Slides
Page 1
K-FASTIGHETER Announcement presentation 11 December 2024 | 15:30 CET
Page 2
TRANSACTION OVERVIEW AND RATIONALE
Page 3
Background Transaction with Brinova BACKGROUND • Founded in 2010 with the ambition to primarily own investment properties but subsequently started construction to lower acquisition costs • Proven concept to challenge a conservative business segment by building repetitively and conceptually • Control the value chain by owning input parameters, including the prefab operation – key component in keeping construction cost low and constantly improving margins • New business plan adopted in May 2024 with a shift of strategy from building only for own ownership to also focus on offering concept houses to external customers • Divides the company into two independent business segments to clarify where value is created and to simplify investment and risk analysis • So much more than a property company • Proof of concept via unique construction set-up • The divestment of a SEK 10.8bn1) property portfolio to Brinova is a unique opportunity to unlock value in Brinova by doubling the size of the company, increasing liquidity by introducing +6,000 new shareholders, making it more accessible to capital markets and banks and over time get included in relevant indexes • Scope to accelerate business plan of K-Fastigheter and shift focus to proven construction concept while maintaining control of property portfolio • Accelerate growth of the highly profitable construction business (historical PtV of 70-75%) • Increased cost efficiency and growth potential of the divested asset to Brinova (historical ROE ~10%) • Value in K-Fastigheter will very clearly post-transaction reside in: • Construction, segment broken out in reporting. Average annual profit of SEK 438m (82% share of Group profits) L5Y until 2023 • Remaining directly owned property portfolio of completed properties of SEK 3.1bn at yield 4.3% along with ongoing projects of SEK 4.2bn at completion value at yield 4.3% • Brinova at most 58.4% ownership. Public value check-mark on a daily basis Note: 1) Three ongoing projects (forward funded where K -Fastigheter is responsible for completion) are included in the SEK 10.8bn. Book value of The Divested Property Portfolio as of 30 Sep 202 4 amounts to 10.1bn. Source: Company information.
Page 4
TRANSACTION OVERVIEW Note: 1) Three ongoing projects (forward funded where K -Fastigheter is responsible for completion) are included in the SEK 10.8bn. Book value of The Divested Property Portfolio as of 30 Sep 202 4 amounts to 10.1bn. 2) The distribution of A and B shares to reflect Brinova’s current relation. 3) Share consideration limited to a maximum of 27.0m A shares and 110.4m B shares, in total 137.4m shares i n Brinova. Source: Company information. The transaction – Property portfolio in exchange for new shares in Brinova Key transaction rationale – Brinova’s perspective Significant geographic overlap in the attractive Öresund Region with the new property portfolio Focused geographical footprint enabling strengthened operating leverage Potential for increased share liquidity from larger market cap, inclusion in indices etc. Creating a leading Swedish residential real estate company Economies of scale due to more than doubling of the property value to SEK 19.2bn 5 5 1. 2. 3. 4. 5. • Shareholder support in K-Fastigheter from Erik Selin Fastigheter AB and Jacob Karlsson for the transaction amount to 73.3% of votes • Shareholder support in Brinova from Backahill and Balder for the transaction amount to 71.4% of the votes Consideration in Brinova shares The Divested Property Portfolio SEK 10.8bn • K-Fast Holding AB (“K-Fastigheter”) will divest a property portfolio of 108 properties in South Sweden, K-Fastigheter Syd, with a combined property value of SEK 10.8bn1) (“The Divested Property Portfolio”). Value based on external valuations (book value as of 30 Sep 2024) • Three ongoing projects are included in The Divested Property Portfolio where value is based on external valuations at completion1) • Total consideration will amount to at most 137.4m2) in newly issued shares in Brinova. The exact number of shares to be determined at the closing date 3) • The transaction is subject to customary regulatory approvals • K-Fastigheter has received exemption from the Swedish Securities Council to launch a mandatory public offer for Brinova
