Contents. Theme: Customer meeting. Invitation to annual general meeting

Transkript

1 ANNUAL REPORT 2001

2 Contents Invitation to annual general meeting 1 The year in brief 2 CEO s comments to shareholders 4 Business concept, goals, strategies and history 6 Organisation and IT-development 7 Personnel 10 Environment 12 Market Overview 20 Share data 22 Financing and sensitivity analysis 24 Five-year summary 25 Report by the Board of Directors 27 Income statements 28 Balance sheets 30 Cash flow analysis 31 Comments on the accounts 32 Notes 37 Audit report 38 Board of Directors 39 Group Management and Auditors 40 Definitions The Annual General Meeting of Wihlborgs Fastigheter AB (publ) will take place on Thursday 4 April 2002 at 5 p.m. at Slagthuset, Jörgen Kocksgatan 7A, Malmö. Shareholders wishing to attend the meeting must be included in the register of shareholders maintained by VPC AB by Monday 26 March 2002 at the latest, and must also send notification of their participation to Wihlborgs Fastigheter AB, Box 97, Malmö, either by to irene.johansson@wihlborgs.se or by phone on or by fax on Notification must reach Wihlborgs by 4 p.m. on 26 March The notification must include the shareholder s name, civic registration number/corporate identity number, address, telephone number and number of shares owned. Shareholders with nominee-registered shares in order to participate must re-register their shares in their own name with VPC AB. A request for such re-registration must be made in good time before Monday 25 March Dividend The Board and Chief Executive Officer propose that the Annual General Meeting retain a dividend for the year 2001 of SEK 0.80 per share. Tuesday 9 April is proposed as the record day for dividends. If the Annual General Meeting decides in accordance with the proposal, the dividend is expected to be distributed by VPC AB on Tuesday 16 April Financial information 2002 Annual General Meeting Interim report January - March Half-yearly report January - June Interim report January - September 4 April 2 May 8 August 31 October 41 Property portfolio Theme: Customer meeting 46 Property valuation 47 Acquisitions and sales 48 Property stock Stockholm Region 52 Property stock Öresund Region 56 Property stock Other 9 Efficient editors in Klara Zenit 19 The profile surfaced in the Submarine Hangar 45 Cool record in Helsingborg 61 Marketing at the office in Järla Sjö 58 Projects and Development 62 Property Managers 63 Property acquisitions and sales during Property register PHOTOGRAPHS: Bengt Alm, Bo Ericsson, Johan Palmborg. Photo montage Klara Zenit: Kopare Bild AB, Photo montage Hammarbyhamnen: White arkitekter and Lund & Valentin arkitekter.

3 The year in brief The property Linneduken in Stockholm was included in the acquisition of Postfastigheter. Wihlborgs strengthened its positions in the principal markets of the Stockholm and Öresund regions during The high tempo in sales of properties outside the core areas and prioritised segments has continued. A total of 117 properties were sold for around SEK 2.7 billion, at an overall profit of SEK 386m. Postfastigheter properties were acquired for SEK 2,7m, and Wihlborgs took possession of the properties on 1 December. Postfastigheter at the time of the acquisition comprised 73 properties with total floor space of around 324,000 sq.m. A large proportion of the property value is accounted for by seven properties in the inner city of Stockholm with lettable space of 60,000 sq.m. The properties have great development potential, and Wihlborgs is considerably strengthening its position in the commercial rental market through the acquisition. Income after financial items rose by 8 per cent to SEK 704m (652m) Profit per share increased to SEK 1.69 (1.48) 117 properties for sold for SEK 2.7 billion In Malmö, the conversion of Ubåtshallen (the Submarine Hangar) was completed with total floor space of 15,000 sq.m. Proposed divided of SEK 0.80 (0.70) per share Net asset value per share at 31 December 2001: SEK 21 1) Key ratios 2) Rental income, SEKm 2,076 2,239 Net operating income, SEKm 1,261 1,362 Profit after financial items, SEKm Return on shareholders equity, % Equity/assets ratio, % Interest coverage ratio, times Earnings per share, SEK Cash flow per share, SEK Dividend per share, SEK 3) ) Based on market value of SEK 23.5 billion. 2) For definitions see page 40. 3) Proposed dividend for WIHLBORGS ANNUAL REPORT

