ANNUAL REPORT 2015 Kungsleden Annual Report 2015 Annual Report Kungsleden “ Our journey to become one of Sweden’s largest, most successful and profitable property companies continues.” THIS IS KUNGSLEDEN Kungsleden is a property company listed on Nasdaq PROPERTY VALUE BY CATEGORY AS OF 31 DECEMBER Stockholm Mid Cap. Our business concept is long- term ownership, active management, improvement and development of commercial properties in selected Office 64% Book value Industrial/Warehouse 26% growth regions like Stockholm, Gothenburg, Malmö 27,470 and Västerås with the aim of delivering an attractive SEK m Retail 9% total return. We build and develop relationships with Other 1% our customers to understand their current and future needs while striving to be a leading player in the municipalities and communities where we own prop- PROPERTY VALUE BY REGION AS OF 31 DECEMBER erties. That is how we create a long-term, sustainable business. Stockholm 49% Book value Mälardalen 21% 27,470 “ Kungsleden is now more concentrated SEK m Gothenburg 16% and focussed, which I believe the market Malmö 14% views quite favourably” ALLOCATION RENTAL REVENUE BY CATEGORY Leif Andersson, Founder of Areim and Salesperson for the Kista portfolio Office 57% Rental revenue Industrial/Warehouse 31% 2,314 Retail 10% SEK m Other 2% VISION BUSINESS CONCEPT FUNDAMENTAL CUSTOMER CONCEPT OFFERING We create attractive Our long-term business premises that enrich concept is to own, actively We strive to own more We will provide attractive people’s working days. manage, improve and properties at select loca- and functional premises develop commercial tions, gathered in clusters, in the right locations properties in growth so that we can adapt and at the right price. We regions in Sweden and sharpen our offering based will always deliver that deliver attractive total on our tenants’ needs something extra. returns. while proactively helping to shape how the entire area develops OUR VALUES Professionalism Consideration Joy We are an organisation that is profes- We show respect and considera- Joy is important to us. Acting sional and ambitious. We push our- tion for each other, our custom- professionally, showing considera- selves to continually improve and ers and the world around us. tion and being both motivated deliver high quality in every detail. and solution-oriented creates joy at work. 2015 IN BRIEF 2015 was an eventful year for Kungsleden. We managed “ Having achieved our long- to – two years ahead of schedule – grow our property portfolio to the size, and with the geographic concen- term goals for 2017 ahead tration and structure that matched our goals for 2017. of schedule, we now set our We also launched a new organisational structure and started implementing Kungsleden’s Flow for our inter- sights on 2020.” nal processes. All of this prepares us well for our con- Biljana Pehrsson, CEO tinued journey towards new goals. Goals 2017 Outcome 2015 PROPERTY CATEGORY, OFFICE Represents at least half of 50% 64% the property portfolio A NEW BUSINESS METROPOLITAN REGIONS PLAN WITH 2020 Represent at least half of the 50% 59% property portfolio GOALS WAS CREATED DURING GEOGRAPHIC DISTRIBUTION <70 69 Reduce the number to MUNICIPALITIES MUNICIPALITIES AUTUMN 70 municipalities or less READ MORE ON PAGE 7 REPORTED PROPERTY VALUE At least SEK 25 billion SEK 25 BILLION SEK 27.5 BILLION THE PROPERTY COMPLETED OPERATING NET NUMBER PORTFOLIO’S TRANSACTION OF PROPERTIES CHANGE IN FOR A VALUE OF VALUE WAS 1,420 6,500 1,545 SEK M SEK M SEK M 291 RENTAL REVENUE PROFITS FROM AVERAGE INTEREST NET FINANCIAL Total return for the PROPERTY increased by 6% to PROPERTY manage- RATE fell from 5% ITEMS improved to PORTFOLIO was 2.2% lower SEK 2,314 (2,193) ment increased 32% to 2.7% SEK –473 (–660) than the industry average million. to SEK 966 (730) million million SEK m 2,193 2,314 SEK m 730 966 % 5 2.7 SEK m –660 –473 % 13 11.7 Industry average 13.9 Industry average 8.7 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 Source: MSCI KUNGSLEDEN ANNUAL REPORT 2015 1 2014 2015 SIGNIFICANT EVENTS Q1 Q2 • The Högsbo cluster grew with the addition of four acquired • Subsequent to taking possession of four office properties in properties Kista during Q1 and Q2, a new cluster was created of approx. • 29 non-strategic properties were divested, bringing us 150,000 sq. m. in one of Stockholm’s largest office markets closer to our goal of owning and managing properties in • Acquisition of office and hotel building, Skrapan – no more than 70 municipalities a prominent landmark in Västerås • 65 per cent of Nordic Modular Group divested to Inter • High leasing volume in Stockholm, Malmö and Gothenburg IKEA Investments • Bond loans issued for SEK 375 million • Master Lease Agreement with ABB renegotiated and • New loans acquired and refinancing for Kista acquisition, replaced with 17 lease agreements at going market rate. lowering the average interest rate to 4.4 per cent • Started implementing Kungsleden’s Flow – structure, • Initiated