Wallenstam — Interim / Quarterly Report 2020

Oct 22, 2020

WALLENSTAM

Interim Report

JANUARY 1–SEPTEMBER 30, 2020

January 1–September 30, 2020

• The net asset value per share increased by SEK 3.80 during the period and amounted to SEK 95.10 (91.30).
• Income from property management amounted to SEK 860 million (851), after giving Covid-19 discounts of just over SEK 30 million net.
• Rental income increased by 4 percent and amounted to SEK 1,576 million (1,511).
• Investment in construction of properties amounted to SEK 2,955 million (2,390).
• On closing day, 2,939 apartments were under construction.
• Changes in value of investment properties amounted to SEK 616 million (1,009), which came entirely from value growth in new construction (505).
• Profit before tax amounted to SEK 1,240 million (1,286) and profit after tax amounted to SEK 974 million (1,038), equivalent to SEK 3.0 per share (3.2).

July 1–September 30, 2020

• Income from property management amounted to SEK 310 million (304).
• Rental income increased by 5 percent and amounted to SEK 536 million (510).
• Changes in value of investment properties amounted to SEK 187 million (460), which came entirely from value growth in new construction (198).
• Profit after tax amounted to SEK 344 million (463), corresponding to SEK 1.1 per share (1.4).

Comparisons in brackets refer to the corresponding period of the previous year for performance measures, and the latest year-end for balance sheet measures, unless otherwise stated.

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HANS WALLENSTAM, CEO

Wallenstam generates results through its own work

"The results so far in 2020 shows that Wallenstam's business is performing very well. Thanks to our business model, we can also generate results in more uncertain times through our own work. We are continuing to deliver and can be proud of what we do. We are gradually continuing to create value, for society, our customers and our shareholders."

"Our new construction in progress has essentially not been impacted at all by the pandemic but is proceeding as planned. Demand for housing is still enormous in the locations where we operate. At present, just over 120,000 people are in our own queue for our newly produced rental apartments. In the commercial holdings, there is uncertainty regarding the most exposed sectors. For us, it is shops and restaurants in the ground floors of our properties that are facing the toughest situation, while there is strong demand for our office space."

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Wallenstam in brief

Number of investment properties: 225
Value of investment properties: SEK 56 billion
Market capitalization: SEK 45 billion
Occupancy rate, lettable area: 97%
Lettable area: 1.2 million sq m
Number of apartments under construction: 2,939
Number of wind turbines: 66

SEK 616 million

GENERATED SURPLUS VALUE IN OUR NEW PRODUCTION DURING 2020
Read more about Wallenstam on page 23.

Important events third quarter

The quarter 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. See more on page 4.

During the quarter, construction started of 85 apartments in Kv. 10 in Kallebäcks Terrasser in Gothenburg, which means that about 800 apartments are now under construction in the urban development project. Of the 85 apartments in Kv. 10, 12 units consist of so-called co-living apartments with a total of 121 rooms for rent.

In total, 145 apartments were completed and occupied during the quarter. In the Parkstråket 1 project, which involves 154 apartments, of which 17 are co-living apartments with 85 rooms for rent, 36 apartments were completed and occupied. Of the Söra Kvarter project's total of 305 apartments, 109 units were completed and occupied during the quarter.

On September 1, the property Österåker Hagby 1:98 was taken into possession, which consists of land for future new production.

In September, Wallenstam issued a green bond, consisting of SEK 300 million with a maturity of two years and with a fixed interest rate of 0.695 percent. The bond is unsecured.

On September 30, an Extraordinary General Meeting was held in Wallenstam, where a resolution was passed on a dividend of SEK 0.50 per share for the 2019 financial year.

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 September 30, 2020, the net asset value per share was SEK 95.10, which represents an increase of SEK 3.80 per share during the first three quarters of 2020 and SEK 15.90 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 30,715 million (29,501) 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 5,589 million (5,322) is recognized in the balance sheet, which consists of a deferred tax asset of SEK 360 million (387) and a deferred tax liability of SEK 5,949 million (5,709).

INCREASE IN NET ASSET VALUE, SEK/SHARE

WALLENSTAM | INTERIM REPORT JAN 1–SEP 30, 2020

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Comments by the CEO

Results through our own work

The results so far in 2020 shows that Wallenstam's business is performing very well. Thanks to our business model, with efficient management, successful letting and cost-efficient new construction, we can also generate results in more uncertain times through our own work. During this very unusual time with the pandemic, all employees have contributed in a fantastic way! We are continuing to deliver and can be proud of what we do.

New production that creates value

Demand for housing is still enormous in the locations where we operate. At present, just over 120,000 people are in our own queue for our newly produced rental apartments.

Our new construction in progress has essentially not been impacted at all by the pandemic but is proceeding as planned. What has been affected in the new production process is the municipalities' processing times. These have become longer, which for us has meant that we were not able to start many of our projects at the rate we had wanted. No projects have been cancelled, but the starts have been brought forward as a consequence of this.

We are still not making any changes in the value of our existing holdings. It is our new production that is showing value growth – once again a confirmation of how our business model generates value even in more uncertain times.

Demand for office space in the inner city

In the commercial holdings, there is uncertainty regarding the most exposed sectors. For us, it is shops and restaurants in the ground floors of our properties that are facing the toughest situation, while there is strong demand for our office space.

There have been many discussions about how the pandemic has changed the way of working and how it will look in the future. My experience after these months is that many, yes, nearly everyone actually, appreciates the office as a workplace, particularly as a social meeting point. But for the individual, it is also very nice to have the flexibility to be able to work from home when needed.