4 CEO s comments to shareholders A strong Wihlborgs with a continued high tempo of business Dear Shareholders, 2001 was another successful year for Wihlborgs. Income after financial items amounted to SEK 704m an increase of 8 per cent compared with the previous year and in line with our forecasts. As a result of the favourable trend, the Board has also proposed an increase in the dividend by ten öre per share to SEK The market The rate of growth slowed down markedly during the first half of A number of heavyweight players in the telecoms sector were forced to issue profit warnings and warn of substantial cutbacks. The United States has a great impact on our economy, and statistics from there prompted hopes of a recovery during the autumn. The dramatic events of September, however, dealt another severe blow to a weakened economy. In the prevailing economic climate, it has become more difficult to make forecasts on future developments. Events also left their mark on the Stockholm Stock Exchange. Although some recovery took place in the late autumn, the year as a whole was another generally weak year for the Stock Exchange. The Affärsvärlden General Index fell by nearly 17 per cent, and although the Carnegie Real Estate Index dropped, overall the property sector outperformed the stock market average. Wihlborgs shares Wihlborgs shares performed substantially better, however. With a rise in share price of just over 9 per cent, the positive trend continued after the very sharp rise in Together with the dividend, this meant that the total return on Wihlborg shares during the year amounted to 15 per cent. Continued concentration During the year, Wihlborgs continued concentrating its operations on the priority principal markets of the Stockholm and Öresund regions, where growth will also continue to be strongest. The focus on commercial properties and projects also became even more clear when Wihlborgs decided to reduce the proportion of residential properties in the portfolio from 20 per cent to 10 per cent. Our strategy has now changed to 70/20/10. where commercial properties account for 70 per cent, property projects 20 per cent and residential properties 10 per cent. Wihlborgs has continued its high tempo of business and sold properties to the value of SEK 2.7 billion at a profit of SEK 386m. For Wihlborgs, this forms a natural part of the business strategy, to attain surplus values in the property stock in order to then acquire or develop new projects for new profits. 2 WIHLBORGS ANNUAL REPORT 2001

5 Rubrik During 2001 Wihlborgs had an excellent opportunity to strength its positions in Stockholm when Postfastigheter was acquired with a property value of SEK 2.7 billion. The development potential is very substantial, and there is good scope for adapting rents to the market as many contracts were signed at lower levels several years ago. We can also achieve efficient and effective administration by co-ordinating with our other properties in central Stockholm. A new market area, Stockholm City, has therefore been formed. The acquisition of Postfastigheter was also accompanied by a number of properties in locations outside our priority areas of Stockholm and Öresund. These properties, which are in good condition and are in good locations in their particular localities, will be disposed of when market conditions permit. My judgement is that these properties should be disposed of no later than the end of More offices and fewer homes Over the last three years we have sold properties for SEK 7 billion at a total profit of SEK 730m. At the same time, we have acquired properties for SEK 5.8 billion. This has meant that our property stock has undergone great change. Today we have a better and more concentrated property stock than we had in Many properties in non-priority localities have been sold, and at the same time the proportion of residential properties in our stock has decreased substantially. In Wihlborgs project portfolio, the Submarine Hangar and the office building for Tyréns in Västra Hamnen in Malmö were completed during the year. Klara Zenit, which is Wihlborgs single largest project, will be completed in This is a project which has developed very favourably and has exceeded all our high expectations. An exciting new project, Järla Sjö, to which the Wihlborgs head office has been moved, is developing strongly. An older, dilapidated factory environment has consequently been given a new face with newly built dwellings and modern office premises. articles of association, which it is proposed should be revised. More efficient organisation During the past year we have continued developing and improving the efficiency of our organisation. Wihlborgs staff have obtained new and powerful tools to assist them in their work. Wihlborgs has moved its offices in Stockholm and Malmö to new efficient premises which have been cost-effectively equipped with efficient aids in IT and telephony. We can see how the geographical distances within the organisation are shrinking, and the cooperation and exchange of experience between the market areas are increasing. We shall continue this work, as I am convinced that only a well-integrated organisation can harness the full strength of the company, to the benefit of shareholders, clients and employees. The profit-sharing foundation set up in 2001, with the assets invested in Wihlborg shares, provides all Wihlborgs staff with further incentives to contribute to growth in the company s earnings and share price. Wihlborgs development and future Sales of properties will continue in 2002, firstly to reduce the property stock in the non-priority areas and secondly to reduce the balance-sheet total and therefore strengthen solvency. Solvency has temporarily fallen as a result of the acquisition of Postfastigheter, but restoration and further improvement are being given top priority in Although the economic climate in 2002 initially appears weaker, by virtue of its size and positioning Wihlborgs will continue to be a strong player developing strongly on the Swedish property market. We shall maintain a continued high tempo of business, and it is my expectation that we shall achieve a good profit again in Buy-back and reverse split A proposal will be put to the Annual General Meeting for a reverse split of 1:5, i.e. five shares consolidated into one share. There is also a proposal to grant the Board authority to buy back shares. We have also reviewed our Erik Paulsson, CEO WIHLBORGS ANNUAL REPORT

