VASAKRONAN 2019 ANNUAL REPORT ANNUAL 2019 VASAKRONAN Annual Report 2019 Contents OVERVIEW Significant events in 2019 2 Statement by the CEO 4 Our business 8 Market and trends 10 Goals and strategies 14 Property management 16 Letting 17 Retail 19 Property development 23 Urban development 25 Our vision is to Ongoing projects 26 create future-proof Future projects 28 Transaction activities 30 cities for everyone, Acquisition in Malmö 31 where people and Financing 32 companies thrive. Magasin X 35 Property holdings 37 REGIONS Our regions 42 Region Stockholm 44 Region Gothenburg 50 Region Malmö 54 Region Uppsala 58 ADMINISTRATION REPORT AND FINANCIAL STATEMENTS Contents financial statements and notes 63 Administration Report 64 Comments to the financial statements 66 Proposed appropriation of profits 78 UPPSALA Notes 79 Risks and risk management 98 STOCKHOLM Corporate Governance Report 102 The Board of Directors and auditors 108 Senior executives 109 Board of Directors signatures 110 GOTHENBURG Auditors’ report 111 SUSTAINABILITY REPORTING Sustainability reporting with GRI Index 116 Climate reporting according to the TCFD 120 Auditor’s statement on the sustainability report 135 Impact Report, green financing 136 MALMÖ Auditor’s statement Impact Report 141 OTHER INFORMATION Targets and fulfilment 142 Quarterly and five-year overview 144 Definitions 148 Addresses, website, calendar and production 148 Sweden’s largest Property value 156 property company SEK billion Energy intensity VASAKRONAN’S ASSIGNMENT is to generate a high, 92 kWh/sq. m. risk-weighted return for our owners the First, Second, Third and Fourth Swedish National Pension Funds, though never at the expense of the environment and Square metres people. A return that will benefit Sweden’s current and 2.3 million future pensioners. IN ADDITION TO THE ASSIGNMENT from our Net lettings 426 owners, Vasakronan’s ambition is to be Sweden’s SEK million leading property company. We will achieve this by: Environmental • Generating a high total yield, that should also certification 85 exceed that of the industry in general. per cent • Being the preferred choice for tenants looking for office or retail premises. Project volumes • Being perceived as the most attractive employer 14,347 SEK million in the industry. • Assuming social responsibility and striving for long- term sustainable development. Rental revenue 7,040 SEK million TO ACCOMPLISH OUR ASSIGNMENT, we must create long-term sustainable value in the business. This Operating surplus 5,207 is achieved through good property management and SEK million development of our properties, streets and areas, supplemented by active transactions. Occupancy rate 94.1 per cent SIGNIFICANT EVENTS IN 2019 Significant events in 2019 POSITIVE RESULTS IN TRIANGELN Successful letting, extended opening hours and an expanded offering of shops led to an increase in the number of visitors as well as sales at Triangeln, Malmö’s most central shopping centre. Visitors increased almost 4%, meaning that the shopping centre had a total of 7,350,000 visitors. In 2019, retailers like XXL, ICA Nära and Gina Tricot opened at the location and sales increased just over 6%. Doubled solar electricity production In Fyrislund, Uppsala, Vasakronan owns 12 hectares of land for which there are currently no development plans. In 2019, Vasakronan decided to construct a solar park on the site. The facility will go into operation in spring 2020, with 11,000 panels with an installed capacity of 4.4 MW – the equivalent of 240 households’ annual power consump- tion. The park will double Vasakronan’s own solar electric- ity production and provide renewable electricity to the grid. 2 VASAKRONAN 2019 ANNUAL REPORT SIGNIFICANT EVENTS IN 2019 Project Strand in final phase During the year Statistics Sweden leased 7,200 square metres at the Strand International interest development property. This means that development of Solna Strand has in green financing entered its final phase. The project encompasses a total of 26,000 square metres and completion is scheduled for the third quarter of 2020. Other tenants at the In 2019, Vasakronan’s lending took property are COWI and UHR, the Swedish Council for Higher Education. a further step in a green direction. Investors around the world, primarily in Asia and Central Europe, are seeking serious investment alternatives in the type of Dark Green debt instrument the company offers. During the year, the company has for the first time issued three green bonds denominated in Japanese yen, American dollars and Australian dollars, respec- tively. Of the total SEK 16.5 billion borrowed during the year, 86% was green. The Swedish Tax Agency at Nya Kronan During the year, the Swedish Tax Agency signed a lease for 42,000 square metres at Nya Kronan in central Sundbyberg. The lease is for ten years and occupancy is scheduled for the end of 2021. The agree- ment encompasses two newly constructed buildings and one existing building that JUVELEN – A SHIMMERING ACQUISITION will be renovated. The agreement with IN UPPSALA the Swedish Tax Agency means the prop- In June, Vasakronan acquired the office property Juvelen (the Jewel) from erties are now fully let. Nya Kronan will Skanska. Located on Stationsgatan in Uppsala, close to Uppsala central have solar cell panels in the facade and station, Juvelen is only a stone’s throw from Vasakronan’s development prop- erty Magasin X. It includes lettable area of over 8,600 square metres, nearly be certified according to LEED, ideally 7,800 square metres of which comprises office space and approximately with a Platinum rating. 