Annual Report • Feb 2, 2012
Annual Report
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| N | Ä | Ä | ||
|---|---|---|---|---|
| Key figures, SEKm | 2011 Oct–Dec |
2010 Oct–Dec |
2011 Jan–Dec |
2010 Jan–Dec |
| Rental income | 458 | 487 | 1,804 | 2,007 |
| Running costs and central costs | –156 | –180 | –640 | –721 |
| Net financial items (excl. changes in value) | –141 | –125 | –600 | –504 |
| Profit from property management activities | 161 | 182 | 564 | 782 |
| Changes in value | 269 | 423 | 853 | 1,147 |
| Tax | –17 | 1 | –276 | –232 |
| Profit/loss after tax | 413 | 606 | 1,141 | 1,697 |
| Surplus ratio, % | 69 | 66 | 68 | 67 |
| Equity/assets ratio, % | – | – | 39 | 39 |
| Equity per share, SEK | – | – | 73 | 69 |
| Return on equity, % | – | – | 9.9 | 16.0 |
2011 l Year-end Report
2011 was a favourable year for Fabege! High net lettings during the year gradually began generating income growth. However, the results from this year's achievements will largely take the shape of income growth in 2012–2013. The property portfolio's value growth was favourable and property transactions during the year generated a positive contribution to earnings. On the whole, I am delighted that property management, development and transactions contributed to the overall earnings.
Strong demand in the rental market and our focus on retaining customers contributed to high net lettings, resulting in an increased occupancy rate and rental growth, while also enabling us to create significant value through project development. During the year, we reduced the project risk by signing several major and important leases and by maintaining a fast pace in the development of the project portfolio. Positive net lettings and development of the property portfolio enabled us to create the foundation for strong income and value growth ahead. I am particularly pleased to see that our employees' initiatives make a difference.
The year's investments and property transactions allowed Fabege to continue to focus on its prioritised sub-markets, all of which experienced a positive trend in 2011. The favourable trend in Arenastaden was particularly gratifying. In
2012, Swedbank Arena will be completed and Vattenfall will relocate to the area. The recently signed agreement concerning the establishment of the Mall of Scandinavia will more clearly define the neighbourhood and we anticipate increased interest in building office space in the area. For Fabege, this entails faster expansion of the area and higher value growth, thus creating the foundation for Arenastaden to be a competitive alternative to the inner city.
The economic outlook deteriorated during the year and uncertainty regarding the trend moving forward is considerable. However, at the time of writing, I still perceive strong demand in the rental market. Stockholm's growth and on-going discussions are paving the way for favourable net lettings also in 2012. We will experience strong growth in rental income and management profit in the coming two years. Fabege is well equipped with a
Fabege's business model
strong balance sheet and a well-situated property portfolio with healthy development potential.
Christian Hermelin Chief Executive Officer
Fabege aims to acquire properties that offer better growth opportunities than existing investment properties in its portfolio. As a significant player in a number of select sub-markets, Fabege has acquired in-depth experience and knowledge about the markets, plans for development, other players and individual properties. The company continuously monitors and analyses developments with a view to exploiting opportunities to develop its property portfolio. Acquisitions
Fabege aims to sell properties that are located outside its concentrated property management units or have limited prospects for further growth. Location, condition and vacancies are key factors determining the growth potential of a property. A fully let property with modern and efficient premises that is deemed to have limited potential for rent increases and capital growth could thus become a candidate for divestment. Sales
Property management is Fabege's main business area. The properties are managed by an efficient in-house organisation, which is divided into separate property management areas. Each area has a large degree of individual responsibility to ensure a high degree of commitment and proximity to the customer. The company's customer-facing property management activities are designed to support a high occupancy rate and encourage customers to remain with Fabege. Satisfied customers help to improve our net operating income. Property Management
Property development in properties with growth potential is a key element of Fabege's business model, helping to add value. In addition to developing and improving acquired properties, Fabege already has a number of development and project properties in its portfolio, and seeks to develop its potential as market conditions permit. The volume of projects is adapted to market demand. New builds and more extensive development projects are always based on the principles defined in the EU GreenBuilding programme. Property Development
property development
The comparison figures for income and expense items relate to values for the period October–December 2010 and for balance sheet items as at 31 December 2010.
During the year the positive net-lettings trend has begun to impact the income statement and value growth remains favourable in both Fourth the project and the investment portfolio. quarter
Profit for the year amounted SEK 1,141m (1,697). Because of a smaller property portfolio, higher market interest rates and a greater deficit value in the portfolio of interest-rate derivatives, earnings declined compared with the preceding year. Earnings per share after tax amounted to SEK 7.01 (10.38).
Rental income totalled SEK 1,804m (2,007) and net operating income SEK 1,227m (1,348). The decline in rental income was due to net sales of properties. The surplus ratio amounted to 68 per cent (67). In a comparable portfolio, rental income increased with 1 per cent while operating income increased with approximately 2 per cent. During 2012 and in the start of 2013, the positive net lettings trend will gradually impact on the occupancy ratio and growth in rental income.
Realised changes in the value of properties amounted to SEK 173m (237), and unrealised changes in value totalled SEK 1,093m (843). The SEK 675m unrealised change in the value of the portfolio of investment properties was primarily attributable to properties with potential for an increase in rent levels and a reduction in vacancy rates. The project portfolio contributed to an unrealised value change of SEK 418m, which comfortably surpassed Fabege's return requirement of 20 per cent on invested capital. Share in profit of associated companies amounted to SEK 9m (18). Changes in the value of interest-rate derivatives and equities amounted to SEK –413m (67), and net interest expense increased to SEK –609m (–522) as a result of higher market interest rates (refer to the Financing section).
