vasakronan ab · a3 bbb bbb baa2 aa bbb- baa2 baa2 a-/a3 a-bbb-issues the world’s first corporate...
TRANSCRIPT
Investor Presentation – 31 December 2019
VASAKRONAN AB
2
DISCLAIMER
IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING.
The following applies to the presentation materials contained in this document, and you are therefore advised to read this carefully before reading, accessing or making any other use of the presentation materials. Inaccessing the presentation, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. This presentation is anadvertisement for the purposes of Directive 2003/71/EC (as amended) and not a prospectus, listing particulars or offering memorandum.
These materials have been prepared by and are the sole responsibility of Vasakronan AB (publ) (the “Company”) and have not been verified, approved or endorsed by any lead manager, bookrunner or underwriterretained by the Company.
These materials are provided for information purposes only and do not constitute, or form part of, and should not be construed as, any offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of, orany solicitation of any offer to underwrite, subscribe for or otherwise acquire or dispose of, any debt or other securities of the Company (“securities”) and are not intended to provide the basis for any credit or any otherthird party evaluation of securities. If any such offer or invitation is made, it will be done so pursuant to separate and distinct documentation in the form of a prospectus, offering circular or other equivalent document (a"prospectus") and any decision to purchase or subscribe for any securities pursuant to such offer or invitation should be made solely on the basis of such prospectus and not these materials. No person is authorised to giveany information or to make any representation not contained in and not consistent with this presentation and, if given or made, such information or representation must not be relied upon as having been authorised by oron behalf of the Company.
These materials should not be considered as a recommendation that any investor should subscribe for or purchase any securities. Any person who subsequently acquires securities must rely solely on the finalprospectus published by the Company in connection with such securities, on the basis of which alone purchases of or subscription for such securities should be made. In particular, investors should pay special attention toany sections of the final prospectus describing any risk factors. The merits or suitability of any securities or any transaction described in these materials to a particular person’s situation should be independentlydetermined by such person. These materials offer no investment, financial, legal, tax or any other type of advice to, and the Company has no fiduciary duties towards, any recipients and therefore any such determinationshould involve, inter alia, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of the securities or such transaction.
These materials may contain certain statements that constitute projections and forward looking statements. Such forward-looking statements may include, without limitation, statements relating to the Company’sbusiness strategies, trends in its business, competition and competitive advantage, regulatory changes, and restructuring plans. Words such as believes, expects, projects, anticipates, seeks, estimates, intends, plans orsimilar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Any such forward-looking statements involve known and unknown risks,uncertainties and other factors, both general and specific, which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements. Any such forward-looking statements will be based on numerous assumptions regarding the Company’s present and future business strategies and theenvironment in which the Company will operate in the future. Investors may get back less than they invested. The Company gives no assurance that any favourable scenarios described are likely to happen, that it ispossible to trade on the terms described herein or that any potential returns illustrated can be achieved. Further, any forward-looking statements will be based upon assumptions of future events which may not prove tobe accurate. A number of important factors could cause actual results, performance or achievements to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. Any such forward-looking statements in these materials will speak only as at the date of these materials. The Company does not intend to update these forward-looking statements except as may berequired by applicable securities laws and assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
The Company makes no representation nor gives any warranty as to the results to be obtained from any investment, strategy or transaction, nor as to whether any strategy, security or transaction discussed herein maybe suitable for recipients’ financial needs, circumstances or requirements. Recipients must make their own assessment of such strategies, securities and/or potential transactions detailed herein, using such professionaladvisers as they may require. No liability is accepted for any direct or consequential losses arising from any action taken in connection with or reliance on the information contained in these materials even where advisedof the possibility of such losses.
These materials are confidential, are being made available to selected recipients only and are solely for the information of such recipients. These materials must not be reproduced (in whole or in part), redistributed orpassed on to any other person or published, in whole or in part, for any purpose without the prior written consent of the Company. The information contained in this presentation has not been subject to any independentaudit or review.
