Annehem Fastigheter : Half-year Report January-June 2021

Half-year report January-June 2021

Annehem enters Helsingborg

April-June

• Rent revenue for the period amounted to SEK 45.5 million (36.7)
• Net operating income amounted to SEK 39.6 million (27.8)
• Income from property management amounted to SEK 21.9 million (6.8)
• Earnings per share amounted to SEK 0.34 (0.09)
• Investments in existing properties amounted to SEK 12.2 million
• Acquisition of Peab Center Helsingborg at a fair value amounting to SEK 131 million - certified in accordance with Swedish Green Building Council Silver, with energy classification B
• Purchase of ground leases in Helsinki at a value of EUR 9.2 million
• Acquisition of logistics property in Södertälje at an underlying property value of SEK 96.5 million - will be certified in accordance with Swedish Green Building Council Silver, with energy classification B

Q2

January-June

• Rent revenue for the period amounted to SEK 90.6 million (69.3)
• Net operating income amounted to SEK 76.4 million (49.4)
• Income from property management amounted to SEK 41.2 million (11.2)
• Earnings per share amounted to SEK 1.03 (0.18)
• Long-termnet asset value per share amounted to SEK 37.9 (26.6)
• The fair value of investment properties amounted to SEK 3,545.9 million (2,912.1)
• Investments in existing properties amounted to SEK 34.7 million
• Coop Mega moved into Carl Berner Torg in February

Net operating income	Property value	Economic occupancy rate
30 June 2021	30 June 2021	30 June 2021

SEK76million	3,546					95%
SEK		million
Summary of the Group's performance
			Apr-Jun		Jan-Jun	Full year
SEK million		2021 1		2020 2	2021 1	2020 2	2020 3
Rent revenue		45.5		36.7	90.6	69.3	151.5
Net operating income		39.6		27.8	76.4	49.4	121.4
Income from property management		21.9		6.8	41.2	11.2	16.0
Income from property management excl. Items affecting comparability	21.9		6.8	41.2	11.2	45.0
Income from property management excl. Items affecting comparability per share, SEK	0.37		0.12	0.70	0.19	0.76
Net income for the period		20.1		5.1	60.9	10.4	71.8
Net income for the period per share, SEK		0.34		0.09	1.03	0.18	1.22
Net loan-to-value ratio, %		35.1		59.7	35.1	59.7	33.1
Equity/assets ratio, %		54.8		43.9	54.8	43.9	54.4
Interest-coverage ratio, multiple			2.9		1.5	2.8	1.4	1.4
Interest-coverage ratio excl. items affecting comparability, multiple		2.9		1.5	2.8	1.4	2.0
Economic occupancy rate, %		95.1		94.0	95.1	94.0	95.5
Return on equity, %			0.9		0.3	2.9	0.7	3.5
Surplus ratio, %		87.2		75.7	84.4	71.2	80.1

1. The financial statements for the period were prepared with legal consolidation in accordance with IFRS 10.
2. The financial statements for the period were prepared in accordance with the method for combined financial statements, see Note 5 for more information.
3. The financial statements for the period were prepared in accordance with a combination of the method for combined financial statements (see Note 5) and legal consolidation in accordance with IFRS 10. Annehem Fastigheter Group was created successively through acquisition of property companies from Peab in 2020. From the date of each legal acquisition, legal consolidation occurred in accordance with IFRS 10.

Q2

CEO's comments

Continued delivery in line with established growth strategy

Annehem continues to grow and develop in a somewhat more stable operating environment. Things are moving in the right direction, but unfortunately, it is too early to say that we have seen the end of the pandemic. The pace of vaccinations has been impressive, allowing the country to start gradually opening up, and thus enabling us to meet one another to a greater extent than we have for a long time. Offices are beginning to be cautiously staffed again and many people are looking forward to meeting their work colleagues again, while employers see challenges in building corporate culture and implementing changes in a world in which physical meetings have been severely restricted for such a long time.

During the second quarter, income from property management rose 10 percent compared with the preceding quarter. The economic occupancy rate was unchanged at 95 percent. This, in combination with long-term leases of an average of 5.4 years with strong tenants, comprises a strength for Annehem's operations, also in more challenging times.

The revaluation of our properties resulted in a marginal value increase. The underlying trend, which was positive, was reduced by the stronger krona against our exposure to the NOK and EUR. The net asset value per share amounted to SEK 37.9.

