Kungsleden – 2020 Annual and Sustainability Report

2020 Annual and Sustainability Report We inspire people every day People spend a major part of thier lives in our buildings. At Kungsleden, we start from them. We create sustainable places that engage, inspire and bring out the best in the people who work in and visit our buildings. By ensuring that people thrive and have a high sense of well- being, we help our customers’ businesses to achieve better results and to grow their companies. At Kungsleden, people work with other people. This is how we make a difference every day and create world-class hospitality. CONTENTS Property value INTRODUCTION This is Kungsleden 4 2020 in brief 6 40.7 CEO’s statement 8 BSEK 5 reasons to invest in Kungsleden 12 STRATEGY AND MARKET Business environment trends 14 Profit from Market overview 16 A value-creating business model 20 property Strategic priorities 22 management Targets and performance 24 New financial targets with focus on growth 25 OPERATIONS Our customers 26 1,257 Property management close to customers 30 MSEK Value-creating development and improvement 34 Strategic acquisitions and optimisation 38 Our properties 40 PEOPLE, PLANET AND CULTURE – sustainability LTV ratio and culture at Kungsleden Sustainability strategy 44 Climate positive by 2035 48 Sustainable offices of the future 52 A diverse employer 58 45.0 Corporate culture, business ethics and % social responsibility 60 CORPORATE GOVERNANCE An interview with the Chair of the Board 65 Corporate governance report 66 Total returns Board of Directors 72 (according to MSCI) Management 74 FINANCIAL STATEMENTS Administration report 78 Risks and risk management 82 7.0 Financing 88 % Multi-year Summary 92 Group Consolidated Income Statement 93 Consolidated Statement of Comprehensive Income 93 Consolidated Statement of Financial Position 94 Return Consolidated Statement of Changes in Equity 95 on equity Consolidated Cash Flow Statement 95 Notes 96 Parent Company Income Statement 112 9.1 Statement of Comprehensive Income 112 % Balance Sheet 113 Statement of Changes in Equity 114 Cash Flow Statement 114 Notes 115 Customer Annual Report signatures 119 Satisfaction Auditor’s Report 120 Index IN-DEPTH SUSTAINABILITY INFORMATION In-deph information about EPRA, TCFD and GRI 122 EPRA-index 130 TCFD 131 73 GRI-index 133 73/100 Summary of Kungsleden’s fulfillment of the reporting standards of the Swedish Annual Accounts Act 136 Auditor’s report on the statutory sustainability statement 136 Employee PROPERTY LIST AND MAPS Satisfaction Index Stockholm 138 Gothenburg 140 Malmö 142 Västerås 144 Regional cities 145 8.0 8/10 OTHER INFORMATION The share 146 Definitions and glossary 148 Invitation to Annual General Meeting 150 Environmen- Calendar 151 tally certified properties Formal Annual Accounts The statutory Annual Report according to the Annual Accounts Act appears in the pages 78-120. Information about the the statutory Sustaina- bility Report appears on page 136. The Administration report comprise of the pages 64-92. This document is a translation of a Swedish language original. In case of any discrepancy between the two versions, the original 42 shall take precedence. % 4 KUNGSLEDEN 2020 ANNUAL AND SUSTAINABILITY REPORT INTRODUCTION This is Kungsleden Kungsleden is people who create places and experiences for people. We deliver attractive and sustainable services in places that offer people a more inspiring working life. This creates value for our customers who achieve better results. Kungsleden is a long-term property owner OUR CUSTOMERS focused on commercial properties in Sweden’s A broad spectrum of businesses and industries growth regions. We own 211 properties with are represented among our customers, from sole total value of MSEK 40,718. The company is proprietorships to large international groups listed on the Nasdaq Stockholm Large Cap. and public administrations. No matter their size or operations, we always endeavour to OUR VISION create an attractive and sustainable cohesive We create attractive and sustainable places approach that strengthens the customer. This is that inspire people. reflected in the excellent results from our customer satisfaction indexes (CSI for 2020: 73). OUR BUSINESS PROPOSITION To actively manage, improve and develop commercial properties on a long-term basis in Sweden’s growth regions and deliver attractive total returns. We create attractive and sustainable places that inspire people. OUR VALUES OUR CUSTOMER PROPOSITION Professionalism, caring and joy. An experience that’s out of the ordinary. We deliver a complete solution: the right premises OUR CUSTOMER PROMISE for your business and your people, in the right • We focus on you. Always. In everything. location, with the right services nearby. • We make you feel welcome • We contribute to your business. • We partner with you and act quickly to make your day at work easier. KUNGSLEDEN 2020 ANNUAL