These materials are not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. In particular, these materials (a)are not intended for distribution and may not be distributed in the United States or to U.S. persons (as defined in Regulation S) under the United States Securities Act of 1933, as amended and (b) are for distribution in theUnited Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) persons falling within Article 49(2)(a)to (d) (“high net worth companies, unincorporated associations etc.”) of the Order (“Relevant Persons”). The presentation is directed only at relevant persons and must not be acted on or relied on by persons who are notRelevant Persons. Any investment or investment activity to which this presentation relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This presentation may only becommunicated to persons in the UK in circumstances where section 21(1) of the Financial Services and Markets Act 2000 does not apply to the Company. These materials are not intended for Retail Clients as defined inDirective 2014/65/EU on markets in financial instruments (MiFID II) and should not be passed on to any such persons.
3
1. Vasakronan Overview 4
2. Business Description 10
3. Swedish Real Estate Market Overview 19
4. Financials 25
5. Funding 31
6. Appendix 38
AGENDA
1. VASAKRONAN
OVERVIEW
Byt ut bild
5
VASAKRONAN IN BRIEFVasakronan owns, develops and manages office properties in Sweden
As of 31 December 2019. FX-rate EURSEK 10,50
Contracted Rent by Geographic Market
Contracted Rent by Property Type
Stockholm
Gothenburg
Malmö
Uppsala• Market value EUR 14.9 bn
• Total area (thousand) 2,300 sqm
• Contracted rent EUR 685 m
• Number of properties 174
• Number of employees 304
• Largest Nordic real estate company
• Modern and high quality portfolio in prime locations
• Strong and committed long-term owners
63%
19%
10%
8%
Stockholm
Gothenburg
Malmö
Uppsala
74%
18%
8%
Offices
Retail
Other - hotel, residential andparking
23.7
20.1
14.913.7
12.010.8
9.1 8.77.6 7.1 6.3
0
2
4
6
8
10
12
14
16
18
20
22
24
6
LARGEST REAL ESTATE COMPANY IN THE NORDICSInvestment property value, EUR bn
Source: Q4 report of each of the companies above for the year 2019.
As of 31 December 2019. FX-rate EURSEK 10,50
A3
BBB
BBB
Baa2 AABBB- Baa2
Baa2
A-/A3
A-
BBB-
Issues the world’s firstCorporate green bond
7
TIMELINE & KEY EVENTSConsistent growth over a period of two decades. Focus on markets with high growth and liquidity
1.9
7.1 6.8 7.3 7.8 8.0 8.3 8.79.8
11.012.0
13.214.9
0
2
4
6
8
10
12
14
16
1998 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ma
rke
t v
alu
e E
UR
bn
CAGR 2008-2019: 9.3 %
AP Fastigheter established
by the AP-funds
AP Fastigheter acquires Vasakronan EUR 4 bn
Carbon neutral operations
Certified according to ISO 14001
Divestment of a portfolio of residential properties for
EUR 0,7 bn
Signs Sweden´s first Green lease agreement
Rating assigned by Moody’s –A3
Issues the world’s first green CP
Continously improved quality in the portfolio through transactions and project development amounting to EUR 0.2-0.4 bn per annum
As of 31 December 2019. FX-rate EURSEK 10,50
8
THE AP-FUNDS’ ROLE IN THE SWEDISH PENSION SYSTEMVasakronan is the Swedish National Pension Funds´ main exposure to the Nordic office market
PARLIAMENT
MINISTRY OF FINANCE
VASAKRONAN HOLDING
VASAKRONAN
SWEDISH NATIONAL PENSION FUND LAW
EXTERNAL AUDITORS
25 % 25 % 25 % 25 %
COMMENTS
• AP-funds are closed-end buffer-funds and part of the Swedish national income pension system• All AP-funds are independent of the government. The funds´ operations are regulated by the Swedish National Pension Funds Act• The AP-funds support Vasakronan with a credit commitment of EUR 1.7 bn and CoC-clause in all funding
The First Swedish National Pension Fund
The Second Swedish National Pension Fund
The Third Swedish National Pension Fund
The Fourth Swedish National Pension Fund
9
ASSIGNED A3 (STABLE) RATING BY MOODY’S
“Largest real estate company by asset value in the Nordics with a dominant position in Sweden’s most attractive office markets”
“100% ownership by AP funds, and ultimately the government, and our expectation of
extraordinary support"
Largest real estate
company in Sweden with
dominant position in
prime office locations
Long-term Government
related owners (AP 1-4)
25% of rental revenues
stem from creditworthy
government and public
sector tenants
Substantial amount of
liquidity supported by a
credit facility from the
owners amounting to
EUR 1.7 bn
High share of
environmentally certified
properties with high
ratings
LTV policy below 55 %
The project portfolio by
nature includes a
speculative element but
represents a relatively
small part of total asset
with Stable outlook
byA3A3
1 2 3 4
5 76
2. BUSINESS
DESCRIPTION
11
THE STRATEGYSustainability is a natural, integral part of Vasakronan’s organization and business. This applies to the board, management and our everyday activities
PRIME LOCATION
GROWTH
MARKETSOFFICES AND CITY RETAIL
Focus on locations in Sweden with strong economic growth
and high liquidity
TRANSACTIONS AND PROJECT DEVELOPMENT
ACTIVE ASSET MANAGEMENT
The premises are modern, efficient and centrally located in areas
with good communication. Retail is concentrated to city centers
The property stock consists of premises that remain attractive even in times of
less demand
The property stock is continuously developed in order to meet the demand
and improve quality
We have a clear and well balanced strategy for transactions and project
development
12
A SUSTAINABLE BUSINESS MODEL
CO2 EMISSIONS
As of 31 December 2019.