The tax expense for the year amounted to SEK –276m (–232), corresponding to 26.3 per cent tax on continuous taxable earnings. Sales of properties resulted in a total
| SEKm | Jan–Dec 2011 |
Jan–Dec 2010 |
|---|---|---|
| Profit from Property Management | 581 | 768 |
| Changes in value (portfolio of investment properties) |
675 | 579 |
| Contribution from Property Management |
1,256 | 1,347 |
| Profit from Property Management | –17 | 14 |
| Changes in value (profit from Property Development) |
418 | 264 |
| Contribution from Property Development |
401 | 278 |
| Contribution from Transactions (Realised changes in value) |
173 | 237 |
| Changes in value, derivatives and equities |
–413 | 67 |
| Profit before tax | 1,417 | 1,929 |
deferred tax cost of SEK –7m. The recognition of tax pertaining to previously unrecognised loss carryforwards resulted in tax revenue of SEK 60m in the fourth quarter.
Profit contributed SEK 744m (1,015) to liquidity. After a decrease of SEK 1,198m (–1,099) in working capital, which varies primarily as a result of the impact of occupancy/final settlement for acquired and divested properties, the liquidity of operating activities changed by SEK 1,946m (–84). Acquisitions of and investments in properties exceeded sales by SEK 1,527m (–2,837). Accordingly, the total change in liquidity resulting from operating activities was SEK 419m (2,753). Cash flow during the period was charged with SEK 489m (329) for the payment of dividends. Share buybacks amounted to SEK 38m (61). After the increase in debt, consolidated cash and cash equivalents totalled SEK 74m (73).
Fabege employs long-term credit lines with fixed terms and conditions. At 31 December 2011, these had an average maturity of 5.9 years. The company's lenders are the major Nordic banks.
Interest-bearing liabilities at the end of the period totalled SEK 16,755m (16,646) and the average interest rate was 3.72 per
2) The comparison figures for income and expense items relate to values for the period January–December 2010 and for balance sheet items as at 31 December 2010.
| JI DECEMBER ZUTT | |
|---|---|
| Amount SEKm |
Average interest rate % |
Share % |
|
|---|---|---|---|
| < 1 year | 4,027 | 5.64* | 24 |
| 1–2 years | 1,850 | 3.70 | 11 |
| 2–3 years | 1,178 | 2.45 | 7 |
| 3–4 years | 0 | 0.00 | 0 |
| 4–5 years | 4,200 | 2.71 | 25 |
| > 5 years | 5,500 | 3.36 | 33 |
| Total | 16,755 | 3.72 | 100 |
* The average interest rate for the < 1 year period includes the margin for the entire debt portfolio because the Company's fixed-rate period is established using interest rate swaps, which are traded without margins.
31 December 2011
| Credit agreements SEKm |
Drawn SEKm |
|
|---|---|---|
| Certificate programme | 5,000 | 1,719 |
| < 1 year | 2,034 | 1,514 |
| 1–2 years | 5,540 | 3,440 |
| 2–3 years | 329 | 329 |
| 3–4 years | 5,040 | 3,735 |
| 4–5 years | 2,041 | 2,041 |
| > 5 years | 4,976 | 3,977 |
| Total | 24,960 | 16,755 |
| Jan–Dec 2011 | Lettable | ||
|---|---|---|---|
| Properties | Area | Category | area, sqm |
| Quarter 1 | |||
| Bocken 51 | Norrmalm | Residential | 2,438 |
| Grimbergen | Belgium | Land | 0 |
| Quarter 2 | |||
| Induktorn 33 | Bromma | Industry/ Warehouse |
17,415 |
| Märsta 15:5 | Märsta | Land | 0 |
| Sicklaön 392:1 | Danvikstull | Land | 0 |
| Uarda 2 | Arenastaden Land | 0 | |
| Quarter 3 | |||
| Näsby 4:1472 | Tyresö | Land | 0 |
| Quarter 4 | |||
| Kåkenhusen 38 | Östermalm | Office/Retail | 6,688 |
| Påsen 8 | Hammarby | Industry/ Warehouse |
3,096 |
| Racketen 11 | Alvik | Land | 0 |
| Styckjunkaren 4 | Huvudsta | Land | 0 |
| Total | 29,637 |
| Jan–Dec 2011 | Lettable area, |
||
|---|---|---|---|
| Properties | Area | Category | sqm |
| Quarter 1 | |||
| Pyramiden 3 | Arenastaden Land | 0 | |
| Signalen 3 | Arenastaden Land | 0 | |
| Quarter 4 | |||
| Farao 8 | Arenastaden Office | 5,774 | |
| Farao 19 | Arenastaden Land | 0 | |
| Solna Nationalare | |||
| nan 8 | Arenastaden | 0 | |
| Total | 5,774 |
cent excluding and 3.80 per cent including commitment fees on the undrawn portion of committed credit facilities.
