Genova Property Group Year-end report January-December 2020

Full-year January-December 2020

• Rental income amounted to SEK 231.1m (180.6), an increase of 28%.
• Net operating income amounted to SEK 177.4m (129.9), an increase of 37%.
• Income from property management¹ increased 49% to SEK 60.8m (40.8), of which income from property management attributable to ordinary shareholders was SEK 18.8m (4,1), corresponding to SEK 0.53 (0.09) per ordinary share.
• Net income after tax amounted to SEK 418.0m (571.0), corresponding to SEK 10.69 (11.77) per ordinary share. The decrease is a result of lower value changes during the period compared with 2019.
• Long-term net asset value attributable to ordinary shareholders increased 62% to SEK 2,364.6m (1,457.0), corresponding to SEK 59.75 (47.43) per ordinary share.
• The Board proposes that a dividend of SEK 10.50 (10.50) per preference share be distributed quarterly and that no dividend be paid on ordinary shares.

Quarter October-December 2020

• Rental income amounted to SEK 62.8m (52.6), an increase of 19%.
• Net operating income amounted to SEK 47.2m (35.5), an increase of 33%.
• Income from property management¹ amounted to SEK 10.8m (13.7), of which income from property management attributable to ordinary shareholders was SEK 0.3m (3.2), corresponding to SEK 0.01 (0.10) per ordinary share.
• Net income after tax amounted to SEK 108.2m (150.6), corresponding to SEK 2.47 (4.56) per ordinary share.

1) Currency effects for the quarter and the period are no longer included in income from property management and are recognised separately in profit or loss. Comparative figures have been restated. Refer to Performance analysis on pages 21-22.

Significant events during the fourth quarter

• In October, Genova conducted a number of strategic lettings of approximately 6,500 sqm with an annual rental value of approximately SEK 10m in Stockholm and Lund. 
• In October, Genova signed a letter of intent with Axfood pertaining to the development of the Viby 19:3 property in Upplands-Bro, where Genova is planning to build a new district. The parties are to work to construct a supermarket with Hemköp covering a floor area of 1,200-2,000 sqm with a 10-year rental agreement, at a minimum, on market terms. The project in Upplands-Bro is being run together with K2A and is expected to commence in 2021.
• In October, Genova agreed to acquire a project property for warehouse and logistics strategically located in Uppsala. When completed, the property will contain approximately 21,500 sqm of lettable area and entail a total investment of SEK 275m. In connection with the accession, Genova paid consideration of SEK 25m. The property is scheduled for completion in September 2021 and the property value when the project is completed is estimated to SEK 360m, with a total rental value of approximately SEK 23.5m and expected net operating income of approximately SEK 22m.   
• In October, Genova agreed to acquire two properties with a school, retirement home, supermarket and rental apartments in Knivsta at an underlying property value of SEK 246m before deductions for deferred tax. The total lettable area is approximately 8,700 sqm and the properties also include land of approximately 50,000 sqm with the potential for future development of residential units and community service properties. The annual rental value for the properties is approximately SEK 14m with an expected net operating income of approximately SEK 12m. The average remaining term for the rental agreements exceeds seven years. Accession took place on 1 December 2020.
• In November, properties were exited by Nackahusen Holding AB and a payment of nearly SEK 50m was received. The properties were already divested on the date of Genova and SBB’s joint acquisition and accession in August 2020. In November, Nackahusen Holding also repaid the bond loan of SEK 360m that was assumed in connection with the acquisition and replaced it with a new bank loan, which means significantly lower financing costs for the jointly owned company.  
• In November, Genova entered into a barter transaction whereby Genova would divest the Sjöborren 5 & 6 properties in Sollentuna at an underlying property value of SEK 111m, while also acquiring one newly renovated preschool in Kungsängen and one newly renovated school in Örnsberg for a total underlying property value of SEK 129m. The divested properties were acquired in December 2018 for SEK 92.5m and contain an extended-stay hotel of approximately 2,600 sqm with an annual rental value of approximately SEK 6m. The accession/exit date was 15 February 2021.
• In December, Genova agreed to divest three commercial properties in Gävle and Sundsvall at an underlying property value of SEK 128m before deductions for deferred tax. The selling price exceeds the book value by approximately 10%. The divestment comprises two properties with car sales premises in Sundsvall and Gävle, and one property with retail in an out-of-town shopping centre in Gävle. The exit date was 15 December 2020.
• In December, Genova commenced the Segerdal project located in central Knivsta, next to the Town Hall and directly adjacent to the train station. The project comprises new construction of approximately 300 rental apartments with a lettable area of approximately 17,000 sqm. The buildings will be environmentally certified and the first occupancy is scheduled for year-end 2022/2023. The project is being carried out as a joint venture together with Redito.