Office rents in inner city locations in Gothenburg, unlike Stockholm, are on a par with renting newly produced office space. In such a situation, many choose the inner city. One possible scenario is that developers will choose to pause larger planned new construction projects of office space in the Gothenburg region, rather than the inner city losing tenants.

In the case of ground floor premises, it is important for us to be as active as possible. We work close to our customers and keep in close contact with them in order to follow their business so we can respond quickly in the event of changed circumstances. We also work on a long-term basis with plans for every property, where we identify different solutions that can be realized over time, for example, to convert the second floors of shops into offices or transform retail space into housing.

Wallenstam's contribution to a green restart

For a long time, Wallenstam has had challenging environmental goals for the operations where we reduced our carbon footprint, among other ways, through being self-sufficient in renewable energy since 2013. We have now drawn up four new climate targets that we will focus on in our business plan:

• Wallenstam shall reduce $\mathrm{CO}_{2}$ emissions from its construction operations by 10 percent per square meter.
• Wallenstam shall reduce $\mathrm{CO}_{2}$ emissions from the properties' energy consumption by 15 percent per heated square meter.
• Wallenstam shall reduce the properties' residual waste by 10 percent per square meter.
• Wallenstam's business trips shall be carried out using electric car, train or via completely carbon-neutral and biofuel-based air travel.

In addition to these four climate targets, we have decided that all bonds that we issue in the future must be green bonds.

The future looks bright despite the pandemic

The pandemic is by no means over and we are all facing a period of continued change. Despite the many clouds that remain on the horizon, I am optimistic and confident about the future for Wallenstam. Our properties are found exactly where we want to have them – in attractive locations in our selected regions Gothenburg, Stockholm and Uppsala. Our business model where we create value through our own work is functioning well. We have huge demand for our apartments.

In addition, we replenished our pipeline with exciting new projects during the year, where we are driving forward our plans in order to provide the market with even more new homes. We are gradually continuing to deliver value, for society, our customers and our shareholders.

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

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Property structure, new construction and financing

Wallenstam entered the crisis early in the year with a strong position both in terms of 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 capital market. In order to provide security and ensure that we can continue our operations with investments in new construction as planned, we chose early on, already in the first and second quarters, to secure our financing for the rest of the year. Our bond maturities during 2020 are matched 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 could be better assessed. In September, an Extraordinary General Meeting was called, where a resolution was passed on a dividend of SEK 0.50 per share for the 2019 financial year. Wallenstam has major investment plans in new production of residential properties and wants to be prepared for the business opportunities that may arise in the near future. In combination with these opportunities, it is positive to also be able to give the shareholders a balanced dividend in view of the fact that the pandemic is still underway.

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. However, the municipalities' processing times have become longer, which for us has meant that we were unable to start our planned projects at the rate we had wanted. No projects have been cancelled, but the starts have been brought forward as a consequence of this.

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. During the third quarter, we were able to complete a number of new lettings, primarily office space.

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 place, 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 total, we provided 15,000 lunches and 4 tons of drinks, energy bars and various small snacks in this way. 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 the third quarter, we mainly offered deferrals, and also provided support to some more tenants, which are covered by the government's expanded list of exposed sectors. In total, the year's rent discounts and other support related to Covid-19 amount to about SEK 33 million.

During the third quarter, we applied for support for the commercial tenants defined by the state which we provided different kinds of discounts to. Up to and including closing day, we received just over SEK 2 million which was also recognized as income, while the remaining part is being processed by the County Administrative Board.

The payment of the rents for the fourth quarter is in line with a normal quarter. To date, we have not noticed any increases in bankruptcies among tenants as a consequence of Covid-19.

Employees

Wallenstam is following the Public Health Agency of Sweden's recommendations and holds regular pulse meetings with experts from within the healthcare system in order to prevent, handle and limit the risk of spread of infection. From the middle of March until August, both of Wallenstam's offices were closed for external visits. Our offices are currently open for pre-booked visits. Wallenstam is flexible regarding the possibilities for employees to work from home, depending on the employee's needs and wishes in relation to both the work situation and commuting possibilities. Many business trips have been replaced by digital forms of meeting, however, we began to allow certain business trips after the summer. In June, our personnel were invited to take a test for antibodies. The digital, virtual viewings prior to letting of our new construction projects that we introduced during the second quarter will continue in the future.

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Consolidated income statement

SEK million	Note	Jan-Sep 2020	Jan-Sep 2019	Jul-Sep 2020	Jul-Sep 2019	Oct-Sep 2019/2020	Jan-Dec 2019
Rental income		1,576	1,511	536	510	2,091	2,026
Operating expenses		-372	-352	-112	-107	-517	-497
Net operating income, properties		1,205	1,159	424	403	1,575	1,529
Management costs and administrative expenses		-168	-163	-53	-49	-233	-228
Financial income		3	4	1	1	3	4
Financial expenses		-180	-149	-61	-50	-229	-198
Income from property management		860	851	310	304	1,117	1,108
Realized changes in value, financial instruments		4	-	-	-	4	-
Participation in profits/losses of associated companies		-6	-4	-2	-2	-7	-5
Revenue, development property sales		107	314	14	16	117	324
Expenses, development property sales		-50	-225	-7	-12	-57	-232
Other income	1	141	244	23	37	195	298
Other expenses	1	-134	-255	-35	-34	-178	-299
Financial expenses, other	1	-16	-17	-5	-6	-24	-25
Profit before changes in value and impairment losses		906	908	297	302	1,167	1,169
Changes in value, investment properties		616	1,009	187	460	2,207	2,600
New construction		616	505	187	198	903	792
Other		-	504	-	262	1,304	1,808
Unrealized changes in value, financial instruments		-239	-596	12	-171	93	-264
Unrealized changes in value, synthetic options*		-44	-35	-51	-18	-49	-40
Profit before tax		1,240	1,286	446	574	3,418	3,464
Current tax		0	0	0	0	0	0
Deferred tax		-266	-248	-102	-111	-745	-727
Profit for the period, after tax		974	1,038	344	463	2,673	2,737
OTHER COMPREHENSIVE INCOME
Items that may be transferred to profit/loss for the period		1	1	0	1	1	0
Items that may not be transferred to profit/loss for the period		0	60	0	40	0	60
Tax attributable to other comprehensive income		-1	-1	0	0	-1	-1
Comprehensive income		974	1,098	343	504	2,672	2,796
DISTRIBUTION OF PROFIT FOR THE PERIOD
Profit for the period attributable to parent company shareholders		974	1,038	344	463	2,673	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		3.0	3.2	1.1	1.4	8.3	8.5