Page 5
NEW BRINOVA AT A GLANCE – LEADING SWEIDSH RESIDENTIAL REAL ESTATE COMPANY Introduction to New Brinova and pro forma KPIs (Q3’24) Rental value and property value splits (Pro forma Q3’24) Note: At completion includes the three projects as if they were completed in 30 Sep 2024. 1) Three ongoing projects (forward funded where K-Fastigheter is responsible for completion) are included in the SEK 10.8bn. Book value of The Divested Property Portfolio as of 30 Sep 2024 amounts to SEK 10.1bn. 2) Including properties that have recently been completed excluding ongoing projects. 3) Viktoria 22 in Helsingborg was a completed property in K -Fastigheter as of 30 Sep 2024, now a forward funded project. 4) Volume weighted average yield based on external valuations as of 30 Sep 2024. • One of the largest listed residential real estate companies in Sweden, with scope for 4.5-5.0% rental increases from 2024-2025 • Operating leverage due to high degree of geographical overlap • Initial cost increase for central administration is expected to be limited • Combined property portfolio entails an attractive mix of predominantly residential properties • Pro forma NAV of New Brinova as of 30 Sep 2024 is SEK 7.5bn • CEO: Per Johansson • Chairman: Erik Selin 4.8% valuation yield4) at completion Geographical overlap in Helsingborg, Höör, Kristianstad, Kävlinge, Landskrona, Lund och Malmö One property under development in Copenhagen 231 number of properties at completion3) 649.8k sq.m. lettable area at completion 60.5% net LTV2) 29.6k property value/sq.m. at completion SEK 1,711 residential rental value/sq.m.2) 19.2bn property value1) SEK 1,008m contracted rent2) SEK 1,073m rental value2) 1.7x ICR2) SEK 187m IFPM (Q1-3’24)2) 5.2% vacancy2) Both administrative offices and properties Old B 8.4Divested 10.8 The Divested Property Portfolio Old Brinova Geographic overview of Brinova and The Divested Property Portfolio SEK 1,008m SEK 19.2bn1) Residential 64% Commercial 16% Community service 20% Contracted rent by category Property value (SEKbn)
Page 6
Brinova’s property portfolio will more than double after the transaction, triple the number of shareholders, keep leverage at a constant level and have a balance sheet solely consisting of bank debt and equity BENCHMARKING VS. PEERS – SIGNIFICANT INCREASE IN SIZE Property value (SEKbn) Note: 1) Three ongoing projects (forward funded where K -Fastigheter is responsible for completion) are included in the SEK 10.8bn. Book value of The Divested Property Portfolio as of 30 Sep 202 4 amounts to 10.1bn. Source: Company information, Quarterly reports. 24.5 19.2 15.0 13.9 13.7 13.3 13.0 9.0 8.4 7.0 4.8 Sveafastigheter New Brinova K-Fastigheter John Mattson Neobo HEBA Trianon Klarabo Brinova Genova Fortinova Portfolio of SEK 10.8bn1) in property value will be transferred to Brinova
Page 7
TRANSACTION RATIONALE – EXECUTING ON THE COMMUNICATED STRATEGY Facilitate the creation of Sweden’s second largest public residential company, benefiting from geographical overlap, scale and operational synergies for future value uplift potential Natural step in the execution phase of K-Fastigheter’s communicated strategy, accelerate construction activities Continue to manage the legacy portfolio, ambition to time transactions with market opportunities while simultaneously receiving exposure to a higher yielding property portfolio Return on equity driven by turnover of balance sheet, home in on K-Fastigheter’s unique setup and proprietary construction model Profits historically primarily created within the Construction segment 5 5 1. 2. 3. 4. 5.
Page 8
K-FASTIGHETER POST TRANSACTION Property management Construction West East Project dev. Construction Prefab ~58% ownership in Brinova South • Clear structure with synergies between two legacy segments, Property management and Construction • Lion’s share of value in Property management will post divestiture reside in the South portfolio through the ~58% ownership in Brinova, generating higher rental income than owning 100% of The Divested South Property Portfolio. Optimized management setup • East and West Property management structure remain intact