6 Business concept, goals and strategies Business concept Wihlborgs will operate on a limited number of sub-markets which function well with high growth in the Stockholm and Öresund regions. The company will administer its existing property stock in an efficient way and develop profitable property projects. The property stock will be constantly improved through the sale, purchase and improvement of properties. Overall goal Wihlborgs, by virtue of its size, strength and orientation, aims to give shareholders a return in excess of the average return for similar companies on the Stockholm Stock Exchange. Financial goals The share dividend is to be not less than 40 per cent and not more than 60 per cent of the net profit. Wihlborgs is to be consistently among the leading listed property companies in relation to profitability (return on reported equity), and at the same time is to surpass the risk-free rate of interest by at least four percentage points. The visible equity/assets ratio is to be at least 25 per cent. The interest coverage ratio is to amount to at least 2.0. Strategy Wihlborgs market positions in the Öresund and Stockholm regions are to be consolidated and further strengthened through concentration on selected market History 1924 The master builder O.P. Wihlborg founds the building firm in Malmö which has given its name to Wihlborgs Fastigheter AB (publ) The Malmö-based group Active acquires Wihlborgs from the Wihlborg family. Building operations in Wihlborgs are sold on and a pure property group is formed within Active Trading in Wihlborg shares takes place without any official listing Wihlborgs B shares are listed on the O list of the Stockholm Stock Exchange. Peab AB becomes the new principal shareholder in Wihlborgs In connection with a new share issue of SEK 371m, Wihlborgs acquires 33 properties, after which Wihlborgs total property portfolio amounts to 410,000 sq.m. Bergaliden becomes the new principal shareholder in Wihlborgs Fastighets AB Stillman is acquired at the beginning of the year. Wihlborgs B shares are listed on the OTC list of the Stockholm Stock Exchange In November, Wihlborgs makes a public bid for the acquisition of M2 Fastigheter AB. In December, Wihlborgs B shares are listed on the A list of the Stockholm Stock Exchange During the spring, Wihlborgs finalises the acquisition of M2 Fastigheter. In September, Wihlborgs makes a public bid for the acquisition of Klövern Fastigheter 4 WIHLBORGS ANNUAL REPORT 2001