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

Note 1 – 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-Sep 2020	Jan-Sep 2019	Jul-Sep 2020	Jul-Sep 2019	Oct-Sep 2019/2020	Jan-Dec 2019
Electricity revenue	116	240	19	35	168	292
Electricity expenses	-53	-180	-12	-10	-72	-199
Depreciation	-57	-57	-19	-19	-76	-76
Management costs and administrative expenses	-8	-16	-2	-5	-12	-20
Net operating income energy	-2	-13	-14	2	8	-3
Financial expenses electricity	-16	-17	-5	-7	-24	-25
Previously Income from natural energy management operations	-18	-29	-19	-4	-16	-27

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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Comments on the consolidated income statement

JULY 1-SEPTEMBER 30

Rental income during the third quarter amounted to SEK 536 million (510), an increase of 5 percent. New construction and net acquisitions and divestments generated SEK 19 million in increased revenue. In comparable holdings, revenue increased by SEK 7 million compared to the previous year. During the quarter, the first payments, of just over SEK 2 million, were received for rent support. We have also provided support of about SEK 2 million to some more tenants, which are covered by the government's expanded list of exposed sectors. As it is uncertain if, when and how much government support will be disbursed, we will recognize these items in line with receiving payment.

Operating expenses increased as a result of additional recently produced properties and higher charges. Net operating income increased by 5 percent to SEK 424 million (403), which corresponds to a surplus ratio of 79.1 percent (79.0).

Net financial items investment properties amounted to SEK -66 million (-56) and were affected negatively by higher interest-bearing liabilities. This was partly due to advance financing as a consequence of the prevailing situation as well as higher STIBOR rates and higher interest rates in the commercial paper market during the period.

Income from property management amounted to SEK 310 million (304). Changes in value of properties were positive and amounted to SEK 187 million (460) and came entirely from our new construction operations (198).

Swap interest rates have increased marginally during the third quarter. The development in value of interest rate derivatives was positive, SEK 11 million (-178).

Profit after tax for the third quarter of 2020 amounted to SEK 344 million (463), which corresponds to earnings per share of SEK 1.1 (1.4).

JANUARY 1-SEPTEMBER 30

Rental income

Rental income for the period increased by SEK 65 million, 4 percent, and amounted to SEK 1,576 million (1,511). Rental income growth during the period came mainly from occupations in our recently produced residential apartment buildings as the existing holdings were affected by 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 91 percent (91). 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 372 million (352) 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 6 million lower during the period compared to the same period in 2019. Net operating income increased by SEK 45 million or 4.0 percent and amounted to SEK 1,205 million (1,159). Added efficient new production accounted for this growth as the existing holdings were affected by temporary discounts. The surplus ratio was 76.4 percent (76.7).

Management costs and administrative expenses

Management costs and administrative expenses totaled SEK 181 million (185) and are distributed among property management, SEK 168 million (163), energy management, SEK 8 million (16) and property transactions, SEK 5 million (6).

Financial income & expenses

Financial income amounted to SEK 3 million (4) and financial expenses totaled SEK 196 million (166) and are distributed among property operations and other, which mainly consists of natural energy. Capitalized interest amounted to SEK 83 million (60).

The average debt for the year was SEK 3.3 billion higher

RENTAL INCOME AND INCOME FROM PROPERTY MANAGEMENT

NET OPERATING INCOME AND SURPLUS RATIO

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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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 1.27 percent (1.23). This was higher compared to the previous year mainly due to a period of higher STIBOR rates and higher interest in the commercial paper market. At the end of the period, we noticed that the credit market has recovered, which was reflected in the average interest rate on closing day which was 13 points lower than at the end of the second quarter. During the period, the average interest rate amounted to 1.31 percent (1.20).

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, also generated annual dividends and a realized 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 57 million (90) 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 15 percent in total compared to the previous year, and amounted to 313 GWh (271). 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 616 million (1,009) and came entirely from gradual value growth in our new construction (505).

Unrealized changes in value, financial instruments

The unrealized change in value of financial instruments in the income statement includes changes in value of interest rate and electricity derivatives and holdings of listed shares.

The value of interest rate derivatives developed negatively during the period, SEK -238 million (-599). On closing day, the 10-year swap rate amounted to 0.29 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 increased during 2020. The unrealized development in value including costs connected to the scheme, amounted to SEK 44 million (35) during the period. To date, the total recognized obligation for the scheme amounts to SEK 97 million (52).

