Wallenstam — Interim / Quarterly Report 2020

Apr 28, 2020

WALLENSTAM

Interim Report

JANUARY 1–MARCH 31, 2020

January 1–March 31, 2020

• The net asset value per share increased by SEK 1.25 during the period and amounted to SEK 92.60 (83.60).
• Income from property management increased by about 6 percent and amounted to SEK 275 million (260).
• Rental income increased by just over 5 percent and amounted to SEK 523 million (497).
• Construction of properties amounted to SEK 983 million (770).
• On closing day, 3,093 apartments were under construction.
• Changes in value of investment properties amounted to SEK 254 million (285).
• Profit before tax amounted to SEK 395 million (416) and profit after tax amounted to SEK 309 million (340), corresponding to SEK 1.0 per share (1.1).

Comparisons in brackets refer to the corresponding period of the previous year unless otherwise stated.

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HANS WALLENSTAM, CEO

Wallenstam stands strong

"Wallenstam stands strong – we are built in such a way that we can withstand crises as well as possible, a direct result of my own experience from the crises I have been through. Apart from strong finances, we have commercial properties in central Gothenburg and residential properties in attractive residential areas in the Gothenburg and Stockholm regions."

"The profit for the quarter is completely in line with our expectations, as the pandemic has not affected our numbers for the first quarter. Income from property management is increasing. The valuation of our investment properties is unchanged. We adjust, as always, the value of our efficient new construction projects in line with their production, and gradually recognize the value that we create."

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Wallenstam in brief

Number of investment properties: 221
Value of investment properties: SEK 54 billion
Market capitalization: SEK 37 billion
Occupancy rate, lettable area: 98%
Lettable area: 1.2 million sq m
Number of apartments under construction: 3,093
Number of wind turbines: 66

73.8%
SURPLUS RATIO

Read more about Wallenstam on page 21.

Important events first quarter

In early 2020, the world has been shaken by a global virus infection, Covid-19, which has had a significant impact on people, the business community and public policy both in Sweden and in the rest of the world. The impact during the first quarter was relatively small. The financial effects of this will only become apparent in the second quarter. See more on page 4.

During the quarter, construction started of 382 apartments in two projects. One project involves 266 rental apartments in Kv.8 in the urban development project Kallebäcks Terrasser in Gothenburg. The other project consists of 116 rental apartments in the Väven block in the urban development project Mölnlycke Fabriker in Härryda Municipality.

In connection with the construction start of the Väven block, an initial drawdown of SEK 500 million was made under the loan agreement with the European Investment Bank (EIB) of SEK 2,500 million for construction of sustainable rental apartments according to the bank's required standard of "nearly-zero-energy buildings" in Sweden. The remaining part of the loan will be drawn down in connection with the year's bond maturities. The credit facility provided by the EIB is unsecured and has an average tenor of 6.5 years.

In March, Wallenstam obtained a land allocation in Ålta Centrum in Nacka Municipality. The land allocation involves approximately 180 apartments and is located adjacent to Wallenstam's center development of Ålta.

During the quarter, Wallenstam also became a 25-percent joint owner in Colive through a new issue. Colive is one of Sweden's first operators of co-living housing through so-called co-living hubs. Colive and Wallenstam have already collaborated on projects in both Stockholm and Gothenburg.

Goal 2023 – Increase in net asset value of SEK 40 per share

In the business plan 2019–2023, Wallenstam's goal is to deliver an increase in net asset value of SEK 40 per share. The goal is measured from October 1, 2018 when the net asset value per share was SEK 79.20. On March 31, 2020, the net asset value per share was SEK 92.60, which represents an increase of SEK 1.25 per share during the first quarter of 2020 and SEK 13.35 per share in total to date during the business plan.

Net asset value

Net asset value describes the Group's total generated value and includes equity and deferred tax liability and amounted to SEK 29,897 million (27,011) on closing day. Deferred tax liability refers mainly to differences between carrying amounts and residual values for tax purposes in Group properties. A net deferred tax liability of SEK 5,410 million (4,671) was recognized in the balance sheet, which consists of a deferred tax asset of SEK 385 million (392) and a deferred tax liability of SEK 5,795 million (5,062).

INCREASE IN NET ASSET VALUE, SEK/SHARE

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Comments by the CEO

We have all, people and companies, been affected by a terrible crisis with many dimensions. The spread of Covid-19 is having an impact on the whole of society. Right now, each one of us is doing all we can to ensure that the effects of the pandemic are as mild as possible on people's lives and health. Many will become ill, we can only work to ensure that as few as possible will lose their lives. In the wake of this, there will naturally be an economic setback for everyone, although of a varying degree. In terms of the financial consequences, this is now the fourth crisis that I am entering, in my capacity as CEO. I have been through the property and financial crisis in the 1990s, the IT crash in 2001 and the Lehman crisis in 2008. The current crisis can be even worse, as many people, apart from being affected financially, can also become seriously ill.

Wallenstam is built in such a way that the company can withstand crises as well as possible, a direct result of my own experience from the crises I have been through. Apart from having close cooperation with and the majority of our financing with our banks, a strong balance sheet is essential. We must also have strong liquidity and financial possibilities in the form of available credit facilities. I am totally comfortable with this as far as Wallenstam is concerned. Today, as we release this report, we have liquid assets of SEK 1,243 million, and in addition to this an overdraft facility of SEK 800 million. We also have the possibility to draw down our backup facility, which is of SEK 4 billion, and is matched against our commercial paper program for the same amount. At present, we have issued commercial paper of SEK 2,760 million, this means that we can draw down SEK 1,240 million from our backup facility when we want to. The two bond maturities we have during 2020, one of SEK 0.4 billion in June and one of SEK 1.5 billion in November, are secured through our loan agreement with the European Investment Bank (EIB). The disbursements of the loan from the EIB are matched against these two bond maturities. As the capital market has some problems during these times, it feels very reassuring that we have good cooperation with our financiers.

Another lesson I have learned, is that the location of the properties is totally crucial in a crisis scenario. Central and attractive properties are sought-after, regardless of the economic situation. We have our commercial properties in Gothenburg inner city, our residential properties are located centrally or in attractive residential areas in the Gothenburg and Stockholm regions. This is reflected, not least in the vacancy rate and willingness to pay. Our residential tenants value our attractive housing. This is shown by the fact that essentially all the rents for our apartments are paid by every month-end, thus also by March 31 for April's monthly rent.

In this turbulent time and particularly for our corporate customers, it feels reassuring to have centrally located properties, as there is always a flow of people, although it has decreased. We have made many individual agreements with our customers that have been hardest hit in the crisis. The government has identified a number of business segments that may face the toughest situation. We have 353

customers with businesses in these areas and they represent 13 percent of our total rental value. At present, we have made individual agreements with 196 of these customers. We have currently received about 95 percent of the total rent for April. The government's support to us is a maximum of 50 percent of the rent reduction provided during the second quarter, however, up to a maximum amount of 25 percent of the original rent for these hardest hit tenants.

The profit for the quarter is completely in line with our expectations, as the pandemic has not affected our numbers for the first quarter. Valuations of different assets are difficult to perform at present. Apart from the prevailing crisis due to the pandemic, we have a low interest rate for the foreseeable future, which could have an upward impact on property values while the transaction market is negatively affected by the challenging situation in terms of financing. In light of this, the valuation of our investment properties is unchanged this quarter. We adjust, as always, the value of our efficient new construction projects in line with their production, and gradually recognize the value that we create. Our efficient new construction is continuing as planned, and we currently have about 3,000 rental apartments in production.

In this time of crisis, we have to take things hour by hour, day by day, month by month - but what I can say is that Wallenstam stands strong.

Hans Wallenstam, CEO

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Uncertainty as a result of Covid-19

In early 2020, the world has been shaken by a global virus infection, Covid-19, which has had a significant impact on people, the business community and public policy both in Sweden and in the rest of the world. The epidemic, which since March 11 has been classified as a pandemic by the WHO, has, among other things, resulted in completely or partially shutdown businesses, a trend that became increasingly apparent in late March and in early April 2020.

