2019 2014 2015 2015 2016 2016 2016 2017 2017 2018 2018 2018 2019 2019 Sector P/EPRA NAV last reported Source: ABG Sundal Collier, Factset, Company data Source: ABG Sundal Collier, Factset, Company data

4 December 2019 ABG Sundal Collier 22

Fastpartner

Fastpartner P/CEPS TTM, 5y Swe sector P/CEPS TTM, 5y

28 22

26 20 24

22 18

20 16 18

16 14

14 12 12

10 10 Q4 Q2 Q3 Q1 Q3 Q4 Q2 Q3 Q1 Q2 Q4 Q1 Q3 Q2 Q3 Q1 Q2 Q4 Q1 Q3 Q4 Q2 Q3 Q1 Q3 Q4 Q2 Q3 2014 2015 2015 2016 2016 2016 2017 2017 2018 2018 2018 2019 2019 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2018 2018 2018 2019 2019

P/CEPS TTM Sector

Source: ABG Sundal Collier, Factset, Company data Source: ABG Sundal Collier, Factset, Company data

5y historical valuation overview: Fastpartner vs. Swe Sector

P/EPRA NAV Current 3y average 5y average Max Min Swe sector average 124% 95% 97% 124% 79% Fastpartner 124% 103% 111% 157% 85% vs. Swe sector 0% 8% 15% 26% 6%

P/CEPS TTM Swe sector average 20.2 17.0 16.8 20.2 14.1 Fastpartner 24.4 18.2 18.8 26.5 14.5 vs. Swe sector 21% 7% 12% 31% 3% Source: ABG Sundal Collier, Factset, Company data

Comparing Fastpartner’s historical multiples with the Swedish sector (see the graphs below), the company has historically traded at a premium on P/CEPS and P/EPRA NAV last reported. The sector’s P/CEPS TTM multiple of ~20x implies that Fastpartner’s multiple of 24x is trading at a ~20% premium to the sector, while the 5y average premium stands at 11%. However, the sector’s EPRA NAVPS premium of 24% implies that Fastpartner is trading in line with the sector while the company has historically traded at a 5y average 14% premium to the sector.

P/EPRA NAV last reported, premium/discount to P/CEPS TTM premium/discount to sector, 5y sector, 5y

50% 50%

40% 40% 30% 30% 20%

20% 10%

10% 0%

-10% 0% -20% -10% P/EPRA NAV last reported premium/discount to sector Average -30% P/CEPS TTM premium/discount to sector Average

Source: ABG Sundal Collier, Factset, Company data Source: ABG Sundal Collier, Factset, Company data

4 December 2019 ABG Sundal Collier 23

Fastpartner

Valuation range Below, we present a scenario analysis of the share price for ’19e-’21e based on the level of P/CEPS or P/EPRA NAV multiples given that our EPRA NAVPS and CEPS estimates hold.

On our ’20 estimates with the stock trading at the current P/EPRA NAV multiple of ~1.2x, we get an equity value of SEK 100. If the share were to trade at its historical low of a P/EPRA NAV of ~0.8x, we get an equity value of SEK 67, and at its historical high of ~1.6x, we get an equity value of SEK 134. This gives us a fair value range of SEK 67-134.

Share price at estimated P/EPRA NAVPS multiples Share price at estimated P/CEPS multiples

P/EPRA NAVPS P/CEPS SP 88 80% 100% 120% 140% 160% 180% SP 88 16x 18x 20x 22x 24x 26x 19e 58 72 86 101 115 130 19e 59 66 73 81 88 95 20e 67 84 100 117 134 150 20e 69 78 86 95 103 112

NAV

EPRA EPRA 21e 77 96 115 134 154 173 CEPS 21e 75 84 94 103 112 122

Source: ABG Sundal Collier Source: ABG Sundal Collier

Yield sensitivity analysis The sector’s strong performance can partly be attributed to market expectations of yield compression. We therefore model what happens with EPRA NAV growth and P/EPRA NAV if yields were to drop by 25bp, 50bp and 75bp. All else equal, we find that a yield compression of 25bp, 50bp and 75bp increases Fastpartner’s EPRA NAV by 11%, 23% and 37%, respectively. Meanwhile, price-to-EPRA NAV multiples imply a 14% premium (25bp), 2% premium (50bp) and 12% discount (75bp) on Q3’20e. This exercise indicates that the market already discounts at least a yield compression of 25bp.

Inspecting the company’s last five years historical value uplifts document that the average value uplifts amounts to 6.2%. In comparison, a potential yield compression of 25bp would imply a value uplift of ~6% in Q3’20e. We find such a scenario of 25bp yield compression as more likely than 50bp to 75bp compression given that such a large compression would imply the largest value uplifts compared to the last five years.

EPRA NAV growth Q3’20e, by 25bp, 50bp and 75bp P / adj. EPRA NAV Q3’20e by 25bp, 50bp and 75bp yield compression yield compression

40% 37% 20% 35% 14% 15% 30% 10% 25% 23% 5% 20% 2%

15% 0% 11% 25bp 50bp 75bp 10% -5% 5% -10% 0% -12% 25bp 50bp 75bp -15% Nav growth P / adj. EPRA NAV Q3'20e

Source: ABG Sundal Collier, company information Source: ABG Sundal Collier, company information

4 December 2019 ABG Sundal Collier 24

Fastpartner

Historical value uplifts Value uplifts Q3’20e by 25bp, 50bp and 75bp yield compression

10% 9.2% 20% 18% 9% 18% 8% 7.6% 16% 7% 14% 5.8% 12% 6% 5.4% 12% 5% 10% 4% 8% 2.8% 5% 3% 6% 2% 4% 1% 2% 0% 0% 2014 2015 2016 2017 2018 25bp 50bp 75bp % value uplifts Average % value uplifts

Source: ABG Sundal Collier, company information Source: ABG Sundal Collier, company information

4 December 2019 ABG Sundal Collier 25

Fastpartner

Risks

Management-related risks In the real estate entrepreneur section, we identify several CEOs, which we believe possess characteristics that can contribute to shareholder-value creation. However, these characteristics can also entail several risks, which we list below:

 Key-person dependency risk: An entrepreneurial-driven company is subject to key-person dependency risk. The company is dependent on the entrepreneur, and if that person leaves it may be difficult to find a natural successor. Typically, entrepreneurs in the sector remain as CEOs over a long period. Consequently, a CEO succession is an unusual event.  Ownership risk: An entrepreneurial-driven company is subject to ownership risk, since the real estate entrepreneurs usually hold a large ownership stake. If a large owner wants to exit a position, and sells the holding, it may put significant pressure on the share price.  Capital allocation risk: Even though we document interesting capital allocation characteristics among the real estate entrepreneurs (such as not paying dividends, spin-offs, flexible acquisition mandates, utilisation of equity instruments etc.), these characteristics may be subject to capital allocation risks. For example, flexible acquisition mandates entail unpredictability, and equity instruments can imply higher leverage.  Risk-taking behaviour: Some real estate entrepreneurs have a tendency to take higher risks compared with other business leaders, in terms of operating with higher leverage and utilising new capital allocation methods with no track record of success.  Historical return is not a predictor of future returns: We document a strong historical return performance among the entrepreneurial-driven companies. However, we cannot be certain that these returns should be attributed to the entrepreneurial skills of the CEOs, since share price performance is dependent on numerous factors.