Interest rates on 75 per cent of Fabege's loan portfolio were fixed using fixedincome derivatives. The average fixed-rate period was 3.6 years, taking the effect of derivative instruments into account, while the average fixed-rate period for variablerate loans was 52 days. In August, Fabege opted to interest hedge part of its loan portfolio. At year-end, the company's portfolio of derivative instruments totalled SEK 5,000m – of which SEK 1,000m was for a term of three years, SEK 1,500m for a term of five years, SEK 1,500m for seven years and SEK 1,000m for a term of ten years – carrying fixed interest at annual rates of between 2.18 and 2.73 per cent. Fabege also holds cancellable swaps totalling SEK 7,550m at interest rates ranging from 2.87 to 3.98 per cent that mature between 2013 and 2018.
The derivatives portfolio is measured at market value and the change in value is recognised in the profit and loss account. At 31 December 2011, the recognised negative fair value adjustment of the portfolio amounted to SEK 664m (267). The derivatives portfolio has been measured at the present value of future cash flows. The change in value is of an accounting nature and has no impact on the company's cash flow. At the due date, the market value of derivative instruments is always zero.
In December, Fabege launched a bond financing program with a limit of SEK 5,000m via the co-owned company Svensk Fastighetsfinansiering AB (SFFAB). Through the bond financing program Fabege borrowed SEK 289m in the capital
market. SFFAB's first issuance took the shape of a three-year bond totalling SEK 650m, of which SEK 400m carried fixed interest at a rate of 3.65 per cent and SEK 250m was subject to variable interest rates. The bonds are secured by property mortgage deeds. SFFAB is jointly owned by Fabege, Wihlborgs, Peab and Brinova. Fabege owns 30 per cent of the company. The aim is to expand the company's financing base with a new source of financing.
Fabege has a commercial paper programme in an amount of SEK 5,000m. At the end of the year, outstanding commercial paper amounted to SEK 1,719m, compared with SEK 2,249m at the beginning of the year. The market for commercial paper has improved during the early part of 2012 and amounts outstanding at 20 January totalled SEK 2,115m. Fabege has available long-term credit facilities covering all outstanding commercial paper at any given time. At 31 December 2011, the company had unutilised committed lines of credit of SEK 3,205m.
The total loan volume includes SEK 939m in loans for projects, on which interest of SEK 27m has been capitalised.
Net interest expense includes SEK 6m in nonrecurring costs.
Shareholders' equity amounted to SEK 11,890m (11,276) at the end of the period and the equity/assets ratio was 39 per cent (39). Shareholders' equity per share totalled SEK 73 (69). Excluding deferred tax on fair value adjustments of properties, net asset value per share was SEK 84 (77).
The rental market developed well during the whole year with considerable activity and demand, despite the global economic turbulence. For Fabege, this was reflected in high net letting, an improved letting ratio and an increase in rents. The transaction market also remained strong, although activity declined during the fourth quarter. Fabege's transaction operation made a significant contribution to total earnings.
Fabege's activities in Property Management and Property Development are concentrated to a few selected submarkets in and around Stockholm. Stockholm's inner city, Solna and Hammarby Sjöstad are the company's principal markets. At
31 December 2011, Fabege owned 97 properties with a total rental value of SEK 2.1bn, a lettable floor area of 1.1m sqm and a carrying amount of SEK 29.2bn, including development and project properties totalling SEK 6.4bn. The financial occupancy rate for the entire property portfolio, including project properties,
was 90 per cent (88). The occupancy rate in the portfolio of investment properties was 92 per cent (91).
New lettings during the period totalled SEK 241m (211), while net lettings amounted to SEK 130m (27). Rents in negotiated contracts increased an average of 7 per cent. Efforts to extend and renegotiate leases with existing customers were highly successful. During the year, several large leases were signed for premises in our project properties, the largest of which pertained to Svea Ekonomi (SEK 24m), The Swedish Civil Contingencies Agency (SEK 18m) and Tastsinn (SEK 18m). A number of major leases were renegotiated and extensions of current leases were completed, such as for Fabege's largest customer, Nasdaq OMX.
During the year, eleven properties were sold for a total of SEK 936m. The sales generated a before-tax profit of SEK 173m and after-tax profit of SEK 166m.
Five properties were acquired for a total of SEK 518m, all in Arenastaden. Four of the properties are undeveloped and comprise sites totalling about 25,000 sqm, which can be developed primarily for offices but also for retail and residential purposes. The fifth property is an approximately 10,000 sqm office property that favourably complements Fabege's existing portfolio in the area.
A total of 26 per cent of Fabege's properties were externally valued at 31 December 2011 and the remaining properties were internally valued based on the latest valuations. The entire property portfolio is externally valued at least once a year. The total market value at 31 December 2011 was SEK 29.2bn (27.0).
Unrealised changes in the value of properties amounted to SEK 1,093m (843). The yield requirement decreased somewhat during the year and the yield requirement for the portfolio averaged 5.7 per cent (6.0).
The SEK 675m (579) increase in the value of the portfolio of investment properties was primarily attributable to rising rents and properties for which the risk of vacancies has declined. The project portfolio contributed to a value increase of SEK 418m (264).
Fabege's project investments are designed to reduce vacancy rates and increase rents in the property portfolio, thereby improving cash flows and adding value. The development of properties is a key feature of Fabege's business model and should make a significant contribution to consolidated profit. The aim is to achieve a return of at least 20 per cent on invested capital.
Investments in existing properties and projects during the year totalled SEK 1,457m (907). The investments involved new builds, extensions and conversions.
