Kungsleden increases profit from property management with 66 percent and raises dividend

Year-end report 2014
THE REPORT IN BRIEF

Fourth quarter (October – December)

  · Rental income increased by 14 percent to SEK 524 (460) million and net
operating income rose to SEK 338 (316) million.

  · Profits from property management improved by 19 percent and were SEK 154
(129) million, which corresponds to SEK 0.90 (1.09) per share.

  · Net leasing was SEK 3 (12) million.

Full year (January – December)

  · Rental income increased by 31 percent to SEK 2,193 (1,669) million and net
operating income rose to SEK 1,491 (1,131) million.

  · Profits from property management improved by 66 percent and were SEK 730
(441) million, which corresponds to SEK 5.02 (4.02) per share.

  · Net leasing was SEK 6 (26) million.

Comments on events during and after the quarter

  · During the quarter, an important strategic acquisition of the Kista holdings
was completed. A total of 74,000 square metres of modern office space has been
added to our existing office complex at Kista with the flagship Kista One. The
acquisition means that Kungsleden is now a leading player at one of the
country’s largest workplaces – Kista Science City. During and after the quarter
strategic properties were acquired totalling SEK 2.4 billion. The streamlining
of the property holdings continued with the sale of non-strategic properties for
SEK 300 million at a profit of SEK 11 million.

  · Year-end valuation of all properties was conducted and the result was an
increase in value of almost SEK 600 million, or just over 3 per cent. The
largest positive value adjustment took place in the office segment in Stockholm
and Västerås due to improved net operating income, investments made and lower
yield requirements in the market.

  · Net operating income and profits from property management increased by 7 per
cent to SEK 338 (316) million and by 19 per cent to SEK 154 (129) million due to
larger property holdings and lower property and financing costs.

  · 65 per cent of the subsidiary Nordic Modular Group was sold to Inter IKEA
Investments with the closing in January 2015.

  · The Board proposes a dividend of SEK 1.50 (1.25) per share.

Comments from Biljana Pehrsson, CEO

2014 was a positive and very eventful year for Kungsleden. Extensive efforts
have been made in the ongoing restructuring of our property holdings. During the
year we bought and sold properties at a value of over SEK 5 billion. This is an
impressive achievment by the organisation and it is gratifying to note that all
sales were made at a profit. A unifying theme in the ongoing restructuring
process for our holdings is a gradual concentration into clusters in our
targeted regions and locations. This year, we have witnessed the strength of our
strategy. One example is the office property, Danderyd Kontor, where the vacancy
rate dropped from 10 to 5 per cent in one year.

The Kista acquisition is an important part of our strategy

During the fourth quarter, Kungsleden completed an important strategic
acquisition in Kista worth SEK 2 billion. We will thereby be creating a cluster
at one of Sweden’s most important work sites, Kista Science City. Additionally
during the quarter, we acquired a modern office building complex that is under
construction in Hyllie, Malmö. Through the purchases and sales over the course
of the year, we have achieved our goal of concentrating more than 50 per cent of
our holdings in the major cities Stockholm, Gothenburg and Malmö, of which the
lion’s share is in Stockholm. It is worth remembering that this is a major
change for Kungsleden, which, just a year ago, had 25 per cent of its holdings
in the metropolitan regions. During the quarter, we also continued to streamline
our operations through the sale of Kungsleden’s last property abroad, and we
sold a majority stake in Nordic Modular Group.

Increased value of the holdings

All of our properties were valued at the end of the year. The increase in value
during the quarter was almost SEK 600 million, which corresponds to just over 3
per cent. It is worth noting that the value has increased the most for our
office holdings in Stockholm and Västerås. On a full year basis, the overall
increase in value was over SEK 1 billion of which SEK 186 million is realised
gains from sales. At the end of the year, the value of the property holdings was
SEK 19.6 billion. With the new rights issue completed during the quarter, we
have the financial flexibility to grow our property holdings to SEK 25 billion
as an initial sub-goal. The long-term ambition is to grow the value of the
holdings to SEK 30 billion.

A strong quarter

Operations continued with a positive trend during the fourth quarter. Net
operating income was SEK 338 million, an increase of 7 per cent compared to the
same period last year. In a comparable set of holdings, the net operating income
rose by 3.6 per cent. Profits from property management grew by 19 per cent from
the previous year and totaled SEK 154 million. The trend for interest costs
remained satisfactory with an average interest rate of 5 per cent, compared to
5.8 per cent at the beginning of the year. During the quarter, new leases were
signed for a total of approximately 50,000 sq.m. The financial occupancy rate
was 89 per cent. Profit before tax rose by 204 per cent to SEK 642 million.

Positive outlook

In 2015, I believe we will continue to see this positive development at
Kungsleden in at least three ways. Firstly, we must ensure the potential to grow
net operating income by continuing to be close to our customers and actively
work on property development and profiling. Secondly, we want to grow through
property acquisitions according to our strategy. Thirdly, we will see continued
improvements in Kungsleden’s financing costs. During 2015, we also expect to be
able to put an end to Kungsleden’s tax litigation. Whatever the outcome, we
expect to benefit by being able to soon direct our full attention to business
operations instead of these tax issues. On account of this good performance, the
Board proposes a dividend of SEK 1.50 (1.25) per share for 2014. With the
positive annual results, we have confidence in Kungsleden’s new strategy. We
look forward with confidence to 2015.
For more information, please contact:

Biljana Pehrsson, Chief Executive of Kungsleden | 46 (0)8 503 052 04 |
biljana.pehrsson@kungsleden.se
Anders Kvist, Deputy CEO and CFO of Kungsleden | 46 (0)8 503 052 11 |
anders.kvist@kungsleden.se

www.kungsleden.se
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Kungsleden AB (publ) discloses the information in this press release according
to the Swedish Securities Markets Act and/or the Swedish Financial Trading Act.
The information was provided for public release on 17 February 2015 at 7:00 a.m.

Kungsleden’s business concept is to own, manage and improve commercial
properties in growth regions in Sweden and to deliver attractive total returns.
Kungsleden’s strategies to create value are based on meeting the premises
requirements of customers by managing, improving and developing properties and
planning consents and by optimising the company’s property portfolio. Kungsleden
has been quoted on NASDAQ Stockholm since 1999.