Wallenstam — Interim / Quarterly Report 2020

Jul 17, 2020

WALLENSTAM

Interim Report

JANUARY 1–JUNE 30, 2020

January 1–June 30, 2020

• The net asset value per share increased by SEK 2.50 during the period and amounted to SEK 93.80 (83.70).
• Income from property management amounted to SEK 549 million (547), after giving Covid-19 discounts of about SEK 30 million.
• Rental income increased by 4 percent and amounted to SEK 1,041 million (1,001).
• Construction of properties amounted to SEK 2,110 million (1,596).
• On closing day, 2,999 apartments were under construction.
• Changes in value of investment properties amounted to SEK 429 million (549), which came entirely from value growth in new construction (307).
• Profit before tax amounted to SEK 795 million (712) and profit after tax amounted to SEK 631 million (575), corresponding to SEK 2.0 per share (1.8).

April 1–June 30, 2020

• Income from property management amounted to SEK 275 million (287), after giving Covid-19 discounts of about SEK 30 million.
• Rental income increased by 3 percent and amounted to SEK 518 million (503).
• Changes in value of investment properties amounted to SEK 175 million (264).
• Profit after tax amounted to SEK 322 million (235), corresponding to SEK 1.0 per share (0.7).

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

---

HANS WALLENSTAM, CEO

Wallenstam is positioned for future opportunities

"It has been an active quarter for Wallenstam. Apart from agreeing on the divestment of our cooperative apartment project Kv. New York comprising 50 apartments that are under construction, we have managed to acquire land for future housing production in attractive locations."

"Net operating income increased by just over 3 percent to SEK 781 million (756), even though we gave rent discounts of about SEK 30 million to our tenants that are operating in the most exposed sectors. Income from property management during the first half of 2020 amounted to SEK 549 million (547), which was slightly more than the year-earlier period. Now we all have to wait and see regarding future developments. However, I can confirm that Wallenstam has a stable financial position, properties in attractive locations and a well-functioning business, which is creating value. Thanks to this strong basis, we also have the ability to capture the opportunities for the future that arise along the way!"

---

Wallenstam in brief

Number of investment properties: 225
Value of investment properties: SEK 55 billion
Market capitalization: SEK 36 billion
Occupancy rate, lettable area: 98%
Lettable area: 1.2 million sq m
Number of apartments under construction: 2,999
Number of wind turbines: 66

75.1%
SURPLUS RATIO

Read more about Wallenstam on page 23.

Important events second quarter

The second quarter of the year was dominated by the continuing effects of 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 economic consequences of the pandemic have impacted the quarter's results. See more on page 4.

An agreement was signed with 14 companies within the Länsförsäkringar Group that they will acquire Wallenstam's newly constructed property New York at Gärdet in Stockholm. The property is recognized as income and is scheduled to be taken into possession by the Länsförsäkringar companies on December 15, when the property is expected to be completed.

During the quarter, Wallenstam acquired a number of plots of land and site leasehold rights, transactions that will enable future new production. Three site leasehold rights were acquired in Gothenburg, and land was acquired in Uppsala and Täby. The latter transaction represents Wallenstam's entry into a new municipality.

On June 30, Wallenstam signed an agreement on the acquisition of additional land in Österåker Municipality, for urban development involving construction of housing and services.

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 June 30, 2020, the net asset value per share was SEK 93.80, which represents an increase of SEK 2.50 per share during the first half of 2020 and SEK 14.60 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 30,295 million (27,047) 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 5,488 million (4,733) was recognized in the balance sheet, which consists of a deferred tax asset of SEK 385 million (418) and a deferred tax liability of SEK 5,872 million (5,151).

INCREASE IN NET ASSET VALUE, SEK/SHARE

WALLENSTAM | INTERIM REPORT JAN 1–JUN 30, 2020

---

Comments by the CEO

We are investing for the future – and acting now

It has been an active quarter for Wallenstam. Apart from agreeing on the divestment of our cooperative apartment project Kv. New York comprising 50 apartments that are under construction, we have managed to acquire land for future housing production in attractive locations. During 2020, we expanded our project portfolio with possible future housing production, and at present the portfolio includes about 16,000 apartments. These projects have different time and planning horizons.

So far 2020 has naturally been dominated by the ongoing pandemic, and all in all, it has been one of the toughest and most dramatic half years in my career. It has involved a lot of work and concerns about people's health as well as the national economy and social development. I would like to thank all our employees who have worked really hard during this period. The company's ambition has been to act as responsibly as possible, where for example, we have given support to our tenants in the form of rent discounts. We have also purchased 15,000 lunches from our restaurateurs – lunches that we have then donated to several different aid organizations such as the City Mission and the Rescue Mission. We have also donated 4 tons of drinks, energy bars and candy to the Intensive Care department at Sahlgrenska University Hospital in Gothenburg.

Income from property management for the first six months was in line with the previous year

Net operating income increased by just over 3 percent to SEK 781 million (756), even though we gave rent discounts of about SEK 30 million to our tenants that are operating in the most exposed sectors. We are now applying for rent support for the discounts given and the support we receive will constitute revenue in the coming quarters. The payment of the rents for the third quarter is like a normal quarter.

Profit was impacted by an increased interest expense of about SEK 20 million, due to increased borrowing for our investments and an increased liquidity reserve. Income from property management during the first half of 2020 amounted to SEK 549 million (547), which was slightly more than the year-earlier period.

The situation for our tenants

There is a sense that the situation is improving somewhat for our commercial tenants. As regards office premises, we see that demand is still good, and we have also let office space and conducted many viewings during the second quarter. The retail segment has faced the toughest situation, where it was already difficult for many businesses even before. It seems like the effects of the pandemic are accelerating the shift in the sector. We are following and managing this shift, and for example, we can reconstruct the upper floor of a two-floor store into office space.

On the residential side, it feels very stable. Demand for our rental apartments has increased during the year and we now have more than 100,000 people in our own queue. There has been great interest in the virtual viewings we have introduced in our new construction projects during the spring. Since this has been so successful, it will also be an important tool in our letting operations going forward.

