2019 Annual Report and Sustainability Report Market leader in secure facilities SPECIALFASTIGHETER IN BRIEF Best at secure facilities Specialfastigheter owns and manages properties including correctional facilities, juvenile care homes, courts of law and police properties. These are all special operations that have stringent requirements, particularly in terms of security. We are a safe, secure and proactive property owner that focuses on long-term relationships, and we define both current and future require- ments in close collaboration with our customers. No. of municipalities We are where Specialfastigheter Ongoing investment 100 is present, around volume, around SEK per cent owned by 70 2 the Swedish state From Ystad in the south to billion Haparanda in the north Properties from north to south Our business Our property holdings comprise floor space of around idea 1.1 million square metres and a market value of SEK Based on sustainable busi- 29,037 million. Many of our customers and their ness practices and long-term, operations fulfil vital societal functions and are commercial ownership, spread across the country, from Ystad in the Special fastigheter develops south to Haparanda in the north. and manages properties in Sweden for customers whose The ten municipalities in the country in which operations demand high we have the largest property holdings: security standards. Total net floor area (NFA) No. of properties Municipality owned, sq m per municipality Stockholm 332,651 6 Our mission Kumla 47,019 2 Local ofce Sundsvall Specialfastigheter’s mission is Södertälje 41,913 13 to own, develop and manage Lund 36,725 6 properties with stringent Solna 34,967 1 security requirements in Swe- Kramfors 30,830 3 Local ofce den on a long-term commer- Luleå 29,533 3 Örebro cial basis, wherever there is a Gothenburg 27,739 4 Head ofce Stockholm (joint) national security interest. The Umeå 26,467 3 guiding principle of our oper- Linköping 24,831 2 Head ofce Linköping (joint) ations is to reduce the state’s overall costs. In a competitive Local ofce Gothenburg market, Specialfastigheter Business areas may also own, develop and ■ Prison and Probation Service business area manage properties in which ■ Defence and Judicial System business area there are other kinds of secu- ■ Institutional Care and Other Special Local ofce Operations business area Lund rity interests and pursue other related business. Three customer-centric business areas Prison and Probation Service Defence and Judicial System Institutional Care and Other business area business area Special Operations business area Our largest business area consists Within this business area, we With several facilities around the of just one customer, the Swedish mainly work with customers in the country, the Swedish National Prison and Probation Service, defence and judicial system who Board of Institutional Care (SiS) is which accounts for 39% of the are responsible for national secu- the largest customer in this busi- company’s income. We own rity. Our property management is ness area. Operations in this area Sweden’s three high-security highly important for several of involve the care and treatment of prisons Kumla, Hall and Saltvik Sweden’s central societal functions. young people with psychosocial along with other well-known issues and adults with addiction prisons, such as Hinseberg, Customers problems. Tidaholm and Öster åker within The Swedish Police this business area. The Swedish Armed Forces Customers The Swedish National Courts The Swedish National Board of Customers Administration Institutional Care (SiS) The Swedish Prison and The Swedish Defence Materiel The National Swedish Museums Probation Service Administration (FMV) of Military History (SFHM) The Swedish Defence Research The Swedish Civil Contingencies Agency (FOI) Agency (MSB) The Swedish Enforcement The National Board of Forensic Authority Medicine The Swedish Prosecution The Folke Bernadotte Academy Authority The Swedish Migration Agency Contents Specialfastigheter 2019 Annual Report and Sustainability Report in brief Inside cover The report integrates financial, sustainability and corporate Our values 1 governance-related information to provide a compre­­­­­ 2019 in brief 2 hensive description of Specialfastigheter’s operations. CEO’s statement 4 Our strengths and assets 6 Administration Report Long-term benchmarking 8 The Administration Report can be found on this page Business model 10 and pages 6–108. External conditions Sustainability Report and strategies The Sustainability Report follows the 2016 GRI Standards: Business intelligence 14 Core option and has been the subject of a limited assurance Stakeholder dialogue 16 report by an external auditor. The scope of the Sustainability Materiality analysis 17 Report is detailed in