COMMENTS
• The energy consumption has been more than halved since 2009
• Renewable or climate-neutral energy have reduced carbon dioxide emissions in Scope 1, Scope 2 and emissions from air travel withapproximately 99 percent between 2006-2019
• As at 31 December, 2019, 85 percent of the portfolio have environmental certification. The certification system mostly used is LEED and 72 percent of the portfolio are certified according to LEED on a Gold or Platinum level
• The target is to have a 100 percent green asset portfolio
• In November 2013, Vasakronan was proud to be the first company in the world to issue green bonds
GRESB, Global Real Estate Sustainability Benchmark 2019
0
5000
10000
15000
20000
25000
30000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-99%
MAGASIN X, SWEDEN´S LARGEST WOODEN OFFICE BUILDING
13
Birger Jarlsgatan, Stockholm CBD Läppstiftet, Gothenburg CBD
Aura, Malmo Kista Science Tower, Stockholm Kista Science City
MODERN AND HIGH QUALITY PORTFOLIO IN PRIME LOCATIONS
14
DIVERSIFIED PUBLIC AND MULTI TENANT BASE
4 153 commercial contracts (residential and garage not included)
CONTRACTED RENT BY SECTOR,% OF PROPERTY PORTFOLIO
TENANT TYPE SHARE IN %
Swedish Police Authority Public 3%
Ericsson Private 3%
H&M (Offices and stores) Private 3%
Swedish Prison and Probation Service Public 2%
Swedish Social Insurance Agency Public 2%
Swedish National Courts Administration Public 1%
Åhléns Private 1%
Handelsbanken Private 1%
KPMG Private 1%
The Riksdag Administration Public 1%
TOTAL 18%
24%
22%
18%
9%
6%
3%
3%
15%
Public sector Services ConsumerGoods
IT
Finance Telecom Industry Other
VASAKRONAN´S TEN LARGEST TENANTS
15
CONTRACTED RENT BY PROPERTY TYPEVasakronan’s revenues are anchored in the office sector with diversification into other segments such as retail
Central Stockholm
inc CBD - Central Business
District
Stockholm
inner suburbs Central Uppsala
UPPSALASTOCKHOLM
Offices
Retail
Other 1)
Offices
Retail
Other 1)
Contracted Rent by Property Type
% of Properties
Contracted Rent by Property Type
% of Properties
1) The category “other” includes residential space, parking and hotels.
As of 31 December 2019.
81%
12%
7%
68%
19%
13%
16
CONTRACTED RENT BY PROPERTY TYPE (CONT’D)…with Stockholm as core city and Uppsala, Gothenburg and Malmo as key hubs
GOTHENBURGMALMO
Offices
Retail
Other 1)
Offices
Retail
Other 1)
Contracted Rent by Property Type
% of Properties
Contracted Rent by Property Type
% of Properties
1) The category “other” includes residential space, parking and hotels.
As of 31 December 2019.