Valuation of our properties

In light of the prevailing uncertainty, it feels reassuring to have a mix in our property holdings of about 50 percent residential properties in attractive residential areas and 50 percent commercial properties in central Gothenburg.

Overall, we have not recognized any changes in value in our existing holdings during the quarter. Some smaller adjustments in the property holdings have been made. Among other things, the value of residential properties was adjusted upwards due to improved net operating income, and the commercial properties with the lowest yield requirement have been adjusted, so that the lowest is now 4.0 percent compared to 3.8 percent previously. At the end of the quarter, the average yield requirement still amounted to about 4.5 percent for commercial properties and about 3.2 percent for residential properties.

As previously, our cost-efficient new construction is still generating value on an ongoing basis in line with continuing production. During 2020, new construction has contributed SEK 429 million (307) so far.

A strong basis generates opportunities

Now we all have to wait and see regarding future developments. However, I can confirm that Wallenstam has a stable financial position and the basis to meet the challenges that may arise. I am convinced that the business of our commercial tenants in the center will slowly but surely come back, as customers return. Our new construction operations are progressing as planned, at an undiminished pace, and demand for our rental apartments is still strong, both for existing apartments as well as newly produced ones. Thanks to this strong basis, we also have the ability to capture the opportunities for the future that arise along the way!

Hans Wallenstam, CEO

3 WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Property structure, new construction and financing

Wallenstam entered this crisis with a strong position both in terms of its financial stability and well-located property holdings in Gothenburg, Stockholm and Uppsala. Approximately half of the holdings consist of residential and half of commercial.

Secured liquidity is particularly important during uncertain times. Our choice to retain a larger proportion of loans in banks, even though the capital market has been cheaper, has provided us with a good platform to stand on when it gets shaky in the market. In order to provide security and ensure that we can continue our operations with investments in new construction as planned, we have now already chosen to secure our financing for the rest of the year even though it makes us somewhat front-loaded in our financing on closing day. We will match the bond maturities which we have during 2020 with already agreed loans from the European Investment Bank. For the part of the commercial paper, which is not refinanced, we have the possibility of using our backup facility with the bank. Apart from these measures, Hans Wallenstam has waived his salary starting from April and until further notice, and the directors' fees for the members of the Board of Directors are unchanged for 2020. In addition, the Annual General Meeting decided in April not to issue any dividend and wait until the consequences of the pandemic can be better assessed.

As regards new construction of rental apartments, we have worked to secure material and labor for our projects in progress so that they can be completed on schedule. We hold regular pulse meetings with our contractors in order to handle any disruptions at an early stage so that we do not experience any production stoppages, which has proved to work well to date.

Rental income and management

We have evenly distributed property holdings between residential and commercial. Our commercial premises are mainly located in central Gothenburg where there is a continued flow of people, even though Covid-19 had a major impact in the short term. The tenants that are included in the government's list of the most exposed sectors represent about 13 percent of our total rental value.

As a landlord, we always try to work close to our tenants, which also applies in particularly uncertain times and in relation to the challenges that have arisen as a consequence of Covid-19. In the first instance, we have provided support through temporary rent discounts but also by purchasing goods and services aimed at helping the tenants to maintain their regular business. Through these support purchases, we have also had the opportunity to support, for example ambulance and hospital staff with food and drinks as well as various aid organizations in our society such as the City Mission and the Rescue Mission, for instance with food deliveries at a time when they are probably needed most. In those cases where we made purchases to support our tenants, and where what we purchased was donated, we equate this for accounting purposes with a temporary discount. In total, the year's rent discounts and other support related to Covid-19 amount to about SEK 30 million.

After the end of the reporting period, it became possible to apply for support from the National Board of Housing, Building and Planning for certain commercial tenants defined by the state. As our discounts have mainly not been conditional on us receiving government support ourselves and as we see that there is great uncertainty about how this support will be allocated, we have chosen not to recognize the possible remuneration that this can provide.

In order to make it easier for the tenants that need it, we have also changed from quarterly to monthly invoicing. In the second quarter, we have mainly provided support through discounts. The payment of the rents for the third quarter is in line with a normal quarter.

We have not noticed any increases in bankruptcies among tenants as a consequence of Covid-19.

Valuation

Wallenstam's strategy is to have a diversified property portfolio between residential and commercial with a high geographical concentration and a focus on our own new construction, something we have seen the benefit of during the past quarter. In our existing holdings, we have not recognized any overall changes in value, during the quarter. Some smaller adjustments in the property holdings have been made. Among other things, the value of residential properties was adjusted upwards due to improved net operating income, and the commercial properties with the lowest yield requirement have been adjusted, so that the lowest is now 4.0 percent compared to 3.8 percent previously. At the end of the quarter, the average yield requirement still amounted to about 4.5 percent for commercial properties and about 3.2 percent for residential properties. The overall development in value of investment properties was positive, which was entirely due to continued growth in our new construction, value which is created in line with the construction and completion of new residential properties. It is therefore reassuring that we have now already secured our financing needs for the year in order to continue this production as planned.

Employees

Since the middle of March, both of Wallenstam's offices have been closed for external visits. Among other measures, employees have worked from home in order to limit the spread of infection and business trips have been replaced by digital forms of meeting. During June, our personnel were invited to take a test for antibodies. We have also introduced digital, virtual viewings of our new construction projects prior to letting.

