enrich and simplify lives through friendly homes · 2021. 1. 20. · heimstaden ab introduction 1)...

1

Company overview

Enrich and Simplify Lives

ThroughFriendly Homes

2

24Heimstaden standalone financials3

8The holding - Heimstaden Bostad2

2Heimstaden AB introduction1

Agenda

3

Heimstaden AB introduction

Heimstaden as an evergreen industrial owner

Customer satisfaction

Exceptional Employer

Innovative portfolio management

Sustainable and competitive growth

Role model for societal contribution

Sustainable development

• Primary strategy is to be an active owner and asset manager of the core holding, Heimstaden Bostad.

• Long-term asset management agreement expires in 2032.

• Operational platform dedicated to owning and managing Friendly Homes.

• Established local Property Management operations throughout Heimstaden Bostad’s markets:

• Strongly committed to Heimstaden Bostad investment. Can also hold non-competing assets outside Heimstaden Bostad.

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Ownership structureHeimstaden AB introduction

1) Voting share 2) Property management company in the Czech Republic is owned by Heimstaden Bostad 3) Common shares (24% of capital, 1/2 vote per share), Class B preference shares (76% of capital, 1/10 votes per share) and Class A preference shares (<1% ofcapital, 1/10 votes per share). Preference shares in Heimstaden Bostad AB are classified as 100% equity by S&P.

Heimstaden AB preference shares are listed on Nasdaq First North under the ticker HEIM PREF and have preferential rights to an annual dividend of SEK 20/share paid quarterly

100%

Preference shares3)

Common shares 3)

2% 1)

Bostad

Family-owned company

51%1) 49%1)

Asset management agreement and property & facility

management services 2)

Preference shares (HEIM PREF)

98% 1)

Institutional investors

PropCo’s

5

COMPANIES AND INVESTMENTS

Primary shareholder: Fredensborg ASHeimstaden AB introduction

Other investmentsH O S P I T A L I T Y

Europe Scandinavia Canary Islands VariousNorway

Owns, manages and develops residential

real estate

Owns and operates restaurants & resorts

Leisure & destination development Real estate developer Owns and operates

hotels & resortsResidential, prop tech,

digitalResidential rental

broker

Norway Norway

• Founded in 1994 by Ivar Tollefsen.• Privately owned Norwegian investment company with focused primarily on residential real estate. • Active, industrial and value-based with a long-term investment horizon.• Heimstaden represents more than 90% of the assets in Fredensborg.

6

8.6

15.2

23.8

31.4

2017 Q3 20202018 2019

Strong investor partners in Heimstaden Bostad with mutual evergreen investment perspective

2013year of initial investment

41.1%current

voting share

25.8amount invested,

SEKbn


5.6%current

voting share

4.0amount invested,

SEKbn


1.9%current

voting share

1.2amount invested,

SEKbn


0.7%current

voting share

0.4amount invested,

SEKbn


Cumulative equity investment in Bostad by institutional shareholders (SEKbn)1)

1) Recently announced SEK 4bn equity raise

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Shareholder agreement between Heimstaden and institutional Heimstaden Bostad investors


• Established in 2013 with latest amendment in 2020 and valid until 2047.

• Heimstaden AB, and other entities controlled by Ivar Tollefsen, has agreed to a non-compete in which Heimstaden Bostad is “the sole residential platform in EU, Norway, Switzerland and the UK”.

• Heimstaden has the right to nominate the majority of the board members, and the board shall have an independent chairman.

• Asset Management Agreement with Heimstaden valid until 2032.

• Involved parties have a right of first offer to purchase shares, 1st prio Institutions 2nd prio Heimstaden.

• Heimstaden may under certain stipulations sell assets at a value not exceeding 5% of Bostad’s NAV on 12m rolling basis. Above 5% demands a majority vote among institutional owners.

• Dividends shall be maximised, but taken into consideration equity issued for the sake of investments and acquisitions, financial policies and the target rating.

• During 2045, parties holding more than 10% of common shares shall have the right to initiate a partial or total exit process. Shareholders may sell equiv. to 20% of new investors’ commitment to the new investor.

• To prevent conflict of interest on dividend payouts, no shareholder may hold only pref B shares.