During the first quarter 2011 the projects in the properties Fräsaren 10, Solna Business Park (let to Vectura and Axfood) and Farao 20, Arenastaden (let to Egmont and Fabege), were completed. The properties have been transferred to the portfolio of investment properties.
The project in the Uarda 5 property, Arenastaden, pertaining to the construction of Vattenfall's new headoffice, is proceeding as planned. At present, work is under way on the facades and interior fittings. The first office floor is now complete.
The office project in the Bocken 39 property on Lästmakargatan 20 is nearing completion. Tenants have moved into the let premises. What remains is customisation of the un-let premises to tenant needs. The property will be transferred to Property Management during the first quarter of 2012.
The National Agency for Education has relocated to the Klamparen 10 property on Fleminggatan 12. Meanwhile, adaptations to the needs of the remaining tenants continue, with occupancy scheduled for 2012. A total of 72 per cent of the property has been let. The detail planning work to enable an add-on to the property continues.
Björn Borg AB has relocated to the Apotekaren 22 property on Tulegatan/ Rådmansgatan. Customisation to the needs of other tenants due to move into the property in 2012 is under way. The occupancy rate of the project is currently 57 per cent and letting work on other vacant premises continues, with several attractive negotiations.
Work on the Uarda 1 (Sjökvarteret), Arenastaden, office project is also proceeding as planned, with work on the frames and facades currently under way. The property is scheduled for occupancy in the early part of the fourth quarter of 2012. The occupancy rate is 66 per cent.
During the year, development work at Arenastaden has moved ahead. Production of Swedbank Arena is fully under way. The arena will be inaugurated during the autumn of 2012. In December, Fabege's jointly owned company Råsta Holding sold the development right to the retail centre to Unibail-Rodamco, thus enabling construction of Mall of Scandinavia to commence in 2012. This contribution to the development of Arenastaden means a great deal for Fabege's continued development of office development rights and existing office properties in Arenastaden. Fabege owns about 200,000 sqm of existing office floor space and 180,000 sqm of development rights in the area. The consortium owns approximately 360,000 sqm of additional development rights.
During the first half of the year, three project properties were transferred from Property Development to Property Management.
The segment Property Management generated net operating income of SEK 1,111m (1,233), corresponding to a surplus ratio of 69 per cent (68). The occupancy rate was 92 per cent (91). Profit from Property Management amounted to SEK 581m (768). Realised and unrealised changes in value totalled SEK 763m (794).
The segment Property Development generated net operating income of SEK
116m (115), corresponding to a surplus ratio of 62 per cent (57). Profit from Property Management totalled SEK –17m (14). The year-on-year decline was due to considerable fluctuations in cash flow between project and development properties. Realised and unrealised changes in value amounted to SEK 503m (286).
| Property name | Property type | Area | Completed | Lettable area, sqm |
Occupancy rate, area, % 1) |
Estimated rental value, SEKm 2) |
Carrying amount, SEKm |
Estimated investment, SEKm |
Of which, accrued, SEKm |
|---|---|---|---|---|---|---|---|---|---|
| Apotekaren 22 3) | Office | Norrmalm | Q4-2012 | 31,599 | 76 | 90 | 1,126 | 204 | 79 |
| Bocken 393) | Office | Östermalm | Q4-2011 | 19,909 | 80 | 75 | 1,160 | 149 | 140 |
| Klamparen 10 | Office | Kungsholmen | Q2-2012 | 22,530 | 72 | 66 | 713 | 233 | 140 |
| Uarda 13) | Office | Arenastaden | Q3-2012 | 41,079 | 60 | 78 | 455 | 533 | 157 |
| Uarda 5 | Office | Arenastaden | Q3-2012 | 44,500 | 100 | 106 | 940 | 1,050 | 642 |
| Total | 159,617 | 78 | 415 | 4,394 | 2,169 | 1,158 | |||
| Other Land and Project properties | 577 | ||||||||
| Other Development properties | 1,406 | ||||||||
| Total Project, Land and Development properties | 6,377 |
1) Operational occupancy rate at 31 December 2011.
2) The annual rent for the largest projects in progress could increase to SEK 415m (fully let) from SEK 132.4m in annualised current rent as of 31 December 2011. 3) Information regarding area, rental value and carrying amount pertains to the entire property. The investment amount pertains to only a portion of the property.
| 31 December 2011 | 31 December 2011 | 1 January – 31 December 2011 | ||||||
|---|---|---|---|---|---|---|---|---|
| No. of properties |
Lettable area, '000 sqm |
Market value, SEKm |
Rental value2), SEKm |
Financial occupancy rate, % |
Rental income, SEKm |
Property expenses, SEKm |
Net operating income, SEKm |
|
| Property holdings | ||||||||
| Investment properties1) | 70 | 929 | 22,773 | 1,803 | 92 | 1,600 | -399 | 1,201 |
| Development properties1) | 9 | 126 | 3,692 | 235 | 76 | 169 | -50 | 119 |
| Land and Project properties1) | 18 | 52 | 2,685 | 60 | 69 | 19 | -11 | 8 |
| Total | 97 | 1,107 | 29,150 | 2,098 | 90 | 1,788 | -460 | 1,328 |
| of which, inner city | 38 | 497 | 16,809 | 1,181 | 92 | 1,028 | -266 | 762 |
| of which, Solna | 37 | 455 | 9,856 | 720 | 88 | 598 | -137 | 461 |
| of which, Hammarby Sjöstad | 13 | 130 | 2,215 | 178 | 84 | 144 | -51 | 93 |
| of which, Other | 9 | 25 | 270 | 19 | 88 | 18 | -6 | 12 |
| Total | 97 | 1,107 | 29,150 | 2,098 | 90 | 1,788 | -460 | 1,328 |
| Expenses for lettings, project development and property administration | -105 | |||||||
| Total net operating income after expenses for lettings, project development and property administration | 1,2233) |
1) See definitions on page 9.
