Genova Property Group Interim report January–March 2021

Quarter January-March 2021

  • Rental income amounted to SEK 63.6m (54.0), an increase of 18%.
  • Net operating income amounted to SEK 45.5m (40.0), an increase of 14%.
  • Income from property management1 increased 33% to SEK 11.6m (8.7), of which income from property management attributable to ordinary shareholders was SEK 1.1m (–1.8), corresponding to SEK 0.03 (–0.06) per ordinary share.
  • Net income after tax amounted to SEK 103.4m (190.6), corresponding to SEK 2.35 (5.86) per ordinary share. The decrease was due to lower value changes during the period compared with the year-on-year quarter.
  • Long-term net asset value attributable to ordinary shareholders increased 42% to SEK 2,388.7m (1,679.3), corresponding to SEK 60.36 (54.66) per ordinary share.

1) Since Q4 2020, currency effects are no longer included in income from property management and are presented on a separate line in the income statement where the comparative figures have been restated.

Significant events during and after the end of the period

First quarter

  • In January, Genova announced a significant acceleration in the pace of its ongoing construction of properties for own long-term management by starting the construction of projectsin Knivsta and Enköping, and an increased area in the ongoing project in Norrtälje. In total, these projects comprise approximately 60,000 sqm and more than 1,000 rental apartments.
  • In January 2021, the Board of Genova set new operational growth targets for the company and extended the business plan to cover the period up to the end of 2025.
  • In Uppsala, the rental agreement with Gluntens Montessori School for approximately 6,000 sqm was extended until 31 August 2041, with an annual rental value of approximately SEK 11m, and in Gävle, the rental agreement with Leo’s Lekland for approximately 3,600 sqm was extended up to 2029, with an annual rental value of SEK 4.5m.
  • In February, Genova successfully issued green capital securities of SEK 500m under a framework of SEK 1,250m.
  • In March, Genova entered into an agreement to acquire a portfolio of community service properties located in attractive areas of Greater Stockholm at an underlying property value of SEK 970m.
  • In March, Genova entered into a barter agreement, in which Genova will acquire two community service-oriented properties and additional building rights in Lund and Haninge for SEK 477m, and divest four commercial properties and one project property for SEK 657m. The acquired properties have potential for future development of both residential units and community service properties.

Events after the end of the period

  • After the end of the period, Genova announced that the company had proposed a redemption of outstanding preference shares in accordance with the redemption clause in the Articles of Association, as set out in the Notice convening the Annual General Meeting.
  • After the end of the period, Genova published a prospectus and applied for admission of its green capital securities to trading on Nasdaq Stockholm.
  • After the period, a new green rental agreement has been signed with the Swedish Police Authority with a lease term of six years and also an extension with Botkyrka Municipality for three years. The agreements, relating to two properties in Tumba, comprise close to 9.000 sqm with approximately SEK13.6m in yearly rents. Rental levels in the new agreements have increased by 25 percent up to SEK 1.600 per sqm.  

CEO’s statement

Genova entered 2021 with a strong first quarter, while the effects of the pandemic remained minimal. We significantly accelerated the pace of our ongoing production of sustainable rental apartments for own management. In addition, we made several acquisitions that are strengthening our earnings capacity, while also providing considerable development potential in property management and for future residential projects. We are consolidating our sustainability profile with a new green finance framework, and in February green capital securities were issued which both creates stronger liquidity and conditions for continued growth.

In the first quarter, Genova continued to grow profitably towards the company’s targets. Over the past 12 months, income from property management has risen to SEK 64m, up 35% per ordinary share. However, due to lower year-on-year value growth in the portfolio, net income for the period was lower while net asset value per ordinary share increased 10%. In pace with our accession of completed acquisitions, earnings and net asset value will further increase in the second quarter.

In early 2021, we significantly accelerated the pace of ongoing production by starting the construction of residential projects in Knivsta and Enköping, and increased the area of our ongoing project in Norrtälje. In total, these projects comprise approximately 60,000 sqm and more than 1,000 rental apartments, and we have more projects in the pipeline with planned construction start during the year.

Acquisitions with development potential

Genova has a considerable building rights portfolio of approximately 400,000 sqm, securing our future growth. By acquiring investment properties with development potential, we can gradually increase the number of building rights. We are currently running a total of around 30 ongoing and planned projects with development of properties for long-term management, which upon completion will have an estimated value of approximately SEK 20 billion. One example is the transaction we completed in March, where we acquired two properties with considerable development potential in Lund, in particular, which is an expanding city where we want to continue growing. Genova already owns properties in central Lund, where we are now pursuing a residential zoning process. This transaction is strengthening our presence in the area and we see potential for creating a new attractive district for residential and community service properties in an historic environment with cultural significance close to the city centre.

During the quarter, we also completed a major acquisition of a community service property portfolio in prime locations in Greater Stockholm with a focus on educational facilities. With this transaction, we are taking a significant growth step forward and Genova’s rental income from community service properties and residential units is almost 60%, well on its way towards the target of 70%. At the same time, the portfolio will add considerably improved earnings capacity and income from property management from stable tenants.

Clear sustainability profile

Genova's focus on sustainability is a competitive advantage. We are working actively to live up to our responsibilities as a property owner, and as a property and urban developer. All buildings in our ongoing projects are constructed with a clear sustainability profile and will hold environmental certification, which we believe is an effective tool for property management and provides a roadmap for improving environmental performance.

With sustainable properties under construction and in our portfolio, we are also creating conditions for various forms of green finance. As part of this process, we have created a new green finance framework that defines a number of sustainability criteria for our operations and has been reviewed by the green bond evaluator, CICERO Shades of Green. For Genova, this is yet another way to ensure that we focus on the right sustainability activities moving forward, as well as providing opportunities for favourable financing terms.

In February, we issued green capital securities of SEK 500m under a SEK 1,250m framework. We are planning to use the capital in accordance with our green framework and in accordance with the proposal to the AGM regarding a redemption of outstanding preference shares. We believe that this change in our capital structure will contribute to a stronger cash flow and to better terms and conditions for our continued growth.

Continued development potential

Looking forward, we see significant development potential in both our project and investment property portfolios, while we are continuously evaluating interesting business opportunities. With stable cash flows, a strong balance sheet and good financing options, we have the flexibility to create continued high profitability and value growth for Genova’s shareholders.

Michael Moschewitz, VD

The interim report in its entirety is available on Genova's website: www.genova.se.

For further information, please contact:

CEO, Michael Moschewitz, phone +46 70 713 69 39, michael.moschewitz@genova.se

CFO, Edvard Schéele, phone +46 70 399 69 90, edvard.scheele@genova.se

ABOUT GENOVA

Genova Property Group AB (publ) is a modern and personal real estate company that owns, manages and develops properties with a focus on Greater Stockholm and Uppsala. As of March 31, 2021, the company owned properties to a value of approximately SEK 6.6 billion with a lettable area of 233,000 sq.m. and held 6,319 residential building rights. Genova's preference shares and ordinary shares have been listed on Nasdaq Stockholm since 12 and 30 June 2020, respectively.

This information is inside information that Genova Property Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on 7 May 2021 at 8.00 a.m. (CET).

Genova Property Group – Smålandsgatan 12 – 111 46 Stockholm – www.genova.se