---

Consolidated income statement

SEK million	Note	Jan-Jun 2020	Jan-Jun 2019	Apr-Jun 2020	Apr-Jun 2019	Jul-Jun 2019/2020	Jan-Dec 2019
Rental income		1,041	1,001	518	503	2,066	2,026
Operating expenses		-260	-245	-123	-111	-512	-497
Net operating income, properties		781	756	395	392	1,554	1,529
Management costs and administrative expenses		-115	-114	-56	-56	-229	-228
Financial income		2	3	0	2	3	4
Financial expenses		-119	-99	-64	-51	-218	-198
Income from property management		549	547	275	287	1,110	1,108
Realized changes in value, financial instruments		4	-	4	-	4	-
Participation in profits/losses of associated companies		-4	-2	-2	-1	-7	-5
Revenue, development property sales		92	298	35	37	118	324
Expenses, development property sales		-42	-214	-3	-28	-60	-232
Other income	1	118	207	35	35	209	298
Other expenses	1	-98	-221	-48	-63	-176	-299
Financial expenses, other	1	-10	-10	-5	-6	-25	-25
Profit before changes in value and impairment losses		609	606	291	261	1,172	1,169
Changes in value, investment properties		429	549	175	264	2,480	2,600
New construction		429	307	175	175	914	792
Other		-	242	-	89	1,566	1,808
Unrealized changes in value, financial instruments		-250	-425	-73	-223	-89	-264
Unrealized changes in value, synthetic options*		7	-17	7	-5	-16	-40
Profit before tax		795	712	400	296	3,547	3,464
Current tax		0	0	0	0	0	0
Deferred tax		-164	-137	-78	-62	-754	-727
Profit for the period, after tax		631	575	322	235	2,793	2,737
OTHER COMPREHENSIVE INCOME
Items that may be transferred to profit/loss for the period		1	1	-1	0	1	0
Items that may not be transferred to profit/loss for the period		-	20	-	20	40	60
Tax attributable to other comprehensive income		-1	-1	0	0	-1	-1
Comprehensive income		631	594	321	254	2,833	2,796
DISTRIBUTION OF PROFIT FOR THE PERIOD
Profit for the period attributable to parent company shareholders		631	575	322	235	2,793	2,737
Average number of outstanding shares, thousands		323,000	323,000	323,000	323,000	323,000	323,000
Profit after tax, SEK per share; dilution does not occur		2.0	1.8	1.0	0.7	8.6	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-Jun 2020	Jan-Jun 2019	Apr-Jun 2020	Apr-Jun 2019	Jul-Jun 2019/2020	Jan-Dec 2019
Electricity revenue	97	205	14	34	184	292
Electricity expenses	-40	-170	-11	-37	-69	-199
Depreciation	-38	-38	-19	-19	-76	-76
Management costs and administrative expenses	-6	-11	-4	-6	-15	-20
Net operating income energy	13	-14	-20	-28	24	-3
Financial expenses electricity	-10	-10	-5	-6	-25	-25
Previously Income from natural energy management operations	2	-25	-26	-35	0	-27

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Comments on the consolidated income statement

APRIL 1-JUNE 30

The second quarter of the year was unusual in many ways as a result of the pandemic that has affected the world. For Wallenstam, this is reflected in financial terms, not least in the temporary discounts and other support that we have helped our tenants with.

Revenue during the second quarter amounted to SEK 518 million (503), an increase of 3 percent. New construction and net acquisitions and divestments generated SEK 20 million in increased revenue. In comparable holdings, revenue decreased by SEK 5 million compared to the previous year. Revenue was affected by temporary rent discounts equivalent to about SEK 30 million. As it is highly uncertain if, when and how much government support will be disbursed and as we have not made our discounts conditional, we have chosen not to recognize any part of possible future remuneration from the government in this quarter.

Operating expenses increased as a result of additional recently produced properties and higher charges. Net operating income increased by almost 1 percent to SEK 395 million (392), which corresponds to a surplus ratio of 76.3 percent (77.9).

Net financial items amounted to SEK -70 million (-55) and were affected negatively by higher interest-bearing liabilities due to advance financing as a consequence of the prevailing situation and higher interest rates in the commercial paper market.

Income from property management amounted to SEK 275 million (287). Changes in value of properties were positive and amounted to SEK 175 million (264) and came entirely from our new construction operations.

Swap interest rates have continued to fall during the second quarter. This had a negative impact on the development in value of interest rate derivatives, SEK -73 million (-224).

Profit after tax for the second quarter of 2020 amounted to SEK 322 million (235), which corresponds to earnings per share of SEK 1.0 (0.7).

JANUARY 1-JUNE 30

Rental income

Rental income for the period increased by SEK 40 million, 4 percent, and amounted to SEK 1,041 million (1,001). Rental income growth during the period came entirely from occupations in our recently produced residential apartment buildings as the existing holdings were affected by a high proportion of temporary Covid-19 discounts to commercial customers.

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 (93). Our occupancy rate for commercial properties in terms of lettable area amounted to 95 percent on closing day compared to 96 percent at year-end.

Operating expenses & net operating income

Operating expenses for the period amounted to SEK 260 million (245) and increased as a result of additional recently produced properties and increased costs for property operation 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 almost SEK 5 million lower during the period compared to the same period in 2019. Net operating income increased by SEK 25 million or 3.3 percent and amounted to SEK 781 million (756). Added efficient new production accounted for this growth as the existing holdings were affected by temporary discounts. The surplus ratio was 75.1 percent (75.6).

Management costs and administrative expenses

Management costs and administrative expenses totaled SEK 126 million (128) and are distributed among property management, SEK 115 million (114), energy management, SEK 6 million (11) and property transactions, SEK 5 million (3).

Financial income & expenses

Financial income amounted to SEK 2 million (3) and financial expenses totaled SEK 129 million (109) and are distributed among property operations and other, which mainly consists of natural energy. Capitalized interest amounted to SEK 52 million (38).

RENTAL INCOME AND INCOME FROM PROPERTY MANAGEMENT

NET OPERATING INCOME AND SURPLUS RATIO

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

The average debt for the year was SEK 3.2 billion higher than the previous year, due to continued investments in new construction and advance financing. The average interest rate on closing day, which reflects future interest to pay in relation to our loans, was 1.40 percent (1.24). This was higher compared to the previous year mainly due to higher interest rates in the commercial paper market. During the period, the average interest rate amounted to 1.31 percent (1.19).

Realized changes in value, financial instruments

Realized changes in value of financial instruments during the year consisted of the divestment of the Group's holding in Eolus Vind AB, which was sold for SEK 36 million during the second quarter of the year. The holding, which was important for the Group's wind power investments, has also been financially beneficial. In addition to annual dividends, the divestment realizes a profit of SEK 27 million, of which SEK 23 million has been recognized as an unrealized change in value in previous reports.

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 50 million (85) and included sales of apartments in the Vasagatan 33 project, individual co-op apartments as well as costs.