2) Time-limited deductions of approximately SEK 98m have not been recognised in the rental value.
3) The table refers to Fabege's property portfolio at 31 December 2011. Income and expenses are recognised as if the properties had been held during the entire period. The difference between recognised net operating income, SEK 1,223m, and net operating income in the profit and loss account, SEK 1,227m, is attributable to net operating income from divested properties being excluded and acquired/completed properties being adjusted upwards as if they had been owned/completed throughout the January–December 2011 period.
| SEKm | Investment properties Jan–Dec 2011 |
Development properties Jan–Dec 2011 |
Total Jan–Dec 2011 |
Investment properties Jan–Dec 2010 |
Development properties Jan–Dec 2010 |
Total Jan–Dec 2010 |
|---|---|---|---|---|---|---|
| Rental income | 1,618 | 186 | 1,804 | 1,806 | 201 | 2,007 |
| Property expenses | –507 | –70 | –577 | –573 | –86 | –659 |
| Net operating income | 1,111 | 116 | 1,227 | 1,233 | 115 | 1,348 |
| Surplus ratio, % | 69 | 62 | 68 | 68 | 57 | 67 |
| Central administration and marketing | –51 | –12 | –63 | –50 | –12 | –62 |
| Net interest expense | –486 | –123 | –609 | –432 | –90 | –522 |
| Share in profit/loss of associated companies | 7 | 2 | 9 | 17 | 1 | 18 |
| Operating profit/loss | 581 | –17 | 564 | 768 | 14 | 782 |
| Realised changes in value, properties | 88 | 85 | 173 | 215 | 22 | 237 |
| Unrealised changes in value, properties | 675 | 418 | 1,093 | 579 | 264 | 843 |
| Profit/loss before tax per segment | 1,344 | 486 | 1,830 | 1,562 | 300 | 1,862 |
| Changes in value, fixed income derivatives and equities | –413 | 67 | ||||
| Profit/loss before tax | 1,417 | 1,929 | ||||
| Properties, market value | 22,773 | 6,377 | 29,150 | 21,453 | 5,516 | 26,969 |
| Occupancy rate, % | 92 | 75 | 90 | 91 | 69 | 88 |
1) See definitions on page 9.
At the end of the year, the Fabege Group had 122 employees (126).
Sales during the period amounted to SEK 102m (102) and the result before appropriations and tax was SEK 1,389m (–150). Net financial items include dividends to the Parent Company of SEK 2,000m (0). Net investments in property, equipment and shares totalled SEK 5m (–30).
The parent company applies Recommendation RFR 2, Accounting for Legal Entities, and the Swedish Annual Accounts Act (see also the profit and loss account and the balance sheet on page 11).
The 2011 AGM passed a resolution authorising the Board, not longer than up to the next AGM, to buy back and transfer shares in the company. Share buybacks are subject to a limit of 10 per cent of the total number of outstanding shares at any time. During the period, 755,000 shares were bought back at an average price of SEK 51.03. At 31 December 2011, the company held 3,166,488 treasury shares, representing 1.9 per cent of the total number of registered shares.
The board of Directors will propose that the Annual General Meeting on 29 March 2012 authorise:
As announced previously, the Swedish Tax Agency has decided to increase the Fabege Group's taxable income in respect of a number of property sales made through limited partnerships (see also the press release from 7 December 2006 and page 53 of Fabege's 2010 Annual Report). The transactions derive from Tornet, the old Fabege and Wihlborgs during the years 2003–2006. As at 31 December 2011, the total increase in taxable income amounts to SEK 8,368m. The decisions have resulted in total tax demands of SEK 2,214m plus a tax penalty of SEK 164m, making a total demand of SEK 2,378m excluding interest payments. At 31 December 2011, accrued interest amounted to SEK 303m. Fabege strongly contests the tax demands resulting from the Tax Agency's and Administrative Court's decisions and has appealed the decisions.
During the spring of 2011, the Swedish Administrative Court announced verdicts in all of Fabege's ongoing tax cases. The Swedish Administrative Court ruled in favour of the Swedish Tax Agency's position that Fabege should be taxed pursuant to the Swedish Tax Evasion Act. All of the verdicts have been appealed with the Swedish Administrative Court of Appeals and Fabege has been granted a respite for the payments of taxes until the Swedish Administrative Court of Appeals has issued a verdict. The Swedish Administrative Court of Appeals has issued a stay of proceedings in all cases pending the Supreme Administrative Court's hearing of the Swedish National Tax Board's preliminary verdict in what is known as the "Cyprus case." During the fourth quarter of 2011, additional tax cases were brought before the Swedish Administrative Court for consideration. As a result, all of the transactions completed by the Fabege Group on the basis of the so-called Holland solution are subject to consideration. Since Fabege does not believe that the Swedish Tax Agency will make further claims, it believes that the above figures concerning increased taxes and tax demands will not rise. Fabege considers that the Tax Agency and the Administrative Court has disregarded a number of important aspects and that the verdicts are therefore incorrect – an assessment shared by Fabege's advisors on the matters. Fabege is of the opinion that it is highly probable that the Administrative Court of Appeal will amend the Administrative Court's rulings to the benefit of Fabege.