AND SUSTAINABILITY REPORT 5 2020 IN BRIEF 2020 in brief Kungsleden continued to deliver solid results with increased profit from property management, high new leasing and increased rental revenue. This was achieved despite the pandemic impacting the entire world during the year. Going forward, we have set one of the most ambitious emissions reduction target in the industry – to be climate positive across its value chain by 2035. • Revenue for 2020 increased to MSEK 2,530 • Current net asset value increased to SEK 97.13 (2,423) per share (90.10). • Profit from property management increased • The Board of Directors proposes an increase by 6 per cent to MSEK 1,257 (1,185). The in the dividend to SEK 2.80 per share (2.60), increase was due to higher rental revenue which corresponds to an increase of 8 per and operating net of 6 per cent and reduced cent. The dividend is paid quarterly. selling and administration costs. • Net leasing for the full-year was MSEK 22 (58). NET ASSET VALUE PER SHARE +48% • Unrealised changes in value on properties SEK amounted to MSEK 948 (1,762), up 2.5 per 97.1 cent. The increase in value was due to the 90.1 reduction in required yield and higher rental 79.7 70.6 revenue. 65.7 • At the end of the period, property value was MSEK 40,718 (38,310 million at the beginning of the year). • Net profit after tax was MSEK 1,636 (2,245), or SEK 7.50 per share (10.28). 2016 2017 2018 2019 2020 PROFIT FROM PROPERTY MANAGEMENT PROPOSED DIVIDEND MSEK +27% MSEK +40% 1,257 1,185 610 1,124 568 524 990 985 480 437 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 6 KUNGSLEDEN 2020 ANNUAL AND SUSTAINABILITY REPORT 2020 IN BRIEF SIGNIFICANT EVENTS DURING THE YEAR Q1 Q3 The Blästern project Hagastaden, Stockholm, The Västerås City cluster expanded through the was completed and Convendum gained full acquisition of the Mimer 6 property, consisting access its premises at the end of February. of a parking facility and building rights on just over 40,000 sq.m. gross total area (GTA). B26 in Västerås, a new creative co-working arena with space for more than 550 people in As the first property company in Sweden, individual and separate office space, was also Kungsleden has adopted the target to become opened in February. climate positive across its value chain by 2035, and has set an interim target to become cli- Kungsleden decided to relocate its head office mate positive in property and facility manage- to the Rotterdam District in Värtahamnen. The ment by 2025. move is scheduled to take place when the project is completed in 2021. Q2 Q4 Moody’s confirmed Kungsleden’s Investment An Extraordinary General Meeting resolved in Grade rating Baa3 with stable outlook. accordance with the Board’s proposal to rein- state the dividend of SEK 2.60 per share to be Kungsleden signed an agreement with the City paid to shareholders for the 2019 financial year. of Stockholm regarding land allocation with This was after the Board had decided in April to 14,000 sq.m. of building rights for offices and wait on making a dividend decision due to the hotel premises in Västberga. Kungsleden already pandemic. owns the neighbouring property, which with this transaction, will enable development of In November, the Board decided to repurchase a total of 22,500 sq.m. of offices. own shares to optimise the capital structure, thereby increasing shareholder value. KUNGSLEDEN 2020 ANNUAL AND SUSTAINABILITY REPORT 7 Focus on future sustainable growth 2020 was a highly remarkable year in which an unanticipated virus impacted our entire world. However, at Kungsleden we could deliver strong earnings and meet our ambitious targets despite the coronavirus pandemic and its conse- quences. Now as we enter 2021, we have a new five-year plan and new financial targets focusing on growth, sustainability and an even strong financial position. 2020 8 KUNGSLEDEN 2020 ANNUAL AND SUSTAINABILITY REPORT KUNGSLEDEN 2020 ANNUAL AND SUSTAINABILITY REPORT 9 CEO’S STATEMENT global crisis often takes of Kungsleden’s property portfolio increased by the form of something SEK 2.4 billion to SEK 40.7 billion during the year entirely unexpected due to completed projects, project investments, occurring that no one improved rental revenue and lower required yield. could have predicted. In spite of market turmoil, we successfully issued That is what happened bonds for SEK 2.6 billion. In doing so, we boosted in 2020 with Covid-19. out share of green financing to 38 per cent, Market conditions at the meaning that our liquidity coverage is favour- start of the year were able. Our LTV ratio at year-end was the lowest in optimal. The situation our history at 45.0 per cent. changed and became highly uncertain in the Our dedicated focus on sustainability is also spring as the pandemic spread at an ever-faster about how we can reduce our carbon footprint as Arate around the world.

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