Annehem's loan-to-value ratio amounted to 35 percent. This, in combination with the stability of the Company's operations and the possibility of raising green loans, considerably improved Annehem's opportunity to secure less expensive financing.

Modern office properties in growth areas

Jörgen Lundgren, CEO

Annehem's property portfolio mainly comprises flexible and environmentally compatible office properties in geographies with strong growth in Sweden, Norway and Finland. We are convinced that this is a major advantage in an office market under change. The dialogue with existing and potential customers is characterised by a heightened uncertainty regarding the size of premises that will be needed and how these should be structured. Annehem has an excellent starting point as complexity increases and companies are looking for new, sustainable premises solutions, in which adaptability and flexibility will be decisive. The importance of this was emphasised by the pandemic, which further increased the demand for this type of premises. Location has always been important, with demands on good transport links in attractive environments in which employees thrive and can develop. The location and design of the premises strengthen companies' attractiveness and their brands. Naturally, companies also continue to prioritise efficiency and cost savings, which is reflected in such metrics as lease cost per employee, combined with future costs for customisation of existing premises or relocation to new premises.

Continued work with our sustainable business model

During the quarter, Annehem took over the Peab Center Helsingborg (Jupiter 11) property, in Helsingborg, which is certified to the Swedish Green Building Council Silver level with energy classification B. Also during the quarter, Annehem acquired a logistics property in Södertälje. The property is being built for Postnord, which has signed a ten-year lease. Environmental certification will take place in accordance with the Swedish Green Building Council Silver with energy classification B. This acquisition also includes a development right in this expansive logistics area. The logistics property diversifies Annehem's property portfolio in a highly exciting and expansive property segment.

Furthermore, a key step for the Company is the preparations that have been initiated and which were further accelerated during the quarter to achieve certification according to Green Equity. Our property portfolio, which largely comprises modern, newly built office properties in expansive cities, provides us with favourable conditions to meet the demands made regarding green rent revenue.

Annehem owns three properties in Helsinki, which are certified according to LEED Platinum. These properties were ground leases, where the Company chose during the quarter to utilise a time-limited option that enabled the purchase of the ground leases. This means that the property is at the full disposal of the Company, at the same time as the attractiveness of these properties further increases as foreign investors, in particular, often demand ownership rights.

During the quarter, Annehem raised additional financing through green loans on significantly better terms.

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Q2

Market commentary

During the quarter, optimism regarding growth in Sweden strengthened further. The Swedish National Institute of Economic Research (the "NIER") forecasts growth of 4.4 percent, while the government is more positive, predicting GDP of 4.7 percent this year. The corresponding forecast GDP growth for our neighbouring countries, where Annehem also has operations, was 3.51 percent for Norway and 3.01 percent for Finland. In this context, it is naturally important to make reservations for a further wave of the pandemic occurring. The healthy growth is not expected to drive inflation to any great extent, which is basically positive for property companies' borrowing costs.

Increased requirements and demands for flexible and environmentally compatible office premises

Companies also foresee opportunities to combine working from home with the important physical presence in the office. This entails that the number of employees in the office will vary to a larger extent than previously, and it will be even more important for property owners to be able to offer flexible office spaces. Well-being and work environment are in focus and offices need to support the success of this transition. The assessment of rent levels is more clearly shifting from cost per sqm to cost per employee. As a property owner, it will be vital to work close to and together with the tenants. Those who succeed in this will facilitate the transition for their tenants in a time when uncertainty is greater regarding future office space requirements. In this shared challenge, Annehem has favourable conditions for growth.

Jörgen Lundgren

CEO

1 Source: Nordic Outlook May 2021, SEB

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This is Annehem

Fastigheter

Business concept

Annehem Fastigheter owns and manages high-quality commercial, community service and residential properties located near good transport links. The properties are located in growth areas in the Nordics and possess a clear environmental profile. Annehem Fastigheter builds lasting relationships and value through management close to customers.

Vision

Annehem Fastigheter is to always be the number one choice for customers and employees wherever we choose to operate.

Mission

Annehem Fastigheter creates attractive and sustainable meeting places and homes. We believe that workplaces, meeting places and homes are tools for nurturing growth and attractiveness. The positive development of our customers in turn creates growth and attractiveness in the cities in which we operate.