It is difficult at present to determine the consequences and the time horizon of the pandemic, but everyone is affected by it in some way. It arrived like a black swan and is something nobody could have foreseen. It has led to devastating consequences almost overnight, particularly for consumer durables and restaurants. It is hard to predict how much this will impact the socioeconomic environment and everything depends on how long the virus will continue to spread.

Financial stability and a good property structure

Wallenstam enters this crisis with a strong position both in terms of its financial stability and property holdings. We had an equity/assets ratio on closing day of 43 percent, and a loan-to-value ratio of 45 percent and we are mainly financed by bank loans. We have evenly distributed property holdings between residential and commercial. We have our commercial premises in central Gothenburg where there is still a flow of people, although it has decreased during the progression of the pandemic. The tenants that are included in the government's list of the most exposed sectors represent 13 percent of our total rental value.

Measures for secured liquidity

Secured liquidity is important during uncertain times and after the end of the reporting period, we secured our financing needs for the year. Our choice to maintain a larger proportion of loans in the bank even though the capital market has been cheaper, provides us with a good platform to stand on when it gets shaky in the market and means that we have continual proximity to the banks. We will match the bond maturities which we have during 2020 with our previously agreed loan with the European Investment Bank. For the part of the commercial paper which is not refinanced, we will use our backup facility with the bank. Apart from these measures, CEO Hans Wallenstam has waived his salary starting from April and until further notice, and the Nomination Committee has proposed unchanged ordinary directors' fees for the members of the Board of Directors for 2020. In addition, the Board decided in early April to withdraw its previous proposal for a dividend to the Annual General Meeting and wait until the consequences of the pandemic can be better assessed. The Board's assessment in the present situation is that it is important to secure the ability to continue making investments, which create many jobs and new housing, and through its amended proposal, the Board wants to allow for further freedom of action in an uncertain economic environment.

Support through individual solutions

Rents for the first quarter were invoiced and paid in advance during the end of 2019 and have thus not been affected by the pandemic. On the other hand, we see an obvious risk that more tenants, primarily within consumer durables, may have difficulties in maintaining their businesses and thereby in paying their rents in future periods if the current circumstances persist.

For the month of April, we have received 95 percent of the total rent. At an early stage, we started making individual agreements with our most exposed customers and at the time of release of this report, we have made agreements with 56 percent of these customers. As a landlord, we try to support our tenants, which can occur through rebates, support in the form of purchases of goods and services aimed at helping the tenants to maintain their regular business. Through this support to our tenants, we have also had the opportunity to help, for example ambulance staff and aid organizations in our society such as the City Mission and the Rescue Mission, with food deliveries at a time when they are probably needed most.

New construction is continuing

Our operations also consist of new construction of rental apartments and there we have worked at an early stage to secure material and labor for our projects in progress so that they can be completed on schedule. We hold daily pulse meetings with our contractors in order to handle any disruptions at an early stage so that we do not experience any production stoppages.

Effects only in the second quarter

As the effects of Covid-19 mainly arose from the middle of March and continued into April, the impact from the outbreak of the pandemic on Wallenstam's profit for the first quarter of 2020 was relatively small. The financial consequences of the pandemic for Wallenstam will be particularly noticeable from the second quarter of 2020. It is not currently possible to estimate the extent of the impact.

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Consolidated income statement

SEK million	Note	Jan-Mar 2020	Jan-Mar 2019	Apr-Mar 2019/2020	Jan-Dec 2019
Rental income		523	497	2,052	2,026
Operating expenses		-137	-133	-501	-497
Net operating income, properties		386	364	1,551	1,529
Management costs and administrative expenses		-59	-58	-229	-228
Financial income		2	2	4	4
Financial expenses		-55	-48	-205	-198
Income from property management		275	260	1,123	1,108
Participation in profits/losses of associated companies		-2	-1	-6	-5
Revenue, development property sales		57	262	119	324
Expenses, development property sales		-39	-186	-85	-232
Other income	1	83	172	209	298
Other expenses	1	-51	-158	-192	-299
Financial expenses, other	1	-5	-4	-26	-25
Profit before changes in value and impairment losses		318	345	1,142	1,169
Changes in value, investment properties		254	285	2,569	2,600
New construction		254	132	914	792
Other		-	153	1,655	1,808
Unrealized changes in value, financial instruments		-177	-202	-239	-264
Unrealized changes in value, synthetic options*		1	-12	-27	-40
Profit before tax		395	416	3,443	3,464
Current tax		0	0	0	0
Deferred tax		-87	-76	-738	-727
Profit for the period, after tax		309	340	2,706	2,737
OTHER COMPREHENSIVE INCOME
Items that may be transferred to profit/loss for the period		3	1	3	0
Items that may not be transferred to profit/loss for the period		-	0	60	60
Tax attributable to other comprehensive income		-1	-1	-1	-1
Comprehensive income		310	340	2,766	2,796
DISTRIBUTION OF PROFIT FOR THE PERIOD
Profit for the period attributable to parent company shareholders		309	340	2,706	2,737
Average number of outstanding shares, thousands		323,000	323,000	323,000	323,000
Profit after tax, SEK per share; dilution does not occur		1.0	1.1	8.4	8.5

*Includes unrealized expenses connected with the execution of the scheme.

Note 1 – Bridge Income from natural energy management operations

As from 2019, Wallenstam has changed the presentation in the income statement due to the fact that Natural energy no longer constitutes a separate segment. All comparative periods have been restated. The previous line items “Income from natural energy management operations” have been replaced by the line items “Other income”, “Other expenses”, and “Financial expenses, other”. Profit before changes in value and impairment charges were unchanged compared to previous periods.

SEK million	Jan-Mar 2020	Jan-Mar 2019	Apr-Mar 2019/2020	Jan-Dec 2019
Electricity revenue	83	171	204	292
Electricity expenses	-29	-133	-95	-199
Depreciation	-19	-19	-76	-76
Management costs and administrative expenses	-2	-5	-17	-20
Net operating income energy	33	14	16	-3
Financial expenses electricity	-5	-4	-26	-25
Previously Income from natural energy management operations	28	10	-9	-27

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Comments on the consolidated income statement

JANUARY 1–MARCH 31

Rental income

Rental income for the period increased by SEK 25 million, which is equivalent to just over 5 percent, and amounted to almost SEK 523 million (497). Growth in rental income during the period was mainly the result of occupations in our recently constructed residential apartment buildings. Wallenstam’s revenue is evenly distributed between residential properties and commercial premises. Our residential property holdings are fully let.

Our commercial properties are situated in central locations in Gothenburg, with offices as our single largest type of commercial premises. The surrender rate, which reflects how large a proportion of the cancellable leases are extended, amounted to 90 percent. Our occupancy rate for commercial properties in terms of lettable area amounted to 96 percent (97) on closing day.

Operating expenses & Net operating income

Operating expenses for the period amounted to SEK 137 million (133) and increased as a result of additional recently produced properties and increased costs for property maintenance due to higher charges. Seasonal effects at Wallenstam consist mainly of variable operating expenses. These are usually highest during quarters one and four when expenses for heating and property maintenance are generally higher. Climate-related expenses were about SEK 4 million lower during the period compared to the same period in 2019. Net operating income increased by 6.0 percent and amounted to SEK 386 million (364). Added efficient new production accounted for almost two thirds of this growth and the existing holdings for the remainder. The surplus ratio was 73.8 percent (73.2).

Management costs and administrative expenses

Management costs and administrative expenses totaled SEK 61 million (65) and are distributed among property management, SEK 59 million (58), energy management, SEK 2 million (5) and property transactions, SEK - million (2).

Financial income & expenses

Financial income amounted to SEK 2 million (2) and financial expenses totaled SEK 60 million (52) and are distributed among property operations and other, which mainly consists of natural energy. Capitalized interest amounted to SEK 24 million (17).