Taxes

The tax expense for the period, which consists in its entirety of deferred tax, amounted to SEK 266 million (248) 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 10 million (10) 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 BY FLOOR SPACE

Tenant	Floor space, sq m
City of Gothenburg	19,931
Essity Hygiene and Health AB	15,639
Filmstaden AB	14,508
Academedia AB	11,427
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	108,789

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

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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Consolidated balance sheet, condensed

SEK million	Sep 30, 2020	Sep 30, 2019	Dec 31, 2019
ASSETS
NON-CURRENT ASSETS
Investment properties	56,226	49,793	52,354
Wind turbines	1,052	1,128	1,109
Participations in associated companies	158	134	133
Financial assets	498	546	549
Financial derivative instruments	4	1	6
Other non-current assets	77	61	71
Total non-current assets	58,016	51,663	54,222
CURRENT ASSETS
Development properties	291	154	175
Financial derivative instruments	0	-	2
Other current assets	181	188	161
Cash and cash equivalents	489	454	129
Total current assets	961	796	467
Total assets	58,977	52,459	54,689
EQUITY AND LIABILITIES
EQUITY
Equity	24,766	22,400	23,792
Equity attributable to non-controlling interests	0	2	2
Total equity	24,766	22,402	23,794
NON-CURRENT LIABILITIES
Provisions for deferred tax	5,589	4,843	5,322
Other provisions	141	128	188
Interest-bearing liabilities	4,756	6,180	3,883
Financial derivative instruments	593	681	356
Lease liability	492	421	420
Other non-current liabilities	22	36	36
Total non-current liabilities	11,594	12,289	10,205
CURRENT LIABILITIES
Interest-bearing liabilities	21,761	17,031	19,998
Financial derivative instruments	0	-	2
Lease liability	1	-	1
Other current liabilities	855	736	689
Total current liabilities	22,617	17,768	20,690
Total equity and liabilities	58,977	52,459	54,689

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 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 3,346 million (2,837), of which SEK 3,283 million (2,805) in investment properties and SEK 63 million (32) in development properties. New construction projects in progress involve 2,939 apartments. The total value of rental apartment and development projects in progress amounted to SEK 7.3 billion (5.8) 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 616 million (1,009) in total, of which the entire change during the period came from value growth in properties under construction (505).

The average yield requirements were impacted marginally since the previous report, due to changes in the property holdings which vary with projects in progress.

On closing day, the average yield requirement amounted to about 4.5 percent for the commercial holdings and to about 3.1 percent for residential properties in operation. The value of investment properties amounted to SEK 56,226 million (52,354) at the end of the period.

Development properties

Development properties include the co-op apartment project New York at Gärdet in Stockholm and three remaining apartments in the Vasagatan 33 project in Gothenburg. The book value of Development properties amounted to SEK 291 million (175) 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 for central office space in Gothenburg is still stable. Retail and restaurant space has been impacted to a greater extent by the ongoing pandemic, which has accelerated the shift, for example, for commerce.

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	848
Projects in progress, rental apartments	6,131
Development properties	291
Total projects in progress	7,270

CHANGES IN PROPERTY HOLDINGS, INVESTMENT PROPERTIES

	Book value, SEK million
Property holdings, January 1, 2020	52,354
+ Acquisitions	391
+ Construction	2,892
- Sales	-
+ Right-of-use asset site leasehold right	73
+ Changes in value, properties	616
- Land partitioning	-102
Property holdings, September 30, 2020	56,226

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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NEW CONSTRUCTION IN PROGRESS, SEPTEMBER 30, 2020

Project	No. of apts.	Occupation*	Sq m**	Of which completed apts. to date
STOCKHOLM
Parkstråket 1, Haninge	154***	Q3 2020	13,500	36
Söra Kvarter, Österåker	305	Q3 2020	15,500	109
Allén, Tyresö	221	Q4 2020	13,500
New York, Gärdet (development property)	50	Q4 2020	3,500
Parkstråket 2, Haninge	131	Q4 2020	7,500
Umami Park, phase 1B, Sundbyberg	75	Q4 2020	3,000
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
Elisedal	336	Q4 2020	24,000
Godhems Backe	138	Q4 2020	6,500
Kv. Rosengången, Mölnlycke Fabriker, Härryda	123	Q4 2020	7,000
Sten Stures Kröningar, Regenten	29	Q4 2020	2,000
Kallebäcks Terrasser Kv. 9	165	2021	9,500
Kallebäcks Terrasser Kv. 11	270	2021	16,000
Kv. Kvarnen, Mölnlycke Fabriker, Härryda	185	2021	10,500
Kallebäcks Terrasser Kv. 8	266	2022	15,000
Kallebäcks Terrasser Kv. 10	85***	2022	8,000
Kv. Väven, Mölnlycke Fabriker, Härryda	116	2022	7,000
Commercial
Kallebäcks Terrasser		2021	20,000
Mölnlycke Fabriker		2021	20,000
Total apartments in projects	3,084		229,000
of which in progress on September 30	2,939

• 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.
  *** of which 17 are co-living apartments with a total of 85 rooms for rent.
  *** of which 12 are co-living apartments with a total of 121 rooms for rent.
  i relates to two sports centers and a multistorey carpark.