Property portfolio

Annehem Fastigheter's current property portfolio has the following geographic range:

• Capital Region: Stockholm, Helsinki and Oslo
• South Region: Malmö, Ljungbyhed, Ängelholm, Gothenburg and Helsingborg

Q2

Capital Region

Property value, SEK 2,441 million

South Region

Property value, SEK 1,105 million

	Helsingfors
Oslo	Stockholm
Göteborg
Ängelholm
Helsingborg
Malmö

Ultimes I&II in Finland

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Comments on

the Group's performance

Income statement

Second quarter

Rent revenue amounted to SEK 45.5 million (36.7), other property income amounted to SEK 11.2 million (5.6), and total property expenses to SEK -17.0 million (-14.5), which means that net operating income increased to SEK 39.6 million (27.8). The positive trend for rent revenue was mainly attributable to the additional properties compared with the year-earlier period, but also to somewhat lower vacancies compared with the preceding year. The increase in rent revenue contributed to a sharp improvement in the surplus ratio from 76 percent in the second quarter of 2020 to 87 percent in the second quarter of 2021.

Other property income developed positively following the rental guarantees issued (by Peab) for Peab Center Malmö, Ultimes I&II and the newly added Peab Center Helsingborg, which amounted to SEK 2.4 million during the quarter. The guarantees, made by Peab, cover 100 percent of the vacancies in Peab Center Malmö (from 1 March 2020), Ultimes I&II (from 1 July 2020), and Peab Center Helsingborg (from 1 May 2021). These guaranties are valid until the areas are let, but not longer than for 36 months from the issuing date.

Income from property management amounted to SEK 21.9 million (6.8) in the quarter. Interest expenses amounted to SEK -11.4 million (-13.1) and decreased year-on-year, as a result of lower indebtedness. Other financial items amounted to SEK 1.7 million and mainly comprised currency effects of SEK -4.6 million and changes in value on fixed-interest derivatives and currency futures of SEK 6.3 million.

The effects of unrealised changes in value of properties amounted to SEK 5.5 million (0.6).

Tax expense for the period amounted to SEK -7.4 million (-2.3). Tax expense is due primarily to deferred tax on the growth in value of the property portfolio and the market valuation of derivatives.

Income for the period amounted to SEK 20.1 million (5.1).

First six months

Rent revenue amounted to SEK 90.6 million (69.3), other property income amounted to SEK 20.8 million (10.2), and total property expenses to SEK -34.9 million (-30.2), which means that net operating income increased to SEK 76.4 million (49.4). The positive trend for rent revenue was mainly attributable to the additional properties compared with the year-earlier period, but also to somewhat lower vacancies. The increase in rent revenue contributed to a sharp improvement in the surplus ratio from 75.7 percent in the second quarter of 2020 to 87.2 percent in the second quarter of 2021.

Other property income developed positively following the rental guarantees issued (by Peab) for Peab Center Malmö, Ultimes I&II and the newly added Peab Center Helsingborg, which amounted to SEK 4.1 million during the first six months. The guarantees, made by Peab, cover 100 percent of the vacancies in Peab Center Malmö (from 1 March 2020), Ultimes I&II (from 1 July 2020), and Peab Center Helsingborg (from 1 May 2021). These guaranties are valid until the areas are let, but not longer than for 36 months from the issuing date.

Income from property management amounted to SEK 41.2 million (11.2) in the quarter. Interest expenses amounted to SEK -23.3 million (-26.3) and decreased year-on-year, as a result of lower indebtedness. Other financial items amounted to SEK 3.3 million and mainly comprised currency effects of SEK 4.6 million and changes in value on fixed-interest derivatives and currency futures of SEK -1.3 million.

The effects of unrealised changes in value of properties amounted to SEK 35.2 million (3.9).

Tax expense for the period amounted to SEK -15.5 million (-4.8). Tax expense is due primarily to deferred tax on the growth in value of the property portfolio and the market valuation of derivatives.

Income for the period amounted to SEK 60.9 million (10.4).

Q2

Net operating income per quarter

SEK million

45

40

35

30

25

20

15

10

5

0

2020 2020 2020 2021 2021

Q2 Q3 Q4 Q1 Q2

Income from property management per quarter

excl. items affecting comparability

SEK million

23

21

19

17

15

13

11

9

7

5

2020 2020 2020 2021 2021

Q2 Q3 Q4 Q1 Q2

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