The average debt for the year was SEK 2.9 billion higher than the previous year, due to continued investments in new construction. The average interest rate on closing day, which reflects future interest to pay in relation to our loans, was 1.31 percent (1.25). This was higher compared to the previous year mainly due to higher 3M STIBOR. During the period, the average interest rate amounted to 1.23 percent (1.15).

Income from sales of development properties

A profit or loss from sales of development properties is recognized when the apartment or property is taken into possession by the purchaser. Apart from the cost, selling and marketing expenses are also included, which are expensed as they arise.

Net profit from sales during the year amounted to SEK 18 million (76) and included sales of apartments in the Vasagatan 33 project, individual co-op apartments as well as costs.

Other income & Other expenses

Income and expenses from electricity production as well as other income and expenses are recognized as other income and other expenses.

Electricity revenue and electricity expenses for the period were significantly lower than the previous year. This was mainly explained by the divestment of the electricity

RENTAL INCOME AND INCOME FROM PROPERTY MANAGEMENT

NET OPERATING INCOME AND SURPLUS RATIO

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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trading business area. Production of electricity increased, by 26 percent in total compared to the previous year, and amounted to 148 GWh (117). The price of electricity and renewable energy certificates decreased, however, which meant that sales from electricity production were lower compared to the previous year.

Change in value, investment properties

Changes in value of investment properties during the period totaled SEK 254 million (285) and came entirely from gradual value growth in our new construction in progress (132). Due to the difficult to judge and uncertain market situation at present, the value of other properties has not been adjusted, which is considered to be a cautious measure, mainly relating to residential.

Unrealized changes in value, financial instruments

The change in value of financial instruments in the income statement includes changes in value of interest rate and electricity derivatives and holdings of listed and unlisted shares. The profit/loss is recognized in the income statement apart from changes in value from unlisted shares, which are recognized against other comprehensive income.

The value of interest rate and electricity derivatives developed negatively during the period, SEK -176 million (-197) and SEK -1 million (-6), respectively. On closing day, the 10-year swap rate amounted to 0.37 percent, compared to 0.68 percent at the start of the year.

Unrealized changes in value, synthetic options

The Annual General Meeting on April 24, 2018 resolved to introduce a synthetic options scheme directed to all personnel. The term of the scheme runs until May 31, 2024 and the estimated cost in the event of a maximum outcome is SEK 330 million. At the start of the scheme in May 2018, personnel were invited to acquire the allocated number of options at a market price. The value of the synthetic options, which varies with Wallenstam's share price, decreased slightly during the first quarter of the year. The unrealized development in value including costs connected to the scheme, amounted to SEK 1 million (-12) during the period. To date, the total recognized obligation for the scheme amounts to SEK 52 million (25).

Taxes

The tax expense for the period, which consists in its entirety of deferred tax, amounted to SEK 87 million (76) net. Tax was calculated at 21.4 percent on current taxable income while deferred tax liabilities and receivables were calculated at the lower tax rate of 20.6 percent that applies starting from 2021. The tax expense for the period was positively impacted by SEK 3 million (3) as a result of remeasurement to the corporate tax rate of 20.6 percent. New corporate taxation rules have not impacted net profit for the year in other respects.

DISTRIBUTION, RENTAL VALUE

THE TEN LARGEST COMMERCIAL TENANTS

Tenant	Floor space, sq m
City of Gothenburg	24,077
Filmstaden AB	14,508
Essity Hygiene and Health AB	13,317
Academedia AB	11,382
Gothenburg Regional Archives	11,000
Västra Götaland County Council	10,108
ICA Fastigheter AB	6,906
Convendum	6,892
Sandryds Handels AB	6,730
Folkuniversitetet	6,308
Total	111,228

Our total commercial floor space is approximately 510,000 sq m.

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Consolidated balance sheet, condensed

SEK million	Mar 31, 2020	Mar 31, 2019	Dec 31, 2019
ASSETS
NON-CURRENT ASSETS
Investment properties	53,619	47,289	52,354
Wind turbines	1,090	1,166	1,109
Participations in associated companies	161	112	133
Financial assets	540	417	549
Financial derivative instruments	7	7	6
Other non-current assets	75	63	71
Total non-current assets	55,493	49,054	54,222
CURRENT ASSETS
Development properties	170	156	175
Financial derivative instruments	0	18	2
Other current assets	204	221	161
Cash and cash equivalents	92	496	129
Total current assets	466	891	467
Total assets	55,959	49,945	54,689
EQUITY AND LIABILITIES
EQUITY
Equity	24,102	21,949	23,792
Equity attributable to non-controlling interests	2	2	2
Total equity	24,104	21,951	23,794
NON-CURRENT LIABILITIES
Provisions for deferred tax	5,410	4,671	5,322
Other provisions	187	108	188
Interest-bearing liabilities	4,463	9,121	3,883
Financial derivative instruments	533	279	356
Lease liability	419	421	420
Other non-current liabilities	36	36	36
Total non-current liabilities	11,048	14,636	10,205
CURRENT LIABILITIES
Interest-bearing liabilities	20,036	12,699	19,998
Financial derivative instruments	3	-	2
Lease liability	1	-	1
Other current liabilities	768	659	689
Total current liabilities	20,808	13,358	20,690
Total equity and liabilities	55,959	49,945	54,689

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Comments on the consolidated balance sheet

OUR PROPERTIES

Development during the period

During the year, we invested a total of SEK 1,030 million (802), of which SEK 1,010 million (791) in investment properties and SEK 20 million (11) in development properties. New construction projects in progress involve 3,093 apartments. The total value of rental apartment and development projects in progress amounted to SEK 5.9 billion (4.0) on closing day.

The right of use value for land granted with site leasehold rights has been estimated at SEK 402 million (402) and is recognized as a part of the properties' value.

Investment properties

Changes in value affected the value of investment properties positively by SEK 254 million (285) in total, of which the entire change during the period came from value growth in properties under construction (132). Due to the difficult to judge and uncertain market situation at present, the value of other properties has not been adjusted, which is considered to be a cautious measure, mainly relating to residential.

The yield requirement was unchanged from the previous report. For the commercial holdings, the average yield requirement amounts to 4.5 percent (4.6). For residential properties in operation, the average yield requirement amounts to almost 3.2 percent (3.3). The value of investment properties amounted to SEK 53,619 million (47,289) at the end of the period.

Development properties

Development properties include the co-op apartment project New York at Gårdet in Stockholm and remaining apartments in the Vasagatan 33 project in Gothenburg. For new construction in progress, also see the table on page 10. The book value of Development properties amounted to SEK 170 million (156) at the end of the period.

Our markets

The cities in which we do business are characterized by strong growth and heavy demand for housing. Only a minor proportion of our rental apartments become available for rent due to relocation, and demand for finished, newly built rental apartments is high.

We build mainly rental apartments, but also cooperative apartments, for example when the land available for rental apartment construction is limited. Our flexible business model, where co-op apartment sales do not start until the project is approaching completion, makes it possible to convert a co-op apartment project into a rental apartment project if demand for co-op apartments is uncertain.

We see that demand is strong for central office space in Gothenburg.

Valuation

Investment properties

Wallenstam measures all of its investment properties internally at fair value. We enjoy good market and property intelligence through active monitoring, which provides us with a firm basis for performing internal valuations of our property holdings. However, we must emphasize that a property's fair value only becomes a reality when the property is sold, for which reason a valuation is always an estimation.

In its assessments of property values, Wallenstam has used different yield requirements. The yield requirements reflect market conditions and differ based on where the property is located and what type of property it is, e.g. housing or offices, etc.

A valuation is calculated based on a property's net operating income including site leasehold rents, set in relation to the yield requirement for each property.

As our properties are valued separately, no consideration is given to the portfolio premium that may exist in the property market.

New constructions of rental properties are measured at fair value, which is determined as cost plus the estimated surplus on the completion date in relation to the degree of completion of the construction. This is in turn based on expenses incurred.