General risks related to real estate companies Real estate companies are subject to macro risks, supply of premises risk, supply of capital risk, debt availability risk, forex risk, regulatory risk, rental income risk, property cost risk, and property value risk. More detail is provided below:

 Macro risk: GDP, population, interest rate and employment data are important demand factors for real estate.  Supply of premises risk: If real estate companies provide too much supply to the market, in terms of starting and finishing too many projects, it may have a negative impact on real estate values and rental levels.  Supply of capital risk: Investor sentiment regarding real estate affects the supply of capital invested in it. A change in investor sentiment can decrease/increase the value of properties, which affects a real estate company’s income statement and balance sheet.  Forex risk: Changes in fundamentals or sentiment to the Swedish krona (SEK) may affect international appetite for investing in Swedish real estate assets, which consequently may decrease the supply of capital.

4 December 2019 ABG Sundal Collier 26

Fastpartner

 Debt availability risk: Lender and debt capital market willingness to provide financing affects debt availability. A change in debt availability can decrease funding opportunities and cost of debt.  Regulatory risks: Regulations concerning taxation, lending, interest rate deductions (among other regulation subjects) may affect earnings capacity and investments.  Rental income risk: Rental income may be affected by higher vacancies, counterparty risk and reduced market rents due to supply and demand changes.  Property cost risk: Property costs include maintenance costs (costs related to maintaining the standard of property), which is a cost item that may be subject to unforeseen changes. Consequently, profitability could fluctuate due to maintenance costs.  Property value risk: Property values are booked at fair value in the balance sheet. Fair value is derived from the properties’ cash flow generation (i.e. rental income, property costs, vacancies), discounted at a cost of capital based on yield requirements. If the cash flow or yield requirement changes, property values may be subject to negative value revisions, which affect reported earnings and may cause debt covenant breaches.

4 December 2019 ABG Sundal Collier 27

Fastpartner

Appendix – Company Overview Fastpartner owns, manages and develops commercial properties. The company is listed on Nasdaq OMX Stockholm, Mid Cap.

The company owns 202 properties valued at SEK 25.8bn and a total lettable area of ~1,5m square metres, which implies a square metre value of the portfolio of ~17,200 SEK/square metre. Fastpartner has the largest exposure to Stockholm (83%) followed by Gävle (6%), Gothenburg (5%) and Norrköping (3%) and Malmö. The company’s real estate segment spans production/logistics, office, retail, residential, hotel and other. Its largest segment is production/logistics, which comprises 43% of total square metres followed by office of 37% and retail of 9%.

Fastpartner’s five largest tenants are Stockholm Stad (14,600 sqm), Vallentuna kommun (12,700 sq m), ICA Sverige (10,100 sq m), Stockholm läns landsting (8,920 sq m) and Sigtuna kommun (7,900 sq m). Other larger tenants are Aleris, Apoteket, Coop, Fitness24seven, Folktandvården, H&M, Handelsbanken, Hotell Älvsjö, ICA Sverige, Intersport, KappAhl, Lidl, Lindex, Nordea, Hemköp, Systembolaget, and Swedbank.

Property value, by region, Q3’19 Lettable area, by segment, Q3’19

3%3% 9% 5% 2% 6% 9%

43%

37% 83%

Production/logistics Office Retail Residential/hotel Other Stockholm Gävle Gothenburg Norrköping Other Source: Company data Source: Company data

Segments The company has four segments, called Region 1, 2, 3 and 4. The table below summarizes key financials for the four different regions as of Q1-Q3’19.

Key financials for Fastpartner’s segments, Region 1, 2, 3 and 4, Q1-Q3’19

Nr of Square Rental income, Rental Rental costs, Rental Property Q1-Q3'19 properties metres '000 SEKm income/sqm SEKm costs/sqm NOI value Region 1 53 420 521 1,655 159 506 361 12,507 Region 2 56 418 295 940 92 294 202 5,610 Region 3 73 436 325 995 115 350 211 5,838 Region 4 20 211 92 579 29 182 63 1,549 Total 202 1,484 1,232 1,107 395 355 837 25,503 Source: Company data

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Region 1 Region 1 region is the largest property segment valued at SEK 12.5bn (49% of property values). It encompasses properties in Stockholm: Stockholm City, Västerort, Solna, Sundbyberg, Spånga, Järfälla, Kalhäll/Bro, Hässelbygård, Tensta and Rinkeby. In addition, this region includes 10 properties in Malmö, Alvesta och Växjö. Region 1 includes properties in prime locations such as Östermalmstorg with Åhléns and Handelsbanken as tenants, and properties in suburb regions such as Tensta Centrum and Rinkeby Centrum. The company has connections with municipalities, local organisations and police to strengthen the regions’ safety and creating a nice atmosphere.

The biggest part is offices (52%), followed by the production/logistics (36%) and retail (7%).

The five largest tenants in the region are Nasdaq, Stockholm Stad, Dagab Logistik och Inköp, Patent- och registreringsverket and Hewlett-Packard, which comprise of ~20% of the lettable area.

For this region, the average yield requirement is 4.6% compared to the average yield requirement of 5.0% for all segments (Q3’19).

Region 1, lettable area, by segment, 2018 Region 1, largest tenants, % of region’s lettable area, 2018

60% 8% 52% 7% 7% 50% 6%

40% 36% 5% 4% 30% 4% 3% 3%

3% 3% 20% 2% 10% 7% 4% 1% 1% 0% 0% Production/logistics Office Retail Residential/hotel Other Nasdaq Stockholm Stad Dagab Patentverket Hewlett-Packard

Source: Company data Source: Company data

Region 2 Region 2 includes properties in the Stockholm areas: Västberga Bromma, Täby, Lidingö, Älvsjö, Bredäng, Södertälje and Årsta. Outside the Stockholm area, the region covers the mid-sized cities Norrköping, Åtvidaberg, Strängnäs, Eskilstuna and Enköping. The property value of SEK 5.6bn (22% of property values) takes it to the third-largest segment.