Other income & Other expenses

The Group's electricity production as well as additional 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 trading business area. Production of electricity increased, by 18 percent in total compared to the previous year, and amounted to 232 GWh (196). The price of electricity and renewable energy certificates decreased, however, which meant that sales from electricity production were lower compared to the previous year.

Changes in value, investment properties

Changes in value of investment properties during the period totaled SEK 429 million (549) and came entirely from gradual value growth in our new construction in progress (307).

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 -249 million (-421). On closing day, the 10-year swap rate amounted to 0.28 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, has decreased slightly during 2020. The unrealized development in value including costs connected to the scheme, amounted to SEK 7 million (-17) during the period. To date, the total recognized obligation for the scheme amounts to SEK 46 million (35).

Taxes

The tax expense for the period, which consists in its entirety of deferred tax, amounted to SEK 164 million (137) 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 6 million (5) 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	10,128
ICA Fastigheter AB	6,906
Sandryds Handels AB	6,730
Folkuniversitetet	6,308
Frisk Service i Göteborg Aktiebolag	6,212
Total	110,568

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

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Consolidated balance sheet, condensed

SEK million	Jun 30, 2020	Jun 30, 2019	Dec 31, 2019
ASSETS
NON-CURRENT ASSETS
Investment properties	55,127	48,757	52,354
Wind turbines	1,071	1,147	1,109
Participations in associated companies	160	111	133
Financial assets	499	441	549
Financial derivative instruments	5	1	6
Other non-current assets	79	62	71
Total non-current assets	56,941	50,520	54,222
CURRENT ASSETS
Development properties	281	155	175
Financial derivative instruments	0	-	2
Other current assets	192	161	161
Cash and cash equivalents	922	342	129
Total current assets	1,396	657	467
Total assets	58,336	51,177	54,689
EQUITY AND LIABILITIES
EQUITY
Equity	24,423	21,897	23,792
Equity attributable to non-controlling interests	0	2	2
Total equity	24,423	21,899	23,794
NON-CURRENT LIABILITIES
Provisions for deferred tax	5,488	4,733	5,322
Other provisions	96	112	188
Interest-bearing liabilities	5,156	6,458	3,883
Financial derivative instruments	604	504	356
Lease liability	492	421	420
Other non-current liabilities	22	36	36
Total non-current liabilities	11,858	12,263	10,205
CURRENT LIABILITIES
Interest-bearing liabilities	21,202	16,380	19,998
Financial derivative instruments	0	-	2
Lease liability	1	-	1
Other current liabilities	852	635	689
Total current liabilities	22,055	17,016	20,690
Total equity and liabilities	58,336	51,177	54,689

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Comments on the consolidated balance sheet

OUR PROPERTIES

Development during the period

During the year, we invested a total of SEK 2,419 million (2,043), of which SEK 2,372 million (2,018) in investment properties and SEK 48 million (25) in development properties. New construction projects in progress involve 2,999 apartments. The total value of rental apartment and development projects in progress amounted to SEK 6.4 billion (4.6) on closing day.

The right of use value for land granted with site leasehold rights has been estimated at SEK 476 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 429 million (549) in total, of which the entire change during the period came from value growth in properties under construction (307).

The yield requirements were marginally adjusted from the previous report. On closing day, the average yield requirement still amounted to about 4.5 percent for the commercial holdings and to about 3.2 percent for residential properties in operation. The value of investment properties amounted to SEK 55,127 million (48,757) at the end of the period.

Development properties

Development properties include the co-op apartment project New York at Gärdet in Stockholm and four remaining apartments in the Vasagatan 33 project in Gothenburg. The book value of Development properties amounted to SEK 281 million (155) 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.

Despite the ongoing pandemic, we see that demand for central office space in Gothenburg is still stable.

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	671
Projects in progress, rental apartments	5,429
Development properties	281
Total projects in progress	6,381

CHANGES IN PROPERTY HOLDINGS, INVESTMENT PROPERTIES

	Book value, SEK million
Property holdings, January 1, 2020	52,354
+ Acquisitions	310
+ Construction	2,062
- Sales	-
+ Right-of-use asset site leasehold right	73
+ Changes in value, properties	429
- Land partitioning	102
Property holdings, June 30, 2020	55,127

WALLENSTAM | INTERIM REPORT JAN 1–JUN 30, 2020

---

NEW CONSTRUCTION IN PROGRESS, JUNE 30, 2020

Project	No. of apts.	Occupation*	Sq m**	Of which occupied to date
STOCKHOLM
Parkstråket 1, Haninge	154	Q3 2020	13,500
Söra Kvarter, Österåker	305	Q3 2020	15,500
Umami Park, phase 1B, Sundbyberg	75	Q3 2020	3,000
Allén, Tyresö	221	Q4 2020	13,500
New York, Gårdet (development property)	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
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	20,000^{i}
Total apartments in projects	2,999		221,000
of which in progress on June 30	2,999

• 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.
  i Relates to two sports centers and a multistorey carpark.

CHANGE, CONSTRUCTION IN PROGRESS

	No. of apts.
New construction in progress,
April 1, 2020	3,085
- Completed	-86
Umami Park, phase 1A, Sundbyberg (38 apts.)
Trollesunds gårdar (48 apts.)
+ Started	0
New construction in progress,
June 30, 2020	2,999

APARTMENTS, CONSTRUCTION IN PROGRESS

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

COMPLETED NEW CONSTRUCTION, 2020*

Name of property	Address	Year of construction/ conversion	Residential sq m	Office sq m	Retail/ Restaurant/warehousing sq m	Industry/ Supermarkets 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) A-F	Trollesundsvägen 56	2020	6,766	-	-	11	-	1,249	-	8,026	110
Passfotot 2
(Project: Trollesunds gårdar) B-C	Trollesundsvägen 58	2020	2,975	-	-	-	-	1,526	-	4,501	48
Freden större 13
(Project: Umami Park, phase 1A)	Östra Madenvägen 7A, 7D / Gesällvägen 7, 7C, 9 / Odlingsgatan 4 B, C, D	2020	8,125	176	662	200	-	3,040	-	12,203	147
Total			25,875	176	911	211	-	7,010	-	34,183	487