Fabege is adhering to its view that the sales were accounted for and declared in compliance with applicable rules. This assessment is shared by external legal experts and tax advisors that have analysed the sales, the arguments of the Swedish Tax Agency and the verdicts of the Administrative Court.
No provision has been made in Fabege's balance sheet. However, until further notice, the amount is instead being recognised as a contingent liability, as in previous financial statements.
Risks and uncertainties relating to cash flow from operating activities are primarily attributable to changes in rents, vacancies and interest rates. A more detailed description is presented in the risk section of the 2010 Annual Report (pages 9–10), and a description of the effect of these changes on consolidated earnings is presented in the sensitivity analysis in the 2010 Annual Report (page 52).
Properties are recognised at fair value and changes in value are recognised in profit and loss. The effects of changes in value on consolidated earnings, the equity/assets ratio and the loan-to-value ratio are shown in the sensitivity analysis in the 2010 Annual Report (page 52).
A description of financial risk, which is the risk that the company will have insufficient access to long-term loan funding, and Fabege's management of this risk is presented in the 2010 Annual Report (pages 10–11 and 64).
No material changes in the company's assessment of risks have been made after publication of the 2010 Annual Report. Under its adopted targets for capital structure, Fabege aims to have an equity/assets ratio of at least 30 per cent and an interest coverage ratio of at least 2 (including realised changes in value).
Both the rental market and transaction market strengthened during 2011. The development of the portfolio and the favourable net lettings trend enable Fabege to continue to generate and deliver contribution to profit from all parts of its business model, meaning property management, property development and property transactions. We look forward to strong earnings in 2012, including:
• A stronger cash flow from the portfolio of investment properties
• A continued high development rate in the portfolio
• Value growth through projects and attractive properties in good locations.
Although uncertainty concerning the economic outlook is considerable, Fabege is well equipped with a strong balance sheet and a property portfolio in good locations with favourable development potential.
Fabege prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS). This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting.
The Group has applied the same
We have reviewed the interim report for Fabege AB (publ) for the period 1 January 2011 to 31 December 2011. The Board of Directors and the Chief Executive Officer are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the Standard on Review Engagements (SÖG) 2410, Review of Interim Financial Information Performed accounting policies and valuation methods as in the most recent annual report.
The parent company prepares its accounts in accordance with RFR 2 Accounting for Legal Entities and the Swedish Annual Accounts Act and has applied the same accounting policies and valuation methods as in the most recent annual report.
Stockholm, 2 February 2012
Christian Hermelin Chief Executive Officer
by the Independent Auditor of the Entity. A review consists in making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with ISA and generally accepted auditing standards.
The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefor, the conclusion expressed based on a review does not givee the same level of assurance as a conclusioexpressed based on an audit.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not, in all material respects, prepared for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the parent company in accordance with the Annual Accounts Act.
Stockholm, 2 February 2012 Deloitte AB
Svante Forsberg Authorised Public Accountant
You are most welcome to visit Fabege's website, which is one of our main information channels. The aim is to continuously provide you with relevant, up-to-date information.
The website provides information on the company and its operations and strategies. You can also find financial information, share data, details about our properties and ongoing projects and much more. Visitors to the website can also search for vacant premises, and our tenants are able to easily find contact details or other information related to the property in which they are located.
Annual report for 2011..................................................................................................... 7 March 2012 Annual General Meeting 2012 ...................................................................................... 29 March 2012 Interim report Jan–March ................................................................................................ 26 April 2012
Source: Trust and Fidessa.
| Shareholder | No. of shares | Share of capital, % |
Share of votes, % |
|---|---|---|---|
| Brinova AB | 23,291,092 | 14.1 | 14.4 |
| Öresund Investment AB | 10,793,144 | 6.5 | 6.7 |
| BlackRock funds | 8,938,454 | 5.4 | 5.5 |
| SEB funds | 6,876,374 | 4.2 | 4.2 |
| Länsförsäkringar funds | 5,724,416 | 3.5 | 3.5 |
| State of Norway | 4,031,647 | 2.4 | 2.5 |
| Swedbank Robur funds | 3,098,233 | 1.9 | 1.9 |
| Mats Qviberg and family | 2,917,686 | 1.8 | 1.8 |
| SHB funds | 2,704,220 | 1.6 | 1.7 |
| ENA City AB | 2,670,000 | 1.6 | 1.6 |
| Fourth AP-fund | 2,600,342 | 1.6 | 1.6 |
| Second AP-fund | 1,830,612 | 1.1 | 1.1 |
| AMF Försäkring & Fonder | 1,630,000 | 1.0 | 1.0 |
| Third AP-fund | 1,402,672 | 0.8 | 0.9 |
| Skandia Liv | 1,165,293 | 0.7 | 0.7 |
| Other Swedish shareholders 38,692,814 | 23.4 | 23.9 | |
| Other foreign shareholders | 43,858,085 | 26.5 | 27.0 |
| Total no. of outstanding shares |
162,225,084 | 98.1 | 100.0 |
| Treasury shares | 3,166,488 | 1.9 | 0.0 |
1) Certain shareholders may, through custodial accounts, have had different holdings than are apparent from the shareholder's register. Source: SIS Ägarservice AB, data derived from Euroclear Sweden AB, as of December 31, 2011.