Land rights and building rights for zoned land are measured at market value.

Development properties

Development properties are properties that we intend to construct in order to divest on completion, for example co-op apartment properties. Development properties are recognized at the lower of cost (investments incurred) and the estimated net realizable value. The profit/loss is recognized when the property or apartment is completed and handed over to the buyer.

TOTAL VALUE, PROJECTS IN PROGRESS

	Book value, SEK million
Land for future new production	673
Projects in progress, rental apartments	5,064
Development properties	170
Total projects in progress	5,907

CHANGES IN PROPERTY HOLDINGS, INVESTMENT PROPERTIES

	Book value, SEK million
Property holdings, January 1, 2020	52,354
+ Acquisitions	47
+ Construction	963
- Sales	-
+ Unrealized changes in value, properties	254
Property holdings, March 31, 2020	53,619

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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NEW CONSTRUCTION IN PROGRESS, MARCH 31, 2020

Project	No. of apts.	Occupation*	Sq m**	Of which occupied to date
STOCKHOLM
Umami Park, phase 1A, Sundbyberg	147	Q2 2019	12,000	109 apts.
Allén, Tyresö	221	Q2 2020	13,500
Trollesunds gårdar, Bandhagen	48	Q2 2020	6,500
Parkstråket 1, Haninge	155	Q3 2020	13,500
Söra Kvarter, Österåker	305	Q3 2020	15,500
Umami Park, phase 1B, Sundbyberg	75	Q3 2020	3,000
New York, Gärdet (co-op)	50	Q4 2020	3,500
Parkstråket 2, Haninge	131	Q4 2020	7,500
Umami Park, phase 2, Sundbyberg	141	Q4 2020	9,500
Umami Park, phase 3, Sundbyberg	133	2021	10,000
UPPSALA
Flanören, Rosendal	161	2021	7,500
GOTHENBURG
Vasagatan 33 (co-op)	30	Q3 2018	3,500	23 apts. sold and taken into possession
Sten Stures Kröningar, Regenten	29	Q3 2020	2,000
Elisedal	336	Q4 2020	24,000
Godhems Backe	138	Q4 2020	6,500
Kallebäcks Terrasser Kv. 9	165	2021	9,500
Kallebäcks Terrasser Kv. 11	270	2021	16,000
Kv. Rosengången, Mölnlycke Fabriker, Härryda	123	2021	7,000
Kv. Kvarnen, Mölnlycke Fabriker, Härryda	185	2022	10,500
Kallebäcks Terrasser Kv. 8 ***	266	2022	15,000
Kv. Väven, Mölnlycke Fabriker, Härryda ***	116	2022	7,000
Commercial
Kallebäcks Terrasser		2021	20,000
Mölnlycke Fabriker		2021	20,000¹
Total apartments in projects	3,225		243,000	132 apts.
of which in progress on March 31	3,093

• Refers to estimated start of occupation. Occupation will occur gradually, often over several quarters.
  ** Number of sq m includes garage, and is rounded off to the nearest 500.
  *** Started during quarter 1, 2020.
  ¹ Relates to two sports centers and a multistorey carpark.

CHANGE, CONSTRUCTION IN PROGRESS

	No. of apts.
New construction in progress, Jan 1, 2020	3,135
- Completed	-424
Terrassen Elva, Tyresö (54 apts.)
Norrgårdshusen, Österåker (128 apts.)
Umami Park, phase 1A, Sundbyberg (109 apts.)
Trollesund gårdar (110 apts.)
Vasagatan 33 (23 apts.)
+ Started	382
New construction in progress, Mar 31, 2020	3,093

APARTMENTS, CONSTRUCTION IN PROGRESS

Total
Stockholm business area
Gothenburg business area

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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COMPLETED NEW CONSTRUCTION, 2020

Name of property	Address	Year of construction/ conversion	Residential sq m	Office sq m	Retail/ Restaurant/ Cinema sq m	Industry/ warehousing sq m	Education/ Care sq m	Garage sq m	Other sq m	Total sq m	No. of apts.
STOCKHOLM
Järnet 12
(Project: Terrassen Elva)	Bollmora Gårdsväg 20, 22	2020	2,376	-	163	-	-	-	-	2,539	54
Hacksta 1:72
(Project: Norrgårdshusen)	Norrgårdshöjden 1-8	2020	5,633	-	86	-	-	1,195	-	6,914	128
Framkallningen 3
(Project: Trollesunds gårdar)	Trollesundsvägen 56 A-F	2020	6,766	-	-	11	-	1,249	-	8,026	110
Total			14,775	-	249	11	-	2,444	-	17,479	292

Refers to fully completed and occupied investment properties

PROPERTY ACQUISITIONS, 2020

Name of property	Address	Year of construction/ conversion	Residen-tial sq m	Office sq m	Retail/ Restaurant/ Cinema sq m	Industry/ warehousing sq m	Education/ Care sq m	Garage sq m	Other sq m	Total sq m	No. of apts.
STOCKHOLM
Murförbandet 1* (Bandhagen)
Total			-	-	-	-	-	-	-	-	-
*Land

PROPERTY HOLDING STRUCTURE AS OF MARCH 31, 2020

Lettable area, sq m	Residential sq m	Office sq m	Retail/ Restaurant/ Cinema sq m	Industry/ warehousing sq m	Education/ Care sq m	Garage sq m	Other sq m	Total	Distribution, place	No. of apts.
Stockholm	301,824	25,499	18,607	15,366	4,479	52,024	3,292	421,091	35%	4,976
Uppsala	27,605	2,138	1,039	101	-	5,732	-	36,615	3%	542
Gothenburg	255,433	207,487	92,238	81,548	48,506	59,443	7,337	751,992	62%	4,129
Total	584,862	235,124	111,884	97,015	52,985	117,199	10,629	1,209,698	100%	9,647
Distribution by type of premises	48%	20%	9%	8%	4%	10%	1%	100%

ACQUISITION, CONSTRUCTION AND SALES OF INVESTMENT PROPERTIES

PROPERTY TYPE

WALLENSTAM | INTERIM REPORT JAN 1-MAR 31, 2020

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12 WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

WIND POWER

On closing day, Wallenstam had 66 wind turbines in operation divided among 20 wind farms. The installed output amounted to 143 MW (143).

Wind turbines are recognized at the lowest of cost less depreciation and impairment losses and the estimated net realizable value. Depreciation for the period amounted to SEK 19 million (19). Estimated value in use of land leases, based on minimum rents, amounted on closing day to SEK 17 million (18) and is recognized as part of the wind power value. On closing day, the consolidated book value of wind turbines amounted to SEK 1,090 million (1,166). The renewable energy certificate inventory and guarantees of origin amounted to SEK 1 million (9) on closing day.

FINANCING

Equity

Shareholders’ equity, including non-controlling interests amounted to SEK 24,104 million (21,951), equivalent to SEK 75 per share (68). The equity/assets ratio was 43 percent (44).

Interest-bearing liabilities

On closing day, outstanding bond loans amounted to SEK 4,050 million (2,950), the outstanding volume of commercial paper, with a framework amount of SEK 4 billion, amounted to SEK 3,585 million (3,526), utilized loans from the European Investment Bank totaled SEK 500 million (-) and total interest-bearing liabilities amounted to SEK 24,918 million (22,241), of which lease liability amounted to SEK 420 million (421). Of this liability, SEK 2.3 billion (1.3) consists of green loans, and SEK 1.0 billion (-) of green bonds.

All the bond loans of SEK 4,050 million (2,950) are contained within the framework of our MTN program (Medium Term Notes), which has a total framework amount of SEK 5 billion. The terms and conditions of the green bonds are the same as for the other bonds with the addition that the issue proceeds can only be allocated to projects and assets that qualify according to Wallenstam’s green framework. The bond loans are listed on Nasdaq Stockholm.