60%
28%
12%
61%
34%
5%
17
MARKET SHARE BY REGIONVasakronan, the largest property owner in its key operating cities and can thus offer customers greater flexibility
GOTHENBURG CBD
CENTRAL UPPSALACENTRAL STOCKHOLM INCLUDING CBD
MALMO CBD AND VÄSTRA HAMNEN
Source: CBRE and Datscha, as of 31 December 2019.
12%
7%
5% 5% 5%
0
5
10
15
20
25
Vasakronan AMF Fabege Hufvudstaden AFA
22%
10% 9%
6% 4%
0
5
10
15
20
25
Vasakronan SkandiaFastigheter
UppsalaAkademi
UppsalaKommun
Castellum
20%
15%
6%
4% 4%
0
5
10
15
20
25
Vasakronan Wihlborgs Balder Volito Midroc
22%
14%
9% 8%
6%
0
5
10
15
20
25
Vasakronan Wallenstam Hufvudstaden Balder SEB
18
Platinan, Gothenburg, EUR 248 m
Kronan, Sundbyberg, Stockholm, EUR 160 m Sergelhuset, Stockholm, EUR 352 m
COMMENTS
• Project development delivers higher return than acquiring properties
• Vasakronan´s project portfolio has delivered an average Internal Rate of Return of 11.5 percent
• Most of the projects are only started if long lease agreements are in place
• Ongoing property developments projects have a total investment volume of EUR 1 366 m, of which EUR 643 m had been capitalized as of 31 December 2019
• The project portfolio represents only 8.4 per cent of total assets
• As of 31 December 2019 the average occupancy rate in major property projects was 69 percent and the percentage of completion was 50 percent
HIGH QUALITY PROJECT PORTFOLIOMost of the project aren’t started until lease agreements are in place
As of 31 December 2019. FX-rate EURSEK 10,50
3. SWEDISH
REAL ESTATE MARKET OVERVIEW
20
MARKET OVERVIEW
STEADY GROWTH IN THE SWEDISH ECONOMYGDP Growth in Sweden, %.
STRONG SWEDISH PROPERTY MARKETTransaction volume, EUR bn
Source: Country economy, SCB, Evidens, National Institute of Economic Research, HUI Research, Eurostat, Sveriges Riksbank.
OFFICE EMPLOYMENTOffice employment, % change in metropolitan regions.
COMMENTS
• Sweden is one of twelve Aaa-rated countries
• The Swedish economy is growing fast compared to the EU as a whole
• This economic environment has created a favourable investment climate in the Swedish property market and has contributed to a rise in property prices
• The transaction volume in 2019 was EUR 21.8 bn
As of 31 December 2019. FX-rate EURSEK 10,50
0,0
5,0
10,0
15,0
20,0
25,0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU
R
Domestic Investors International Investors
(5.2%)
6.0%
2.7%
(0.3%)
1.2%2.6%
4.5%
2.7% 2.1% 2.3%1.2% 1.1%
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Estimate
0.5%
1.7%
3.7%
3.2%
0.9%
3.3%
2.2%
2.7%
4.8%
3.9%
0.5%
1.9% 2.0%
0%
1%
2%
3%
4%
5%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Estimate
2021Estimate
21
POPULATION GROWTHStrong urbanisation trend in Sweden and strong population growth in all of Vasakronan´s cities
MALMOGOTHENBURG
UPPSALASTOCKHOLM
Source: Inhabitants in Swedish municipalities 1950 – 2018, Statistics Sweden, Forecasts: Municipalities’ projections for 2019-2025.
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
1 000 000
1 100 000
1 200 000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E
2021E
2022E
2023E
2024E
2025E
inhabitants
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E
2021E
2022E
2023E
2024E
2025E
inhabitants
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E
2021E
2022E
2023E
2024E
2025E
inhabitants
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E
2021E
2022E
2023E
2024E
2025E
inhabitants
22
MARKET RENTS AND VACANCIES - OFFICESIncreasing office rents in all markets, vacancies continue to decline
MALMO CBDGOTHENBURG CBD
UPPSALA INNER CITYSTOCKHOLM CBD
Source: Cushman & Wakefield. As of December 2019.