collaboration with Fryshuset, offering eleven processes and company culture youth summer jobs within Kungsleden’s property management organisation Q3 Q4 • Additional acquisition of office property in Kista, growing • New cluster established via acquisition at Gärdet/ the cluster even more Frihamnen with 89,000 sq. m. office and hotel space • Completion of the major property development project • High leasing volume in Kista, Gärdet/Frihamnen and Täby in Umeå. Our tenant, International English School, moved • Redemption of old interest rate swaps lowers the average in and opened its doors to students in August interest rate to 2.7 per cent • Ylva Sarby Westman appointed Deputy CEO and CIO • Remaining share of Nordic Modular Group divested to Inter • New website launched: www.kungsleden.se IKEA Investments • The head office moves home, to our own building at • The Administrative Court handed down a negative ruling on Warfvinges väg, West Kungsholmen the last remaining tax case and a provision and payment of SEK 1.3 billion was made • An important goal achieved when, after property divest- ments, Kungsleden lowers its presence to 69 municipalities • Company-wide implementation of level 1 in Kungsleden’s Flow – clarifying our twelve core processes, linking them to templates and other tools Tegeludden 13, Stockholm Launch of new company website Strategic property acquisitions for SEK 5.8 billion and non-strategic property divestitures for SEK 700 million Gårda 19:10, Gothenburg Kungsleden moves to own properties in Stockholm New organisation in place, with more responsibility for and Gothenburg regional managers and sustainability manager 2 KUNGSLEDEN ANNUAL REPORT 2015 Stettin 5, Stockholm CONTENTS 1 2015 in brief 36 Sustainability 2 Significant events 40 Kungsleden’s stock 4 CEO comments 41 Kungsleden as an 6 Business plan and strategic investment focus areas 42 Case: Solar collector 8 Market overview and sun screen 10 Value creation 44 Financing 12 Theme: Actively manage 47 Risk overview 18 Expand and optimise 48 Corporate governance report 20 Case: Kungsleden moves home 54 Board of Directors 22 Region Stockholm 55 Business management 26 Region Gothenburg 57 Financial statements 28 Region Malmö 85 Auditor’s report 30 Region Mälardalen 86 Definitions 32 Develop and improve 87 Glossary 34 Case: A city oasis 88 Invitation to the AGM The formal annual report covers pages 18–85. KUNGSLEDEN ANNUAL REPORT 2015 3 CEO BILJANA PEHRSSON’S COMMENTS WE MET OUR LONG- TERM GOALS AHEAD OF SCHEDULE In 2015, Kungsleden completed the first erty management efforts would then be tive premises that enrich people’s working stage of its strategic transformation, a the engine. In this annual report, we give days. Clusters provide the foundation for process that was initiated in 2013. Over particular emphasis to our active prop- realising that vision: it’s where we are three years, we have built up a competent erty management. We describe our man- able to create attractive work and meeting management organisation and succeeded agement cycle as a process, starting with places, with a comprehensive offering that in restructuring and growing the prop- the customer offering via new leasing offers customers a high level of flexibility. erty portfolio, while adhering to strict and adaptations, our interactions with Our corporate customers do business in financial targets. Achieving this has cre- tenants and eventually establishing long- an environment that requires rapid and ated the conditions for being a long-term term relationships with them via leasing constant adaptation. For this reason, they owner, active manager and developer of arrangements. Focus was on this very must have flexible solutions for their commercial properties in Sweden’s growth cycle as we worked with implementation premises. Through our clusters, Kungs- regions, with the goal of delivering an of Kungsleden’s Flow. I am convinced leden provides flexibility by offering attractive total return. that this is where we can make a differ- premises that vary in size, standard and In 2015, we acquired strategic proper- ence, creating value for tenants and price range. Clusters help us establish a ties worth SEK 5.8 billion and we divested shareholders alike. closer bond with our customers, along non-strategic properties for SEK 700 For 2015, total yield for the property with deeper roots in the community. million, as well as our remaining 35 per- portfolio was 11.7 per cent. Our customers represent a broad cross- cent share in Nordic Modular. section of the Swedish business sector There was significant growth in new QUALITY AT RIGHT LOCATIONS and the public sector. Among our corpo- leasing during the year, corresponding to THAT PERSISTS ACROSS BUSINESS rate tenants we have everything from a rental value of SEK 133 million, which CYCLES start-ups and small, established local is a 22 per cent increased compared to Streamlining of the property portfolio in companies to medium-sized listed Swed- the year before.