165,391,572 100.00 100.0
Profit before tax plus depreciation-, plus/minus unrealised changes in value less current tax, divided by average number of shares.
Total assets less non-interest bearing liabilities and provisions.
Stated as an annual value. Index-adjusted basic rent under the rental agreement plus rent supplements.
Interest-bearing liabilities divided by shareholders' equity.
Properties in which a conversion or extension is in progress or planned that has a significant impact on the property's net operating income. Net operating income is affected either directly by the project or by limitations on lettings prior to impending development work.
Dividend yield Dividend for the year divided by the share price at year-end.
Shareholders' equity (including minority share) divided by total assets.
Parent company shareholders' share of equity according to the balance sheet divided by the number of shares at the end of the period.
Contract value divided by rental value at the end of the period.
Profit after financial items plus financial expenses and plus/minus unrealised changes in value, divided by financial expenses.
Properties that are being actively managed on an ongoing basis.
Land and developable properties and properties in which a new build/complete redevelopment is in progress.
Interest-bearing liabilities divided by the carrying amount of the properties at the end of the period.
New lettings during the period less terminations to vacate.
Parent company shareholders' share of profit after tax for the period divided by average number of outstanding shares during the period.
Contract value plus estimated annual rent for vacant premises after a reasonable general renovation.
Profit before tax plus interest expenses-, divided by average capital employed. In interim reports, the return is converted to its annualised value without taking account of seasonal variations
Total no. of shares
Profit for the period/year divided by average shareholders' equity. In interim reports the return is converted to its annualised value without taking account of seasonal variations.
In accordance with IFRS 8, segments are reported as viewed by management, i.e. broken down into two segments: Investment Properties and Development Properties.Rental income and property expenses as well as realised and unrealised changes in value including tax are directly attributable to properties in each segment (direct income and expenses). In cases where a property changes character during the year, earnings attributable to the property will be allocated to either segment based on the period of time that the property belonged to the segment. Central administration and items in net financial items have been allocated to the segments in a standardised manner based on each segment's share of the total property value (indirect income and expenses).
The property asset is directly attributable to each segment and is recognised as of the closing date.
Net operating income divided by rental income.
| SEKm | 2011 Oct–Dec |
2010 Oct–Dec |
2011 Jan–Dec |
2010 Jan–Dec |
|---|---|---|---|---|
| Rental income | 458 | 487 | 1,804 | 2,007 |
| Property expenses | –140 | –165 | –577 | –659 |
| Net operating income | 318 | 322 | 1,227 | 1,348 |
| Surplus ratio, % | 69% | 66% | 68% | 67% |
| Central administration and marketing | –16 | –15 | –63 | –62 |
| Net interest expense | –149 | –139 | –609 | –522 |
| Share in profit/loss of associated companies | 8 | 14 | 9 | 18 |
| Profit/loss from property management activities | 161 | 182 | 564 | 782 |
| Realised changes in value of properties | 90 | 47 | 173 | 237 |
| Unrealised changes in value of properties | 321 | 166 | 1,093 | 843 |
| Unrealised change in value of fixed income derivatives | –134 | 213 | –397 | 106 |
| Change in value of equities | –8 | –3 | –16 | –39 |
| Profit/loss before tax | 430 | 605 | 1,417 | 1,929 |
| Current tax | –1 | –3 | –1 | –3 |
| Deferred tax | –16 | 4 | –275 | –229 |
| Profit/loss for period/year | 413 | 606 | 1,141 | 1,697 |
| Comprehensive income attributable to parent company shareholders | 413 | 606 | 1,141 | 1,697 |
| Earnings per share, SEK | 2.55 | 3.72 | 7.01 | 10.38 |
| No. of shares at end of period, millions | 162.2 | 163.0 | 162.2 | 163.0 |
| Average no. of shares, millions | 162.2 | 163.0 | 162.7 | 163.5 |
| SEKm | 31 Dec 2011 31 Dec 2010 | |
|---|---|---|
| Assets | ||
| Properties | 29,150 | 26,969 |
| Other tangible fixed assets | 1 | 3 |
| Financial fixed assets | 1,124 | 714 |
| Current assets | 362 | 1,504 |
| Cash and cash equivalents | 74 | 73 |
| Total assets | 30,711 | 29,263 |
| Equity and liabilities | ||
| Equity | 11,890 | 11,276 |
| Provisions | 585 | 423 |
| Interest-bearing liabilities 1) | 16,755 | 16,646 |
| Derivatives | 664 | 267 |
| Non-interest-bearing liabilities | 817 | 651 |
| Total equity and liabilities | 30,711 | 29,263 |
| Equity/assets ratio, % | 39 | 39 |
| Contingent liabilities | 3,376 | 2,520 |
| SEKm | Equity | Of which, attributable to parent company shareholders |
Of which, attributable to minority |
|---|---|---|---|
| Equity, 1 Jan 2010 | 9,969 | 9,969 | – |
| Share buybacks | –61 | –61 | – |
| Cash dividend | –329 | –329 | – |
| Profit/loss for the period | 1,697 | 1,697 | – |
| Equity, 31 Dec 2010 | 11,276 | 11,276 | – |
| Share buybacks | –38 | –38 | – |
| Cash dividend | –489 | –489 | – |
| Profit/loss for the year | 1,141 | 1,141 | – |
| Equity, 31 Dec 2011 | 11,890 | 11,890 | – |
1) Of which short-term SEK 3,219m (5,818).