Rent / sqm Vacancies, %
0
5
10
15
0
100
200
300
400
500
600
700
800
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
0
5
10
15
0
50
100
150
200
250
300
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
0
5
10
15
0
50
100
150
200
250
300
350
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
0
5
10
15
0
50
100
150
200
250
300
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
As of 31 December 2019. FX-rate EURSEK 10,50
23
RETAIL MARKET OVERVIEWIncrease in Retail Sales 2019 but e-commerce sector accounted for most of the growth
INCREASE IN RETAIL SALESGrowth in Total Retail Sales, %
COMMENTS
• The growth in the retail sector is expected to grow by 3.0 percent in 2019 and 2% in 2020, the steadily growing e-commerce sector accounted for most of the growth
• E-commerce is growing fast and is expected to increase 14 per cent in 2019
• Still a strong demand for retail stores in excellent locations
• E-commerce companies establish physical stores in order to increase sales online, and the other way around
• Although a negative turnover growth in physical stores, the result ofVasakronan’s retail stores renegotiation 2019 showed an increase of 1,9 percent
Source: SCB, HUI Research, E-barometern.
SERGELGATAN STOCKHOLM CBD
3.6% 3.7%
0.7%
2.0% 2.0%
3.4%
5.8%
3.4%
2.1%
2.7%
3.4%
2.0% 2.0%
0%
1%
2%
3%
4%
5%
6%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Estimate
2021Estimate
24
MARKET RENTS AND VACANCIES – RETAIL PREMISESRents and vacancies are stable on the retail premises market
MALMO CBDGOTHENBURG CBD
STOCKHOLM CBD
Rent / sqm Vacancies, %
Source: Cushman & Wakefield and Forum Fastighetsekonomi. As of December 2019 (Uppsala Inner City as of March 2019).
UPPSALA INNER CITY
0
2
4
6
8
10
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
0
2
4
6
8
10
0
100
200
300
400
500
600
700
800
900
1 000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
0
2
4
6
8
10
0
200
400
600
800
1 000
1 200
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
%
EU
R/s
q.m
0
2
4
6
8
10
0
100
200
300
400
500
600
700
800
900
1 000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
(%)
EU
R/s
qm
As of 31 December 2019. FX-rate EURSEK 10,50
4. FINANCIALS
0%
5%
10%
15%
20%
VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI VK MSCI
26
TOTAL RETURNBusiness target - a total return of at least 6,5% over a ten year period, and a total return of 0,5% above the industry average
Notes: (1) MSCI-Index excludes Vasakronan.
Source: MSCI Swedish Property Index.
20172011 2012 2013 2014 2015 2016 2018201010 year average
Vasakronan
MSCI Swedish Property Index(1)
9,9%
11,5%
Capital Growth
Income Return
2019
COMMENTS
Vasakronan has delivered a better total return than the Swedish Property Index MSCI nine out of ten years
External valuation is carried out twice a year by independent firms of appraisers pursuant to the RICS Red Book
27
STABLE OCCUPANCY RATEOccupancy rates have been stable over the cycle. 1,6 % of the office vacancy is related to project development
OCCUPANCY RATE
Investment Properties
Projects
VACANCIES
%
5,9%
5,9%
As of 31 December 2019.
91,9 92,8 93,0 93,0 93,4 92,0 92,6 94,2 93,1 93,1 94,1
0
10
20
30
40
50
60
70
80
90
100%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
4,3%
1,6%
28
LEASE AGREEMENTS AND CONTRACT RENEWALSDuring the last 12 months the rents on renewals have increased by 12,0 %
DURATION IN CONTRACT PORTFOLIOAverage Term 4,0 Years (Share, %)
ANNUAL LEASING VOLUMESEUR m
COMMENTS
An average lease agreement in the Swedish market is between 3 and 7 years
Lease agreements up to 25 years in properties built for special purposes, for example courts and life science
Tenants normaly pays for heating, cooling, waste management and property tax
Lease agreements are adjusted according to inflation with a protection against deflation
Of all the contracts up for renegotiation over the last 12 months, more than 70 percent of the tenants decided to extend their contracts