The largest part within Region 2 is production/logistics (55%), followed by offices (23%) and retail (13%). Moreover, the five largest tenants in the region are Sandvik, Bileko Car Parts, Antalis, Packoplock Scandinavia and Mio, which comprise ~26% of the lettable area. For Region 2, the average yield requirement is 5.8% compared to the average yield requirement of 5.0% for all segments (Q3’19).

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Region 2, lettable area, by segment, 2018 Region 2, largest tenants, % of region’s lettable area, 2018

60% 10% 55% 9% 9% 50% 8% 8%

40% 7% 6% 5% 30% 5% 23% 4% 20% 3% 13% 2% 2% 10% 7% 2% 2% 1% 0% Production/logistics Office Retail Residential/hotel Other 0% Sandvik Bileko Car Parts Antalis Packoplock Mio

Source: Company data Source: Company data

Region 3 Region 3 includes properties in Märsta, Vallentuna, Arlandastad, Knivsta, Upplands Väsby, Sollentuna, Kista, Uppsala, Göteborg, Mölndal, Ulricehamn och Alingsås. The property value of SEK 5.8bn (23% of property values) takes it to the second largest segment.

The largest part is offices (43%), followed by production/logistics (33%) and retail (12%). Moreover, the five largest tenants in the region are Bergman & Beving, Momentum group, Vallentuna Municipality, Sigtuna Municipiality, and Alnova Balkongsystem, which comprise of ~26% of the lettable area.

For Region 3, the average yield requirement is 5.6% compared to the average yield requirement of 5.0% for all segments (Q3’19).

Region 3, lettable area, by segment, 2018 Region 3, largest tenants, % of region’s lettable area, 2018

50% 14% 45% 43% 12% 12% 40% 35% 33% 10% 30% 8% 25% 6% 20% 6%

15% 12% 4% 3% 10% 8% 2% 2% 4% 5% 2%

0% 0% Production/logistics Office Retail Residential/hotel Other Bergman & Momentum Vallentuna Sigtuna Alnova Beving Source: Company data Source: Company data

Region 4 The Region 4 segment includes properties in Gävle, Söderhamn, Sundsvall and Dalarna. Gävle is the largest region and comprise of 70% of the lettable area. Region 4 is the smallest segment with a property value of SEK 1.5bn (6% of property values).

The largest part is production/logistics (61%), followed by offices (11%) and retail (2%). Moreover, the five largest tenants in the region are Gavlefastigheter Gävle Municipality, FLB Logistik, Gavlegårarna, Ulno, and LK Prefab, which comprise of ~53% of the lettable area.

For Region 4, the average yield requirement is 6.3% compared to the average yield requirement of 5.0% for all segments (Q3’19).

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Region 4, lettable area, by segment, 2018 Region 4, largest tenants, % of region’s lettable area, 2018

70% 30% 61% 25% 60% 25%

50% 20% 40% 15% 13% 30% 26% 10% 20% 6% 11% 4% 4% 10% 5% 2% 0% 0% Production/logistics Office Retail Other Gävle FLB Logistik Gavlegårdarna Ulno LK Prefab

Source: Company data Source: Company data

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Appendix - Macro overview

Fastpartner holds a diverse portfolio of real estate assets across Sweden’s larger City regions, Stockholm, Gothenburg and Malmö. However, 83% of the property value is located in the Stockholm region. Furthermore, it holds a mixed portfolio of real estate segments including production/logistics, office, retail, residential, hotels etc. Hence, owning Fastpartner is a broad investment in the Swedish (however, tilted to Stockholm) real estate asset class. Therefore, we start from a top-down perspective and argue that the company’s real estate exposure may be attractive due to the positive macro indicators: 1) High yield gap between real estate yields and government bonds 2) Supply of private equity capital On the other hand, there are some macro indicators that are negative: 1) Weaker labour market 2) Leading indicators signal weaker economy

In the next sections, we elaborate on these macro perspectives.

Historical large yield gap The yield gap between real estate yields and government bonds can indicate price appreciation/depreciation. Real estate yields are at a record low but the gap to government bond yields is at historically high levels on a 10-year perspective. For example, the gap between prime office yields in Stockholm and the Swedish 10-year government bond is 3.5%, which is close to the 10y high figure of 3.9%. In other words, from a relative perspective, real estate pricing appears to be favourable in relation to the Swedish 10y government bond. The graph below illustrates the Swedish 10y government bond, Stockholm prime office yields and yield gap for the last ten years.

Sweden 10y government bond, Stockholm prime office yields and yield gap, 2009-2019

6

5

4

3 % 2

1

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -1 Sweden 10y Prime office yield, Stocholm Yield gap Source: ABG Sundal Collier, JLL, Thomson Reuters

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Money on the sidelines We argue that there is a large supply of capital, which consequently can push yields downwards. The background for our view on supply of capital can be derived from: 1) datapoints on raised capital from real estate private equity funds and 2) market reports that expect high investment activity.

Datapoints on raised capital Screening for all private equity funds in Western Europe with a real estate focus shows 129 funds with available data.14 The screen results in private equity names such as Blackstone, Warburg, Apollo, Morgan Stanley. These 129 funds have currently invested USD 263.4bn and raised USD 345.9bn, i.e. there is remaining investment of USD 82.5bn. In comparison, the property values in Western Europe amount to USD 3,186bn.15 Hence, the ratio of the private equity funds’ remaining investments to property value is 2.6%.

An interesting note on supply of capital is the recent Bråviken Logistik transaction, which was highlighted in a press release on 2019-09-25. Bråviken Logistik divested its entire property portfolio16 at a price of SEK 1,800m (or a square metre price of ~12,900 SEK/square metre). Based on the latest quarter’s NOI of SEK 23.5m, and annualising the figure by multiplying by four, we arrive at a yield of 5.2% (adjusted for SEK 1.1m in ongoing projects). The buyer of the assets is an undisclosed South Korean actor. Hence, this may indicate that there is new Asian money competing on the Swedish transaction market.

Another noteworthy piece of news, released on 24 September, is Blackstone’s launch of European last mile logistics real estate company, Mileway. The firm Mileway has EUR 8bn in assets, according to The Financial Times.17 James Seppala, who is head of Blackstone Real Estate Europe, comments:

“Mileway is a natural evolution of our European logistics strategy, which is one of our highest conviction, long-term investment themes. As the largest last mile logistics real estate company in Europe, Mileway will meet growing e-commerce- related demand for last mile logistics real estate, facilitate faster delivery times and support the growth of small and large businesses.”

In summary, private equity funds’ remaining investments and examples of recently started funds and transaction indicate that there is a continued interest of investing in real estate and a supply of capital, which could push yields downwards.