| SEKm | 2011 Jan–Dec |
2010 Jan–Dec |
|---|---|---|
| Net operating income and realised changes in the value of existing property portfolio excluding depreciation |
1,407 | 1,600 |
| Central administration | –63 | –62 |
| Net financial items paid | –595 | –520 |
| Income tax paid | –1 | –3 |
| Change in other working capital | 1,198 | –1,099 |
| Cash flow from operations | 1,946 | –84 |
| Investments and acquisition of properties | –1,986 | –940 |
| Sale of properties, carrying amount of divested properties |
756 | 3,978 |
| Other investments (net) | –297 | –201 |
| Cash flow from investing activities | –1,527 | 2,837 |
| Dividend to shareholders | –489 | –329 |
| Share buybacks | –38 | –61 |
| Change in interest-bearing liabilities | 109 | –2,463 |
| Cash flow from financing activities | –418 | –2,853 |
| Change in cash and cash equivalents | 1 | –100 |
| Cash and cash equivalents at beginning of period |
73 | 173 |
| Cash and cash equivalents at end of period |
74 | 73 |
| 2011 Jan–Dec |
2010 Jan–Dec |
|
|---|---|---|
| Financial | ||
| Return on capital employed, % | 7.2 | 8.7 |
| Return on equity, % | 9.9 | 16.0 |
| Interest coverage ratio, times | 2.2 | 3.0 |
| Equity/assets ratio, % | 39 | 39 |
| Loan-to-value ratio, properties, % | 57 | 62 |
| Debt/equity ratio, times | 1.4 | 1.5 |
| Share-related 1) | ||
| Earnings per share for the period, SEK | 7.01 | 10.38 |
| Equity per share, SEK | 73 | 69 |
| Cash flow per share, SEK | 4.49 | 6.13 |
| No. of outstanding shares at end of period, '000 |
162,225 | 162,980 |
| Average no. of shares, '000 | 162,719 | 163,504 |
| Property-related | ||
| No. of properties | 97 | 103 |
| Carrying amount, properties, SEKm | 29,150 | 26,969 |
| Lettable area, sqm | 1,107,000 | 1,138,000 |
| Financial occupancy rate, % | 90 | 88 |
| Surplus ratio, % | 68 | 67 |
1) No dilution effect arises, since there are no potential shares (such as convertibles).
| SEKm | 2011 Jan–Dec |
2010 Jan–Dec |
|---|---|---|
| Income | 102 | 102 |
| Expenses | –193 | –190 |
| Net financial items | 1,877 | 77 |
| Change in value, fixed income derivatives | –397 | 106 |
| Change in value, equities | 0 | –29 |
| Profit/loss before tax | 1,389 | 66 |
| Tax | 158 | –28 |
| Profit/loss for period/year | 1,547 | 38 |
| SEKm | 30 Dec 2011 | 31 Dec 2010 |
|---|---|---|
| Interests in Group companies | 13,328 | 13,328 |
| Other fixed assets | 39,090 | 37,669 |
| of which, receivables from Group companies |
38,815 | 37,524 |
| Other current assets | 161 | 25 |
| Cash and cash equivalents | 69 | 64 |
| Total assets | 52,648 | 51,086 |
| Equity | 10,382 | 9,363 |
| Provisions | 68 | 63 |
| Long-term liabilities | 38,892 | 35,771 |
| of which, liabilities to Group companies | 25,156 | 24,676 |
| Short-term liabilities | 3,306 | 5,889 |
| Total equity and liabilities | 52,648 | 51,086 |
Fabege, which is one of the leading property companies in Sweden, conducts opera tions that are primarily focused on letting office premises and property development.
The company's portfolio is highly concentrated to three sub-markets offering robust growth in the Stockholm area; Stockholm's inner city, Solna and Hammarby Sjöstad. Fabege offers attractive and efficient premises, principally for offices but also for retail and other operations.
Fabege manages a well-located property portfolio, which is developed conti nuously through improvements, sales and acquisitions. By collecting properties in clusters, increased customer proximity is achieved which, combined with compre hensive market knowledge, creates conditions for efficient management and a high occupancy rate.
At 31 December 2011, Fabege owned 97 properties with a combined market value of SEK 29.2bn. The rental income amounted to SEK 2.1bn.
Chief Executive Officer Phone: +46 (0)8-555 148 25, +46 (0)733-87 18 25 Åsa Bergström
Deputy CEO and Chief Financial Officer Phone:+46 (0)8-555 148 29, +46 (0)706-66 13 80
Bo Nilsson Director of Communications Phone: +46 (0)8-555 148 20, +46 (0)702-45 86 29
More information about Fabege and its operations is available on the Group's website. The website also includes a webcast presentation from 2 February 2012, in which Christian Hermelin and Åsa Bergström present earnings for the quarter.
The information contained in this report is such that Fabege is legally obliged to disclose under the Securities Market Act and/or the Financial Instruments Trading Act. The informa tion was released for publication on 2 February 2012.
Fabege AB (publ) Box 730, SE-169 27 Solna, Visit address: Pyramidvägen 7, SE-169 56 Solna, Sweden Phone: +46 (0)8-555 148 00 Fax: +46 (0)8-555 148 01 E-mail: [email protected] Internet: www.fabege.se Company registration no: 556049-1523 Registered office of the Board: Stockholm
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