Annehem Fastigheter : Half-year Report January-June 2022

Half-year Report January-June 2022	Q2
Strong trend for net
operating income

April-June

• Rent revenue for the period amounted to SEK 54.0 million (45.5)
• Net operating income amounted to SEK 46.2 million (39.6)
• Income from property management amounted to SEK 16.1 million (21.9)
• Income from property management, excl. currency effects amounted to SEK 24.1 million (20.3)
• Earnings per share amounted to SEK 2.20 (0.34).
• Investments in existing properties amounted to SEK 1.6 million (12.2)
• Valuations of investment properties yielded an increase in fair value of SEK 111.2 million (5.5)

January-June

• Rent revenue for the period amounted to SEK 104.5 million (90.6)
• Net operating income amounted to SEK 87.6 million (76.4)
• Income from property management amounted to SEK 36.4 million (40.9)
• Income from property management, excl. currency effects, amounted to SEK 44.4 million (37.9)
• Earnings per share amounted to SEK 4.88 (1.03)
• Long-termnet asset value per share amounted to SEK 46.0 (37.7)
• Investments in existing properties amounted to SEK 6.2 million (34.7)
• The fair value of investment properties amounted to SEK 4,388.5 million (3,545.9).
• Valuations of investment properties yielded an increase in fair value of SEK 253.8 million (35.2)

Net operating income	Property value	Economic occupancy rate
Jan-Jun 2022	30 June 2022	30 June 2022

SEK 87.6million	SEK			million	95%
		4,389
Summary of the Group's performance
			Apr-Jun			Jan-Jun		Full year
SEK million			2022		2021		2022		2021	2021
Rent revenue			54.0		45.5		104.5		90.6	187.8
Net operating income			46.2		39.6		87.6		76.4	155.8
Income from property management			16.1		21.9		36.4		41.2	86.2
Income from property management excl. currency effects			24.1		20.3		44.4		41.2	86.2
Income from property management excl. currency effects per share, SEK		0.41		0.34		0.75		0.79	1.46
Net income for the period			129.9		20.1		288.1		60.9	209.7
Net income for the period per share, SEK			2.20		0.34		4.88		1.03	3.56
Net loan-to-value ratio, %			37.0		35.1		37.0		35.1	38.3
Equity/assets ratio, %			54.2		54.8		54.2		54.8	53.9
Interest-coverage ratio, multiple			2.8		2.8		2.7		2.6	3.0
Economic occupancy rate, %			95.0		95.1		95.0		95.1	93.0
Return on equity, %			5.0		0.9		11.2		2.9	9.2
Surplus ratio, %			85.5		87.2		83.8		84.4	83.0

Q2

CEO's comments

The location, flexibility and sustainability profile of properties is becoming increasingly important

Challenging times also create opportunities

The past quarter's uncertainty has proved challenging for many, especially the property sector. High inflation combined with a higher risk premium on financing has led to interest rate increases for both real estate companies and individuals. While the war in Ukraine is first and foremost a terrible humanitarian tragedy, it has also caused supply chain disruptions and led to longer delivery times and sharp price increases for goods such as building materials.

Those property companies that finance their operations by issuing bonds are hit first and hardest. As a result, we are now seeing players who need to divest large portfolios, which is also creating opportunities for acquisitions.

Strong balance sheet combined with solely bank loan financing

At the end of the first six-month period, we had an unutilised credit framework of SEK 345.0 million and cash of SEK 252.9 million, which means that, under existing loan agreements, we have an acquisition capacity of about SEK 1.5 billion at our disposal. During the quarter, additional green financing was

raised for the fully leased logistics property that we took into possession. This took place at aJörgen Lundgren, CEO considerably lower cost of funds than the original financing raised by Annehem in connection with the

IPO in December 2020. Annehem does not raise capital by issuing bonds, but borrows money from the four largest banks in Sweden, who we perceive to be excellent partners.

Nasdaq Green Equity Designation

We are extremely proud that Nasdaq approved our application for Nasdaq Green Equity Designation on 9 May.

However, we are humbly aware that there is still much to be done since we, as a property company and therefore major energy consumer, need to work together with others to make every contribution we can to this important and absolutely necessary transition.

Value-generating strategic acquisitions and properties taken into possession

During the quarter, Annehem took possession of a logistics property in Almnäs, Södertälje. The property has a strong sustainability profile with Swedish Green Building Council Silver combined with energy class B. The property has been fully leased to PostNord, which is totally in line with our strategy to increase our exposure in an area we refer to as "fine logistics."

