Stable property management with great potential through projects
2020 was in many ways a very unusual year, affected by a pandemic which had effects that no one could have anticipated at the beginning of the year. Despite this, Klövern achieved a fine result for the year with a strengthened financial position. 2020 was also my last full year as Klövern’s CEO.
Nine eventful years
After nine years as Klövern’s CEO, I am leaving a completely different company than the one I took over in 2012. The total property value then was SEK 15 billion. After these years of substantial growth, the corresponding figure is now SEK 57 billion. During the same period, the average rent per square metre has increased by 49 per cent, which reflects the upgrading of the portfolio. We have also taken the step to expand outside Sweden. The international portfolio in Copenhagen and New York now makes up 15 per cent of total property value.
Today, Klövern is a company with a strong, stable base constituted by managemant of around 350 properties. At the same time, there has been a repositioning to enable the company to increase its value-creating operations in project development. Our large project portfolio has a fantastic potential and includes a number of urban development projects in Sweden and abroad.
During my years as CEO, we have also placed great focus on sustainable development. I am convinced that sustainability will become even more important not only in the environmental sphere but also with regard to social aspects and finance, in the form of green financing, among others.
Good earnings in 2020
Klövern’s earnings for 2020 are good and have, thanks to effective property management, among other things, developed in a stable way despite some loss of income associated with the challenging conditions in the world. Some tenants have, of course, had a tough time but overall our diversified portfolio has provided stability. Klövern has received 99 per cent of the rents invoiced for 2020. For a comparable portfolio, i.e. properties owned throughout the whole of 2019 and 2020, both income and the operating surplus were at the same level as in 2019.
A recovering market
The pandemic has had a marked negative effect on both the global and the Swedish economy. However, the ongoing vaccination provides hope for a good recovery during 2021. We can ourselves see that the market is gradually recovering by increased demand in the rental and transaction markets and by an increasing improvement in financing conditions in the capital market.
Net moving-in reflects the challenges of the year
During the year, the external net moving-in amounted to SEK –90 million. The explanation for this is mainly several small vacations that we have known about for a long time during the first quarter and to the hesitant letting market during the second and third quarters. However, the series of negative net moving-in figures during the first three quarters was brought to an end in the fourth quarter when net moving-in amounted to SEK 11 million.
During the year, new leases have been signed, among others, with Volvo Cars, Strukton Rail, Parfums Christian Dior, Politiforbundet and a number of municipalities and regions. In December 2020 and January 2021, we have also extended three large leases for a total of approximately 52,600 sq.m. in Kista.
Streamlining by location and product
We have worked for many years with the strategy of focusing the property portfolio on the growth locations and markets where we want to be long-term owners, and primarily on office properties. During the fourth quarter, we took another big step in line with the strategy through divesting 12 properties in a transaction with Mileway, mainly consisting of warehouses and logistics premises. The transaction took place at a premium of 21 per cent in relation to book value. In total, the contracts for divestment of properties signed during 2020 have exceeded book values by 20 per cent.
Repositioning for increased project development
For the past couple of years, Klövern has increasingly carried out repositioning to increase project development. Capacity in value-creating project development has been increased at the same time as properties at less prioritized locations have been divested, including the whole of Klövern’s property portfolio in Karlstad and all investment properties in Örebro. At the year-end, development properties accounted for 16 per cent of the total property value. In all, project development, including development of building rights, contributed SEK 513 million to increases in value of properties in 2020.
Klövern’s largest urban development projects are in Kista Science City and Söderstaden, both in Stockholm, and in Uppsala and Västerås. The two largest ongoing projects, two office properties in New York, are expected to be completed during the third quarter of 2021 and the beginning of 2022 respectively. Letting work is in process and in February this year, the first lease contract at project 1245 Broadway was signed. During 2020, the letting market in New York has for natural reasons been affected by the pandemic. However, we are secure in that all our properties in Manhattan are in exceptionally good locations. In all, ongoing projects in Sweden and abroad are expected to have a large positive effect on net moving-in during the coming two years.
Strengthened financial position
During 2020, we have placed special emphasis on securing good long-term financing and enhancing our financial strength even more. During the second quarter, SEK 5 billion in existing bank loans and secured bonds were refinanced. We also obtained new loans and credit decisions for new loans of over SEK 4 billion. In June, Klövern obtained an investment grade rating (BBB- with stable outlook) from Scope Ratings and in October SEK 2 billion of green bonds were issued. At the end of the year, a fully guaranteed rights issue of around SEK 2 billion was completed which provides us with even greater opportunities of value creation through efficiently financed project development of commercial and residential premises.
Positioned for a continued recovery
I hope that we now, when vaccination can take place on a broad scale, will see a gradual return to our normal existence. It is difficult to say anything about the long term effects of the pandemic but Klövern has shown in the past year that it stands on a stable foundation and we are now positioned for a continued economic recovery. Finally, I would like to emphasize the fine. committed work that all Klövern’s employees have performed during my nine years as CEO. I am also happy to conclude this Statement by the CEO with good hope of a more stable year for society at large in 2021.
Stockholm, 22 March 2021