Due to rising rents the rent on renewals have increased by 12 percent in total during the last 12 months
40 40 43 43
51
38
59
45
58
49
94
0
20
40
60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190%
20%
40%
60%
2020 2021 2022 2023 and after
As of 31 December 2019. FX-rate EURSEK 10,50
29
INCOME STATEMENTEBITDA and EBITDA margin have been improved over time due to growth in revenues and stable expenses
INTEREST EXPENSESEBITDA
RENTAL REVENUE
COMMENTS
Revenues have increased by approximately 31 percent compared to 2009
Property expenses have been stable at a low level during the same period
EBITDA and EBITDA margin have been improved over time
EBITDA Margin
63%66%
68%69% 69%
70%
EUR/sqm
71%70%70%
73%75%
511 525576 568 574 562 572 595 618
640 670
0
100
200
300
400
500
600
0
100
200
300
400
500
600
700
800
900
1000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU
R/s
qmE
UR
m324 344
392 399 399 388 399 416436 470
500
0
100
200
300
400
500
600
0
100
200
300
400
500
600
700
800
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU
R/s
qmE
UR
m -126 -121
-157 -150 -143-120
-107 -110 -111-99 -108
-250
-200
-150
-100
-50
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU
R m
As of 31 December 2019. FX-rate EURSEK 10,50
30
CAPITAL STRUCTURE AND INTEREST COVERAGE RATIOLTV has been below 50% since 2011 and ICR has been way above the minimum of 2,0 times
LOAN TO VALUE
%INTEREST COVERAGE RATIO
2,0 Times
ICR & LTV TARGET
• Interest Coverage Ratio has improved substantially and is well above the minimum of 2,0 times
• LTV shall have maximum of 55 percent
• LTV has been below 50 percent since 2011
• LTV is accepted be lower at times of high property values and vice versa
• Limited Secured LTV at 7 percent of Total Assets
DIVIDEND POLICY
• Under normal circumstances dividends shall correspond to 40-60 percent of the Group's profit before value changes and after taxes
• In order to avoid over capitalization, larger dividend can be paid in periods of rising property values
• In times of negative property value development, dividends may need to be lower or none, and if required, capital injection will be requested from the owners
times
52% 52%49% 48%
46% 46%44% 43% 43%
41%38%
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2,8 2,92,5
2,7 2,83,2
3,7 3,8 3,9
4,7 4,6
0
1
2
3
4
5
6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
55 %
As of 31 December 2019.
5. FUNDING
32
GOVERNMENT BACKED OWNERSHIP STRUCTUREVasakronan is the Swedish National Pension Funds’ strategic investment in the Swedish office market. Therefore, they are supporting the Company with a RCF and CoC clauses on all debt instruments.
CREDIT FACILITY
Vasakronan has a EUR 1,7 bn revolving credit
facility with the owners.
The agreement has a constant maturity and can
be terminated with a notice period of 24 months
The commitment can be used for general
corporate purposes
Gives extremely strong liquidity position and
lowers risk of short-term funding
CHANGE OF CONTROL
The change of control clause covers all our
capital market and bank funding. It is one
example of our owners’ long-term commitment
which provides security to our investors
Change of Control occurs when the aggregate
holdings of AP Funds ceases to represent at
least 51 per cent. of the total voting rights
represented by the shares and the rating is
lowered by at least one full rating notch
33
DIVERSIFIED FUNDINGWith high proportion of green financing
DEBT PORTFOLIO, EUR BN
LARGE PROPORTION OF DARK GREEN FUNDING
6,4
47%Green
Funding
COMMENTS
• Vasakronan has a diversified funding with a broad investor base
• Limited Secured LTV at 7 percent of Total Assets
• First corporate in the world to issue a Green Bond and a Green Commercial Paper
• Dark green Second Opinion from CICERO and an Impact Report that is validated by the auditors
Commercial Papers0,7
Bonds SEK2,4
Bonds NOK1,0
Bonds EUR0,4
Bonds JPY0,1