In 2020, we concluded acquisition agreements for two housing projects at good levels. We will take the first project in Malmö into possession during Q1 2023 and the second project in Gothenburg during Q2 2024. Both projects will be environmentally certified and hold energy class B.

Stable trend for net operating income

While the pandemic is unfortunately not completely over, the impact on Annehem has been very limited from an economic perspective. Our tenants have obviously been affected like everyone else, but we have found effective solutions together for handling the desired transition via the opportunities that our flexible premises offer. Concessions on rents related to the pandemic amounted to slightly less than SEK 0.5 million since the pandemic started.

During the year, net operating income increased 14.7 percent. The economic occupancy rate was 95.0 percent and the average contract length was 5.5 years. On 30 June, the property value was SEK 4,388.5 million and we noted a capital appreciation of SEK 111.2 million, or 2.7 percent, during the quarter. Higher inflation had a positive impact on our rent revenue, since 97.0 percent of the rental value is derived from index-linked leases. During the quarter, we also noted slightly lower return requirements for our modern office properties in Sweden, while return requirements increased slightly in Oslo and remained unchanged in Helsinki. The net loan-to-value ratio amounted to 37.0 percent.

Offering tomorrow's offices and premises

One segment that has performed well is modern offices in areas well served by public transport, where demand remains high according to several property assessment reports. They report strong demand where tenants have to make fast decisions because these types of office spaces quickly find new tenants. We have also noted a strong direct market for modern offices, where transactions have closed with lower return requirements than in the preceding quarter. The pandemic has accelerated a process

Annehem Fastigheter Half year report January-June 2022

2 | 25

Q2

that has been ongoing for many years. A company's needs for flexibility have increased since it is now more difficult to know when and how often employees will be coming into the office.

This obviously affects property owners like us to varying degrees. The ability to work remotely is fundamentally something positive that, in some cases, could be an advantage for a company in a recruitment process. At the same time, there are employees who have difficulty in working from home due to lack of space, for example. The need to meet co-workers is important for sharing experiences and understanding, which in turn generates creativity and energy.

About 70.0 percent of Annehem's rent revenue comes from modern, flexible and sustainable offices in areas well served by public transport. We are obviously happy about that and will do everything we can to take advantage of the opportunities that also exist in the challenging times we are facing. Annehem has the privilege of working with reputable tenants with long leases.

Market commentary

More and more economists are warning that inflation will lead to a more sustained rise in prices. In the past 12 months (May 2021-May 2022), the Consumer Price Index rose by 7.3 percent in Sweden, 7.0 percent in Finland and 5.7 percent in Norway. Historically high levels for all countries. The Swedish Riksbank has raised its rates twice this year - the latest by a full 50 basis points - and is predicting an interest rate of 3-4 percent over the next few years. The unemployment rate is expected to continue gradually falling in all three countries during 2022 and 2023.

Next year, rent levels for office properties in Stockholm are expected to increase with the index, which is 5-6 percent, and then fall back to 2-3 percent depending on inflation. According to Nordea Economic Outlook (2/2022), the price of homes is expected to fall about 10 percent due to higher interest rates, despite continued population growth. For rental property projects, we have noted a 50-100 bps increase in the return requirement in the market.

Uncertainty is increasing with associated opportunities and challenges

Annehem has been relatively cautious with acquisitions in the strong real estate market we have had for some time, with subsequently very low return requirements. We are now seeing a sharp market correction, especially in the housing segment. That provides opportunities to make successful acquisitions at completely new levels. Annehem is well-equipped to take advantage of these opportunities, with a strong balance sheet and good liquidity and available credit. Demand for our modern, flexible and sustainable offices in areas well served by public transport remains very strong. That gives us the confidence and strength to continue our growth journey towards our communicated financial growth targets.

In autumn 2021, Annehem decided to hedge the interest-rate risk for additional credit volumes with long maturities and now has a three-yearfixed-interest rate. We are expecting higher interest rates that are not only driven by macroeconomic factors but also by new capital adequacy requirements, which are increasing banks' funding costs.

As I will be stepping down from my position at Annehem on 14 August, I would like to take this opportunity to thank all employees for your commitment and the fantastic work we have done together. I would also like to wish my successor, Monica Fallenius, the best of luck.