Page 9
4.2 7.3 4.2 3.1 8.4 7.3 10.8 3.1 9.5 10.8 8.4 1.3 8.4 VISUALISUNG VALUE AND POTENTIAL IN K-FASTIGHETER’S BUSINESS MODEL Note: Based on Q3 2024 financials. Not adjusted for future balance sheet impacting items. Graph based on property values at completion. Source: Company information Illustrative change in K-Fastigheter’s property value transitioning into K-Fastigheter 2.0 • New strategy outlined in May 2024, dividing operations in two business segments: Construction and Property Management • Sale of K-Fastigheter Syd, and K-Fastigheter becomes the largest shareholder in Brinova • K-Fastigheter consolidates Brinova into P&L and BS • Following the intended dividend, K- Fastigheter has the capability to in-house manage its newly built conceptual houses and the flexibility to time the markets to optimise returns 2 3 New Brinova K-Fastigheter 2.0 2 31 1 K-Fastigheter Syd Consolidated K-Fastigheter K-Fastigheter pre transaction K-Fastigheter post transaction & pre intended dividend of Brinova shares K-Fastigheter post transaction and post intended dividend of Brinova shares Deconsolidation post intended dividend K-Fastigheter 2.0 Completed Ongoing Completed Ongoing K-Fastigheter 2.0 Value in Brinova visualised through being a public company and can thus be more easily valued by owners and analysts
Page 10
CONTRASTING VALUE CREATION MODELS Production of concept houses Ongoing property management About SEK 430m is needed to construction start 1,000 apartments per year Translating into favoured approach Increase initiation of constructions, selling parts of the portfolio and/or sell ongoing and future constructions • Equity needed per started apartment SEK 0.43m • Project profit per apartment SEK 0.80m • Gross margin 26% (PtV 74%) • Return on equity = 186% • Each newly constructed apartment ties up about SEK 1.23m of equity • 3% return on equity at 4% interest rate • 4.5% return on equity at 3% interest rate • Another 5% return with 2% value increase per year. Over time value of residential properties has developed in line with GDP
Page 11
STRATEGY IN PRACTICE, K-FASTIGHETER GOING FORWARD Production of concept houses Ongoing property management – decreased platform • Proven value creation model, proprietary construction setup • +80% of profits historically generated within Construction • Time market for optimal returns, risk appetite function of see-through to end-customer demand • Flexibility with regards to divestment options • Forward funding or forward sale • Co-Op transformation, always started on rental calculation • Turnkey contracts – no own equity needed • Portfolios, based on geography or as single units • Ongoing activites: • Identify what and where we shall keep properties • See divestments as part of ongoing operations • Flexibility and ability to keep properties in the books and sell when the timing on the market is favourable for optimal returns • Transaction with Brinova will generate higher rental income than owning 100% of The Divested South Property Portfolio • Economies of scale post Brinova transaction due to more than doubling of the property value to SEK 19.2bn Strategy in practice Accelerated growth within ongoing property management through the Brinova transaction and continued focus on high-growth capability within construction SEKm Profit/loss1) Profit/loss1) Period Property mgmt. Share of profit Construction Share of profit 2021 – 2023 344.7 16% 1,650.0 84% 2019 – 2023 472.9 18% 2,189.7 82% Note: 1) Profit excluding change in value for properties under management and derivatives.
Page 12