*Refers to fully completed and occupied investment properties

PROPERTY ACQUISITIONS, 2020

Name of property	Address	Year of construction/ conversion	Residential sq m	Office sq m	Retail/ Restaurant/warehousing sq m	Industry/ Supermarkets sq m	Education/ Care sq m	Garage sq m	Other sq m	Total sq m	No. of apts.
STOCKHOLM
Murförbandet 1* (Bandhagen)
Täby Tibble 10:8-9*
Täby Bergkristallen 1*
UPPSALA
Kvarngärdet 71:1*
GOTHENBURG
Majorna 721:75	Fiskhamnen 27	1973	-	-	-	1,207	-	-	-	1,207	0
Majorna 721:78, 721:81	Fiskhamnen 23-25	1974	-	-	-	2,416	-	-	-	2,416	0
Total			-	-	-	3,623	-	-	-	3,623	-

*Land

PROPERTY HOLDING STRUCTURE AS OF JUNE 30, 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	312,544	26,085	18,880	15,566	4,479	56,590	3,292	437,436	36%	5,171
Uppsala	27,605	2,138	1,039	101	-	5,732	-	36,615	3%	542
Gothenburg	255,433	207,487	92,238	85,171	48,506	59,443	7,337	755,615	61%	4,129
Total	595,582	235,710	112,157	100,838	52,985	121,765	10,629	1,229,666	100%	9,842
Distribution by type of premises	49%	19%	9%	8%	4%	10%	1%	100%

ACQUISITION, CONSTRUCTION AND SALES OF INVESTMENT PROPERTIES

PROPERTY TYPE, FLOOR SPACE

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

12 WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 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 38 million (38). 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 1,071 million (1,147). The renewable energy certificate inventory and guarantees of origin amounted to SEK 2 million (7) on closing day.

FINANCING

Equity

Shareholders' equity, including non-controlling interests amounted to SEK 24,423 million (21,899), equivalent to SEK 76 per share (68). The equity/assets ratio was 42 percent (43).

Interest-bearing liabilities

On closing day, outstanding bond loans amounted to SEK 3,650 million (3,450), the outstanding volume of commercial paper, with a framework amount of SEK 4 billion, amounted to SEK 2,070 million (3,612), utilized loans from the European Investment Bank totaled SEK 1,000 million (-) and total interest-bearing liabilities amounted to SEK 26,852 million (23,259), of which lease liability amounted to SEK 493 million (421). Of this liability, SEK 3.5 billion (1.8) consists of green loans, and SEK 1.0 billion (0.5) of green bonds.

All the bond loans of SEK 3,650 million (3,450) 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.

---

The average remaining fixed interest term is 39 months (41). Of the loan portfolio, 46 percent (42) of the loans have fixed interest terms longer than one year. On closing day, the average interest rate on our loans was 1.40 percent (1.24).

Financing of the loan portfolio is mainly secured by mortgage deeds for properties. The bond loans and the loan from the EIB 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 493 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 599 million, compared to a net indebtedness of SEK 349 million on December 31, 2019. Of this, interest rate derivatives accounted for SEK -600 million (-350), electricity derivatives for SEK 0 million (2) and currency derivatives for SEK 1 million (-1).

During 2020, the Group entered into new interest rate derivative contracts totaling SEK 1.05 billion with a maturity of 10.5 years. The total volume of outstanding interest rate derivatives, where Wallenstam pays fixed interest, amounts to SEK 10.8 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 1,722 million (1,139). Approved overdraft facilities amounted to SEK 800 million (800), of which no portion was 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 1,000 million (-) was drawn down from the facility. The Group's approved and unutilized credit facilities totaled SEK 5,500 million (4,000).

On June 30, 2020, accessible liquidity totaled SEK 7,222 million (5,139), of which SEK 2,070 million (3,612) represents a credit commitment for issued outstanding commercial paper.

FIXED TERMS, AVERAGE INTEREST RATES, JUNE 30, 2020

Interest maturity structure	Amount, SEK million	Average interest rate, %	Proportion, %
0-1 year	14,284	1.75	54.2
1-2 years	-	-	-
2-3 years	401	1.09	1.5
3-4 years	500	0.56	1.9
4-5 years	1,823	1.07	6.9
5-6 years	2,100	0.92	8.0
6-7 years	2,000	1.13	7.6
7-8 years	1,500	1.18	5.7
8-9 years	1,500	1.03	5.7
>9 years	2,250	0.80	8.5
Total	26,358	1.40	100.0

ACCESSIBLE LIQUIDITY

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

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	-	-	-	575	-	575
Translation difference	-	-	20	-	-	20
Changes in value, owner-occupied properties	-	-	1	-	-	1
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
TRANSACTIONS WITH SHAREHOLDERS
Dividends	-	-	-	-307	-	-307
Closing equity, Jun 30, 2019	165	359	24	21,349	2	21,899
Opening equity, Jan 1, 2020	165	359	64	23,204	2	23,794
Profit for the period	-	-	-	631	-	631
Translation difference	-	-	0	-	-	0
Changes in value, currency derivatives	-	-	2	-	-	2
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
TRANSACTIONS WITH SHAREHOLDERS
Dividend non-controlling interests	-	-	-	-	-2	-2
Dividends	-	-	-	-	-	-
Closing equity, Jun 30, 2020	165	359	64	23,835	0	24,423