Market reports Market reports provide additional signals of a continued interest in the asset class. For example, JLL comments on the Stockholm office market and Swedish Logistics market in a report:18

“JLL forecast an active and healthy investment market in Stockholm for the remainder of 2019, with transaction volumes mainly driven by deals within the office and residential sector, and prime office yields remaining low and stable across all sub-markets.”

14 The screen was done in Bloomberg’s private equity tool, September 2019 15 MSCI, Real Estate Market Size, 2018 16 Three properties in Nyköping, Norrköping and Jönköping 17 https://www.ft.com/content/3be264cc-de00-11e9-9743-db5a370481bc 18 JLL, Nordic Outlook Autumn 2019.

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“The strong investor appetite shows no signs of weakening. There are currently a lot of capital willing to invest in the sector, both international and domestic. Activity on the investment market will be high during the coming 6 to 12 months.”

In addition to the information from the JLL market report, Hemfosa’s CEO Caroline Arehult argues in an interview with Dagens Industri (25 September) that there is an immense interest for real estate, and that everyone seems to be a buyer. In her exact words (ABGSC translation):

“We thought the market was hot before the summer, but when we talk to brokers it seems that the interest is even greater now. But I see no signs that there will be any setback but rather that it will be even hotter. With the low interest rate, I think it will continue for a good while. There is a lot of money to be invested. Right now there is a huge supply shortage of real estate, everyone seems to want to buy, and there is a continued downward pressure on yield requirements. In the hunt for returns, real estate is a good alternative.”19

In summary, we think that market reports provides additional indication of the positive market sentiment for real estate, indicating that a yield compression awaits.

Weaker Swedish employment growth The monthly data points on employment growth and the unemployment rate clearly indicate that the labour market has been weakening in 2019. In February 2019, the y-o-y employment growth decline was -0.2%, which was the first negative figure since 2010. The trend continued in May: with y-o-y employment falls of -0.8%. However, the trend in recent months has been positive.

Declining employment figures are also reflected in the unemployment rate. The trend for the unemployment rate has been increasing since the beginning of 2018.

Employment growth y-o-y, Sweden, 2007-present, Unemployment rate, Sweden, 2007-present, monthly monthly data data

5% 10% 4% 9% 3%

2% 8% 1% 7% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -1% 6% -2% 5% -3%

-4% 4% Employment growth y-o-y 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Unemployment rate

Source: SCB Source: SCB

Another indication of how the labour market has been weakening can be seen in statistics from the Swedish Public Employment Service (Arbetsförmedlingen). Layoff notices (on a 12-month rolling basis) amounted to ~47,700 in September. One year earlier, the figure was ~34,700, which corresponds to a y-o-y increase of 38%. Layoff notices (T12m) have increased every month in 2019. Since February, the y-o-y increase has been more than 25%.

19 https://www.di.se/analys/fastighetsbranschens-nya-kokpunkt-alla-verkar-vilja-kopa/

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Layoff notices T12m, Sweden, 1981-present, monthly Layoff notices T12m, Sweden, 2016-present, monthly data data

200,000 50,000

180,000 48,000

160,000 46,000

140,000 44,000

120,000 42,000

100,000 40,000

80,000 38,000

60,000 36,000 40,000 34,000 20,000 32,000 0 30,000 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2016 2017 2018 2019 Notice of layoffs, T12m Notice of layoffs T12m

Source: Swedish Public Employment Service Source: Swedish Public Employment Service

In summary, labour market data illustrates a slowdown in employment growth and increasing unemployment rates. The labour market is an important demand factor for real estate companies and can therefore affect several KPIs such as occupancy rates and rental rates.

A weaker Swedish economy An important leading indicator for economic development is the PMI. The Swedish PMI figures for the industry and service sectors have been declining during 2019. The industrial PMI has fallen from 52.2 at the beginning of the year to 46 in October. Meanwhile, the services PMI has fallen from 54.0 at the beginning of the year to 49.5 in October. Hence, the PMI figures indicate a weaker economy.

PMI Industry, Sweden, 2007-present, monthly data PMI Service, Sweden, 2007-present, monthly data

70 70

65 65

60 60

55 55

50 50

45 45

40 40

35 35

30 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 PMI Industry Sweden Trailing three months PMI service sector Sweden Trailing three months Source: ABG Sundal Collier, Thomson Reuters Source: ABG Sundal Collier, Thomson Reuters

The Economic Tendency Survey (Konjunkturbarometern) from the Swedish National Institute of Economic Research (Konjunkturinstitutet)20 indicates that confidence among firms and consumers is weakening. Values over 100 indicate a stronger economy than normal (below 100 indicates a weaker economy than normal). In

20 The National Institute of Economic Research (NIER) is a government agency operating under the Ministry of Finance which perform analyses and forecasts of the Swedish and international economy. The Economic Tendency Survey is a report that summarises how firms and consumers view the economy. The survey for firms includes new orders, output and employment, while the survey for consumers includes personal finances, inflation and saving. The survey mainly relates to the past three months and next three months for firms (for consumers it relates to the past 12 months and next 12 months).

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January 2019, the Economic Tendency Survey came in at 102.4 while the October 2019 figure was at 94.7. In summary, confidence among businesses weakened during 2019.

The economic tendency survey, Sweden, 1996- The economic tendency survey, Sweden, 2016- present, monthly data present, monthly data 115 130

120 110 110

100 105

90 100 80

70 95 60

50 90 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2016 2017 2018 2019 Economic tendency indicator Economic tendency indicator

Source: ABG Sundal Collier, Thomson Reuters Source: ABG Sundal Collier, Thomson Reuters

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Appendix - Stockholm real estate fundamentals Since 83% of Fastpartner’s property value is located in Stockholm, and office (37%) and production/logistics (43%) comprise of 80% of the lettable area, we focus on property fundamentals (yield, supply, and rents) within these geographical areas and segments. We start by mapping real estate fundamentals for office followed by logistics.

Office The Stockholm office market has been strong (in terms of high demand relative to supply). Real estate companies have documented high occupancy rates, increasing rents and lower yields in combination with a shortage of supply.

Supply Office supply in Stockholm is illustrated in the graph below. New construction of offices as a percentage of total office stock is expected to be at low levels of ~1% for 19e-21e. A report from JLL21 notes the record-low vacancy rate of 5.5% in Stockholm. Moreover, JLL documents that there is 360,000 square metres under construction the coming three years, whereof 50% is pre-let. Office developments in Solna and Sundbyberg are the major volume contributors, followed by the Stockholm inner city and suburbs.