NEW K-FASTIGHETER – SO MUCH MORE THAN A PROPERTY COMPANY Introduction to New K-Fastigheter Geographical footprint ranging from Skåne to Stockholm Offices Production plants • Income will continue to primarily be generated from the Construction segment (prior to the transaction 74% of income Q1-3 2024 and 81% of income since 2019), while balance sheet remains property tilted • K-Fastigheter’s operations will mainly comprise activities in project development, prefab manufacture of frame solutions, and construction management for external parties • The current goal is to commence construction of 1,000 apartments per year and gradually increase this to 1,200 apartments per year in the coming years • K-Fastigheter has the capability to in-house manage its newly built conceptual houses and the flexibility to time markets to optimise returns • K-Fastigheter has a portfolio of ~SEK 3.1bn completed projects and ongoing projects with ~SEK 4.2bn in expected value after completion • Besides its development focus, K-Fastigheter will also own at most 58.4% of Brinova, generating an increased rental income to the group • CEO: Jacob Karlsson • Chairman: Erik Selin Production plants for e.g. prefab manufacturing in regions with attractive population growth K-Fastigheter will continue to focus on construction, hold completed projects with a value of SEK ~3.1bn and ongoing projects with a compl etion value of SEK ~4.2bn post the transaction and own at most 58.4% of Brinova Property portfolio Brinova 621 number of construction starts (Q1-3’24) 1,745 number of apartments in construction (30 Sep ‘24) 2,257 number of apartments in project development (30 Sep ‘24) 1,056 number of apartments under management (30 Sep ‘24)
Page 13
APPENDIX
Page 14
THE DIVESTED PROPERTY PORTFOLIO IN BRIEF (1/2) Financials (Q3’24) Selected properties Residential 93% Commercial 7%Hässleholm 21% Helsingborg 16% Kristianstad 13% Växjö 13% Malmö 11% Other 25% SEK 563.8m SEK 534.9m Rental value by geography Contracted rent by category SEK 1,898 residential rental value/sq.m. SEK 10.8bn property value1) 304.4k sq.m. lettable area SEK 35.3k property value/sq.m. 59.7% net LTV at completion2) 5.1% Vacancy3) 108 / 4,279 number of properties / apartments 4.4% reported yield4) The Divested Property Portfolio constitutes the vast majority of K -Fastigheter’s property portfolio in South Sweden Värnhem 2, Hässleholm Amerika Södra 27, Helsingborg Söderberg 1, Kristianstad Dammsnäckan 2, Malmö Note: The Divested Property Portfolio currently consist of 108 properties of which 3 properties under construction in Copenhagen, Helsingborg and Malmö. All figures include properties unde r construction (rental value of SEK 67m) unless otherwise stated. 1) Three ongoing projects (forward funded where K -Fastigheter is responsible for completion) are included in the 10.8bn. Book value of The Divested Property Portfolio as of 30 Sep 2024 am ounts to SEK 10.1bn. 2) Assuming LTV at completion for the 3 properties under construction of 57.3%. 3) Including properties that have recently been completed excluding ongoing projects. 4) Volume weighted average yield based on external valuations as of 30 Sep 2024. 65% of properties completed after 2019
Page 15
THE DIVESTED PROPERTY PORTFOLIO IN BRIEF (2/2) Ongoing development projects constitute ~10% of The Divested Property Portfolio value Note: Three ongoing projects (forward funded where K-Fastigheter is responsible for completion) are included in the SEK 10.8bn. Book value of The Divested Property Portfolio as of 30 Sep 202 4 amounts to SEK 10.1bn. Viktoria 22 in Helsingborg was a completed property in K-Fastigheter as of 30 Sep 2024, but is now one of three forward funded projects. Pederstrup By 1, Copenhagen Skjutskontoret 3, Malmö Viktoria 22, Helsingborg Total sq.m 8,997 Expected completion Q4’26- Q1’27 Total sq.m 11,054 Total apartments 153 Total apartments 41 Total apartments 154 Expected completion Q3’26 Expected completion Q2-Q4’25 Total sq.m 3,128
Page 16
CAPITALISATION TABLES Note: Based on Brinova NAV per share of SEK 32.46, The Divested Property Portfolio NAV of 4.3bn and total new issued shares in Brinova of 133.4m (at the most 58.4% K-Fastigheter ownership if max number of shares of 137.4m). Source: Company information, Holdings. Pre transaction Post transaction Largest owners Capital % Votes % Erik Selin Fastigheter AB 32.4% 37.1% Jacob Karlsson AB 31.1% 36.2% Capital Group 7.4% 5.4% Fjärde AP-fonden 4.1% 3.0% Länsförsäkringar Fonder 3.9% 2.9% ODIN Fonder 2.4% 1.7% First Fondene 2.1% 1.5% Andra AP-fonden 1.9% 1.4% Handelsbanken Fonder 1.6% 1.2% Tredje AP-fonden 1.5% 1.1% Top-10 total 88.4% 91.5% Largest owners Capital % Votes % Backahill AB 24.0% 40.0% Fastighets AB Balder 18.9% 