Consolidated statement of cash flows

SEK million	Jan-Jun 2020	Jan-Jun 2019	Apr-Jun 2020	Apr-Jun 2019	Jul-Jun 2019/2020	Jan-Dec 2019
Profit before changes in value and impairment losses*	609	606	291	261	1,172	1,169
Adjustment for items not included or arising in cash flow	-58	-11	-30	29	-37	10
Taxes paid	0	0	0	0	0	0
Cash flow before change in working capital	551	595	261	290	1,135	1,179
Change in working capital	172	97	105	32	248	174
Cash flow from operating activities	723	692	367	322	1,383	1,353
INVESTMENTS/DIVESTMENTS
Investment in properties and individual co-op apartments	-2,427	-2,013	-1,403	-1,236	-4,226	-3,812
Investments in intangible assets & property, plant and equipment, and wind turbines	-13	-30	-6	-4	-28	-45
Investments in financial assets	-	-	-	-	-69	-69
Investments in associated companies	-30	-	-	-	-55	-25
Divestment of properties, development properties & property, plant and equipment	67	327	15	60	368	628
Cash flow from investing activities	-2,404	-1,716	-1,395	-1,180	4,011	-3,323
FINANCING
Raised interest-bearing liabilities	7,163	8,511	5,697	5,401	16,702	18,050
Amortization of interest-bearing liabilities	-4,688	-6,798	-3,580	-4,383	-13,184	-15,294
Net change in overdraft facilities	-	-119	-257	-	-	-119
Advance payment futures contracts	-	-4	-	-6	-4	-8
Dividend paid to minority owner	-2	-	-2	-	-2	-
Dividends paid	-	-307	-	-307	-307	-614
Cash flow from financing activities	2,473	1,283	1,858	704	3,206	2,016
Changes to liquid assets	793	259	830	-154	580	46
Cash and cash equivalents at beginning of the period	129	83	92	496	496	83
Cash flow for the period	793	259	830	-154	580	46
Cash and cash equivalents at the end of the period	922	342	922	342	1,076	129
Unutilized overdraft facilities at the end of the period	800	800	800	800	800	800
Blocked bank balances	-	-3	-	-3	-	-1
Available liquid assets	1,722	1,139	1,722	1,139	1,876	928

*Includes interest paid and received, including gross flows from interest rate swap contracts, of SEK-175 million (-135) and SEK 1 million (3) respectively, of which SEK 52 million (38) was capitalized as a non-current asset.

14 WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Segments report

| 2020
SEK million | Gothenburg
Jan-Jun | Stockholm
Jan-Jun | Other
Jan-Jun | Elimination
Jan-Jun | Total
Jan-Jun |
| --- | --- | --- | --- | --- | --- |
| INCOME STATEMENT | | | | | |
| Rental income | 698 | 356 | - | -14 | 1,041 |
| Operating expenses | -162 | -97 | - | - | -260 |
| Net operating income | 536 | 259 | - | -14 | 781 |
| Management costs and administrative expenses | -75 | -45 | -8 | 14 | -115 |
| Net financial items | -121 | -65 | 69 | - | -117 |
| Income from property management | 341 | 148 | 61 | - | 549 |
| Unapportioned items | | | | | |
| Realized changes in value, financial instruments | | | | | 4 |
| Participation in profits/losses of associated companies | | | | | -4 |
| Sales result, development properties | | | | | 50 |
| Other income | | | | | 118 |
| Other expenses | | | | | -98 |
| Financial expenses, other | | | | | -10 |
| Profit before changes in value and impairment losses | | | | | 609 |
| Changes in value | | | | | 186 |
| Profit before tax | | | | | 795 |
| BALANCE SHEET | | | | | |
| Investment properties | 33,491 | 21,636 | - | - | 55,127 |
| Wind turbines | - | - | 1,071 | - | 1,071 |
| Development properties | 14 | 267 | - | - | 281 |
| Unapportioned assets | - | - | - | - | 1,857 |
| Total assets | | | | | 58,336 |
| Equity | - | - | - | - | 24,423 |
| Interest-bearing liabilities and lease liabilities | 14,156 | 10,448 | 2,247 | - | 26,851 |
| Unapportioned liabilities | - | - | - | - | 7,062 |
| Total equity and liabilities | | | | | 58,336 |
| Property investments in progress including land | 2,820 | 3,561 | - | - | 6,381 |
| 2019
SEK million | Gothenburg
Jan-Jun | Stockholm
Jan-Jun | Other
Jan-Jun | Elimination
Jan-Jun | Total
Jan-Jun |
| INCOME STATEMENT | | | | | |
| Rental income | 694 | 319 | - | -12 | 1,001 |
| Net operating income, properties | 535 | 233 | - | -12 | 756 |
| Income from property management | 355 | 126 | 65 | - | 547 |
| Unapportioned items | | | | | |
| Realized changes in value, financial derivatives | | | | | -2 |
| Sales result, development properties | | | | | 85 |
| Other income | | | | | 207 |
| Other expenses | | | | | -221 |
| Financial expenses, other | | | | | -10 |
| Profit before changes in value and impairment losses | | | | | 606 |
| Changes in value | | | | | 107 |
| Profit before tax | | | | | 712 |
| BALANCE SHEET | | | | | |
| Investment properties | 30,496 | 18,260 | - | - | 48,757 |
| Wind turbines | - | - | 1,147 | - | 1,147 |
| Development properties | 64 | 91 | - | - | 155 |
| Unapportioned assets | - | - | - | - | 1,118 |
| Total assets | | | | | 51,177 |
| Equity | - | - | - | - | 21,899 |
| Interest-bearing liabilities | 13,199 | 8,379 | 1,681 | - | 23,259 |
| Unapportioned liabilities | - | - | - | - | 6,019 |
| Total equity and liabilities | | | | | 51,177 |
| Property investments in progress including land | 1,531 | 3,087 | - | - | 4,618 |

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

The Wallenstam share*

The Wallenstam B share is listed on Nasdaq Stockholm, Large Cap. During 2020, the Wallenstam share price has decreased by 4.7 percent. The property indices OMX Stockholm Real Estate PI and OMX Stockholm PI fell by 21.7 percent and 5.0 percent, respectively, during the same period.

At the end of the period, the Wallenstam share price was SEK 107.90 compared to SEK 113.20 at year-end 2019. The market capitalization was SEK 35,607 million (37,356) based on the total number of registered A and B shares. Equity per share amounted to SEK 76 (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

The Annual General Meeting resolved not to pay any dividend for the financial year 2019, in accordance with the Board's proposal, which is a precautionary measure in light of Covid-19 and the uncertain economic environment at present.

Turnover

During the period, the Wallenstam share had an average daily turnover on Nasdaq Stockholm of about SEK 34.3 million (21.6).

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

AVERAGE SHARE LIQUIDITY PER DAY

SHAREHOLDINGS, JUNE 30, 2020

	A shares	B shares	Equity, %	Votes, %
Hans Wallenstam and family, and company	34,500,000	49,068,000	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		7,227,826	2.19	1.14
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		129,098,610	39.13	20.39
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 9 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-JUN 30, 2020

---

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 277 million (280), of which rental income amounted to SEK 60 million (61).