New office supply vs. estimated total stock, Stockholm

300,000 2.5%

250,000 2.0%

200,000 1.5% 150,000 1.0% 100,000

0.5% 50,000

0 0.0%

1997 1998 2001 2002 2004 2005 2006 2008 2009 2010 2012 2013 2014 2016 2017 2018 1995 1996 1999 2000 2003 2007 2011 2015

2020e 2019e New supply Greater Sthlm (lhs) New building of estimated office stock (rhs)

Source: ABG Sundal Collier, JLL

However, we expect an increasing supply. We document total investments in ongoing projects and remaining investments in ongoing projects for Atrium Ljungberg, Balder, Castellum, Fabege, Klövern, Kungsleden, Platzer and Vasaskronan. Since 2014, the total investments in ongoing projects have increased by ~220%. Hence, supply will increase.

21 JLL, Nordic Outlook, Autumn 2019

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Total and remaining investments in ongoing projects, SEKbn, for nine companies

45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 2018 2019

Remaining investment, SEKm Total investment, SEKm

Source: Company information and ABG Sundal Collier

Rents The prime office22 rent in Stockholm CBD locations amounts to 7,600 SEK per square meter, which corresponds to all-time high levels. Between 2009 and 2019, rents have increased by 100% and the five-year figure amounts to ~70%. Moreover, between 2018 and 2019, rent has increased by 4% y-o-y. In addition, JLL states that it has recorded top rents of 9,500 per square meter. Furthermore, the high rents and shortage of supply in the inner city have also driven increasing rents in the suburbs where there is good access to public transport.

Prime office rents, Sweden

8,000

7,000

6,000

5,000

4,000 SEK/sqm 3,000

2,000

1,000

0

1980 1982 1984 1986 1990 1994 1998 2002 2004 2006 2008 2010 2012 2016 1988 1992 1996 2000 2014 2018 Stockholm Gothenburg Malmö

Source: ABG Sundal Collier, JLL

22 JLL’s definition: “Prime office rent refers to the optimum open-market rent level that can be expected for a national office unit of the highest quality and specification in the best location in a specific market or submarket”

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However, datapoints from Hufvudstaden’s Stockholm prime rents show that prime office rents have stagnated in recent quarters, indicating that rents have peaked. According to Hufvudstaden, prime office rents increased 18% in 2016, 19% in 2017 and 3% in 2018. In Q1, Q2 and Q3 2019, the average increase was 2%. Hence, we argue that rents in the Stockholm office market have peaked.

Stockholm prime office rents, yearly data, provided Stockholm prime office rents, yearly data, provided by Hufvudstaden by Hufvudstaden

25% 30% 25% 25% 20% 19% 18% 22% 20% 20% 19% 15% 15% 13% 10% 9% 10% 7% 5% 5% 3% 5% 2% 3% 2% 2% 2% 0% 0% 0% 2013 2014 2015 2016 2017 2018 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219 Q319 Stockholm prime office rents Stockholm prime office rents

Source: ABG Sundal Collier, Hufvudstaden Source: ABG Sundal Collier, Hufvudstaden

Yields/transactions Stockholm prime office yields of 3.5% are at all-time lows. The last ten years yields have compressed by 210bp from 5.6% to 3.5% and the five-year compression amounts by 75bp from 4.25% to 3.5%, which corresponds to value uplifts of 60% and ~20%.

The Stockholm office market exhibited high investment activity in H1 2019, with transaction volumes amounting to SEK 27.6bn (whereof office SEK 9.4bn) or a y-o-y growth of 9%. This figure amounts to roughly one-third of the transaction volume in Sweden. Moreover, there is a strong appetite from international investors, which accounted for 30% for the investment volume in Stockholm.23

23 JLL, Nordic Outlook, Autumn 2019.

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Prime office yields, Sweden

8.0

7.0

6.0 %

5.0

4.0

3.0

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016 2018 Stockholm Gothenburg Malmö

Source: ABG Sundal Collier, JLL

Implied square meter price In the graph below we have derived the implied square meter price from the above prime office rent and prime yield in Stockholm with an assumed NOI margin of 60%, 70% and 80%. The current implied square meter price derived from the NOI margin of 60%, 70% and 80% is ~130,000 SEK per square meter, 152,000 SEK per square meter and ~174,000 SEK per square meter. An NOI margin of 70% implies that the implied square meter price has increased by 165% between 2009 and 2019 and 105% between 2014 and 2019. Furthermore, between 2018 and 2019 the prices have increased by 4%.

The strong development of square meter prices is a product of increasing rents and compressing yields.

Implied square meter price, by NOI margin, Stockholm

180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 60% 70% 80%

Source: ABG Sundal Collier, JLL

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The matrix below illustrates what happens to the implied share price if rental levels change and if yields increase or decrease, with an assumed NOI margin of 70%, all else being equal. Especially noteworthy from this exercise is that yield compressions have exponential value uplifts compared with yield increases on value depreciation.

For example, if the rent remains the same but the yield compresses by 100bp the implied square meter price increases by 60,800 SEK per square meter. Meanwhile, an increase of yields by 100bp with unchanged rents will decrease the implied square meter price by ~33,800. In other words, the same percentage change of 100bp in yield have different effects.

Implied square meter price if yield and rent change, assumed NOI margin of 70%, all else being equal

NOI 70% Office yield 70% 4.75% 4.50% 4.25% 4.0% 3.75% 3.5% 3.25% 3.0% 2.75% 2.50% 2.25% -10% -51,200 -45,600 -39,341 -32,300 -24,320 -15,200 -4,677 7,600 22,109 39,520 60,800 -5% -45,600 -39,689 -33,082 -25,650 -17,227 -7,600 3,508 16,467 31,782 50,160 72,622 0% -40,000 -33,778 -26,824 -19,000 -10,133 0 11,692 25,333 41,455 60,800 84,444 5% -34,400 -27,867 -20,565 -12,350 -3,040 7,600 19,877 34,200 51,127 71,440 96,267

Rent change Rent 10% -28,800 -21,956 -14,306 -5,700 4,053 15,200 28,062 43,067 60,800 82,080 108,089 Source: ABG Sundal Collier, JLL

Logistics Yields Prime logistics yields in Stockholm have decreased by 275bp from 7.5% to 4.8% between 2009 and 2018, corresponding to value uplifts of 56%. Meanwhile, prime office yields in Stockholm have compressed by 210bp from 5.6% to 3.5% for the same period, which contributed to value uplifts of 60%. Besides favourable macro conditions, the increasing demand for logistics and warehouse premises, and a strong interest from international and domestic investors have contributed to yield compressions.

An example of the international appetite for logistics is Blackstone’s purchase of 30 properties from Corem Property Group in June 2019. The transaction value amounted to SEK 4.2bn and was the largest deal across all real estate segments in H1 2019. Furthermore, the occupancy rate and rental value for the portfolio was announced as 88% and SEK 309m. If we assume a NOI margin of 76%,24 that implies a yield of ~4.9%. Thirteen locations in Sweden are included in the property portfolio including Tranås, Falun, Gävle, Västerås, Halmstad, Helsingborg, Hudiksvall, Uppsala, Katrineholm and Kumla, i.e. mid-size and smaller cities in Sweden. We see the transaction as an indication that the current reported prime logistics yield in Stockholm of 4.8% will compress to lower levels.