31.4% Familjen Hofmann 10.4% 11.7% Tor-Björn Bengtsson 7.7% 2.8% Länsförsäkringar Fonder 5.0% 1.8% SEB Investment Management 4.4% 1.6% First Fondene 3.0% 1.1% ODIN Fonder 2.8% 1.0% Lannebo Kapitalförvaltning 2.4% 0.9% PriorNilsson Fonder 2.1% 0.8% Top-10 total 80.6% 93.0% K-FASTIGHETER Largest owners Capital % Votes % K-Fastigheter 57.7% 57.7% Backahill AB 10.2% 16.9% Fastighets AB Balder 8.0% 13.3% Familjen Hofmann 4.4% 5.0% Tor-Björn Bengtsson 3.2% 1.2% Länsförsäkringar Fonder 2.1% 0.8% SEB Investment Management 1.9% 0.7% First Fondene 1.3% 0.5% ODIN Fonder 1.2% 0.4% Lannebo Kapitalförvaltning 1.0% 0.4% PriorNilsson Fonder 0.9% 0.3% Nordea Liv & Pension 0.5% 0.2% Carnegie Fonder 0.5% 0.2% Jacob Karlsson AB 0.4% 0.2% Henry Dunkers Stiftelse 0.4% 0.2% Catella Property IM 0.3% 0.1% Dala Marknad AB 0.3% 0.1% Gillesvik 0.2% 0.1% Anders Bengtsson 0.2% 0.1% PAM Capital AB 0.2% 0.1% Top-20 total 94.9% 98.1% Largest owners Capital % Votes % Erik Selin Fastigheter AB 18.7% 18.7% Jacob Karlsson AB 18.4% 18.1% Backahill AB 10.2% 16.9% Fastighets AB Balder 8.0% 13.3% Familjen Hofmann 4.9% 5.5% Capital Group 4.3% 4.3% Länsförsäkringar Fonder 4.4% 3.0% Fjärde AP-fonden 2.3% 2.3% ODIN Fonder 2.5% 1.8% First Fondene 2.4% 1.6% SEB Investment Management 2.4% 1.2% Tor-Björn Bengtsson 3.2% 1.2% Andra AP-fonden 1.1% 1.1% Handelsbanken Fonder 1.1% 1.0% Tredje AP-fonden 0.9% 0.9% Carnegie Fonder 1.0% 0.7% Futur Pension 0.7% 0.6% Sara Mindus 0.4% 0.4% Swedbank Robur Fonder 0.4% 0.4% Lannebo Kapitalförvaltning 1.0% 0.4% Top-20 total 88.4% 93.4% Illustrative example – post intended dividend
Page 17
K-FASTIGHETER PRO FORMA CONSOLIDATED FINANCIALS Source: Company information. Q1-Q3 2024 K-Fastigheter before the transaction K-Fastigheter after the transaction, consolidated Brinova after the transaktion K-Fastigheter excl. Region Syd Rental income 452.9 859.5 727.5 132.0 Other income 367.8 369.1 5.9 363.2 Operating costs -446.2 -587.7 -272.5 -315.2 Gross profit 374.5 640.9 460.9 180.0 Central administration -55.0 -75.5 -21.0 -54.5 Depreciation and amortisation -45.6 -46.1 -0.8 -45.3 Profit from participation in associated and jointly controlled companies 9.2 9.2 0.0 9.2 Net financial items -204.7 -336.8 -252.4 -84.4 Profit before changes in value 78.4 191.7 186.7 5.0 Balance sheet as of 30 Sep 2024 Investment properties 15,012.8 23,461.0 18,524.8 4,936.2 Other non-current assets 1,599.8 2,165.6 70.0 2,095.6 Total non-current assets 16,612.6 25,626.6 18,594.8 7,031.8 Current assets 359.9 627.9 428.6 199.3 Total assets 16,972.5 26,254.5 19,023.4 7,231.1 Equity and liabilities Equity 5,214.5 8,386.3 6,529.0 1,857.3 Deferred tax liability 1,079.4 1,909.3 1,031.9 877.4 Non-current interest bearing liabilities 7,063.6 8,955.0 6,657.1 2,297.9 Other non-current liabilities 194.8 224.2 111.4 112.8 Total non-current liabilities 8,337.8 11,088.5 7,800.4 3,288.1 Current interest-bearing liabilities 2,849.3 6,127.4 4,467.8 1,659.6 Total current liabilities 570.9 652.3 226.2 426.1 Total non-current liabilities 3,420.2 6,779.7 4,694.0 2,085.7 Total equity and liabilities 16,972.5 26,254.5 19,023.4 7,231.1
Page 18
K-FASTIGHETER KEY PERFORMANCE INDICATORS Source: Company information. 30 September 2024 K-Fastigheter before the transaction K-Fastigheter after the transaction, consolidated Brinova after the transaktion K-Fastigheter excl. Region Syd Rental value, SEKm 655.2 1,231.5 1,073.3 157.1 Contracted rent, SEKm 624.7 1,164.1 1,007.6 155.5 Financial occupancy rate, % 95.3% 95.4% 94.8% 99.0% Profit from property management Q1-Q3 2024, SEKm 102.2 215.5 186.7 28.8 Property value, SEKbn 15.0 23.5 18.5 4.9 Interest coverage ratio (R12M) 1.5 1.6 1.7 1.6 Loan-to-value ratio, % 61.0% 61.1% 60.5% 61.9% Debt-to-equity ratio, % 58.4% 57.4% 58.5% 54.7% Number of properties 120.0 243.0 229.0 14.0 Lettable area, thousands of sq.m. 359.7 705.1 626.6 77.9 Share of contracted rental value Residential, SEKm 577.6 788.0 641.2 146.5 Share of contracted rental value properties for public use, SEKm 0.0 205.0 205.0 0.0 Share of contracted rental value commercial, SEKm 47.1 171.1 161.4 9.0 Number of shares outstanding, millions 246.0 246.0 231.1 246.0 Average number of shares outstanding, millions 244.1 244.1 231.1 244.1