Annual Report 2017 with Sustainability Report www.rikshem.se Combining professionalism with community involvement Rikshem is one of Sweden’s largest private property companies. The company owns, develops and man- ages residential properties and properties for public use – sustainably and for the long term. By investing wisely in growth areas and new production of residential properties and properties for public use, the company will continue to grow. Rikshem’s vision is to make a difference in the development of the good community. By combining professionalism with community involvement, Rikshem aims to promote long- term, sustainable community development from a social, environmental, and financial perspective. One of Sweden’s largest private property companies 28,000 SEK 41 billion Rikshem provides Sweden with The market value of the properties 27,924 residential properties across totaled MSEK 41,039. the country. Long-term owner The year in brief Rikshem AB (publ) is 100 percent owned by • Completed acquisition of 802 apartments in Umeå Rikshem Intressenter AB, in which AMF Pensionsförsäkring AB • Began production of northern Sweden’s tallest residential building (pension company) and Fjärde AP-fonden (The Fourth Swedish in wood, Flyttfågeln, in Umeå National Pension Fund, AP4) own 50 percent each. • Nominated as Community Developer of the Year alongside Lindbäcks bygg for industrial construction in wood • Changed the organization to increase focus on property management and sustainability • Issued the first euro bond under the EMTN program • Employed 158 young people for summer jobs in Rikshem’s residential areas • Divested the BoViva properties, a concept residence for seniors • Nominated for the Halmstad Building Committee Architecture Prize, A strong 2017 for nursing home in Harplinge Favorable market, efficient property management, stable revenue • Awarded with the Kalmar Urban Design Prize in the Preservation category for increase and successful new production were a few of the the renovation of the Apotekaren 1 property factors underlying this year’s positive earnings. • Acquired two project properties in Uppsala, which together will become the Nordic region’s largest nursing home • Divested the Haparanda property portfolio • Signed acquisition agreements for 84 apartments from Helsingborgshem, A- with completion in 2018 • Nominated for the 2018 Construction Project of the Year Award for creative construction of 60 new one-room apartments in existing buildings in Norrbacka, Märsta Rikshem’s credit rating • Signed acquisition agreements for 257 apartments in Västerås, with completion in 2018 from S&P Global is A- with a stable outlook. • Started production of 462 apartments in wood • Energy savings of 1.6 percent in comparable portfolios Key performance data MSEK 2017 2016 Market value of properties 41,039 37,878 5% Rental income 2,665 2,484 Net operating income 1,555 1,420 No. of properties 586 574 5% Return on equity, % 16.8 20.6 6% Annualized total return, % 8.1 9.7 Loan-to-value ratio, % 59 62 Our largest cities Uppsala 25 percent Greater Stockholm 24 percent Helsingborg 11 percent Healthy total return Norrköping 7 percent 25% Östersund 6 percent Umeå 5 percent The total return for the year (the sum of capitalization 5% 24% Västerås 5 percent and changes in value of property portfolio) Luleå 5 percent amounted to 8.1 percent. Kalmar 5 percent 7% We are also active in Halmstad 3 percent Malmö 3 percent Jönköping <1 percent Return on equity 5% Linköping <1 percent Nyköping <1 percent % 11% Ale <1 percent 30 25 20 15 10 The property portfolio 5 0 2015 2016 2017 Breakdown of Breakdown of the rental income properties’ market value Total return % 12 10 8 6 4 Residential leases, 64% Residential, 70% 2 Public sector, 29% Nursing homes, 22% 0 Private sector, 7% Schools, 6% 2015 2016 2017 Commercial, 2% Contents General Message from the CEO ...........................................................3 Business concept, vision and mission ............................. 4 Objectives ....................................................................................5 Sustainable value creation .................................................... 6 A responsible company ......................................................... 8 Strong demand for rental apartments ............................. 11 Properties for residential and public use ........................12 Operations Rikshem’s property portfolio ..............................................13 Project and property development ...................................16 Easy and safe for customers ...............................................19 Property management ..........................................................21 Efforts to reduce climate impact ...................................... 23 A good selection of materials ............................................ 25 Renovations that create value .......................................... 27 Committed to sustainable urban development ..........28 Organized for customers and sustainability ................ 33 An inclusive workplace ....................................................... 34 Employee safety .....................................................................36 Financial reports, governance and index Increased borrowing abroad..............................................38 Risks and risk management ...............................................40 On the Sustainability Report .............................................. 43 Index of the statutory sustainability report ...................44 GRI content index ................................................................. 45 Board of Directors ..................................................................49 Management ...........................................................................50 Report of the Directors ......................................................... 52 Corporate governance report ............................................ 57 Financial statements .............................................................60 Notes ..........................................................................................69 Auditor’s report .......................................................................99 List of properties................................................................... 103 Key performance data .........................................................112 Definitions...............................................................................113 Cover image: The Flyttfågeln property in Umeå, under construction. Rikshem is constructing three buildings with a total of 110 rental apartments and 32 ownership apartments. The building on the right is northern Sweden’s tallest residential building in wood. 2017 A year defined by change and a great ambition Message from the CEO Working at Rikshem is a way of contributing to positive community development. We combine professionalism with community involvement, and through our work we affect the daily lives of numerous people and sometimes the development of an entire residential area. At the same time, we contribute to the return on pension capital for Sweden’s retirees. At Rikshem, 2017 was defined by change and a spirit of enterprise. Social sustainability plays an important role for Rikshem. In the New ownership directives clarified the expectations for the compa- areas where we operate, we strive to help create solutions. We ny regarding the importance of long-term thinking, the continued take responsibility for improving residential areas and residential ambition for growth without endangering the level of return and the properties so that they are attractive. We also become involved expectations that we are to set an example with our sustainability with the people who live and work in our areas. For example, efforts. Changes to our organization were implemented in order to Rikshem is active in the Läxhjälpen Foundation, Tjejers rätt i sam- meet the strict requirements imposed during the year. The aim was hället (TRIS) and Café Välkommen. We also offer young people to increase regional presence, focus on property management and summer jobs in our areas. With the knowledge and experience we elucidate the role of sustainability as an important value-creating possess, we can work alongside other property owners, munici- element of our business by linking together business development palities and organizations to help meet the social challenges found and sustainability in the same department. This is also reflected in many residential areas around Sweden so that they remain safe in the new composition of the management team, which now and secure. Positive community development in our areas is also includes the regional managers and the new Head of Business and deemed to positively impact property values. Sustainability Development. On the financial side, work was carried Safe areas with modern apartments that meet today’s ex- out to secure long-term financing on favorable terms by extending pectations for housing are some of the things Rikshem seeks to our loan maturity and fixed-interest periods. As part of this work, offer its customers. Property management is an important part Rikshem’s first euro bond was also issued under the company’s of the company’s customer offering, as is customer dialogue in EMTN program. The year also included several new production connection with renovation and collaboration with local tenant projects, renovations that created value