CHANGE, CONSTRUCTION IN PROGRESS

	No. of apts.
New construction in progress,
July 1, 2020	2,999
- Completed	-145
Parkstråket 1, Haninge (36 apts.)
Söra kvarter, Österåker (109 apts.)
+ Started	85
New construction in progress,
September 30, 2020	2,939

APARTMENTS, CONSTRUCTION IN PROGRESS

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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COMPLETED NEW CONSTRUCTION, 2020*

Name of property	Address	Year of construction/ conversion	Residen-tial sq m	Office sq m	Retail/ Restaurant/warehousing	Industry/ Educa tion/ 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
Passfotot 2
(Project: Trollesunds gårdar)	Trollesundsvägen 58 B-C	2020	2,975	-	-	-	-	1,526	4,501	48
Freden större 13
(Project: Umami Park, phase 1A)	Östra Madenvägen 7A, 7D / Gesällvägen 7, 7C, 9 / Odlingsga-tan 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 fully occupied investment properties

PROPERTY ACQUISITIONS, 2020

Name of property	Address	Year of construction/ conversion	Residen-tial sq m	Office sq m	Retail/ Restaurant/warehousing	Industry/ Educa tion/ 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*
Österåker Hagby 1:98*
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	0

*Land

PROPERTY HOLDING STRUCTURE AS OF SEPTEMBER 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	255,451	207,739	92,881	85,200	48,506	59,443	7,334	756,554	61%	4,129
Total	595,600	235,962	112,800	100,867	52,985	121,765	10,626	1,230,605	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-SEP 30, 2020

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WALLENSTAM | INTERIM REPORT JAN 1-SEP 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 cost less depreciation and impairment losses. Depreciation for the period amounted to SEK 57 million (57). Estimated value in use of land leases, based on minimum rents, amounted on closing day to SEK 16 million (17) and is recognized as part of the wind power value. On closing day, the consolidated book value of wind turbines amounted to SEK 1,052 million (1,109). The renewable energy certificate inventory and guarantees of origin amounted to SEK 2 million (14) on closing day.

FINANCING

Equity

Shareholders' equity, including non-controlling interests amounted to SEK 24,766 million (23,794), equivalent to SEK 77 per share (74). The equity/assets ratio was 42 percent (44).

Interest-bearing liabilities

On closing day, outstanding bond loans amounted to SEK 3,785 million (3,950), the outstanding volume of commercial paper, with a framework amount of SEK 4 billion, amounted to SEK 2,090 million (3,993), utilized loans from the European Investment Bank totaled SEK 1,000 million (-) and total interest-bearing liabilities amounted

Newly opened Tavolo lets New York meet Italy in Artilleristallarna

At the end of September, Götaplatsgruppen opened the doors to the restaurant Tavolo in the spacious premises. Older details have been preserved and together with the carefully thought-out decor, a cosy and timeless ambiance is created. Already in the week before the opening day, more than 11,000 people had booked a table.

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to SEK 27,011 million (24,302), 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 1.3 billion (1.0) of green bonds.

All the bond loans of SEK 3,785 million (3,950) 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.

The average remaining fixed interest term is 38 months compared to 40 months during the year-earlier period. Of the loan portfolio, 47 percent (42) of the loans have fixed interest terms longer than one year. On closing day, the average interest rate on our loans was 1.27 percent (1.23).

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 the loan from the EIB and for the credit commitment for the commercial paper program.

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 588 million compared to a net indebtedness of SEK 349 million on December 31, 2019. Of this, interest rate derivatives accounted for SEK -588 million (-350), electricity derivatives for SEK 0 million (2) and currency derivatives for SEK 0 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 on entry into the contracts. The total volume of outstanding interest rate derivatives, where Wal- lenstam 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 1,289 million (928). 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. During the quarter, we opted to reduce the backup facility for commercial paper from SEK 4,000 million to SEK 3,000 million, since we have a lower volume of outstanding commercial paper. The Group's approved and unutilized credit facilities totaled SEK 4,500 million (6,500).

On September 30, 2020, accessible liquidity totaled SEK 5,789 million (7,428), of which SEK 2,090 million (3,993) represents a credit commitment for issued outstanding commercial paper.

Interest maturity structure	Amount, SEK million	Average interest rate, %	Proportion, %
0-1 year	14,144	1.51	53.3
1-2 years	300	0.70	1.1
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	7.9
6-7 years	2,000	1.13	7.5
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	26,517	1.27	100.0

FIXED TERMS, AVERAGE INTEREST RATES, SEPTEMBER 30, 2020

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 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	-	-	-	1,038	-	1,038
Financial instruments for sale	-	-	60	-	-	60
Changes in value, currency derivatives	-	-	0	-	-	0
Translation difference	-	-	1	-	-	1
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
TRANSACTIONS WITH SHAREHOLDERS
Dividends	-	-	-	-307	-	-307
Closing equity, Sep 30, 2019	165	359	64	21,812	2	22,402
Opening equity, Jan 1, 2020	165	359	64	23,204	2	23,794
Profit for the period	-	-	-	974	-	974
Translation difference	-	-	0	-	-	0
Changes in value, currency derivatives	-	-	1	-	-	1
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
TRANSACTIONS WITH SHAREHOLDERS
Dividend non-controlling interests	-	-	-	-	-2	-2
Dividends	-	-	-	-	-	-
Closing equity, Sep 30, 2020	165	359	64	24,178	0	24,766