JLL argues in its Nordic Outlook Report (2019) that there is a big supply of domestic and international capital willing to invest in logistics. Therefore, JLL expects high transaction activity over the coming 12 months.

24 Corem’s reported NOI margin 2018 in the annual report.

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Prime yields, logistics, 2009-2019 Prime yields, logistics vs. office, 2009-2019

8.5% 8.5% 8.0% 8.0% 7.5% 7.5% 7.0% 7.0% 6.5% 6.5% 6.0% 6.0% 5.5% 5.5% 5.0% 4.5% 5.0% 4.0% 4.5% 3.5% 4.0% 3.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Stockholm Göteborg Jönköping Skåne Stockholm office Stockholm logistics

Source: ABG Sundal Collier, Company information Source: ABG Sundal Collier, Company information

Rents Logistics companies state that rental levels have been weak/flat in recent years. For example, Catena states:

“Despite the limited supply of space, development in rent levels has been weak, particularly in the regional towns.”25

Moreover, Catena has published a chart which illustrates that average rent levels have hovered around SEK 600 per square metre the last years. An additional example of the flat rental level development is provided by Sagax, which states that:

“In Stockholm, the rent level has been moderately rising, with low variation since the mid-1990s and has now recovered to the level of 1990.”26

We argue that logistics and warehouse facilities are in locations where land is abundant, which implies that potential rental growth may be difficult to achieve. However, we see some rental growth potential in city logistics and some complex specialised logistics facilities. This argument is in line with Catena, which states that:

“The rent for well-placed terminals as well as e-commerce warehouses and specialised premises for e.g. food, for which demand is also high, is somewhat higher than for warehouses. In Stockholm, as well as both in and around other major cities, the supply of developable land is decreasing compared with the rest of the country in pace with increasing residential construction for example.”27

25 Catena’s 2018 annual report p. 16 26 Sagax’s 2018 annual report p. 17 27 Catena’s 2018 annual report p. 16

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Appendix – Management

Sven-Olof Johansson Other current assignments: Chairman of the board of Compactor Fastigheter, board member CEO and board member of Samhällsbyggnadsbolaget, Autoropa and STC Interfinance. Education: M.Pol.Sc., Master of Science in Political Science.

No. shares: 130,717,915 (69.9%) and 74,100 preference shares.

Born: 1945 With the company since 1997

Christopher Johansson Other current assignments: CEO and board member of Compactor Fastigheter Vice CEO Education: PhD, Doctor of Technology in Computer Science. No. shares: 6,750 (< 0.01%)

With the company since 2012 Born 1977

Daniel Gerlach Other current assignments: - CFO Education: M.Sc., Master of Science in Economics and Business Administration.

No. shares: 14,000 (< 0.01%)

Born 1976

Svante Hedström Other current assignments: - Real Estate Manager Education: M.Sc., Master of Science in Civil Engineering.

No. shares: 53,800 (0,03%).

With the company since 2008 Born: 1961

Håkan Bolinder Other current assignments: - Regional manager, region 1 Education: B.Sc., Bachelor of Science Maintenance and Service. No. shares: 0

With the company since 2004 Born 1963

Jenny Tallskog Other current assignments: - Regional manager, region 2 Education: M.Sc., Master of Science in Civil Engineering.

No. shares: 0

With the company since 2019 Born 1978

Patrik Arnqvist Other current assignments: - Regional manager, region 3 Education: M.Sc., Master of Science in Economics and Business Administration.

No. shares: 5,830 (<0.01%).

With the company since 2012 Born: 1979

Fredrik Thorgren Other current assignments: - Regional manager, region 4 Education: M.Sc., Master of Science in Economics and Business Administration.

No. shares: 4,500 (<0.01%).

With the company since 2015 Born 1974

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Appendix – Ownership The CEO and Board Member Sven-Olof Johansson holds ~69.9% of shares outstanding. In addition, the Head of Real Estate Svante Hedström and the Chairman of the Board Peter Carlsson have ownership stakes in the company. The largest owners of non-insider positions are Länsförsäkringar Fonder and Nordea Fonder, which are the second- and third-largest owners after Sven-Olof Johansson. Länsförsäkringar holds ~7% of the shares while Nordea holds ~3%. Other big owners are Familjen Kamprads Stiftelse (~3%), Swedbank Robur (~3%) and Catella (~1%).

In September, Sven-Olof Johansson increased his ownership and bought 500,000 shares at SEK 80, which corresponds to a value of ~SEK 40m.

Top five insiders

Owner Insider Title Value, SEKm % shrs outs. % votes Sven-Olof Johansson Sven-Olof Johansson CEO & board member 12,276.6 69.9% 71.8% Svante Hedström Svante Hedström Head of Real Estate 5.1 0.03% 0.03% Peter Carlsson Peter Carlsson Chairman of the board 3.2 0.02% 0.02% Daniel Gerlach Daniel Gerlach CFO 1.3 0.01% 0.01%

Patrik Arnqvist Patrik Arnqvist Regional manager 0.7 0.00% 0.00%

Source: Holdings, December 2019

Top five institutions

Owner Value, SEKm % shrs outs. % votes

Länsförsäkringar Fonder 1,239.5 7.1% 7.3%

Familjen Kamprads stiftelse 577.2 3.3% 3.2%

Nordea Fonder 568.7 3.2% 3.3%

Sw edbank Robur Fonder 486.7 2.8% 2.8%

Catella Fonder 153.0 0.7% 0.1%

Source: Holdings, December 2019

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Appendix – preference and D-shares explained In this section, we describe the definition and advantage/disadvantages of the alternative equity instruments preference shares and D-shares from the shareholders’ perspective.

Definition Preference shares are an instrument which have preference to dividends. The instrument is senior to common equity but subordinate to bonds/debt owners. i.e. in the case of liquidation they have preference to assets over common shareholders.

Sagax’s CEO, David Mindus, explains D-shares in the Sagax annual report28 in conjunction with the issuance of the class:

“In 2016, Sagax issued a new common share class, known as a dividend share or a Class D share. The Class D share has a financial character that resembles the company’s preference share but, according to the rating agencies’ criteria, it exclusively constitutes shareholders’ equity. The reason for issuing a new share class is to adapt the company’s financial profile so that it fulfills the criteria for being classed as investment grade, which is the credit class that institutional bond investors focus on.”

