Kungsleden increases profit from property management with 46 per cent

Interim report January - September 2014
THE REPORT IN BRIEF
Third quarter (June – September)

  · Rental income increased by 32 per cent to SEK 552 (419) million and net
operating income increased to SEK 404 (310) million.
  · Profits from property management improved by 46 per cent and were SEK 217
(149) million, which corresponds to SEK 1.81 (1.31) per share.
  · Net leasing was SEK –6 (12) million.

Interim period (January – September)

  · Rental income increased by 38 per cent to SEK 1,669 (1,210) million and net
operating income increased to SEK 1,152 (815) million.
  · Profits from property management improved by 84 per cent and were SEK 575
(313) million, which corresponds to SEK 4.81 (2.93) per share.
  · Net leasing was SEK 3 (14) million.

Comments on events during and after the quarter

  · The rights issue that was decided on 16 September at an extraordinary
general meeting was fully subscribed and concluded during October. Kungsleden
will receive capital from the rights issue of SEK 1,593 million before the
deduction for emission costs.
  · Having sold properties for SEK 2.4 billion during the year, Kungsleden has
now transitioned to an active buyer. During the quarter, two strategic
acquisitions were made in Malmö for a value of SEK 385 million. In total during
the year, four properties in Malmö were acquired for SEK 485 million.
  · As of this interim report, the subsidiary, Nordic Modular Group is being
reported separately since the holding is “held for sale”.

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Comments from Biljana Pehrsson, CEO
Kungsleden has successfully completed the company’s rights issue for nearly SEK
1.6 billion, which marks another important milestone in realizing the company’s
strategy. The rights issue was fully subscribed with great interest from
shareholders both with and without preferential rights. Having successfully
completed the rights issue and with strong support from our shareholders, we are
now ready to realize the potential that we identified through acquisitions in 18
selected micro locations for commercial properties and some 20 development
projects among our own property holdings. We now have the financial flexibility
to grow the property portfolio to around SEK 25 billion, with a long-term
ambition of increasing it to SEK 30 billion.
Thus far in 2014, we have implemented a successful consolidation and
streamlining process by divesting non-strategic properties. This means that, as
of the third quarter, Kungsleden has transitioned to an active buyer. We
currently see good acquisition opportunities in the market and completed two
strategic acquisitions in Malmö during the quarter, worth almost SEK 400
million.
Our focus is on actively managing, developing and improving our properties. In
September, we had the first-ever “Kungsleden Property Days”, which was a company
-wide showcasing event of our property holdings, where all managers presented
plans on how new values will be realized at each property and development right.
Operations continued with a positive trend during the third quarter. Gross
profit was SEK 404 million, an increase of 30 per cent compared to the same
period last year due to larger property holdings and a higher operating net.
Gross profit for the third quarter increased by 6 per cent compared to the
second quarter despite that the size of the property portfolio had declined due
to the sales that were made. The surplus margin for properties was 73 per cent,
which is in line with last year.
The profits from property management also improved by 46 per cent compared to
last year and by 14 per cent compared to last quarter. Financing costs increased
only marginally, which had a positive impact on profits from property
management, which was SEK 217 million. The average interest rate continued to
fall and was 5.0 per cent, compared to 5.8 per cent at the beginning of the
year.
During the interim period, new leases were signed for approximately 83,400 m2
and the financial occupancy rate was nearly 89 (90) per cent
Profit before tax increased to SEK 322 (202) million, despite the fact that
during the quarter there were negative unrealized changes in the value of
financial instruments of SEK –70 (57) million caused by falling long-term
interest rates. The value trend for properties was positive, and the total
change in value was SEK 176 million. The positive value change for properties
that were vacated during the quarter contributed to this, as did higher values
resulting from improved operating net and investments that were made. There was
a positive impact on the value increases from a higher occupancy rate and higher
rental income. However, changes in the market’s required return have not been
taken into consideration in the third quarter. As always, Kungsleden will make a
complete internal and external valuation of the entire property portfolio at
year-end, at which time any changes in the required return will be considered.
Profit before tax, not including changes in the value of financial instruments
improved to SEK 392 (145) million.
We have decided to move Kungsleden’s head office to one of our own properties
during autumn 2015. We will be moving from leased facilities at Vasagatan in
central Stockholm to our own building on the central boulevard, Warfvinges väg,
located in flourishing Västra Kungsholmen, Stockholm.
With a new foundation following changes that were made since the new strategy
was implemented in 2013 and a strengthened balance sheet, Kungsleden now enters
into a new phase of its development. The company will now capitalize on its
favourable situation and realize its growth plans so that it can create even
more value for Kungsleden’s shareholders. In this context, I would like to thank
our shareholders for the support they have shown by providing the company with
the capital it requires to continue on this exciting journey.
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
Detta pressmeddelande finns tillgängligt på svenska på
www.kungsleden.se/pressmeddelanden

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 24 October 2014 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 OMX Stockholm since 1999.