Consolidated statement of cash flows

SEK million	Jan-Sep 2020	Jan-Sep 2019	Jul-Sep 2020	Jul-Sep 2019	Oct-Sep 2019/2020	Jan-Dec 2019
Profit before changes in value and impairment losses*	906	908	297	302	1,167	1,169
Adjustment for items not included or arising in cash flow	-46	-1	12	10	-35	10
Taxes paid	0	0	0	0	0	0
Cash flow before change in working capital	860	907	309	312	1,132	1,179
Change in working capital	189	189	16	92	173	174
Cash flow from operating activities	1,049	1,096	326	404	1,305	1,353
INVESTMENTS/DIVESTMENTS
Investment in properties and individual co-op apartments	-3,360	-2,814	-933	-801	-4,358	-3,812
Investments in intangible assets & property, plant and equipment, and wind turbines	-15	-32	-2	-2	-28	-45
Investments in financial assets	-	-	-	-	-10	-10
Investments in associated companies	-30	-25	-	-25	-30	-25
Divestment of properties, development properties & property, plant and equipment	80	551	13	224	157	628
Cash flow from investing activities	-3,325	-2,320	-922	-604	-4,269	-3,264
FINANCING
Raised interest-bearing liabilities	10,479	11,600	3,315	3,089	16,929	18,050
Amortization of interest-bearing liabilities	-7,844	-9,514	-3,156	-2,716	-13,624	-15,294
Net change in overdraft facilities	-	-119	-	-	-	-119
Net change promissory notes	4	-59	4	-59	4	-59
Advance payment futures contracts	-	-6	-	-3	-2	-8
Dividend paid to minority owner	-2	-	-	-	-2	-
Dividends paid	-	-307	-	-	-307	-614
Cash flow from financing activities	2,636	1,595	163	311	2,998	1,956
Changes to liquid assets	360	371	-433	112	35	46
Cash and cash equivalents at beginning of the period	129	83	922	342	454	83
Cash flow for the period	360	371	-433	112	35	46
Cash and cash equivalents at the end of the period	489	454	489	454	489	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	1,289	1,251	1,289	1,251	1,289	928

*Includes interest paid and received, including gross flows from interest rate swap contracts, of SEK-267 million (-213) and SEK 1 million (4) respectively, of which SEK 83 million (60) was capitalized as a non-current asset.

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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Segments report

| 2020
SEK million | Gothenburg
Jan-Sep | Stockholm
Jan-Sep | Other
Jan-Sep | Elimination
Jan-Sep | Total
Jan-Sep |
| --- | --- | --- | --- | --- | --- |
| INCOME STATEMENT | | | | | |
| Rental income | 1,056 | 540 | - | -20 | 1,576 |
| Operating expenses | -235 | -137 | - | - | -372 |
| Net operating income | 821 | 404 | - | -20 | 1,205 |
| Management costs and administrative expenses | -107 | -71 | -10 | 20 | -168 |
| Net financial items | -181 | -101 | 104 | - | -177 |
| Income from property management | 533 | 232 | 95 | - | 860 |
| Unapportioned items | | | | | |
| Realized changes in value, financial instruments | | | | | 4 |
| Participation in profits/losses of associated companies | | | | | -6 |
| Sales result, development properties | | | | | 57 |
| Other income | | | | | 141 |
| Other expenses | | | | | -134 |
| Financial expenses, other | | | | | -16 |
| Profit before changes in value and impairment losses | | | | | 906 |
| Changes in value | | | | | 334 |
| Profit before tax | | | | | 1,240 |
| BALANCE SHEET | | | | | |
| Investment properties | 34,100 | 22,126 | - | - | 56,226 |
| Wind turbines | - | - | 1,052 | - | 1,052 |
| Development properties | 8 | 283 | - | - | 291 |
| Unapportioned assets | - | - | - | - | 1,408 |
| Total assets | | | | | 58,977 |
| Equity | | | | | 24,766 |
| Interest-bearing liabilities and lease liabilities | 14,450 | 10,800 | 1,760 | - | 27,011 |
| Unapportioned liabilities | - | - | - | - | 7,200 |
| Total equity and liabilities | - | - | - | - | 58,977 |
| Property investments in progress including land | 3,276 | 3,994 | - | - | 7,270 |
| 2019
SEK million | Gothenburg
Jan-Sep | Stockholm
Jan-Sep | Other
Jan-Sep | Elimination
Jan-Sep | Total
Jan-Sep |
| INCOME STATEMENT | | | | | |
| Rental income | 1,048 | 481 | - | -18 | 1,511 |
| Net operating income, properties | 818 | 359 | - | -18 | 1,159 |
| Income from property management | 550 | 202 | 99 | - | 851 |
| Unapportioned items | | | | | |
| Realized changes in value, financial derivatives | | | | | -4 |
| Sales result, development properties | | | | | 89 |
| Other income | | | | | 244 |
| Other expenses | | | | | -255 |
| Financial expenses, other | | | | | -17 |
| Profit before changes in value and impairment losses | | | | | 908 |
| Changes in value | | | | | 378 |
| Profit before tax | | | | | 1,286 |
| BALANCE SHEET | | | | | |
| Investment properties | 30,864 | 18,929 | - | - | 49,793 |
| Wind turbines | | | 1,128 | - | 1,128 |
| Development properties | 56 | 98 | - | - | 154 |
| Unapportioned assets | | | - | - | 1,384 |
| Total assets | | | | | 52,459 |
| Equity | - | - | - | - | 22,402 |
| Interest-bearing liabilities | 13,109 | 8,768 | 1,754 | - | 23,632 |
| Unapportioned liabilities | | | - | - | 6,425 |
| Total equity and liabilities | | | | | 52,459 |
| Property investments in progress including land | 1,642 | 3,253 | - | - | 4,894 |

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 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 increased by 20.8 percent. The property index OMX Stockholm Real Estate PI fell by 9.0 percent and the OMX Stockholm PI index rose by 7.0 percent during the same period.