Significant events after the end of the period

• Genova is significantly accelerating the pace of its ongoing construction of properties for own long-term management by starting the construction of projects in Knivsta and Enköping, and increased area in the ongoing project in Norrtälje. In total, these projects comprise approximately 60,000 sqm and more than 1,000 rental apartments. This means that Genova’s production rate has increased significantly from 438 residential units under construction at 30 September 2020 to more than 900 at the end of the first quarter of 2021. The projects are being constructed with a clear sustainability profile and will be environmentally certified. As part of this process, a new green finance framework has been established with a ‘second opinion’ from Cicero.
• In January 2021, the Board of Genova set new growth targets for the operations and extended the business plan to cover the period up to the end of 2025. The operational targets were revised upwards and, as of 2022, will increase ongoing construction of own-produced residential units to 1,500 per year from the previous figure of 750, and increase the share of rental income from residential and community service properties to at least 70% of Genova’s total rental income by the end of 2023, from the previous figure of 60% by the end of 2024. The company’s financial targets, risk limitations and dividend policy will remain unchanged.
• After the end of the quarter, Genova extended the rental agreement with Gluntens Montessori School for the Flogsta 47:1 property with approximately 6,000 sqm and an annual rental value of approximately SEK 11m until 31 August 2041. In addition, the rental agreement with Leo’s Lekland for the Mackmyra 20:18 property of approximately 3,600 sqm and an annual rental value of SEK 4.5m was extended for three years until 2029.
• During and after the end of the quarter, more than 10,000 sqm were newly let in the project property for warehouse and logistics in Uppsala which was acquired in October 2020, and construction started immediately at the beginning of 2021. The property will comprise a total of 21,500 sqm and is scheduled for completion in September 2021.
• Genova has engaged ABG Sundal Collier AB and Swedbank AB (publ) to act as joint bookrunners and arrange investor meetings starting on 24 February 2021 to study the possibility of issuing new subordinated perpetual floating rate callable green capital securities in the amount up to SEK 700m, under a framework of SEK 1,250m. This may be followed by a capital market transaction, with reservation for factors such as the prevailing market conditions. Upon completion of the transaction, the issue proceeds will be used in accordance with the green framework that has been established, including redemption of preference shares outstanding.

CEO’s statement

2020 was a year of strong development and important growth steps for Genova, in a turbulent business environment marked by the coronavirus pandemic. Our ordinary share was listed on Nasdaq Stockholm and the proceeds of a new share issue strengthened our financial position and liquidity. Genova’s first and environmentally certified rental apartments were completed and we added several strategic acquisitions to the portfolio. The year ended with continued growth in the investment property portfolio, net operating income and the number of residential units under construction.

The pandemic that we thought was receding in autumn continued to create uncertainty in the fourth quarter and early 2021. We are grateful that most of our tenants continued to handle the challenges well, and that the impact on Genova’s operations is very limited. Overall, property management, projects and transactions have been able to continue efficiently, with consideration for the guidance and advice issued by the authorities. At the same time, we are looking forward to the time when we can once again work closely with our colleagues, tenants and partners in the manner we are accustomed to and appreciate.

Successful letting and good profitability

In 2020, Genova continued to develop with good profitability. During the year, income from property management rose to SEK 61m, corresponding to an increase of 64% per ordinary share, which is well above the annual growth target of 20%. However, the value changes were greater in 2019, meaning that Genova’s net income after tax for the period is lower than in the preceding year. We also outperformed our target of at least 20% for annual growth in long-term net asset value per ordinary share due to transactions, successful management and profitable project development.

During the year, we signed new and extended rental agreements for more than 30,000 sqm with stable and long-term tenants. We consider this a sign of the strength in our portfolio, confidence in our locations, and proof of the strong work taking place in our property management activities.

Accelerated pace of residential construction

In summer 2020, Genova’s first rental apartments were completed and occupied, a major step forward in our growth strategy. Genova has a clear focus on growth through the production of sustainable rental apartments, and community service properties for own management. We have several projects under construction, all with a clear sustainability profile, planned environmental certification and green finance. In January, we announced that we would be significantly accelerating the pace of ongoing production by starting the construction of projects in Knivsta and Enköping, and increased area in our ongoing project in Norrtälje. In total, these projects comprise approximately 60,000 sqm and more than 1,000 rental apartments. This means that Genova’s production rate has increased significantly from 438 residential units under construction at 30 September 2020 to more than 900 at the end of the first quarter of 2021.

New growth targets

In light of this development, Genova’s Board set new operational growth targets in January 2021 to step up the pace of our business operations. As of 2022, we will increase our ongoing construction of own-produced residential units to 1,500 per year from the previous target of 750. In addition, we will increase the share of rental income from residential and community service properties to at least 70% of Genova’s total rental income by the end of 2023, from the previous target of 60% at the end of 2024.

We now have a substantial building rights portfolio of nearly 400,000 sqm with considerable excess value to work with, ensuring stable organic growth with high profitability and strong concentration to our prioritised markets of Greater Stockholm and the Uppsala Region. At the same time, we are currently evaluating several new and exciting acquisitions that could boost our earnings capacity, while also generating additional building rights. During the quarter, we made a number of strategic acquisitions with considerable development potential and sales outside the core markets that are helping to streamline the property portfolio.

We are well-equipped to meet Genova’s new growth targets – the balance sheet is strong, liquidity is good and the team is ready.

Michael Moschewitz, VD

The year-end 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 December 31, 2020, the company owned properties to a value of approximately SEK 5.4 billion with a lettable area of 190,000 sq.m. and held 5,890 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 24 February 2021 at 8.00 a.m. (CET).

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