the GRI list of contents on page 52. Sustainable value chain 18 Target areas 20 = Sustainability Report Creating customer value 21 The Statutory Sustainability Report pursuant to Best at security 23 the Annual Accounts Act. Long-term profitability 25 – Supplier collaboration 25 Specialfastigheter Sverige AB (publ) Responsibility for the Company registration number 556537-5945 environment and climate 28 Proactive skills sourcing 30 While every care has been taken in the translation of this Description of operations annual report, readers are reminded that the original annual report, signed by the Board of Directors, is in Swedish. Property portfolio 33 The auditors have only audited the Swedish annual accounts Property development 36 and consolidated accounts of Specialfastigheter Sverige AB Property management (publ) for the year 2019. and operations 39 Financial management 42 Responsibility and governance Risks and risk management 45 Sensitivity analysis 49 GRI Sustainability Report 50 Assurance Report 58 Message from the Chairman 60 Corporate Governance Report 61 Board of Directors 68 Management 70 Financial statements Consolidated financial statements, incl. comments 73 Five-year summary 79 Consolidated notes 80 Parent Company’s financial statements, incl. comments 98 Parent Company’s notes 102 Declaration by the Board 108 Auditor’s report 109 Property holdings 113 Definitions 116 Reporting calendar Inside cover Annual General Meeting Inside cover Addresses Back cover Customers are safe with us a strong local presence and financial stability. Taken together, this makes us a leading supplier At Specialfastigheter, our focus is always on the customer. of secure facilities. We supply secure facilities – secure, adapted and sustain- able premises that actively contribute to our customers’ Our core values – security, long-term planning, proximity operations. We work in close collaboration with our cus- and collaboration – always form part of our daily opera- tomers to identify solutions together that support their tions. Our Code of Conduct also supports us in our daily operations as well as our shared long-term customer rela- work and helps us conduct business in a way that reflects tionship. We have a high level of operational reliability, our values. Security Long-term planning Proximity Collaboration Security issues are our We are a stable company that We have a customised organ- Together we can create highest priority. Our mission invests in the long term isation in which we discuss opportunities to ensure our requires great responsibility together with our customers. plans, needs and wishes customers’ success. and skill. through open dialogue. SPECIALFASTIGHETER 2019 ANNUAL REPORT AND SUSTAINABILITY REPORT 1 2019 IN BRIEF 2019 in brief: Security & Sustainability Security and safety continue to be major and current societal issues, as are the growing demands for long-term sustainability and how we as a property company can move in that direction. In this section, we have collated some of the most significant events for Specialfastigheter during the year. 2019 in figures Total rental income Profit from property management Market value increased increased increased 5.0% 2.1% 6.4% SEK million SEK million SEK million 2,000 2,054 1,500 30,000 1,956 1,410 1,440 29,037 1,846 1,367 25,000 27,288 1,714 1,751 1,200 1,269 1,500 25,002 22,999 1,108 20,000 20,919 900 1,000 15,000 600 10,000 500 300 5,000 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 CO2 emissions 5 years in brief from purchased energy rose 2019 2018 2017 2016 2015 Income from property management, SEK million 2,261 2,138 2,028 1,912 1,867 Net operating income, SEK million 1,631 1,574 1,495 1,409 1,400 0.9% Profit from property management, SEK million 1,440 1,410 1,367 1,269 1,108 EBT, SEK million 2,170 2,825 2,165 2,100 1,474 Net profit for the year, SEK million 1,717* 2,423 1,719 1,638 1,178 CO emissions, % 2 Return on equity, % 14.9 24.2 20.3 22.6 15.6 0 Adjusted return on equity, % 9.9 13.0 12.8 13.7 11.8 Yield, % 5.8 6.0 6.2 6.5 6.8 -20 Rental income, SEK/sq m 1,882 1,793 1,700 1,644 1,618 Occupancy rate, % 98.5 99.0 99.0 98.6 98.7 -40 –54 Surplus ratio, % 72.1 73.6 73.7 73.7 75.0 -60 Net floor area, sq m, thousand 1,090 1,094 1,079 1,088 1,058 Investments including property acquisitions, -80 –75 SEK million 1,029 882 1,398 1,288 419 Market value, investment properties, SEK million 29,037 27,288 25,002 22,999 20,919 -100 2012 2013 2014 2015 2016 2017 2018 2019 2030 Loan-to-value ratio, % 45.9 45.7 53.3 55.9 57.8 Equity/assets ratio, % 39.2 38.3 33.8 32.2 30.2 Outcome Target * The lower profit compared with previous years is mainly due to lower unrealised value changes in investment Our target is to reduce CO2 emissions from pur- chased energy by 75% by 2030 (base year 2012).