At the end of the period, the Wallenstam share price was SEK 136.80 compared to SEK 113.20 at year-end 2019. The market capitalization was SEK 45,144 million (37,356) based on the total number of registered A and B shares. Equity per share amounted to SEK 77 (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

At the Annual General Meeting in April 2020, in accordance with the Board's proposal, it was resolved not to issue any dividend for the 2019 financial year, which was a precautionary measure in light of Covid-19 and the uncertain economic environment that prevailed. On September 30, an Extraordinary General Meeting was held, where a resolution was passed on a dividend of SEK 0.50 per share for the 2019 financial year. On October 7, a total of SEK 161.5 million was disbursed to the shareholders.

Turnover

During the period, the Wallenstam share had an average daily turnover on Nasdaq Stockholm of about SEK 30.7 million (21.6).

SHARE PRICE TREND Q4 2015-Q3 2020

AVERAGE SHARE LIQUIDITY PER DAY

SHAREHOLDINGS, SEPTEMBER 30, 2020

	A shares	B shares	Equity, %	Votes, %
Hans Wallenstam and family, and company	34,500,000	49,090,000	25.33	62.21
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		6,500,000	1.97	1.03
David Wallenstam		5,563,682	1.69	0.88
Elin Wallenstam Sjögren		4,327,240	1.31	0.68
Lisa Liljeqvist		4,279,240	1.30	0.68
Other owners		129,652,928	39.29	20.46
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 17 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-SEP 30, 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 380 million (383), of which rental income amounted to SEK 92 million (93).

Net profit for the period was impacted by changes in value of financial derivative instruments, SEK -240 million (-654), mainly due to falling swap interest rate levels. Profit after tax amounted to SEK -36 million (-610).

Investments in intangible assets and property, plant and equipment during the period amounted to SEK 29 million (11). Parent company external loans amounted to SEK 13,032 million (13,421) on closing day.

EXTRAORDINARY GENERAL MEETING

In August, it was announced that the Board had decided to call an Extraordinary General Meeting. At the Extraordinary General Meeting of Wallenstam AB on September 30, 2020, a resolution was passed, in accordance with the Board's proposal, to pay a dividend of SEK 0.50 per share for the 2019 financial year. The record day for the payment was set as October 2, 2020 and disbursement from Euroclear Sweden AB occurred on October 7, 2020.

INCOME STATEMENT, PARENT COMPANY

SEK million	Jan-Sep 2020	Jan-Sep 2019	Jan-Dec 2019
Management revenue	245	235	273
Rental income	92	93	124
Revenue, sales of renewable energy certificates	43	53	57
Other revenue	1	2	2
Total revenue	380	383	456
Management costs and administrative expenses	-263	-263	-359
Operating expenses	-22	-28	-36
Depreciation and impairment losses properties	-23	-23	-30
Expenses, sales of renewable energy certificates	-21	-51	-52
Change in value, synthetic options scheme	-44	-35	-40
Other expenses	-1	-2	-2
Total expenses	-374	-401	-519
Operating income	5	-18	-63
Profit/loss from participations in Group companies	34	-212	33
Interest income and similar profit/loss items	462	405	455
Interest expenses and similar profit/loss items	-298	-230	-223
Changes in value, derivative instruments	-240	-654	-323
Net financial items	-42	-690	-59
Profit/loss after financial items	-37	-708	-122
Appropriations	-	1	373
Tax on net profit/loss	1	96	-17
Profit/loss after tax	-36	-610	234
OTHER COMPREHENSIVE INCOME
Changes in value, currency derivatives	1	1	-1
Tax attributable to other comprehensive income	0	0	0
Comprehensive income	-35	-609	233

BALANCE SHEET, PARENT COMPANY

SEK million	Sep 30, 2020	Sep 30, 2019	Dec 31, 2019
Assets
Properties	1,331	1,343	1,340
Participations in Group companies	5,518	5,141	5,879
Financial derivative instruments	5	1	8
Receivables from Group companies	24,498	20,353	21,894
Other assets	202	303	206
Cash and cash equivalents	488	447	122
Total assets	32,041	27,588	29,449
Equity and liabilities
Equity	10,435	9,934	10,470
Provisions	129	78	84
Interest-bearing external liabilities	13,032	13,097	13,421
Liabilities to Group companies	7,736	3,689	4,994
Financial derivative instruments	593	681	357
Other liabilities	117	110	123
Total equity and liabilities	32,041	27,588	29,449

WALLENSTAM INTERIM REPORT JAN 1-SEP 30,2020

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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 September 30, 2020, the estimated market value of the properties amounted to around SEK 56 billion. A change in value of plus/minus 10 percent is thus equivalent to about plus/minus SEK 5.6 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.

A change in the interest rate of plus/minus 50 points is equivalent to about plus/minus SEK 71 million.

A change in the electricity price of 1 ore per kWh is equivalent to about plus/minus SEK 39 million during valuation of wind turbines, while a change in the renewable energy certificate price of 1 ore per kWh is equivalent to about SEK +19 million or SEK -12 million 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 0.8 million.

In June, an agreement was signed on the divestment of Wallenstam’s new construction project New York in Stockholm. The buyer is a 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, Barn i Nöd (Swedish International Help for Children) and Bethlehem Church. During the year, the Rescue Mission in Gothenburg received contributions and discounts equivalent to SEK 3.3 million, and Bethlehem Church received 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, 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 there is uncertainty about how this support will be allocated, possible remuneration will be recognized when payment is received.

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.