Bonds AUD0,1
Bonds USD0,2
Secured bank loans 1,1
Nordic- and European Investment Bank
0,5
As of 31 December 2019. FX-rate EURSEK 10,50
34
VASAKRONAN´S GREEN FINANCE FRAMEWORKVasakronan´s Green Bonds raise funds for projects with environmental benefits
COMMENTS
• Second Opinion from CICERO with Dark Green Shading
• The proceeds from Vasakronan´s green bonds are financingthe following green projects;
o New construction and major renovation – LEED Platina and at least 25 percent below current building regulation (Swedish BBR code)
o Existing buildings – LEED Gold and energy performance
under 100 kWh/sqm
o Solar energy projects
ENERGY CONSUMPTION
-57%
020406080
100120140160180200220
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
kW
h/s
qm
35
DEBT OVERVIEWLow risk due to long Average Fixed Interest Term and long Average Loan Maturity
AVERAGE INTEREST RATE,
FIXED INTEREST TERM AND AVERAGE LOAN MATURITY
DEBT MATURITY PROFILE, AVERAGE OF 5,2 YEARS DEBT – COVER RATIO 166%
COMMENTS
• Credit facility from owners and cash covers all debt maturities and cash flows within 18 months
• Long average fixed interest rate maturity of 5,8 years
• Vasakronan has an ambition to diversify the investor base further in new markets
• Short term debt will be replaced by longer dated funding, Average Loan Maturity has increased by 1.3 years since 2018
0
1
2
3
4
5
6
7
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Years
/ %
Fixed interest term Average loan maturity Average interest rate
0
500
1 000
1 500
2 000
2 500
0–1 1–2 2–3 3–4 4–5 >5
EU
R m
Commercial Papers Secured Bank Loans Bonds SEK Bonds other currencies NIB+EIB
0
500
1 000
1 500
2 000
2 500
Available Liquidity Short term debt
EU
R m
As of 31 December 2019. FX-rate EURSEK 10,50
36
KEY CREDIT HIGHLIGHTS
Government
backed ownership
structure
Largest real
estate company
in the Nordics
Modern and high
quality Office-
portfolio in
prime locations
Strong
financial
performance
Diversified public
and multi
tenant base
Sustainable
Business
Model
with Stable outlook
byA3A3
APPENDIX
38
FINANCIAL POLICYVasakronan has a conservative Treasury Policy with limited risk.
POLICY
FINANCIAL
RISKS
FINANCIAL POLICY ACTUAL AS AT 31 DECEMBER 2019
FINANCING RISK
Average Loan Maturity At least 2 years 5.2 years
Loan Maturing 12 Months Max 40% 19%
Credit Facility from Owners and Cash / Loan Maturity 12 Months At least 100% 166%
INTEREST RATE RISK
Interest Coverage Ratio At least 2,0 times (last 12 months) 4.6 times
Fixed Interest Term At least 2 years 5.8 years
Interest Maturity within 12 Months Max 55% 32%
CREDIT RISK
Counterpart´s RatingAt least A-, or BBB+ for derivatives under
CSAsFulfilled
CURRENCY RISK
Currency Exposure without assets in foreign currency Not allowed Fulfilled
Secured Debt/Gross Assets Max 20% 7%
39
INCOME STATEMENT
Income Statement (EURm) 2017 2018 2019
Rental Revenues 618 640 670
Revenue Growth, % 3,8% 3,5% 4,8%
Operating Expenses (63) (68) (65)
Repairs and Maintenance Expenses (10) (10) (11)
Property Administration (32) (34) (36)
Property Tax (52) (50) (62)
Site Leaseholds 1) (16) (14) --
Net Operating Income 446 464 496
Surplus ratio, % 72,1% 72,5% 74,0%
Central Administration (9) (10) (11)
Profit from Joint Ventures and Associated Companies (0) 15 105
Other Operating Income or Expenses -- -- --
Interest income 0 0 0
Interest expenses (111) (100) (108)
Site Leaseholds 1) -- (14)
Profit Before Value Change and Tax 325 370 469
Change in Value of Investment Properties 759 1 014 1 264
Depreciation of land lease agreements -- -- (1)
Change in Value of Financial Instruments 45 1 (84)
Divested or Impaired Goodwill (2) (6) (7)
Profit Before Tax 1 127 1 380 1 641
Current Tax (9) (11) (22)
Deferred Tax (235) (139) (294)
Profit from Assets Held for Sale -- -- --
Profit for the Period 883 1 229 1 325
Other Items -- -- (0)
Profit for the Period 883 1 229 1 325
1) Reclassification in accordance with IFRS 16 Leasing
40