800 square metres encompasses stores and restaurants. The purchase price was based on an underlying property value of SEK 563 million. VASAKRONAN 2019 ANNUAL REPORT 3 STATEMENT BY THE CEO 4 VASAKRONAN 2019 ANNUAL REPORT STATEMENT BY THE CEO Ready to meet tomorrow’s challenges “Vasakronan had another year of record-breaking results. We are now look- ing forward to the inauguration of the completely renovated Sergelhuset and the introduction of Arena, our own co-working concept,” says Vasakronan’s CEO Johanna Skogestig. Best full-year results ever for Vasakronan – again! thing from traditional lettings, turnkey offices and Smart & Why did 2019 go so well? Klart premises to Arena. The turnkey offices are ready for “There are several interconnected factors that contributed to immediate occupancy and in a Smart & Klart office, which our fantastic performance – SEK 13.9 billion after tax. Obvi- even comes with a coffee machine and pot plants, tenants can ously the continued increase in value for attractive properties move in and begin working the same day. With the addition of had a major role. At the end of the year, our collected portfolio the co-working concept Arena, we can offer our customers an was valued at over SEK 156 billion. Another reason was that even higher degree of flexibility and service. It’s a natural com- several of our ongoing projects are nearing completion and plement to our total offering.” have been let under very favourable market conditions. An equally important contributing factor was the successful new Why are tenants demanding more flexibility letting and renegotiations of existing properties.” and what does this mean for Vasakronan? “Markets for many of our customers are all the more volatile, 2020 has been at least equally exciting, hasn’t it? which makes it difficult for them to anticipate what their “Yes indeed! Everyone at Vasakronan is looking forward to needs for premises will be after a few years. As a result, the opening of the new Sergelhuset property in Stockholm’s they’re demanding solutions that give them as much room to most central location. It will include Arena, our own model for manoeuvre as possible. They don’t know if they’ll need more co-working, and introduce an entirely new digital interface floor space or less, another type of premises or another geo- for our tenants. In 2020, Vasakronan also took the first steps graphic location. toward creating a climate-neutral value chain by 2030, where In our view, even going forward most companies will still we not only consider our own operations but also the climate want their own premises that they can apply their own iden- impact we have through our project activities and our tenants’ tity to. But beyond that, they want an offering that gives them use of our properties.” maximum flexibility, like a rubber band. That’s why we think several customers find our full palette of options appealing. Why is it important for Vasakronan It enables and simplifies quick transitions and adaptations. to have its own co-working alternative? An example of something our customers want is the ability to “Arena is an important part of our total office space offering. share conference rooms, reception and other services. This We are noting demand from our customers for a higher can include complementing a head office in the inner suburbs degree of flexibility, so it is important for us to offer every- with workplaces in the city centre.” VASAKRONAN 2019 ANNUAL REPORT 5 STATEMENT BY THE CEO “ Sergelstan is a good example of what we want to create – a part of Stockholm City where everyone wants to be.” JOHANNA SKOGESTIG, CEO OF VASAKRONAN What role do new technological One development property that’s attracting several solutions play for the office offering? tenants is Magasin X in Uppsala. Why do so many “Technological and particularly digital development is advanc- organisations want to have offices there? ing incredibly quickly. The shared digital language RealEstate- “It’s extremely gratifying. Even though there are two years left Core has given us control over all of our data so we can use it until the property’s expected completion, 80% of the office efficiently. So far, this has primarily entailed streamlining and space is already let.