Background and purpose
Kungsleden’s business plan 2020 is focused on quality growth, optimization of the property portfolio and financial stability in order to create attractive total returns.
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Background
Over the past years, Kungsleden’s property portfolio has become geographically focused to a limited number of growth regions with concentration in the office segment. Close to 80 per cent of the portfolio is now located in Stockholm, Göteborg, Malmö and Västerås. Offices comprise 65 per cent of the portfolio.
Operationally, Kungsleden’s strategy is to own properties in clusters with high availability. The cluster strategy makes it possible to strengthen the customer offering and achieve both asset as well as and property management synergies. Today, Kungleden has eleven clusters.
The target is that Kungleden’s earnings shall grow by increasing the net operating income generated by the existing properties as well as by growing the portfolio through investments and selective acquisitions.
Biljana Pehrsson, CEO of Kungsleden, comments:
“Today, Kungsleden is a high-quality property company which aims to deliver attractive total returns to our shareholders and build sustainable shareholder value. I am pleased that our main shareholder Gösta Welandson has expressed his support for the strategy developed by the board and management, and that he is willing to back the proposed rights issue. The rights issue will strengthen the Company´s financial position and enables reduction of financial leverage.
Kungsleden will continue to refine its property portfolio and aims for financially disciplined growth. We have identified a large number of organic investment opportunities in the existing property portfolio, resulting not least from strong new lettings in 2016. Furthermore, we are continuously exploring selective and strategic add-on acquisitions in our clusters, of which the acquisition of Emporia Office in Hyllie in Malmö is a recent example.”
Purpose
The main purpose of the rights issue is to strengthen our balance sheet and enable further profitable growth with financial discipline.
The proceeds will be used for value-creating investments in the Company’s existing property portfolio. Strong new lettings in 2016 enable profitable investments in tenant improvements and modernization. In addition, Kungsleden has a robust yielding pipeline consisting of re-development, extension projects as well as new construction. In total, the planned investments amount to SEK 2-3 billion for 2017-2019, enabling primarily higher rental income but also reduced operating costs.
The new issue also allows for selective high-quality acquisition opportunities in our core markets such as the recent acquisition of Emporia Office in Hyllie (Malmö). An important feature is that the rights issue makes it possible to reduce the financial risk of the company by increasing the equity ratio and decreasing the loan-to-value ratio. Kungsleden’s financial policy targets a loan-to-value ratio in the interval of 50-60 per cent through the cycle, with an average over time of 55 per cent. At this point in the cycle, Kungsleden will be striving for a loan-to-value ratio in the interval of 50-55 per cent.
In conclusion, it is the Board of Director's assessment that the rights issue will improve Kungsleden’s ability to create an attractive total return with balanced risk profile for the Company's shareholders.