Bostad

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Agenda

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A leading European residential platform

139bnGAV (SEK)

7.3bnRENTAL INCOME (SEK)

2.5xICR1)

51%LTV1)

100,870HOMES

BBBS&P rating2)

The holding - Heimstaden Bostad

Note: Rental income is reported earnings capacity1) As defined by S&P with hybrid capital classified as 50% debt and 50% equity. 2) Rating upgrade from BBB- (pos. outlook) to BBB (stable) on 14 December 2020

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- Everyone needs a place to live- Governments support housing costs

Essential human need

Strong demand- Urbanisation, longer lifespan and smaller households- Limited new housing supply

- European home ownership at 68%1)

- Drop in value has significant macroeconomic ramificationsCo-investing with the people

- Limited downside from regulated rents significantly below market

- Acquisition below replacement cost - gradual shift to marketFavourable regulatory environment

Robust “hardware”- Living cannot be digitalised- Long “facelift” intervals

Why ResidentialThe holding - Heimstaden Bostad

Source: Eurostat. 1) Weighted average

11Source: Eurostat

More than 80 million residential rental units in Europe gives a unique opportunity to consolidate the market

+80

# of rental residentialunits (million)

All Europe

#

20

101

4

10

7

2

1

12

European residential market offers numerous opportunities to drive consolidation with significant untapped market potential.

Size drives quality and returns for all stakeholders.

Heimstaden Bostad is ideally positioned to consolidate the European residential market.

Track record of building market leadership across countries.

Operational excellence allows extraction of synergies from integrating assets.

1

1

2


12

Vonovia Deutsche Wohnen

Heimstaden Grand CitiyBalderLEG Akelius Adler / Ado Vesteda Kojamo Tag Wallenstam

84.4124.1139.0

584.5

267.0

136.9 122.883.7 81.9 68.1 60.0 56.0

GAV (SEKbn) and residential units

11)

415’ 162’ 101’ 138’ 44’ 76’ 41’ 71’ 27’ 35’ 86’ 10’

Among Europe’s leading residential real estate companies

1)

Note: Largest privately owned residential real estate companies in Europe, not including state-/government owned companiesSource: Company information, latest reported figures per 28.10.2020. 1) Residential GAV only


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Homes GAV GAV % GAV/sqmResidential

areaRegulated

income

30,076 45,466 33% 22,089 89% 100% 27 key growth cities

9,728 37,068 27% 42,508 95% 16% Mostly centrally located in Copenhagen

12,635 23,303 17% 22,909 98% 60% Price well below replacement cost limits competition

4,589 16,510 12% 74,553 72% -Highly liquid portfolio of small residential units

42,544 13,555 10% 5,157 96% 38% Moravia-Silesia region, 3rd most densely populated region

1,298 3,034 2% 33,808 93% 97% Attractive micro locations in Berlin with pipeline

100,870 138,936 100% 20,173 93% 54%

Diversified portfolio

Σ


Portfolio as of 30.09.2020

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● 3,902 residential units (282,000 sqm of lettable area).

● Acquisition price approx. SEK 8.5 billion (EUR 830 million).

● 100% regulated.

● Closing Q4 2020 and Q1 2021.

Recent larger investmentsThe holding - Heimstaden Bostad

Note: EURSEK 10.25

Berlin, Germany Denmark

● 152 residential properties with 6,237 residential units (594,400 sqm), of which 357 residential units under construction with turnkey delivery within 12 months (34,000 sqm).

● Acquisition price: SEK 16.6 billion (DKK 12.1 billion).

● Operational platform with some 85 employees.

● Total GRI p.a.: SEK 938 million (DKK 684 million).

Warsaw,Poland

● Two development projects for a total 640 residential units (24,363 sqm).

● Acquisition price approx. SEK 667 million (EUR 65 million).

● SEK 51 million (EUR 5 million) gross rental income p.a.

● Turnkey delivery fully furnished in Q1 2022 and Q1 2023.

● No development risk.

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18,700

15,616

13,441

11,87311,191

4,912

3,258

8,063

EUCZNO NLDK DESE PL

Invested in advanced economies with welfare systems protecting the downside


1) Example from Norwegian income and rental growth in Oslo 2) As defined by OECDSources: Oxford Economics, Eurostat, OECD

Strong markets Considerable social support Housing cost burden

AAA Aaa AAA

AAA Aaa AAA

AAA Aaa AAA

AAA Aaa AAA

AAA Aaa AAA

AA- Aa3 AA-

Social benefits spending, EUR per capita, 2017

4.2% 4.2% 6.7% 5.9% 5.7% 7.3% 4.2%

% Unemployment rate

27%26%

23%22% 22% 21% 20%

24%

SEDK NODE CZNL PL EU

40%

Share of disposable income spent on housing, 2018

Housing cost overburden threshold2)

A- A2 A- 9.1%

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Fully integrated platform ensures quality assets and Friendly Homes

Friendly Homes

Marketing, customer experience, digital services and sustainable living

Investments Financing Asset management Operations


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10 key focus areas identified from the UN SDGs

Industry specific impact areas General impact areasAchieve gender equality and empower all women and girls.

Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

Reduce inequality within and among countries.

Ensure sustainable consumption and production patterns.

Protect, restore and promote sustainable use of terrestrial ecosystems.

Ensure access to affordable, reliable, sustainable and modern energy for all.

Ensure availability and sustainable management of water and sanitation for all.

Make cities and human settlements inclusive, safe, resilient and sustainable.

Take urgent action to combat climate change and its impacts.


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Targets established to address global challenges

1) The target applies to Scandinavian countries and is currently under review. During 2019 and 2020, we acquired numerous properties in the Netherlands, Germany and the Czech Republic. As each country's energy mix differs, our new target map, which is under development, will be differentiated. 2) With focus to integrate the social lease contracts throughout the entire portfolio (not in separate buildings) - focus on inclusion.


10 key focus areas identified to address UN sustainable development goals

Setting targets aligned with the Paris agreement

Joined UN Global Compact in 2019, committing to its 10 principles on human rights, labour conditions, environment & anticorruption.

Aligning with global frameworks

● Fossil fuel free operations by 20301.

● Reduce amount of purchased energy by 10% per sqm by 20231.● At least 1% reduced water consumption per year and sqm until 2030.

Social

Governance

● 0% work-related sick leave and injuries from 2023.● At least 3% of apartments shall consist of social lease contracts by 20232.● 100 young adult jobs each year as student job and summer jobs.● Gender equality in Group Management Team (40%-60%).

● 100% of employees sign the Code of Conduct for Employees and have completed training.

● 100% of contractors and suppliers sign the Code of Conduct for business partners.

Environment

Selection of ESG targets

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Reporting and benchmarking in line with global standardsThe holding - Heimstaden Bostad

We report for all our markets according to the GRI standard. Our emissions are reported in accordance with the GHG Protocol.

The 2020 annual report will include our first TCFD report, and will be published in March 2021.

Submitted our first CDP report in August 2020 based on FY 2019 reporting. In December 2020 Bostad received a score offor the Climate Change program.

C

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Increasing diversification and strong operational performance over time


Net operating income and margin 12-months rolling Gross asset value

80

120

0

20

40

60

100

140

160

Q4’19 Q2’20

68.5

135.1

45.9

Q1’18 Q2’18

86.4

Q3’18 Q4’18

66.5

Q1’19 Q2’19 Q3’19 Q1’20 Q3’20

131.4

72.379.3

89.6

113.3

138.9

SE DK DENO NL CZ

50%

55% 56% 56% 57% 57%4,000

2,000

0

500

1,000

1,500

3,500

2,500

3,000

Q3’19

54%

Q1’19

2,402

957

53%

Q1’18 Q2’18 Q2’20Q1’20

55%

3,597

Q4 ’19Q3’18

54%

2,190

Q4’18

2,044

55%

1,593

Q2’19 Q3’20

1,260

1,7511,942

2,767

3,232

NLDENOSE DK CZ Surplus ratio %

SEK million SEK billion

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Scalable growth with improved financials over time

S&P rating

Credit outlook

BBB-

Stable

BBB-

Positive

BBB-

Positive

Gross asset value LTV1)

56% 57% 55% 53% 51%

SEK 20bnSEK 44bn

2016 2017

SEK 72bn

Q3 202020192018

SEK 113bnSEK 139bn

1) Debt / Debt + Equity as defined by S&P with hybrid capital classified as 50% debt and 50% equity

BBB

Stable

• Upgraded to 'BBB' in December 2020

• S&P cited a strengthened residential portfolio, enhanced earnings base and strong financial discipline


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Diversified and well-distributed debt profile

Funding sources maturity profile Unencumbered assets Cost of debt and loan tenor

7.38.1

10.5 10.2 10.3

Q2 2020

1.9%

2017

1.7%

2018

1.8%

2019

1.7% 1.7%

Q3 2020

Average interest rate Average loan tenor (years)

SEK billion

• Undrawn revolving credit facilities of SEK 13.7 billion.