18 WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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Key ratios – multi-year summary

Accumulated during period	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018
PROPERTY-RELATED KEY RATIOS
Net operating income, properties, SEK million	1,205	781	386	1,529	1,159	756	364	1,429	1,078
Surplus ratio, property management, %	76.4	75.1	73.8	75.5	76.7	75.6	73.2	74.8	75.8
Income from property management, SEK million	860	549	275	1,108	851	547	260	1,011	758
Changes in value, new construction, SEK million	616	429	254	792	505	307	132	598	421
Value of investment properties, SEK million	56,226	55,127	53,619	52,354	49,793	48,757	47,289	45,811	44,360
Area, sq m (thousand)	1,231	1,230	1,210	1,201	1,199	1,188	1,181	1,186	1,197
Occupancy rate – lettable area, %	97	98	98	98	98	99	99	99	99
Development properties, net, SEK million	291	281	170	175	154	155	156	317	658
FINANCIAL KEY RATIOS
Profit after tax, SEK million	974	631	309	2,737	1,038	575	340	2,998	1,769
Return on equity, %	11.2	12.0	11.9	12.3	10.4	10.6	14.6	14.8	12.2
Return on total capital, %	6.6	7.0	7.0	7.2	6.1	6.2	9.5	9.7	8.4
Interest coverage ratio, times	5.7	5.9	6.1	6.3	7.0	7.4	1.5	1.3	1.2
Loan-to-value ratio, %	46	46	45	45	45	46	45	45	46
Average interest rate on closing day, %	1.27	1.40	1.31	1.22	1.23	1.24	1.25	1.06	0.98
Average fixed-interest term, months	38	39	38	38	40	41	44	39	36
Equity/assets ratio, %	42	42	43	44	43	43	44	45	44
Equity, SEK million	24,766	24,423	24,104	23,794	22,402	21,899	21,951	21,611	20,688
Net asset value, SEK million	30,715	30,295	29,897	29,501	27,666	27,047	27,011	26,574	25,608
Market capitalization, SEK million	45,144	35,607	37,290	37,356	36,828	32,406	30,971	27,126	27,786
Repurchase of shares, SEK million	-	-	-	-	-	-	-	229	204
Per share data
Profit after tax, SEK	3.0	2.0	1.0	8.5	3.2	1.8	1.1	9.3	5.5
P/E ratio, times	16.5	12.5	13.5	13.4	15.9	14.0	10.0	8.9	11.3
Cash flow from operating activities, SEK	3.2	2.2	1.1	4.2	3.4	2.1	1.1	1.1	0.2
Equity, SEK	77	76	75	74	69	68	68	67	64
Net asset value per share, SEK	95.10	93.80	92.60	91.30	85.70	83.70	83.60	82.30	79.20
Share price, SEK	136.80	107.90	113.00	113.20	111.60	98.20	93.85	82.20	84.20
Shares outstanding, average, thousands	323,000	323,000	323,000	323,000	323,000	323,000	323,000	323,854	324,073
Shares outstanding at end of period, thousands	323,000	323,000	323,000	323,000	323,000	323,000	323,000	323,000	323,310

Quarterly overview

	Jul-Sep 2020	Apr-Jun 2020	Jan-Mar 2020	Oct-Dec 2019	Jul-Sep 2019	Apr-Jun 2019	Jan-Mar 2019	Oct-Dec 2018	Jul-Sep 2018
Rental income, SEK million	536	518	523	515	510	503	497	488	480
Net operating income, properties, SEK million	424	395	386	370	403	392	364	351	372
Surplus ratio, property management, %	79.1	76.3	73.8	71.8	79.0	77.9	73.2	71.9	77.4
Income from property management, SEK million	310	275	275	257	304	287	260	253	296
Return on equity, %	11.2	12.0	11.9	12.3	10.4	10.6	14.6	14.8	12.2
Earnings per share after tax, SEK	1.1	1.0	1.0	5.3	1.4	0.7	1.1	3.8	1.4
Cash flow per share from operating activities, SEK	1.0	1.1	1.1	0.8	1.3	1.0	1.1	0.9	1.0
Equity per share, SEK	77	76	75	74	69	68	68	67	64
Net asset value per share, SEK	95.10	93.80	92.60	91.30	85.70	83.70	83.60	82.30	79.20
Share price, SEK	136.80	107.90	113.00	113.20	111.60	98.20	93.85	82.20	84.20

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.

19 WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 2020

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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, October 22, 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-SEP 30, 2020

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Review report

To the Board of Directors of Wallenstam AB (publ)
Corp. id. 556072-1523

Introduction

We have reviewed the condensed interim financial information (interim report) of Wallenstam AB (publ) as of 30 September 2020 and the nine-month period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.

Göteborg 22 October 2020

KPMG AB

Mathias Arvidsson
Authorized Public Accountant

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 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.

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	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018
Equity, SEK million	24,766	24,423	24,102	23,792	22,400	21,897	21,949	21,609	20,686
Average equity, SEK million	23,896	23,323	22,828	22,329	21,708	21,278	20,813	20,305	19,795
Total assets, SEK million	58,977	58,336	55,959	54,689	52,459	51,177	49,945	48,262	46,655
Average total assets, SEK million	56,084	54,524	52,846	51,306	49,700	48,333	46,983	45,728	44,508

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

WALLENSTAM | INTERIM REPORT JAN 1-SEP 30, 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 more than 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 1,200 apartments under construction on closing day.

Gothenburg

Our property holdings in the Gothenburg business area 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 1,700 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-SEP 30, 2020

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Calendar

Year-end report 2020	February 9, 2021
Publication of Annual report 2020	week commencing March 22, 2021
Interim report Q1, 2021	April 27, 2021
Annual General Meeting 2021, Gothenburg	April 27, 2021
Interim report Q2, 2021	July 8, 2021

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 October 22, 2020.

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 64 Gothenburg
Visiting address: Kungsportsavenyen 2
Telephone +46 31-20 00 00
www.wallenstam.se
Co reg. no. 556072-1523