116 sustainable rental apartments

Wallenstam has signed a loan agreement of SEK 2,500 million with the European Investment Bank for construction of sustainable rental apartments. One of the projects within the agreement is the Väven block in Mölnlycke Fabriker, where construction started in January.

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The average remaining fixed interest term is 38 months (44). Of the loan portfolio, 42 percent (45) of the loans have fixed interest terms longer than one year. On closing day, the average interest rate on our loans was 1.31 percent (1.25).

Financing of the loan portfolio is mainly secured by mortgage deeds for properties. The bond loans are unsecured. The commercial paper program has underlying credit commitments for the outstanding volume of commercial paper at each date. Covenants are issued for this.

Lease liability

The recognized lease liability corresponds to the rights of use for land leases and site leasehold rights. The liability on closing day totaled SEK 420 million (421).

Derivative instruments

Wallenstam's financial derivative instruments consist of interest rate and electricity derivatives. On closing day, Wallenstam had a net indebtedness in respect of derivative instruments of SEK 528 million, compared to a net indebtedness of SEK 349 million on December 31, 2019. Of this, interest rate derivatives accounted for SEK -526 million (-350), electricity derivatives for SEK 0 million (2) and currency derivatives for SEK -2 million (-1).

During 2020, the Group entered into new interest rate derivative contracts totaling SEK 0.6 billion with a maturity of 10 years. The total volume of outstanding interest rate derivatives, where Wallenstam pays fixed interest, amounts to SEK 10.3 billion, compared to SEK 9.7 billion in the annual accounts.

Interest rate derivatives are used to obtain a desired interest maturity profile in a flexible, cost-efficient way. They are measured through discounting future cash flows at present value based on observable market interest rates

and are classified at level 2. The arising deficit or surplus value for interest rate derivatives, which reflects how the Group's hedged interest rates relate to the market rate of interest on closing day, is recognized in the balance sheet and in unrealized changes in value, financial instruments in the income statement.

Electricity derivatives are used to mitigate the effect of market fluctuations by hedging income for future electricity production. These are measured at market value and the changes in value are continually recognized in the Group in the line item unrealized changes in value, financial instruments. As we do not apply hedge accounting for electricity derivatives, no reversal effect arises in unrealized changes in value in the consolidated income statement in connection with realization of electricity derivatives.

Currency derivatives are used to a limited extent in order to hedge purchasing from foreign countries. Hedge accounting is applied and therefore translation effects are recognized in other comprehensive income.

Available liquid assets

Available liquid assets, including available bank overdraft facilities, amounted to SEK 635 million (1,293). Approved overdraft facilities amounted to SEK 800 million (800), of which SEK 257 million (-) were used on closing day. At the end of 2019, the EIB (European Investment Bank) approved a credit facility of SEK 2,500 million for new construction of energy-efficient rental apartments. During the period, SEK 500 million (-) was drawn down from the facility. The Group's approved and unutilized credit facilities totaled SEK 6,000 million (4,000).

On March 31, 2020, accessible liquidity totaled SEK 6,635 million (5,293), of which SEK 3,585 million (3,526) represents a credit commitment for issued outstanding commercial paper.

FIXED TERMS, AVERAGE INTEREST RATES, MARCH 31, 2020

Interest maturity structure	Amount, SEK million	Average interest rate, %	Proportion, %
0-1 year	14,248	1.54	58.2
1-2 years	-	-	-
2-3 years	-	-	-
3-4 years	-	-	-
4-5 years	1,200	0.67	4.9
5-6 years	1,300	0.87	5.3
6-7 years	1,500	1.00	6.1
7-8 years	1,500	1.16	6.1
8-9 years	3,000	1.10	12.2
>9 years	1,750	0.90	7.1
Total	24,498	1.31	100.0

ACCESSIBLE LIQUIDITY

WALLENSTAM | INTERIM REPORT JAN 1-MAR 31, 2020

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Consolidated statement of changes in equity

SEK million	- Equity attributable to parent company shareholders -
	Share capital	Other capital contributed	Other reserves	Profit brought forward	Non-controlling interests	Total equity
Opening equity, Jan 1, 2019	165	359	4	21,081	2	21,611
Profit for the period	-	-	-	340	-	340
Translation difference	-	-	1	-	-	1
Changes in value, owner-occupied properties	-	-	0	-	-	0
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
TRANSACTIONS WITH SHAREHOLDERS
Dividends	-	-	-	-	-	-
Closing equity, Mar 31, 2019	165	359	4	21,421	2	21,951
Opening equity, Jan 1, 2020	165	359	64	23,204	2	23,794
Profit for the period	-	-	-	309	-	309
Translation difference	-	-	0	-	-	0
Changes in value, owner-occupied properties	-	-	3	-	-	3
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
TRANSACTIONS WITH SHAREHOLDERS
Dividends	-	-	-	-	-	-
Closing equity, Mar 31, 2020	165	359	65	23,513	2	24,104

Consolidated statement of cash flows

SEK million	Jan-Mar 2020	Jan-Mar 2019	Apr-Mar 2019/2020	Jan-Dec 2019
Profit before changes in value and impairment losses*	318	345	1,142	1,169
Adjustment for items not included or arising in cash flow	-28	-40	22	10
Taxes paid	0	0	0	0
Cash flow before change in working capital	290	305	1,164	1,179
Change in working capital	67	65	175	174
Cash flow from operating activities	357	370	1,339	1,353
INVESTMENTS/DIVESTMENTS
Investment in properties and individual co-op apartments	-1,024	-777	-4,059	-3,812
Investments in intangible assets & property, plant and equipment, and wind turbines	-7	-26	-26	-45
Investments in financial assets	-	-	-69	-69
Investments in associated companies	-30	-	-55	-25
Divestment of other securities held as non-current assets	-	0	-	-
Divestment of properties, development properties & property, plant and equipment	52	267	413	628
Cash flow from investing activities	-1,009	-536	-3,796	-3,323
FINANCING
Raised interest-bearing liabilities	1,467	3,110	16,407	18,050
Amortization of interest-bearing liabilities	-1,109	-2,415	-13,988	-15,294
Net change in overdraft facilities	257	-119	257	-119
Advance payment futures contracts	-	3	-11	-8
Amortization of financial assets	-	-	-	-
Dividends paid	-	-	-614	-614
Repurchase of own shares	-	-	-	-
Cash flow from financing activities	615	579	2,052	2,016
Changes to liquid assets	-37	413	-404	46
Cash and cash equivalents at beginning of the period	129	83	496	83
Cash flow for the period	-37	413	-404	46
Cash and cash equivalents at the end of the period	92	496	92	129
Unutilized overdraft facilities at the end of the period	543	800	543	800
Blocked bank balances	-	-3	-	-1
Available liquid assets	635	1,293	635	928

*Includes interest paid and received, including gross flows from interest rate swap contracts, of SEK-82 million (-75) and SEK 0 million (2) respectively, of which SEK 24 million (17) was capitalized as a non-current asset.