There are different views on whether to classify the instrument as debt, hybrid or equity. McKinsey Valuation29 argues that preferred equity resembles unsecured debt more than equity and therefore views it as a hybrid instrument. Rating institutions typically view preference shares as a hybrid between equity and debt. On the other hand, several entrepreneurs argue that preference shares are equity since the company is never obliged to pay back the issued money.

Advantages/disadvantages The advantages of preference and D-shares are access to capital and leverage on profitability. A disadvantage of preference and D-shares is that they are subordinate debt, which implies that the instruments have capped upside, but limited risk protection.

One view of shareholder value creation is to create as much profit as possible for as few shares as possible, without excessive risk. Preference shares and D-shares are a tool to achieve this view of value creation. The issuance of these equity instruments implies that the company leaves some of its profit today and keeps the future profit. i.e. the holders of preference shares/D-shares receive a dividend yield today but a capped upside to the company’s future profit. This is well suited for investors who prefer money today in the form of yielding predictable coupons. On the other hand there are ordinary shareholders which are not interested in today’s profit but the rather the future potential from the company’s value creation. These different views, short-term/low-risk seeking shareholders (preference/D-shares) and long-term/high-risk seeking shareholders, create a powerful source of value creation to both type of shareholders. In summary, we think that Mindus condenses our argument in the 2013 annual report:

28 Sagax annual report, 2016, page 4. 29 Koller, Tim, Marc Goedhart, and David Wessels. Valuation: measuring and managing the value of companies. Vol. 499. John Wiley and sons, 2010.

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“Preference shares enable Sagax to reach investor categories that value a steady stream of dividends. The preference shares diversify Sagax’s capital base and allow the company to increase the Group’s capital without increasing the number of common shares.”30

Furthermore, investment grade ratings can be facilitated with preference shares and D-shares. Once again, we turn to Mindus for a suggestion of why such a rating may be attractive:

“Why is such a credit rating desirable for the company? Sagax is and will remain a considerable net borrower. By being a borrower with an investment grade rating, Sagax will improve its access to the capital market and obtain more advantageous borrowing terms.”31

It is vital for real estate companies to have access to financing, have a sound risk profile in their financing, and have a low cost of financing in order to create attractive returns for shareholders. Preference shares and D-shares are another tool in the toolbox to achieve this goal.

30 Sagax annual report, 2013, p. 7 31 Sagax annual report, 2016, p. 4

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Appendix – Financial targets The company has formulated the following targets:

 Achieve income from property management of SEK 950m (on a R12m basis) by the end of 2020. ABGSCe at SEK 942m 2020e.  ROE > 15 % over a 5y period. ABGSCe at 18.7% 2020e.  NOI margin > 70% (unspecified time frame). ABGSCe at 69% 2019e.  Payout ratio of 1/3 of profit after tax and after unrealized value changes. ABGSCe at 52% of cash earnings.  Growth in profit from property management per share of 10% p.a. over a 5y period. ABGSCe at 12% growth 2019e. The graphs below compares the company’s target with the outcome.

Fastpartner’s ROE target vs. outcome Fastpartner’s NOI Margin target vs. outcome

40% 75%

35% 70% 30%

25% 65%

20%

60% 15%

10% 55% 5%

0% 50% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Outcome Target Outcome Target

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

Fastpartner’s growth from property management Fastpartner’s income from property management target vs. outcome

40% 800

35% 700

30% 600

25% 500

20% 400

15% 300

10% 200

5% 100

0% 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Outcome Target Income from property management

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

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Income Statement (SEKm) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019e Q1 2020e Q2 2020e Q3 2020e Rental income 368 396 409 428 426 445 459 475 Other income 0 0 0 0 0 0 0 0 Operating costs -126 -138 -116 -121 -139 -150 -126 -132 Net operating income 242 258 292 307 287 295 333 343 NOI margin (%) 65.7 65.2 71.5 71.6 67.3 66.2 72.5 72.1 Administration costs -9 -8 -8 -9 -11 -9 -9 -9 All other income & costs 6 3 -2 25 0 0 0 0 Recurring EBIT 239 253 282 323 276 286 324 334 Net financial items -59 -75 -80 -78 -73 -78 -77 -77 Recurring Pretax Profit 179 178 201 245 203 208 247 258 Value change realized 1 0 0 350 0 0 0 0 Value change unrealized 477 577 241 423 0 0 0 0 Value change derivatives -6 -26 -37 -29 0 0 0 0 Pretax profit 651 730 405 989 203 208 247 258 Deferred profit tax -111 -131 -61 -84 -17 -18 -21 -22 Current tax -18 -20 -26 -29 -24 -25 -29 -31 Net profit 522 579 318 876 162 166 196 205 Minority interest (including pref dividend) -10 -10 -10 -10 -10 -10 -10 -10 Net profit to shareholders 512 570 308 866 152 156 187 195 Other income statement related infor. Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019e Q1 2020e Q2 2020e Q3 2020e Cash earnings 151 149 166 206 170 174 208 217 Tax rate (%) 19.9 20.6 21.6 11.4 20.4 20.4 20.4 20.4 Rental growth (%) 1.7 7.5 3.2 4.7 -0.5 4.5 3.3 3.4 NOI growth (%) 4.9 16.5 16.5 16.5 16.5 12.6 12.6 12.6 CEPS adj. growth (%) 3.5 17.2 17.2 17.2 17.2 14.7 14.7 14.7 Source: ABG Sundal Collier, Company data