Net profit for the period was impacted by changes in value of financial derivative instruments, SEK -252 million (-473), mainly due to falling swap interest rate levels. Profit after tax amounted to SEK -57 million (-525).

Investments in intangible assets and property, plant and equipment during the period amounted to SEK 27 million (7). Parent company external loans amounted to SEK 12,873 million (12,636) on closing day.

INCOME STATEMENT, PARENT COMPANY

SEK million	Jan-Jun 2020	Jan-Jun 2019	Jan-Dec 2019
Management revenue	174	164	273
Rental income	60	61	124
Revenue, sales of renewable energy certificates	42	52	57
Other revenue	1	2	2
Total revenue	277	280	456
Management costs and administrative expenses	-183	-186	-359
Operating expenses	-16	-20	-36
Depreciation and impairment losses properties	-15	-15	-30
Expenses, sales of renewable energy certificates	-21	-50	-52
Change in value, synthetic options scheme	7	-17	-40
Other expenses	-1	-2	-2
Total expenses	-228	-289	-519
Operating income	49	-10	-63
Profit/loss from participations in Group companies	17	-226	33
Interest income and similar profit/loss items	300	253	455
Interest expenses and similar profit/loss items	-193	-151	-223
Changes in value, derivative instruments	-252	-473	-323
Net financial items	-128	-597	-59
Profit/loss after financial items	-79	-607	-122
Appropriations	-	1	373
Tax on net profit/loss	23	80	-17
Profit/loss after tax	-57	-525	234
OTHER COMPREHENSIVE INCOME
Changes in value, currency derivatives	2	-	-1
Tax attributable to other comprehensive income	0	-	0
Comprehensive income	-55	-525	233

BALANCE SHEET, PARENT COMPANY

SEK million	Jun 30, 2020	Jun 30, 2019	Dec 31, 2019
Assets
Properties	1,338	1,349	1,340
Participations in Group companies	5,742	5,133	5,879
Financial derivative instruments	5	1	8
Receivables from Group companies	22,949	20,903	21,894
Other assets	228	291	206
Cash and cash equivalents	920	334	122
Total assets	31,183	28,011	29,449
Equity and liabilities
Equity	10,414	10,018	10,470
Provisions	77	60	84
Interest-bearing external liabilities	12,873	12,636	13,421
Liabilities to Group companies	7,089	4,669	4,994
Financial derivative instruments	604	504	357
Other liabilities	125	125	123
Total equity and liabilities	31,183	28,011	29,449

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

ANNUAL GENERAL MEETING 2020

The Annual General Meeting (AGM) of Wallenstam AB (publ) on April 28, 2020, passed resolutions on the following matters, among others:

• The AGM adopted the annual accounts for 2019 and the Board’s proposal not to pay any dividend for the financial year 2019.
• The AGM granted the Board of Directors and the Chief Executive Officer discharge from liability and in accordance with the proposal of the nomination committee elected Lars-Åke Bokenberger as new Chairman of the Board of Directors and Mikael Söderlund as a new member of the Board. Agneta Wallenstam, Anders Berntsson and Karin Mattsson were re-elected as Board members. Fees to be paid to the Board of Directors were approved of SEK 740,000 to the Chairman of the Board, SEK 260,000 to the Vice Chairman and SEK 160,000 to each of the other Board members. The sums include compensation for committee work. Furthermore, it was decided that SEK 1,700,000 will be paid in additional directors’ fees to the Chairman of the Board, who in his chairmanship position will assist the company management to a significant extent during the year.

• Dick Brenner (chairman), Lars-Åke Bokenberger, Anders Oscarsson and Hans Wallenstam were elected as members of the nomination committee ahead of the 2021 AGM.

• The AGM resolved to elect KPMG as the company’s auditor for the period until the end of the 2021 AGM. KPMG has advised that Mathias Arvidsson will be the chief auditor.

• The AGM approved the Board’s proposal for guidelines for remuneration to senior executives.
• The AGM authorized the Board until the next AGM, on one or more occasions, to take decisions regarding the acquisition of so many own B shares on Nasdaq Stockholm, such that the company’s maximum holding at any given time does not exceed 10 percent of all shares in the company. The acquisition must take place within the registered price range at the time (i.e. the spread between the highest buying price and lowest selling price).
• The AGM authorized the Board until the next AGM - with or without preferential rights for shareholders - to take decisions regarding the assignment of the company’s own shares by means other than through Nasdaq Stockholm. Assignment may take place against cash payment, against consideration other than in cash or by offsetting debt because of the company’s assignment in exchange for a claim on the company. The Board’s decision regarding assignment must be executed within the time period determined by the Board. The number of own shares assigned may not exceed the number of shares held by the company at the time of assignment.

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

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 June 30, 2020, the estimated market value of the properties amounted to around SEK 55 billion. A change in value of plus/minus 10 percent is thus equivalent to about plus/minus SEK 5.5 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 2.9 billion (2.8).

A change in the interest rate of plus/minus 50 points is equivalent to about plus/minus SEK 72 million (63).

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.

A member of Wallenstam’s Board, through his own consulting company, sold consulting hours to Wallenstam for SEK 0.4 million.

In June, an agreement was signed on the divestment of Wallenstam’s new construction project New York in Stockholm. The buyer is a Group company where a member of Wallenstam’s Board of Directors is a board member. The agreed property value amounts to approximately SEK 420 million and the property is scheduled to be taken into possession in December. As part of the agreement, Wallenstam will be responsible for the technical management for a period of two years from the date of taking possession.

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 1.6 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, figures presented in this report do not, in some cases, 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.

Recognition of government support

Government support is recognized in the financial statements when there is reasonable certainty that the company will be able to fulfil the conditions associated with the grants and that these grants will be received. Wallenstam has given discounts to commercial tenants, which are in the categories defined by the government where it is possible to apply for support. As the Group’s discounts have mainly not been conditional on us receiving this support ourselves and as there is uncertainty about how this support will be allocated, possible remuneration will be recognized when it can be calculated with greater certainty.

EVENTS AFTER THE END OF THE REPORTING PERIOD

No events of material importance for the company’s position have occurred after the end of the reporting period.