7 Effectiveness Wihlborgs is to have continued high cost-effectiveness and be one of the leading Swedish property companies. segments, both geographically and functionally. Restructuring and disposal of the property stock in the rest of Sweden are continuing. Wihlborgs is to maintain a continued high tempo in property sales. The company s property portfolio is to be focused on the property segment of commercial premises and the development of property projects and to a lesser extent be geared towards residential properties. Wihlborgs took a decision in 2001 to further reduce the proportion of residential properties from 20 per cent to 10 per cent of the value of the property portfolio. In the long term, the property portfolio is to consist of 70 per cent commercial premises, 20 per cent projects and 10 per cent residential properties. Customer The main target group for commercial premises is small and medium-sized companies with a strong financial position. Wihlborgs is to maintain good customer relations through good value for money in the services and business it provides. The company is to aim to increase the proportion of customers who rent premises in both the Stockholm and Öresund regions. Wihlborgs is to offer services which increase added value and stimulate long-term relations, one example being IT-Nomaden (see page 6). Improvement Acquisition of properties with development potential and disposal of fully-developed properties represent a significant part of Wihlborgs operations. In this way value is created which contributes to continued good profitability in the company. The average turnaround time for projects is to be in the range of 3-5 years. Projects are to be financed to at least 50 per cent from the company s own funds. Visible yield is to amount to at least 9 per cent At the beginning of the year, Wihlborgs finalises the acquisition of Klövern Fastigheter AB. Wihlborgs disposes of its stock in the Netherlands comprising 11 properties, which came to Wihlborgs on the acquisition of Klövern. On 13 April 1998, Wihlborgs makes a bid for Fastighets AB Storheden in Stockholm, and the merger takes place late in the summer of the same year Wihlborgs acquires Svedeg GmbH s 50 per cent holding in the company owning the property Blåmannen 20/Klara Zenit in central Stockholm. Wihlborgs subsequently owns 75 per cent of the joint company in which Peab AB already owned 25 per cent. acquires the shares of the other partners in Activum Fastighetsutveckling AB in Södertälje. JM, Peab and Wihlborgs form a jointly owned development company for the Kranen area in Västra Hamnen in Malmö. in the inner city of Stockholm. In December, Wihlborg shares are listed on the O list of the Stockholm Stock Exchange Conversion of A shares with high voting strength to B shares. Wihlborgs subsequently has only one type of share, Wihlborg B, where each share carries one vote. Wihlborgs 2001 The principal shareholder Bergaliden disposes of the whole of its shareholding of 30.2 per cent in Wihlborgs. Wihlborgs acquires Postfastigheter with 73 properties, seven of which are WIHLBORGS ANNUAL REPORT

8 Organisation and IT development The high pace of business in the Wihlborgs Group necessitates a flexible organisation. Adjustments to and adaptations of the organisational structure take place continuously as a result of changes in the property portfolio. There is a readiness among the employees to develop and change to other tasks when new needs arise. New constellations and working communities lead to the development of skills and exchange of experience. Business development Stockholm South Stockholm City Communication Stockholm North Group management Malmö South Projects and Development Malmö North Helsingborg Economy / Administration Other properties Copenhagen Organisation The Wihlborgs organisation consists of eight market areas responsible for the administration of the properties in Wihlborgs two principal regions, Stockholm and Öresund, as well as the properties in the rest of Sweden. In addition, there are supporting and shared central company functions such as Projects and Development, Business Development, Finance and Administration and Communication. The split into market areas close to the clients means that Wihlborgs has strong local roots and can respond quickly to new trends and changed needs among its clients. The principles guiding how Wihlborgs acts are to be professionalism, speed, efficiency and profit orientation, combined with a high level of service. A re-organisation was carried out during 2001, which meant that residential properties were combined with commercial premises in geographical market areas. Wihlborgs works constantly to improve the property portfolio through the sale, acquisition and improvement of properties. The Projects and Development Unit plays a key role here, by co-ordinating and managing the projects. Continuous work takes place within the Group to bridge the geographical distance between the regions. A personnel conference is held annually at which all staff receive up-to-date information in various areas and can play an active part in discussions on development of the company. The IT investments (see below) also contribute to a more geographically and business integrated company. Chart of Wihlborgs with the operating divisions and central corporate support functions. organisation and supporting business activities. The vision is to become the IT-based property company. New telecommunication and computer functions were installed in a joint VPN network at the time when the offices in Stockholm and Malmö moved to new premises. This means, for example, new telephone exchanges with integrated mobile telephony and new client-server solutions for data communications. The work on development and work portal to enable information to be stored and published centrally and accessed via the networks and simple and secure equipment is continuing in IT Nomad The IT Nomad project was launched during the year and is intended to support the tenants in their work on change with new services. The range of services offered includes analyses, technology, telecommunications, premises, support systems and project management. The formation of larger networks of suppliers is part of the IT Nomad project. Wihlborgs has signed co-operation contracts with a number of leading suppliers, under which the services and products are co-ordinated, marketed and mediated through the IT Nomad. By expanding the range of services, Wihlborgs is able to boost its competitiveness and create added value for its tenants. New IT solutions Wihlborgs regularly reviews the need for support for its operations in the form of IT and telecommunications solutions, with the aim of increasing the efficiency of the 6 WIHLBORGS ANNUAL REPORT 2001

