A strong first quarter

Klövern is reporting strong earnings for the first quarter of 2019. Acquisitions, high net moving-in, rising rent levels and continued positive changes in value of properties contributed to the good earnings performance. We have continued to realize our strategy of streamlining and concentration.

Income increased to SEK 896 million in the first quarter of 2019 and to SEK 3,374 million in the past 12 months. Profit from property management improved to SEK 362 million, with the operating margin amounting to 67 per cent. Positive changes in value of properties amounting to SEK 544 million contributed to a profit before tax of SEK 848 million. Net moving-in amounted to SEK 47 million, as compared with SEK 89 million in all of 2018. The two largest moving-in during the quarter were in Åby Arena in Gothenburg, where Åbymässan has moved in on approximately 15,000 square metres and Åby Hotel has opened a new hotel with around 8,000 square metres.

Despite a long period of strong rental growth, particularly in the Stockholm region, rental growth also remained good in the first quarter of the year. The vacancy rate for modern office premises is low in many places, both in Stockholm and in other metro-politan areas, as well as in Klövern’s regional cities. The trend of rising rent levels has been offset to some extent in that many tenants have found a way to decrease their space by switching to a more flexible way of working, but the net effect is positive, as is reflected by the solid development in income.

The property portfolio in Copenhagen, which constitutes 7 per cent of Klövern’s total portfolio, is performing well. Including the two additional lease agreements that were signed in late March/early April, the economic occupancy rate in Klövern’s seven properties in Copenhagen amounts to just over 99.9 per cent. In New York the project at 1245 Broadway is progressing according to plan. The ground-breaking at the parking lot was in January, and ground work in the form of excavation and laying the foundation is now being performed. The state-of-the-art office building will be 22 stories high with a project area of almost 17,000 square metres. It is a clear strategy on Klövern’s part to invest outside of Sweden in order to minimize the geo-graphic risk that focusing exclusively on the Swedish market would entail. We remain open to additional acquisitions of office properties, particularly in Copenhagen and New York.

Project development is an important part of Klövern’s business model. We consistently focus on identifying profitable projects based on our existing property portfolio. In terms of results, in the form of increased property values, the project operations (including development of building rights) contributed SEK 122 million during the first quarter of 2019 and SEK 953 million during the last 12 months. The largest ongoing projects are 1245 Broadway in New York and the soon-to-be-completed Åby Arena in Gothenburg.
In the housing sector, we have continued to act carefully in Klövern Living with a focus on pushing forward local plans and developing the future project portfolio while planned production starts have been postponed. However, through its ownership in Tobin Properties, Klövern has an ongoing project development of housing. These projects will be completed with a high quality.

The first quarter of the year was relatively quiet on the transac-tion front. This came on the heels of a very intensive year in 2018 in which we were involved in 55 transactions to streamline our portfolio while at the same time entering two new foreign mar-kets. In the first quarter of 2019 we strengthened our position in Stockholm by acquiring a high-quality office property in Kista with a lettable area of around 18,700 square metres. The prop-erty is a good complement to Klövern’s already strong presence in Kista. Five smaller divestments were carried out during the quarter as part of the ongoing streamlining of the portfolio.

Klövern’s financial strength continues to be good. The adjusted equity ratio improved during the quarter to 38.2 per cent. At the same time, the average period of tied-up capital amounted to 4.3 years, while the average fixed-interest period was 2.6 years, and as much as 90 per cent of the credit volume was interest rate hedged or at a fixed rate. The capital market continues to offer relatively good liquidity. During the first quarter of 2019, we issued SEK 1,600 million under an existing unsecured green bond programme.

The net asset value per share (EPRA NAV) amounted to SEK 18.15, corresponding to an increase of 3 per cent since the end of last year and 22 per cent during the past 12 months.

Overall, we are pleased with the result for the first quarter of the year and look forward to a continued good development during the rest of 2019.

Rutger Arnhult, CEO Klövern