WE ARE BUILDING AT ALL TIMES ANNUAL REPORT 2017 WALLENSTAM 2017 Our business process is based on our business concept. We build, acquire and develop properties for people and companies based on the needs of our customers, the community and shareholders. The properties are develo- ped and managed sustainably and profitably to generate value growth. Profits are reinvested and used to develop the business further. Shareholders receive a share of the profits in the form of dividends. INVESTMENT PROFIT SALES MANAGEMENT INCREASE IN VALUE SEK 2,950 MILLION SEK 2,421 MILLION DIVIDEND SEK 1.80*/SHARE *Proposed dividend – Q1 – – Q2 – – Q3 – – Q4 – 14 446 76 1, 953 percent increase in profit from Construction starts of 446 apart- percent was the surplus ratio on apartments were in production by property management during the ments in four different projects in closing day, an increase of two Wallenstam in the fourth quarter. first quarter, mainly due to improved Tyresö, Sundbyberg and Helsingborg. percentage points compared to the Due to the uncertain market efficiency in management and letting More than one thousand people previous year. situation, the first phase of the co- operations. came to the inauguration of the “Mitt Marina Fritsche succeeded op apartment project Orangeriet in Wallenstam was chosen by Järfälla i Kallebäck” meeting place, the hub Thomas Dahl and became respon- Solberga, involving 90 apartments Municipality as one of two anchor in our urban development project in sible for the Gothenburg business was converted into rental apartments developers for Barkarbystaden IV. In Gothenburg involving 2,000 apart- area and joined the Group Manage- in October. Later in the fall, several addition, Wallenstam received land ments in total. ment team as from July 1. ongoing co-op apartment projects allocations of 17,000 sq m for con- We obtained land allocations for Wallenstam’s CO2-neutral property were converted into rental apart- struction of commercial space and more than 400 apartments in Öster- Kopparhuset on Kungsportsavenyen ments. apartments in central Gothenburg åker, a completely new municipality in Gothenburg was named Western The urban development project and for more than 300 apartments in for Wallenstam to build and operate Sweden’s smartest property. Wallen- Umami Park was chosen as the central areas of Mölndal. in. stam also won the “Listed Company winner of the YIMBY prize for 2017, In May, Wallenstam’s office in of the Year” award. which is awarded every year to an central Uppsala opened. A reduction of the share capital organization that has made a positive was carried out through cancellation contribution to Stockholm becoming of 10,000,000 of the B shares, which a more densified, sustainable and the company itself was the holder of, vibrant urban city. in accordance with the resolution of In November, an MTN program was the Annual General Meeting 2017. established with a framework amount of SEK 5 billion, and bonds were issued for SEK 1,750 million. THIS IS WALLENSTAM WE ARE BUILDING AT ALL TIMES With more than 70 years’ experience of and environmental responsibility. We set Our commercial properties are found in property management and construction of the goal in our business plan of achieving attractive inner city locations in Gothen- both residential and commercial properties, an average rate of net asset value growth, burg. In close collaboration with the city, we offer a wealth of expertise in the deve- excluding dividends and repurchases, of at we are working to ensure the right mix of lopment and densification of our cities. We least 10 percent per year during the period companies, stores and restaurants in and manage more than 8,000 rental apartments 2014–2018. around our properties. We are engaged and 530,000 sq m of commercial floor in the areas we operate in through co- space, mainly office and retail premises. We We have been listed on the Stockholm operation and support to various youth conduct extensive construction operations, Stock Exchange since 1984 and we now activities and organizations, with the mainly production of rental apartments for have more than 13,000 shareholders for aim of strengthening and supporting the our own management. Through our cost- whom we are working every day to create local community. We are self-sufficient in efficient new production, we are able to value through efficient management and renewable energy, through our 64 wind complete our new construction projects in profitable new construction projects. turbines. both economic upturns and downturns. We currently own and build residential Wallenstam makes it possible for more For us at Wallenstam, urban develop- properties in growth markets, mainly in people to stay, work and live their lives in ment is about taking economic, social Stockholm, Gothenburg and Uppsala. pleasant and attractive areas. HIGH