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Income Statement (SEKm) 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e Rental income 639 766 921 1,135 1,271 1,349 1,451 1,658 1,844 1,931 Other income 0 0 0 0 0 0 0 0 0 0 Operating costs -247 -270 -310 -364 -418 -413 -469 -514 -556 -575 Net operating income 393 496 611 771 853 936 982 1,144 1,288 1,356 NOI margin (%) 61.4 64.8 66.3 67.9 67.1 69.4 67.7 69.0 69.9 70.2 Administration costs -18 -21 -24 -27 -30 -29 -32 -35 -38 -39 All other income & costs 4 9 0 12 29 17 23 25 0 0 Recurring EBIT 379 484 587 756 852 923 973 1,133 1,250 1,317 Net financial items -153 -192 -214 -241 -244 -225 -235 -305 -308 -295 Recurring Pretax Profit 226 293 373 515 608 699 738 828 942 1,022 Value change realized 1 1 1 12 14 34 1 350 0 0 Value change unrealized 109 25 284 952 1,478 935 1,199 1,241 0 0 Value change derivatives -46 59 -71 98 -100 61 174 -92 0 0 Pretax profit 289 378 587 1,576 2,000 1,728 2,111 2,327 942 1,022 Deferred profit tax 53 -28 -78 -284 -326 -185 -195 -293 -80 -87 Current tax -24 -27 -42 -62 -75 -92 -110 -100 -112 -122 Net profit 318 323 466 1,231 1,599 1,451 1,806 1,934 750 814 Minority interest (including pref dividend) 0 -19 -38 -38 -38 -38 -38 -38 -38 -38 Net profit to shareholders 318 304 428 1,193 1,561 1,413 1,768 1,896 712 776 Other income statement related infor. 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e Cash earnings 202 285 369 415 495 569 589 691 792 862 Tax rate (%) 10.3 14.6 20.5 21.9 20.1 16.0 14.4 16.9 20.4 20.4 Other investments na na na na na 0 0 0 0 0 Divestments na na na na na na na na na na EPS 2.00 1.91 2.69 7.42 9.41 7.81 9.77 10.48 3.94 4.29 CEPS 1.27 1.79 2.31 2.58 2.98 3.15 3.26 3.82 4.38 4.77 CEPS adj. 1.27 1.79 2.31 2.58 2.98 3.15 3.26 3.82 4.38 4.77 Dividend per share Adj 0.92 1.03 1.17 1.25 1.33 1.43 1.60 1.90 2.00 2.10 Payout ratio of CEPS (%) 72.3 57.8 50.4 48.4 44.7 45.5 49.1 49.8 45.7 44.1 Rental growth (%) 37.6 19.8 20.2 23.3 12.0 6.2 7.5 14.3 11.2 4.7 NOI growth (%) 33.3 26.4 23.0 26.3 10.7 9.7 4.9 16.5 12.6 5.3 CEPS adj. growth (%) 14.8 40.9 29.5 11.6 15.6 5.5 3.5 17.2 14.7 8.9 Balance Sheet 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e Properties 7,834 9,563 12,046 15,466 17,394 20,116 22,330 26,891 30,210 32,472 Deferred tax asset 0 0 0 0 0 0 0 0 0 0 Receivables 67 66 70 88 87 461 453 453 453 453 Cash and liquid assets 110 176 276 165 806 216 676 676 676 676 Other assets 141 179 183 220 170 191 70 948 1,054 1,103 Current liabilities 0 0 0 0 0 82 94 186 186 186 Total assets 8,152 9,983 12,574 15,939 18,456 20,983 23,529 28,968 32,394 34,705 Shareholders equity 2,308 2,945 3,271 4,315 6,435 7,607 9,114 11,633 13,193 14,941 Minority 0 0 0 0 0 0 0 0 0 0 Deferred tax 492 529 608 892 1,209 1,394 1,589 1,689 1,801 1,923 Interest bearing debt 5,054 6,194 7,911 9,938 10,116 11,194 12,157 14,122 15,911 16,478 Short-term debt 0 0 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 82 94 186 186 186 Total liabilities and equity 8,152 9,983 12,574 15,939 18,456 20,983 23,529 28,968 32,394 34,705 Other balance sheet related infor. 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e Net IB debt 4,944 6,018 7,636 9,773 9,311 10,978 11,481 13,446 15,235 15,802 Rental area m2 (000) 788 986 1,139 1,295 1,388 1,406 1,443 1,484 1,484 1,484 Rent per m2 811 777 808 877 915 959 1,005 1,117 1,242 1,301 Equity ratio (%) 28.3 29.5 26.0 27.1 34.9 36.3 38.7 40.2 40.7 43.1 Net loan to value (%) 63.1 62.9 63.4 63.2 53.5 54.6 51.4 50.0 50.4 48.7 ICR real estate (%) 245.4 247.9 274.5 308.5 337.6 404.0 404.0 363.1 405.9 446.9 Interest rate on debt (%) 3.5 3.4 3.0 2.7 2.4 2.1 2.0 2.4 2.1 1.9 Occupancy rate (%) 89.8 88.4 88.4 88.5 88.1 88.5 90.3 90.3 90.3 90.3 BVPS 14.49 18.49 8.17 13.20 26.60 30.28 39.31 53.24 72.93 82.59 EPRA NAV per share 16.73 17.80 24.80 32.47 42.77 50.20 59.70 72.07 83.63 96.17 Valuation 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e Shares outstanding adj. 159 159 159 161 166 181 181 181 181 181 Share price na 23.89 35.46 49.56 45.33 48.83 60.34 91.60 91.60 91.60 Market cap. (m) na 3,805 5,649 7,970 7,517 8,834 10,916 16,570 16,570 16,570 P/E na 12.5 13.2 6.7 4.8 6.3 6.2 8.7 23.3 21.4 Net IB debt/share 31 38 48 61 56 61 63 74 84 87 P/CEPS na 13.4 15.3 19.2 15.2 15.5 18.5 24.0 20.9 19.2 P/CEPS adj. na 13.4 15.3 19.2 15.2 15.5 18.5 24.0 20.9 19.2 EV/Recurring EBIT na 20.3 22.6 23.5 19.8 21.5 23.0 26.5 25.4 24.6 Implicit yield (%) na 4.7 4.5 4.4 4.6 4.5 4.3 3.6 3.8 4.0 Yield on BV (%) 5.0 5.2 5.1 5.0 4.9 4.7 4.4 4.3 4.3 4.2 Dividend yield (%) na 4.3 3.3 2.5 2.9 2.9 2.7 2.1 2.2 2.3 P/EPRA NAV na 1.34 1.43 1.53 1.06 0.97 1.01 1.27 1.10 0.95 P/BVPS na 1.29 4.34 3.75 1.70 1.61 1.53 1.72 1.26 1.11 EV/NOI na 19.79 21.76 23.01 19.72 21.17 22.81 26.25 24.69 23.87

Source: ABG Sundal Collier, Company data

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Analyst certification I/We, Staffan Bulow, Tobias Kaj, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report.

Analyst valuation methods ABG Sundal Collier analysts may publish valuation ranges for stocks covered under Company Sponsored Research. These valuation ranges rely on various valuation methods. One of the most frequently used methods is the valuation of a company by calculation of that company's discounted cash flow (DCF). Another valuation method is the analysis of a company's return on capital employed relative to its cost of capital. Finally, the analysts may analyse various valuation multiples (e.g. the P/E multiples and the EV/EBITDA multiples) relative to global industry peers. In special cases, particularly for property companies and investment companies, the ratio of price to net asset value is considered. Valuation ranges may be changed when earnings and cash flow forecasts are changed. They may also be changed when the underlying value of a company's assets changes (in the cases of investment companies, property companies or insurance companies) or when factors impacting the required rate of return change.

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covered in this report. w mo

ABG Sundal Collier is engaged in providing liquidity in Fastpartner’s securities at the time of this report’s publication.

mo

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Production of report: 04/12/2019 06:29 CET. All prices are as of market close on 02 December, 2019 unless otherwise noted.

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