Interim Report January - June 2018 Comments from the CEO

Hemfosa’s second quarter was dominated by work involving the two major deals that we completed at the end of June and after the close of the quarter. In June, we strengthened our financial position to enable attractive acquisitions by carrying out a directed share issue that was met with great interest from institutional investors in Sweden and abroad. Meanwhile, the process to prepare Hemfosa for a potential split into two specialized property companies is ongoing.


Hemfosa continued its stable development during the second quarter. A slight increase in property and interest expenses had a negative impact on profit from property management while changes in value yielded an overall improved profit after tax.

If we exclude other property income of a nonrecurring nature and changes in the value of joint ventures from profit from property management, both of which are recognized in profit from property management, profit from property management for the period increased by just over 20 percent year on year.

The transactions signed in June and July represent important steps for Hemfosa in its efforts to continue growing and optimizing its property portfolio. The acquisition of properties valued at approximately SEK 1.1 billion in northern and central Sweden, mainly comprising tenants in the community services sector, strengthens Hemfosa’s property portfolio with a healthy yield and establishes cooperation with key partners in attractive regions.

In addition, we are very pleased that we were able to complete a major portfolio acquisition consisting of mainly offices, warehouse and logistics properties valued at about SEK 3.6 billion after the close of the period. This acquisition complements the strong portfolio of commercial properties we own, in addition to our community service properties, and that we have gathered together in the subsidiary Nyfosa ahead of the intended demerger. The acquired portfolio will also contribute favorable earnings and will enable us to bundle certain properties with our current portfolio and sell these onward. I believe that both acquisitions are good examples of Hemfosa’s ability to act quickly and to identify and carry out good business in the Swedish property market.


In June, we implemented a directed share issue for SEK 1 billion to quickly and effectively raise additional equity for Hemfosa. We view the significant interest in the new issue as confirmation that the direction we have taken is appreciated by investors in the market. The purpose of the new issue is to optimize the capital structure ahead of the potential split of Hemfosa and to facilitate further acquisitions. The agreement to divest a property in Uppsala for SEK 1 billion that was signed in June helps to further bolster our balance sheet. The first six months has yielded an increase in the earnings capacity – the most important performance measure to me – of 10 percent and a sustained strong increase in the second half of the year on account of the transactions completed. With the announced acquisitions that we will gain possession of in the autumn, growth will be in the same order of magnitude.


In parallel with ongoing acquisitions, we are working to become even better at meeting the need for premises among our tenants in the community services sector. We are currently working with several exciting new build projects where our involvement spans from turning of the very first sod to management of the completed properties. We have identified growing demand for community service properties among our existing customers and generally among municipalities, county councils and other operators. At the same time, we can see that there is a need for a long-term partner such as Hemfosa that can contribute expertise, concept, implementation and financing to realize new build projects.


During the spring and summer, evaluation work and preparations ahead of a demerger of Hemfosa have progressed according to plan. We have met with positive reactions from the market and shareholders, who – like us – see a specialization of the two parts of the Group as a natural step forward for sustained value creation.

Efforts are in progress to build the management teams for both companies. Together with incoming CEO of Hemfosa Caroline Arehult, we recently filled key management positions at Hemfosa. With Hemfosa’s CFO Karin Osslind wishing to end her operative career in the autumn, we have recruited Peter Anderson as her replacement. Peter was most recently employed as Finance Director at Kungsleden. I would like to thank Karin Osslind for the invaluable role she has played at Hemfosa as my right-hand woman and who has helped found and make Hemfosa what it is today. We have also recruited Anna Alsborger, currently Head of Transactions at Hemsö Fastigheter, as new Head of Transactions at Hemfosa as Stina Lindh Hök has chosen to move to the position of COO at Nyfosa, and Jenny Lindholm, currently acting Head of Transactions at Hemfosa, will become Head of Transactions at Nyfosa. In our opinion, both Peter and Anna have the necessary experience and expertise from the property sector to make important contributions to Hemfosa’s future development.

Hemfosa is in a strong position after the first six months of 2018. We have expanded our property portfolio by adding further portfolios that are a good match for our community service and commercial property portfolios, we have strengthened our cash funds and have attractive projects in progress that will create new functional and sustainable properties for our tenants. We are looking forward to taking further steps in the demerger process and, if so approved by the shareholders, to carrying out the demerger in the second half of 2018.

Jens Engwall, VD

Interim Report Januay - June 2018