WALLENSTAM | INTERIM REPORT JAN 1-MAR 31, 2020

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Segments report

| 2020
SEK million | Gothenburg
Jan-Mar | Stockholm
Jan-Mar | Other
Jan-Mar | Elimination
Jan-Mar | Total
Jan-Mar |
| --- | --- | --- | --- | --- | --- |
| INCOME STATEMENT | | | | | |
| Rental income | 357 | 173 | - | -7 | 523 |
| Operating expenses | -83 | -53 | - | - | -137 |
| Net operating income | 273 | 120 | - | -7 | 386 |
| Management costs and administrative expenses | -38 | -24 | -4 | 7 | -59 |
| Net financial items | -60 | -31 | 39 | - | -53 |
| Income from property management | 176 | 65 | 35 | - | 275 |
| Unapportioned items | | | | | |
| Participation in profits/losses of associated companies | | | | | -2 |
| Sales result, development properties | | | | | 18 |
| Other income | | | | | 83 |
| Other expenses | | | | | -51 |
| Financial expenses, other | | | | | -5 |
| Profit before changes in value and impairment losses | | | | | 318 |
| Changes in value | | | | | 77 |
| Profit before tax | | | | | 395 |
| BALANCE SHEET | | | | | |
| Investment properties | 32,938 | 20,680 | - | - | 53,619 |
| Wind turbines | - | - | 1,090 | - | 1,090 |
| Development properties | 31 | 138 | - | - | 170 |
| Unapportioned assets | - | - | - | - | 1,080 |
| Total assets | | | | | 55,959 |
| Equity | - | - | - | - | 24,104 |
| Interest-bearing liabilities and lease liabilities | 13,658 | 9,755 | 1,505 | - | 24,918 |
| Unapportioned liabilities | - | - | - | - | 6,937 |
| Total equity and liabilities | | | | | 55,959 |
| Property investments in progress including land | 2,320 | 3,587 | - | - | 5,907 |
| 2019
SEK million | Gothenburg
Jan-Mar | Stockholm
Jan-Mar | Other
Jan-Mar | Elimination
Jan-Mar | Total
Jan-Mar |
| INCOME STATEMENT | | | | | |
| Rental income | 345 | 158 | - | -6 | 497 |
| Net operating income, properties | 259 | 111 | - | -6 | 364 |
| Income from property management | 170 | 59 | 31 | - | 260 |
| Unapportioned items | | | | | |
| Realized changes in value, financial derivatives | | | | | -1 |
| Sales result, development properties | | | | | 76 |
| Other income | | | | | 172 |
| Other expenses | | | | | -158 |
| Financial expenses, other | | | | | -4 |
| Profit before changes in value and impairment losses | | | | | 345 |
| Changes in value | | | | | 71 |
| Profit before tax | | | | | 416 |
| BALANCE SHEET | | | | | |
| Investment properties | 29,598 | 17,691 | - | - | 47,289 |
| Wind turbines | - | - | 1,166 | - | 1,166 |
| Development properties | 79 | 77 | - | - | 156 |
| Unapportioned assets | - | - | - | - | 1,334 |
| Total assets | | | | | 49,945 |
| EQUITY | - | - | - | - | 21,951 |
| Interest-bearing liabilities | 12,645 | 7,993 | 1,603 | - | 22,241 |
| Unapportioned liabilities | - | - | - | - | 5,753 |
| Total equity and liabilities | | | | | 49,945 |
| Property investments in progress including land | 1,301 | 2,680 | - | - | 3,981 |

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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The Wallenstam share*

The Wallenstam B share is listed on Nasdaq Stockholm, Large Cap. During 2020, the Wallenstam share price has decreased by 0.2 percent. The property indices OMX Stockholm Real Estate PI and OMX Stockholm PI fell by 24.6 percent and 18.4 percent, respectively, during the same period.

At the end of the period, the Wallenstam share price was SEK 113.00 compared to SEK 113.20 at year-end 2019. The market capitalization was SEK 37,290 million (37,356) based on the total number of registered A and B shares. Equity per share amounted to SEK 75 (74).

Wallenstam has a mandate from the Annual General Meeting (AGM) to repurchase so many shares, such that the company's holding at any one time does not exceed 10 percent of all shares in the company. No shares were repurchased during 2020. On closing day, the company held a total of 7,000,000 treasury shares, repurchased at an average price of SEK 76.16 per share.

Dividend

As a precautionary measure in light of Covid-19 and the uncertain economic environment at present, the Board has withdrawn its proposal for a dividend of SEK 1.90 per share. Instead, the Board will propose to the Annual General Meeting that no dividend should be paid for the 2019 financial year. The Board intends to wait until the consequences of Covid-19 can be better assessed and if circumstances allow, the ambition is to call an Extraordinary General Meeting during the second half of 2020. In the event of an Extraordinary General Meeting, a new proposal will be submitted for a dividend and the size of the dividend.

Turnover

During the period, the Wallenstam share had an average daily turnover on Nasdaq Stockholm of about SEK 38.6 million (21.6).

* Comparions in brackets refer to amounts as of December 31, 2019.

AVERAGE SHARE LIQUIDITY PER DAY

SHAREHOLDINGS, MARCH 31, 2020

	A shares	B shares	Equity, %	Votes, %
Hans Wallenstam and family, and company	34,500,000	49,040,000	25.32	62.20
AMF - Insurance and funds		32,317,332	9.79	5.10
Anna-Carin B Wallenstam and Anders Berntsson		19,300,000	5.85	3.05
Agneta Wallenstam		18,204,000	5.52	2.87
Henric and Ulrika Wiman		12,037,752	3.65	1.90
Monica and Jonas Brandström		7,413,326	2.25	1.17
Bengt Norman		7,000,000	2.12	1.10
David Wallenstam		5,640,000	1.71	0.89
Elin Wallenstam Sjögren		4,327,240	1.31	0.68
Lisa Liljeqvist		4,279,240	1.30	0.68
Other owners		128,941,110	39.07	20.36
Total number of shares	34,500,000	288,500,000
Repurchased shares*		7,000,000	2.11
Registered shares	34,500,000	295,500,000
Total registered shares	330,000,000		100.00	100.00
Total outstanding shares	323,000,000

The proportion of institutional ownership amounted to around 16 percent of equity and around 8 percent of votes.
Foreign ownership amounted to around 10 percent of equity and around 5 percent of the votes.
Source: Euroclear Sweden AB
*Repurchased own shares lack voting rights.

WALLENSTAM | INTERIM REPORT JAN 1-MAR 31, 2020

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Parent Company

The parent company's primary operations are the performance of Group-wide services including financial services as well as trading in renewable energy certificates and guarantees of origin. In addition, the parent company owns a small number of properties.

Total revenue during the period amounted to SEK 157 million (163), of which rental income amounted to SEK 31 million (31).

Net profit for the period was impacted by changes in value of financial derivative instruments, SEK -178 million (-218), mainly due to falling swap interest rate levels. Profit after tax amounted to SEK -55 million (-138).

Investments in intangible assets and property, plant and equipment during the period amounted to SEK 8 million (5). Parent company external loans amounted to SEK 13,904 million (9,249) on closing day.

INCOME STATEMENT, PARENT COMPANY

SEK million	Jan-Mar 2020	Jan-Mar 2019	Jan-Dec 2019
Management revenue	83	79	273
Rental income	31	31	124
Revenue, sales of renewable energy certificates	42	52	57
Other revenue	0	1	2
Total revenue	157	163	456
Management costs and administrative expenses	-89	-92	-359
Operating expenses	-7	-9	-36
Depreciation and impairment losses properties	-8	-8	-30
Expenses, sales of renewable energy certificates	-21	-50	-52
Change in value, synthetic options scheme	1	-12	-40
Other expenses	-1	-1	-2
Total expenses	-125	-172	-519
Operating income	32	-9	-63
Profit/loss from participations in Group companies	11	-1	33
Interest income and similar profit/loss items	146	122	455
Interest expenses and similar profit/loss items	-88	-74	-223
Changes in value, derivative instruments	-178	-218	-323
Net financial items	-109	-171	-59
Profit/loss after financial items	-77	-181	-122
Appropriations	-	1	373
Tax on net profit/loss	21	41	-17
Profit/loss after tax	-55	-138	234
OTHER COMPREHENSIVE INCOME
Changes in value, currency derivatives	3	-	-1
Tax attributable to other comprehensive income	-1	-	0
Comprehensive income	-53	-138	233

BALANCE SHEET, PARENT COMPANY

SEK million	Mar 31, 2020	Mar 31, 2019	Dec 31, 2019
Assets
Properties	1,333	1,355	1,340
Participations in Group companies	5,742	5,372	5,879
Financial derivative instruments	8	25	8
Receivables from Group companies	23,843	19,635	21,894
Other assets	230	245	206
Cash and cash equivalents	87	489	122
Total assets	31,242	27,122	29,449
Equity and liabilities
Equity	10,416	10,712	10,470
Provisions	82	55	84
Interest-bearing external liabilities	13,904	9,249	13,421
Liabilities to Group companies	6,178	6,713	4,994
Financial derivative instruments	536	279	357
Other liabilities	126	114	123
Total equity and liabilities	31,242	27,122	29,449

WALLENSTAM INTERIM REPORT JAN 1-MAR 31, 2020

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Other information

OPPORTUNITIES & RISKS

Wallenstam’s opportunities and risks, and how we manage them, are presented in the 2019 Annual Report on pages 34–39. No significant changes have taken place since then.