BALANCE SHEET
Balance Sheet (EURm) Dec 31, 2017 Dec 31, 2018 Dec 31, 2019
Intangible Assets 204 199 193
Investment Properties 12 084 13 232 14 864
Equipment 4 4 4
Investment Properties, site leaseholds 1) -- -- 499
Other Financial Receivables 88 97 201
Total Non-Current Assets 12 380 13 532 15 761
Current Receivables 83 86 112
Cash and Cash Equivalents 136 211 335
Total Current Assets 218 297 447
TOTAL ASSETS 12 599 13 829 16 208
Total Equity 4 893 5 740 6 682
Deferred Tax Liabilities 1 602 1 742 2 035
Debt, site leaseholds 1) -- -- 499
Interest-Bearing Debt 5 564 5 818 6 347
Non-Interest Bearing Liabilities 539 529 645
TOTAL EQUITY AND LIABILITES 12 599 13 829 16 208
1) Reclassification in accordance with IFRS 16 Leasing
41
CASH FLOW STATEMENT
Cash Flow Statement (EURm) Dec 31, 2017 Dec 31, 2018 Dec 31, 2019
Net operating income 446 464 496
Central administration (9) (10) (11)
Add back amortisation and depreciation 1 1 1
Adjustment for other non-cash items (1) (1) (1)
Cash flow from operating activities before interest and tax 437 454 485
Interest Paid, Net (113) (102) (113)
Taxes Paid (assumed to equal current tax) (1) (13) (23)
Cash Flow Before Changes in Working Capital 322 340 349
Change in Net Working Capital 8 6 16
Cash Flow From Operating Activities 330 346 365
Intangible assets -- -- --
Investments in Existing Property (242) (318) (423)
Net Acquisitions/Divestments (42) 180 55
Other PPE, Net (0) (2) (0)
Other Financial Assets -- -- (1)
Dividends from joint ventures -- 15 29
Cash Flow from Investing Activities (284) (139) (340)
Dividends and Group Contribution (381) (381) (381)
Loans to Owner -- -- --
Change in Debt, Interest-Bearing Liabilities 334 256 492
Change in collateral (34) 24 20
Redemption of Financial Instruments (34) (46) (32)
Cash Flow from Financing Activities (115) (147) 99
Cash Flow from the Period (69) 75 124
Opening Balance Cash and Cash Equivalents 204 136 211
Closing Balance Cash and Cash Equivalents 136 211 335
42
CASH FLOW FROM THE BUSINESS AFTER NET INVESTMENTSCash Flow from the business exceeds net investments
( 400)
( 300)
( 200)
( 100)
0
100
200
300
400
500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU
R m
Cash flow from the business
Net investments
Free cash flow before financing
43
YIELD DEVELOPMENTProperty yields offer attractive spread over government bonds in all Vasakronan’s key cities
Source: Cushman & Wakefield, Bloomberg.
-1%
0%
1%
2%
3%
4%
5%
6%
7%
200
5 Q
2
200
5 Q
4
200
6 Q
2
200
6 Q
4
200
7 Q
2
200
7 Q
4
200
8 Q
2
200
8 Q
4
200
9 Q
2
200
9 Q
4
201
0 Q
2
201
0 Q
4
201
1 Q
2
201
1 Q
4
201
2 Q
2
201
2 Q
4
201
3 Q
2
201
3 Q
4
201
4 Q
2
201
4 Q
4
201
5 Q
2
201
5 Q
4
201
6 Q
2
201
6 Q
4
201
7 Q
2
201
7 Q
4
201
8 Q
2
201
8 Q
4
201
9 Q
2
201
9 Q
4
Stockholm CBD Uppsala Inner City Gothenburg CBD Malmö CBD Swedish 10Y Gov Yield
44
LONG TERM TARGETS
FINANCIAL
A total return of at least 6,5 percent per year
A total return of at least 0,5 percentage points higher than the real estate sector
ENVIRONMENTAL
Our properties are self-sufficient and need no purchased energy
We have halved our power requirements
Our business and those of our customers generate no waste that is unable to be recycled or reused
Our business is climate-neutral by 2030
We build our properties using renewable, recycled or reused materials
All of our financing is green
We are ranked as the most sustainable property company in the world
SOCIAL
All employees act in accordance with our values and our Code of Conduct
We have a positive work environment free from negative stress
Discrimination and harassment do not occur at our workplaces
The design of our properties contributes to the security, safety and health of those both inside and outside them
Suppliers work in accordance with our Code of Conduct for suppliers
We reflect the society in which we work in terms of gender, ethnicity and age
We have no workplace accidents at our construction sites