CEO

Jörgen Lundgren

Annehem Fastigheter Half year report January-June 2022

3 | 25

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 3,155 million

South Region

Property value, SEK 1,234 million

	Helsingfors
Oslo	Stockholm
Göteborg
Ängelholm
Helsingborg
Malmö

Sadelplatsen 4 in Solna

Annehem Fastigheter Half-year Report January-June 2022

4 | 25

Comments on

the Group's performance

Income statement

Second quarter

Rent revenue amounted to SEK 54.0 million (45.5), other property income amounted to SEK 11.8 million (11.2), and total property expenses to SEK 19.6 million (17.0), which means that net operating income increased to SEK 46.2 million (39.6). The positive trend for rent revenue was mainly attributable to the additional properties compared with the year-earlier period.

Other property income amounted to SEK 11.8 million (11.2) and comprised invoiced operating costs, income from short leases and from the rental guarantees issued by Peab for the properties Stenekullen 2, Ultimes I&II and Jupiter 11, which amounted to SEK 1.8 million (2.4) for the quarter. Rental guarantees were issued for 100 percent of the vacant spaces in Stenekullen 2 (from 1 June 2020), Ultimes I&II (from 1 July 2020) and Jupiter 11 (from 1 May 2021) by Peab. These guarantees are valid until the vacant spaces are leased, but for no longer than 36 months from the issuing date.

Income from property management amounted to SEK 16.1 million (21.6) in the quarter. Interest expenses amounted to SEK 13.6 million (11.4), which are somewhat higher than the year-earlier quarter, due to higher borrowing in order to finance the additional properties, and higher costs for interest-rate swaps. Other financial items amounted to SEK -7.9 million (1.3) and mainly comprised currency effects of SEK 0.9 million (-4.6) and changes in value of currency futures of SEK -8.8 million (5.9), which had a negative impact on income from property management.

The effects of unrealised changes in value of properties amounted to SEK 111.2 million (5.5). The effects of changes in value of fixed-interest derivatives amounted to SEK 32.9 million (0.4).

Tax expense for the period amounted to SEK 30.3 million (7.4). Tax expense is due primarily to deferred tax on the growth in value of the property portfolio and the fair value measurement of fixed-interest derivatives.

Income for the period amounted to SEK 129.9 million (20.1).

First six months

Rent revenue amounted to SEK 104.5 million (90.6), other property income amounted to SEK 22.2 million (20.8), and total property expenses to SEK 39.1 million (35), which means that net operating income increased to SEK 87.6 million (76.4). The positive trend for net operating income was mainly attributable to the additional properties compared with the year-earlier period.

Other property income amounted to SEK 22.2 million (20.8) and comprised invoiced operating costs, income from short leases and from the rental guarantees issued by Peab for the properties Stenekullen 2, Ultimes I&II and Jupiter 11, which amounted to SEK 3.8 million (5.4) for the first six months. Rental guarantees were issued for 100 percent of the vacant spaces in Stenekullen 2 (from 1 June 2020), Ultimes I&II (from 1 July 2020) and Jupiter 11 (from 1 May 2021) by Peab. These guarantees are valid until the vacant spaces are leased, but for no longer than 36 months from the issuing date.

Income from property management amounted to SEK 36.4 million (40.9) in the quarter. Interest expenses amounted to SEK 26.0 million (23.3), which are higher than for the year-earlier period, due to higher borrowing in order to finance the additional properties. Other financial items amounted to SEK -

8.1 million (2.9) and mainly comprised currency effects of SEK 6.7 million (4.6) and changes in value of currency futures of SEK -14.8 million (-1.7).

The effects of unrealised changes in value of properties amounted to SEK 253.8 million (35.2). The effects of changes in value of fixed-interest derivatives amounted to SEK 68.4 million (0.3).

Tax expense for the period amounted to SEK 70.4 million (15.5). Tax expense is due primarily to deferred tax on the growth in value of the property portfolio and the fair value measurement of fixed-interest derivatives.

Income for the period amounted to SEK 288.1 million (60.9).

Q2

Net operating income per quarter

SEK million 45

40

35

30

2021	2021	2021	2022	2022
Q2	Q3	Q4	Q1	Q2

Income from property management per quarter

excl. currency effects

SEK million 30

25

20

15

10

5

2021 2021 2021 2022 2022

Q2 Q3 Q4 Q1 Q2

Annehem Fastigheter Half-year Report January-June 2022

5 | 25