SENSITIVITY ANALYSIS

As of March 31, 2020, the estimated market value of the properties amounted to around SEK 54 billion. A change in value of plus/minus 10 percent is thus equivalent to about plus/minus SEK 5.4 billion. A general change of plus/minus 0.25 percentage points in property yield requirements is equivalent to about SEK -3.2 billion or SEK +3.8 billion, while a general change of revenue of 5 percent is equivalent to about plus/minus 2.8 billion (2.6).

A change in the interest rate of plus/minus 50 points is equivalent to about plus/minus SEK 67 million (58).

A change in the electricity price of 1 öre per kWh is equivalent to about plus/minus SEK 41 million (43) during valuation of wind turbines, while a change in the renewable energy certificate price of 1 öre per kWh is equivalent to about plus/minus SEK 21 million (23) during valuation of wind turbines.

TRANSACTIONS WITH RELATED PARTIES

Wallenstam’s related parties consist chiefly of Group companies. Board members, company management and their families and the companies they control are also related parties. Transactions with related parties mainly consist of administrative fees and the renting of premises between Group companies. Individuals related to Board members and Group Management rent apartments. Insurance services are purchased from companies where members of Wallenstam’s Board of Directors are Board members, for a total equivalent to about SEK 5 million in net expenditure for the year. The CEO is a joint owner (50 percent) of Aranea Holding AB. Aranea Holding AB owns 48 percent of Renew Group Sweden AB, a floorball equipment manufacturer. Aranea is a tenant of Wallenstam with an annual rental value equivalent to SEK 0.6 million.

Wallenstam’s involvement in environmental and social responsibility issues is described in more detail on pages 27–33 of the 2019 Annual Report. As part of its social responsibility work, the Wallenstam Group not only contributes financially to a number of organizations but also gives its time in the form of e.g. board work. As a result of such board positions, related party status arises in the case of the Rescue Mission in Gothenburg and Barn i Nöd (Swedish International Help for Children). During the year, the Rescue Mission in Gothenburg received contributions and discounts equivalent to SEK 0.2 million. The Rescue Mission in Gothenburg and Barn i Nöd rent premises from Wallenstam equivalent to annual rental income of about SEK 4.8 million and SEK 0.1 million, respectively.

All transactions take place on market-related terms.

ROUNDING OFF

As a result of rounding off, the figures presented in this report in some cases do not sum up exactly to the total and percentages may differ in order for them to correspond to the actual numerical data.

ACCOUNTING PRINCIPLES

This report was prepared in accordance with IAS 34. The accounting principles are unchanged compared to the 2019 Annual Report. The Parent Company’s accounting principles comply with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 2.

New and amended standards and principles that entered into force on January 1, 2020 or subsequently are not expected to have any material impact on the Wallenstam Group’s financial statements.

EVENTS AFTER THE END OF THE REPORTING PERIOD

In early 2020, the world has been shaken by a global virus infection, Covid-19, which has had a significant impact on people, the business community and public policy both in Sweden and in the rest of the world. The impact during the first quarter was relatively small. The financial effects will only become apparent in the second quarter. See more on page 4.

The Board decided in early April to withdraw its previous proposal for a dividend to the Annual General Meeting in order to wait until the consequences of the pandemic can be better assessed.

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Key ratios – multi-year summary

Accumulated during period	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018	Mar 31, 2018
PROPERTY-RELATED KEY RATIOS
Net operating income, properties, SEK million	386	1,529	1,159	756	364	1,429	1,078	706	341
Surplus ratio, property management, %	73.8	75.5	76.7	75.6	73.2	74.8	75.8	75.0	73.0
Income from property management, SEK million	275	1,108	851	547	260	1,011	758	462	217
Changes in value, new construction	254	792	505	307	132	598	421	267	93
Value of investment properties, SEK million	53,619	52,354	49,793	48,757	47,289	45,811	44,360	43,446	42,187
Area, sq m (thousand)	1,210	1,201	1,199	1,188	1,181	1,186	1,197	1,196	1,175
Occupancy rate – lettable area, %	98	98	98	99	99	99	99	99	99
Development properties, net, SEK million	170	175	154	155	156	317	658	691	656
FINANCIAL KEY RATIOS
Profit after tax, SEK million	309	2,737	1,038	575	340	2,998	1,769	1,310	310
Return on equity, %	11.9	12.3	10.4	10.6	14.6	14.8	12.2	11.8	11.5
Return on total capital, %	7.0	7.2	6.1	6.2	9.5	9.7	8.4	8.3	7.2
Interest coverage ratio, times	6.1	6.3	7.0	7.4	1.5	1.3	1.2	1.1	3.6
Loan-to-value ratio, %	45	45	45	46	45	45	46	46	44
Average interest rate on closing day, %	1.31	1.22	1.23	1.24	1.25	1.06	0.98	1.01	1.90
Average fixed-interest term, months	38	38	40	41	44	39	36	38	34
Equity/assets ratio, %	43	44	43	43	44	45	44	44	44
Equity, SEK million	24,104	23,794	22,402	21,899	21,951	21,611	20,688	20,252	19,572
Net asset value, SEK million	29,897	29,501	27,666	27,047	27,011	26,574	25,608	25,113	24,548
Market capitalization, SEK million	37,290	37,356	36,828	32,406	30,971	27,126	27,786	26,582	25,031
Repurchase of shares, SEK million	-	-	-	-	-	229	204	182	147
Per share data
Profit after tax, SEK	1.0	8.5	3.2	1.8	1.1	9.3	5.5	4.0	1.0
P/E ratio, times	13.5	13.4	15.9	14.0	10.0	8.9	11.3	11.5	11.3
Cash flow from operating activities, SEK	1.1	4.2	3.4	2.1	1.1	1.1	0.2	-0.8	0.8
Equity, SEK	75	74	69	68	68	67	64	63	60
Net asset value per share, SEK	92.60	91.30	85.70	83.70	83.60	82.30	79.20	77.60	75.80
Share price, SEK	113.00	113.20	111.60	98.20	93.85	82.20	84.20	80.55	75.85
Shares outstanding, average, thousands	323,000	323,000	323,000	323,000	323,000	323,854	324,073	324,405	325,050
Shares outstanding at end of period, thousands	323,000	323,000	323,000	323,000	323,000	323,000	323,310	323,550	324,000

Quarterly overview

	Jan-Mar 2020	Oct-Dec 2019	Jul-Sep 2019	Apr-Jun 2019	Jan-Mar 2019	Oct-Dec 2018	Jul-Sep 2018	Apr-Jun 2018	Jan-Mar 2018
Rental income, SEK million	523	515	510	503	497	488	480	475	467
Net operating income, properties, SEK million	386	370	403	392	364	351	372	365	341
Surplus ratio, property management, %	73.8	71.8	79.0	77.9	73.2	71.9	77.4	76.8	73.0
Income from property management, SEK million	275	257	304	287	260	253	296	245	217
Return on equity, %	11.9	12.3	10.4	10.6	14.6	14.8	12.2	11.8	11.5
Earnings per share after tax, SEK	1.0	5.3	1.4	0.7	1.1	3.8	1.4	3.1	1.0
Cash flow per share from operating activities, SEK	1.1	0.8	1.3	1.0	1.1	0.9	1.0	-1.6	0.8
Equity per share, SEK	75	74	69	68	68	67	64	63	60
Net asset value per share, SEK	92.60	91.30	85.70	83.70	83.60	82.30	79.20	77.60	75.80
Share price, SEK	113.00	113.20	111.60	98.20	93.85	82.20	84.20	80.55	75.85

Earnings-based key ratios are calculated on the average number of outstanding shares; yield figures are calculated on rolling twelve-month profit or loss.