EQUITY/ASSETS RATIO PROPERTY VALUE 2017 TOTAL OCCUPANCY RATE, AREA Non-interest-bearing Equity, liabilities, 13% 44 % SEK billion percent 41 Interest-bearing 98 liabilities, 43 % Our 211 properties are found in attractive locations The occupancy rate in our residential holdings amounts in cities with high growth and strong demand. to 100 percent and in our commercial properties it is 66 percent of the floor space is found in the A high equity/assets ratio and a low loan-to-value 96 percent. The total lettable area is about 1.1 million Gothenburg region, 32 percent is in the ratio gives us a strong financial position and good sq m. We have just over 8,000 residential tenants and Stockholm region and the rest is in Uppsala. conditions for our investment program with an 1,000 commercial tenants. investment plan of about SEK 2–3 billion annually. VALUE CREATED THROUGH NUMBER OF APARTMENTS NUMBER OF APARTMENTS IN OUR COST-EFFICIENT NEW CONSTRUCTION IN PRODUCTION DEC 31, 2017 PROJECT PORTFOLIO, ABOUT SEK 733 million 1,953 12,000 A large part of the properties’ unrealized changes We create homes! We are primarily a rental apartment Our major efforts in acquiring land and land allocations in value comes from our own work with cost- producer, building properties for our own manage- for new construction have led to a large number of efficient new construction. ment. A smaller proportion of our projects consist of potential future apartments. cooperative apartments and development properties constructed for sale. CONTENTS This is Wallenstam see cover Wallenstam 2017 see cover STRATEGIC DIRECTION Vision, Business Concept and Goal 2 Goal 2014–2018 3 Guiding Principles 2014–2018 4 Comments by the CEO 6 Comments by the Chairman 10 Board of Directors 12 Group Management 14 The Wallenstam Share 16 Investing in Wallenstam 20 Financial Strategy 22 Responsible Enterprise 24 Risks That Generate Opportunities 32 OPERATIONS AND MARKETS Organization and Employees 36 Market Outlook 40 Property Management 46 Valuation of Properties 52 Property Overview 53 Value-creating Construction 54 KEY RATIOS Energy Production 62 Five-year Summary 64 2017 2016 2015 FINANCIAL REPORTS PROPERTY-RELATED KEY RATIOS Rental income, SEK million 1,701 1,607 1,549 How to Read Our Income Statement 66 Net operating income properties, 1,264 1,175 1,130 Administration Report 67 SEK million Consolidated Accounts 72 Surplus ratio property management, % 74 73 73 Group Accounting Principles Income from property management, 806 733 672 and Notes 78 SEK million Parent Company Accounts 111 Occupancy rate – lettable area, % 98 98 98 Value of investment properties, 41,410 36,555 32,090 Parent Company Accounting Principles SEK million and Notes 115 Auditor’s Report 127 FINANCIAL KEY RATIOS Corporate Governance Report 130 Net asset value, SEK million 24,314 22,159 18,630 PROPERTY LIST Equity/assets ratio, % 44 45 44 Loan-to-value ratio, % 43 43 45 Stockholm 136 Average interest rate Uppsala 137 on closing day, % 1.88 1.97 2.22 Gothenburg 138 Income from natural energy manage- -40 -61 -5 ment, SEK million Helsingborg 142 Profit before unrealized Completed New Construction, changes in value, SEK million 765 865 1,027 Acquisitions and Sales 143 Profit after tax, SEK million 2,421 3,348 2,754 Wind Power 144 Return on equity, % 13.0 20.9 19.6 OTHER PER-SHARE DATA Wallenstam’s GRI Reporting 145 Profit after tax, SEK 7.4 10.1 8.3 Welcome to the AGM 147 Equity, SEK 60 54 45 Glossary 147 Dividend, SEK 1.80* 1.70 1.50 Definitions 148 Calendar 149 * Proposed dividend for the 2017 financial year. A number of alternative performance measures (APM) are referred to in the Wallenstam’s statutory sustainability report is found on Annual Report. For definitions and further information see page 65. the following pages: business model inside cover, pages 2, 20 and 24-25, environmental questions pages 24-28, 30-32, 35 and 145, social conditions and personnel- related questions pages 24-30, 32-34, 36-38 and 145, respect for human rights pages 24-27, 29-30, 33 and 145, anti-corruption pages 24-26, 33-34, 38, 133-134 and 145 as well as diversity in the Board page 131. WALLENSTAM WORKS TO DEVELOP, BUILD AND MANAGE PROPERTIES IN A SUSTAINABLE MANNER VISION To be a leading urban developer and market-leading property owner in selected metropolitan areas. BUSINESS CONCEPT To develop, build, buy and sell properties that are sustainable in business and human terms in selected metropolitan areas. GOAL To achieve an average rate of net asset value growth, excluding dividends and repurchases, of at least 10 percent annually until the end of 2018. Goal 2014-2018 3 GOAL 2014–2018 NET ASSET VALUE GROWTH The growth rate in net asset value, excluding dividends and repurchases, must be at least 10 percent per year. TOTAL VALUE CREATED The Group’s net asset value amount- excluding dividends and repurchases, holdings.