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Key ratios – multi-year summary

Accumulated during period	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018
PROPERTY-RELATED KEY RATIOS
Net operating income, properties, SEK million	781	386	1,529	1,159	756	364	1,429	1,078	706
Surplus ratio, property management, %	75.1	73.8	75.5	76.7	75.6	73.2	74.8	75.8	75.0
Income from property management, SEK million	549	275	1,108	851	547	260	1,011	758	462
Changes in value, new construction, SEK million	429	254	792	505	307	132	598	421	267
Value of investment properties, SEK million	55,127	53,619	52,354	49,793	48,757	47,289	45,811	44,360	43,446
Area, sq m (thousand)	1,230	1,210	1,201	1,199	1,188	1,181	1,186	1,197	1,196
Occupancy rate – lettable area, %	98	98	98	98	99	99	99	99	99
Development properties, net, SEK million	281	170	175	154	155	156	317	658	691
FINANCIAL KEY RATIOS
Profit after tax, SEK million	631	309	2,737	1,038	575	340	2,998	1,769	1,310
Return on equity, %	12.0	11.9	12.3	10.4	10.6	14.6	14.8	12.2	11.8
Return on total capital, %	7.0	7.0	7.2	6.1	6.2	9.5	9.7	8.4	8.3
Interest coverage ratio, times	5.9	6.1	6.3	7.0	7.4	1.5	1.3	1.2	1.1
Loan-to-value ratio, %	46	45	45	45	46	45	45	46	46
Average interest rate on closing day, %	1.40	1.31	1.22	1.23	1.24	1.25	1.06	0.98	1.01
Average fixed-interest term, months	39	38	38	40	41	44	39	36	38
Equity/assets ratio, %	42	43	44	43	43	44	45	44	44
Equity, SEK million	24,423	24,104	23,794	22,402	21,899	21,951	21,611	20,688	20,252
Net asset value, SEK million	30,295	29,897	29,501	27,666	27,047	27,011	26,574	25,608	25,113
Market capitalization, SEK million	35,607	37,290	37,356	36,828	32,406	30,971	27,126	27,786	26,582
Repurchase of shares, SEK million	-	-	-	-	-	-	229	204	182
Per share data
Profit after tax, SEK	2.0	1.0	8.5	3.2	1.8	1.1	9.3	5.5	4.0
P/E ratio, times	12.5	13.5	13.4	15.9	14.0	10.0	8.9	11.3	11.5
Cash flow from operating activities, SEK	2.2	1.1	4.2	3.4	2.1	1.1	1.1	0.2	-0.8
Equity, SEK	76	75	74	69	68	68	67	64	63
Net asset value per share, SEK	93.80	92.60	91.30	85.70	83.70	83.60	82.30	79.20	77.60
Share price, SEK	107.90	113.00	113.20	111.60	98.20	93.85	82.20	84.20	80.55
Shares outstanding, average, thousands	323,000	323,000	323,000	323,000	323,000	323,000	323,854	324,073	324,405
Shares outstanding at end of period, thousands	323,000	323,000	323,000	323,000	323,000	323,000	323,000	323,310	323,550

Quarterly overview

	Apr-Jun 2020	Jan-Mar 2020	Oct-Dec 2019	Jul-Sep 2019	Apr-Jun 2019	Jan-Mar 2019	Oct-Dec 2018	Jul-Sep 2018	Apr-Jun 2018
Rental income, SEK million	518	523	515	510	503	497	488	480	475
Net operating income, properties, SEK million	395	386	370	403	392	364	351	372	365
Surplus ratio, property management, %	76.3	73.8	71.8	79.0	77.9	73.2	71.9	77.4	76.8
Income from property management, SEK million	275	275	257	304	287	260	253	296	245
Return on equity, %	12.0	11.9	12.3	10.4	10.6	14.6	14.8	12.2	11.8
Earnings per share after tax, SEK	1.0	1.0	5.3	1.4	0.7	1.1	3.8	1.4	3.1
Cash flow per share from operating activities, SEK	1.1	1.1	0.8	1.3	1.0	1.1	0.9	1.0	-1.6
Equity per share, SEK	76	75	74	69	68	68	67	64	63
Net asset value per share, SEK	93.80	92.60	91.30	85.70	83.70	83.60	82.30	79.20	77.60
Share price, SEK	107.90	113.00	113.20	111.60	98.20	93.85	82.20	84.20	80.55

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.

20 WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

Report signatures

The Board and CEO certify that the interim report provides a fair view of the Parent Company's and Group's operations, financial position and results and describes the significant risks and uncertainties to which the Parent Company and Group Companies are exposed.

Gothenburg, July 17, 2020

Lars-Åke Bokenberger
Chairman of the Board

Karin Mattsson
Vice Chairman of the Board

Anders Berntsson
Board member

Agneta Wallenstam
Board member

Mikael Söderlund
Board member

Hans Wallenstam
CEO

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

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	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018
Equity, SEK million	24,423	24,102	23,792	22,400	21,897	21,949	21,609	20,686	20,250
Average equity, SEK million	23,323	22,828	22,329	21,708	21,278	20,813	20,305	19,795	19,421
Total assets, SEK million	58,336	55,959	54,689	52,459	51,177	49,945	48,262	46,655	45,625
Average total assets, SEK million	54,524	52,846	51,306	49,700	48,333	46,983	45,728	44,508	43,452

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

WALLENSTAM | INTERIM REPORT JAN 1-JUN 30, 2020

---

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 9,800 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 5,700, are located in the Stockholm business area. Approximately 500 of these apartments are located in Uppsala. The Stockholm business area had around 1,350 apartments under construction on closing day.

Gothenburg

Our property holdings in Gothenburg consist of just over 4,100 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-JUN 30, 2020

---

Calendar

Interim report Q3, 2020

October 22, 2020

This is information that Wallenstam is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 CEST on July 17, 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

^{}[]

in

^{}[]

f

Wallenstam AB (publ)
SE-401 64 Gothenburg
Visiting address: Kungsportsavenyen 2
Telephone +46 31-20 00 00
www.wallenstam.se
Co reg. no. 556072-1523