2022 2023

6.9

2025 2028+2020 20272021 2024 2026

3.4

5.3

8.29.1 8.5 7.9

9.0

22.5

MortgageHybrid

Bank debtBondsCert


100%94%

73%

35%

7%

35%

CZ NO SEDE0%

NL DK Total

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2.4x2.4x

2.3x2.4x

2.5x 2.5x

Q3'19 Q4'19 Q1'20 Q2'20 Q2'20

Target >2.4x

56%53% 53% 51% 51%

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

Loan-to-value Financial policy 45-55%

Within targeted credit metricsThe holding - Heimstaden Bostad

1) EBITDA Interest Coverage as defined by S&P with hybrid capital classified as 50% debt and 50% equity.2) Debt / Debt + Equity as defined by S&P with hybrid capital classified as 50% debt and 50% equity. 3) Secured LTV calculated as Secured Loans / Total assets

Interest coverage ratio (S&P defined)1) Loan-to-value (S&P defined)2) Secured loan-to-value3)

• Expected to remain above target in Q4 2020, despite recent Hybrid issue.

• Due to acquisitions with high ICR, expected to increase in the medium term.

• Financial policy established in Q4 2019. • Expected LTV of 50-55% going forward.

35% 34%30% 30%

27%

Q3’19 Q3’20Q4’19 Q1’20 Q2’20

• Expected 25-35% short term.• Long-term target is 25%.

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Agenda

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Net Asset Value and Financial PolicyHeimstaden standalone financials

1) Net debt / (Share of Bostad’s NAV + Investment properties) 2) Operating income / Financial costs 3) Operating income / (Financial costs + Cost of hybrid) 4) Excluding non-controlling interestNote: HST issued 2x500SEKm of senior unsecured bonds 15 October 2020

Financial Policy – Standalone basisNet Asset Value end of Q3 2020

29,805 29,0782,078

Share of Bostad’s NAV4)

Loan amount

Cash Investmentproperties

393 -198-3,000

Bonds Net asset value

SEK million

KPIs Financial policy Q3 2020

Net LTV1) <40% 4%

ICR2) >2.0x 6.9x

ICR incl Hybrid Cost3) >1.4x 3.5x

• The financial policy of Heimstaden serves as a framework for the handling of the company’s financial risk, without limiting its commercial opportunities.

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Maturity ProfileHeimstaden standalone financials

1.8

0.2

20232021 2022 2024

1.2

4.0

Bank debtBondsHybrid

In Q4 2020, Heimstaden successfully issued two senior unsecured bonds for a total nominal amount of SEK 1,000 million with maturity in 2024 and 2025, respectively.

• Q3 2020 cash position of SEK 2,078 million.− Exceeds debt maturities both in 2021 and 2022

• The cash position and financial policy aims to withstand both a drop in asset values as well as the underlying refinancing risk in the HY market.

• The shares in Bostad are highly attractive and therefore assumed to be relatively liquid.

Liquidity positionSEK billion

27

Share structure and dividendsHeimstaden standalone financials

Dividends on different share classes Heimstaden’s percentage of # shares in Heimstaden Bostad

• Common shares have 0.5 votes per share, while Pref A and Pref B have 0.1 votes per share.

• Heimstaden is the sole owner of Pref A shares.

• Pref C: potential new share class to be issued to ensure >50% voting for Heimstaden.

Common shares

35%60%

100%

Pref A Pref B

• 100% of Bostad’s FFO is to be paid out.

• Shareholder with >10% ownership can demand cash payout.

• Minimum dividend = Pref A + Pref B.

• Pref A dividend is based on 0.20% of gross asset value.

• Pref B dividend yield is minimum 3.5%.− Pref B dividend yield depends on LTV and ROE.

• Dividends on common shares are the residual between FFO and Pref A & Pref B dividends but are conditional on Bostad maintaining its credit worthiness.

• Dividend split between the three share classes are subject to a rebalancing mechanism to maintain max 35% common shares and min 65% preference shares.

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Heimstaden’s claim to Bostad’s NAVHeimstaden standalone financials

• Heimstaden owns 44.6% of total shares in Bostad. As at 30 September 2020, the Equity value was:

− 60.1% of Common shares (SEK 14.9bn)

− 100% of Pref A (SEK 0.2bn)

− 35.1% of Pref B (SEK 14.7bn)

• Bostad’s GAV would need to decrease by 45.3% before shareholders lose all value in case of a liquidation.

• Due to the nature of Bostad’s assets, Heimstaden is in a solid position to maintain cash flow payments to the company’s debt holders in the case of liquidation of Bostad.

Pref B 28.4%

GAV 92.7%

Other assets 5.0%Cash 2.3%

Common shares 16.8%

Assets

Pref A 0.1%Hybrid 5.7%

Unsecured debt 21.0%

Secured debt 28.0%

Liabilities & Equity

Heimstaden’s role in the priority ranking Cash flow claims in the case of liquidation

45.3%

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