Starting from Q1 2020, EPRA NAV is not reported, as Wallenstam is not a member of EPRA.

WALLENSTAM | INTERIM REPORT JAN 1-MAR 31, 2020

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Definitions

Share yield

The proposed dividend as a percentage of the share price at the end of the period.

Share total yield

The share price trend during the year including distributed dividend as a percentage of the share price at the start of the period.

Alternative performance measures (APM)

Wallenstam presents a number of financial measures that are outside IFRS definitions (Alternative performance measures, according to ESMA's guidelines) with the aim of enabling effective evaluation of the company's financial position and performance for investors and for the company's management. This means that these measures are not always comparable with measures used by other companies and shall therefore be considered as a complement to measures defined according to IFRS. Wallenstam applies these alternative key ratios consistently over time. The definitions describe how Wallenstam's key ratios are calculated. The key ratios are alternative performance measures according to ESMA guidelines unless otherwise stated.

The number of shares

The number of registered shares at any given time.
Number of shares outstanding: the number of registered shares less repurchased own shares at any given time.
Average number of shares: weighted average number of shares outstanding at any given time.

Residential property

Property, which predominantly consists of residential space.

Loan-to-value ratio

Interest-bearing liabilities and lease liability less cash and cash equivalents in relation to the Group's investments in properties, development properties and wind power at the end of the period.

Market capitalization

Share price multiplied by the number of registered shares on the closing day.

Net operating income

Rental income less operating and maintenance expenses, and property tax.

Development properties

Development properties refer to properties constructed with the intention of being sold after completion.

Rental value*

Rental income and the estimated market rent for vacant space.

Cash flow per share

Cash flow for the period in relation to the average number of shares outstanding.

Cash flow from operating activities per share

Cash flow from operating activities for the period in relation to the average number of shares outstanding.

Commercial property

Property, which predominantly consists of commercial space.

Net letting

New lets signed during the period less cancellations.

P/E ratio

Share price at the end of the period in relation to profit after tax for the average number of shares over the latest rolling 12-month period.

Earnings per share after tax

Profit after tax in relation to the average number of outstanding shares, in accordance with IFRS.

Return on equity**

Profit after tax in relation to average equity, calculated on a rolling 12-month basis.

Return on total capital**

Profit before tax with reversal of interest expenses and early redeemed derivatives for the latest rolling 12-month period in relation to average total capital employed.

Interest coverage ratio

Profit or loss before changes in value and impairment charges with reversal of net financial items and early redeemed interest rate derivatives for the latest rolling 12-month period in relation to net financial items and early redeemed interest rate derivatives for the latest rolling 12-month period.

Interest coverage ratio excl. early redeemed interest rate derivatives

Profit or loss before changes in value and impairment charges with reversal of net financial items and early redeemed interest rate derivatives for the latest rolling 12-month period in relation to net financial items for the latest rolling 12-month period.

Community property

Property, which is predominantly used by tax funded activities and is specifically adapted for community services.

Average interest

Interest expenses for the period including profit or loss on swap agreements realized during the period in relation to interest-bearing liabilities.

Equity/assets ratio

Equity in relation to total capital employed at the end of the period.

Net asset value

Equity with the addition of deferred tax liabilities.

Net asset value per share

The Group's net asset value in relation to the number of outstanding shares at the end of the period.

Occupancy rate – lettable area

Let floor space in relation to total floor space.

Changes in value, investment properties

Gains or losses from sales of investment properties during the period less expenses and the assessed market value of the properties at the previous reporting period and gains or losses from the change in the assessed market value of investment properties compared to the previous reporting period.
Changes in value, New construction: The increase in value is gradually recognized during the construction of the property until the first year the property is taken into operation. Change in value new construction recognizes the difference between the cost of construction of a new rental apartment and the value it has on completion.
Change in value Other: Refers to changes in the value of investment properties, which have been in operation for one calendar year or more.

Surrender rate

Proportion of leases extended in relation to the proportion of cancellable leases.

Surplus ratio

Net operating income as a percentage of rental income.

For further information, please refer to: www.wallenstam.se/glossary

*Operational key ratios, are not considered alternative key ratios according to ESMA's guidelines.

** Bridge alternative performance measures	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018	Mar 31, 2018
Equity, SEK million	24,102	23,792	22,400	21,897	21,949	21,609	20,686	20,250	19,570
Average equity, SEK million	22,828	22,329	21,708	21,278	20,813	20,305	19,795	19,421	19,024
Total assets, SEK million	55,959	54,689	52,459	51,177	49,945	48,262	46,655	45,625	44,426
Average total assets, SEK million	52,846	51,306	49,700	48,333	46,983	45,728	44,508	43,452	42,298

For average values, add the latest five periods and divide by five.

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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This is Wallenstam

BUSINESS PLAN 2023

Goal

To achieve an increase in net asset value of SEK 40 per share starting from October 1, 2018 through December 31, 2023

Guiding principles

• We shall exceed customer expectations and improve the overall impression of Wallenstam every year through attractive apartments and premises as well as good service.
• Through our strong corporate culture, we shall be an attractive employer and improve our Engagement Index score every year.
• We shall reduce our environmental impacts every year, through initiatives within the focus areas energy, transports and resources.

Defined key ratios

• The equity/assets ratio should not be less than 30 percent.

VISION

Wallenstam shall be the natural choice of people and companies for housing and premises.

BUSINESS CONCEPT

We develop and manage people's homes and workplaces based on a high level of service and long-term sustainability in selected metropolitan areas.

WALLENSTAM TODAY

Wallenstam was founded in 1944 and the head office is located in Gothenburg. The company's B share is listed on Nasdaq Stockholm, Large Cap and Wallenstam is one of the larger listed property companies in Sweden.

Our residential properties are located in Stockholm, Uppsala and Gothenburg, while our commercial properties are concentrated towards inner city locations in Gothenburg. All in all, Wallenstam has approximately 9,600 apartments and 1,000 commercial tenants. Wallenstam is a major producer of homes in the regions where we operate and we mainly build rental apartments for our own property management.

Wallenstam is self-sufficient in renewable energy through its 66 own wind turbines in operation. Production covers our own properties' energy needs and those of our tenants.

Operations are conducted in the Stockholm business area and the Gothenburg business area.

Stockholm

The majority of our apartments, just over 5,500, are located in the Stockholm business area. Approximately 500 of these apartments are located in Uppsala. The Stockholm business area had around 1,450 apartments under construction on closing day.

Gothenburg

Our property holdings in Gothenburg consist of just over 4,000 apartments and about 900 commercial tenants that rent office and retail premises, mainly in inner city locations. The Gothenburg business area had around 1,650 apartments under construction on closing day.

BUSINESS PROCESS

Wallenstam builds, develops and manages properties and areas based on the needs of people and society, and according to the wishes and requirements of customers and shareholders. We create value growth through construction, development and management as well as a high level of service and long-term sustainability. Profits are reinvested and used to develop the business further. Shareholders receive a share of the profits in the form of dividends.

WALLENSTAM | INTERIM REPORT JAN 1–MAR 31, 2020

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Calendar

Interim report Q2, 2020
Interim report Q3, 2020
July 17, 2020
October 22, 2020

This is information that Wallenstam is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 CEST on April 28, 2020.

This interim report has not been subject to review by the company's auditors.

Contact

For further information, please contact
Susann Linde, CFO and Head of IR
tel: +46 705-17 11 34
e-mail: susann.linde@wallenstam.se

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Wallenstam AB (publ)
SE-401 84 Gothenburg
Visiting address: Kungsportsavenyen 2
Telephone +46 31-20 00 00
www.wallenstam.se
Co reg. no. 556072-1523