9 Personnel Wihlborgs future is built on the commitment of its staff, where knowledge and ideas for improvement both internally and externally are to be utilised for common and continued positive development of the company and its staff as a group and as individuals. (From the Personnel Policy) The employees are the company s most important resource, and the right combination of staff is a decisive factor in the development of the company and the quality of work. The recruitment of new staff is to be guided by the company s long-term needs and plans for broadened and deepened skills. When adding services, the company is to endeavour to provide existing staff with an opportunity to develop within the Group. Personnel composition The Wihlborgs Group had 169 employees at the turn of the year. Of these, 65 work in Malmö, 64 in Stockholm and 35 in Helsingborg. There are five employees in Copenhagen. The number of full-time equivalent employees was 178. During 2001, 29 people left the company and 17 were newly appointed. Staff turnover was 16 per cent, and the average period of employment within the Group was 6.7 years. There is a wide age spread in the Group. Average age is 44 years. A smaller number are below the age of 30 or over 60. Women and men 108 men and 61 women work in the company. Among white-collar staff the distribution is half men, half women, while all the property maintenance staff are men. When new staff are appointed, emphasis is put on the importance of a more even distribution between men and women and an increased diversity of cultural background. Employees distributed by age % 30 Employees distributed by sex Men 64% Women 36% Employees classified by work task: Management 3% Information/IT/Environment/Personnel 3% Finance/business development 4% Projects & Development 8% Market/letting: 6% Administration/property maintenance 57% Finance/administration 19% Information as of 31 December 2001 WIHLBORGS ANNUAL REPORT

10 PERSONNEL Skills development Wihlborgs skill-raising efforts are designed to be profitable for both the company and the individual member of staff. Skills development is intended to provide staff with the know-how they need to be able feel secure in their work situation and provide professional and committed work. The training efforts are task-related and take place at an individual level on the basis of organisational needs. Each manager has to conduct professional development interviews with his or her staff at least once a year. Both parties are responsible for the interviews being constructive and providing practical results. Experience of the interviews is favourable within Wihlborgs. Training in the environmental and IT areas was given priority during Change in number of employees during 2001 Number of full-time equivalents Sales; Burlöv Center -4 Nyköping -3 Pensioners -4 Acquisition of Postfastigheter 5 Left company -18 Newly appointed 12 Number of full-time equivalents Employees who have left -29 Newly appointed 17 Change in number of employees -12 The profit-sharing foundation To reward and encourage the staff, following a decision taken at the 2001 Annual General Meeting Wihlborgs has formed a profit-sharing foundation in which all employees receive holdings in the form of shares in the company, based on the profit for the year. The staff consequently have a greater incentive to contribute to the development of profits and share price in Wihlborgs. 8 WIHLBORGS ANNUAL REPORT 2001

11 Customer meeting From left Jan Johansson, project leader Klara Zenit, Axel Östergren, Controller E+T förlag och Urban Ehrling, project manager Wihlborgs. Efficient editors in Klara Zenit We have created a flexible and space-efficient office in Klara Zenit. Because we came into the process early on and because Wihlborgs has been very attentive to our needs, we were able to review the way we work in a natural way when we moved and create more efficient work flows. So says Axel Östergren, controller at E+T Förlag, whose publications include the magazines Affärsvärlden and Ny Teknik. The publishing company s staff, numbering around 170, now work in a modern, open-plan office with great opportunities for direct communication. A total of five magazines and a number of newsletters and webpages are produced in the new premises in Klara Zenit. In Klara Zenit, an entire quarter at Drottningsgatan-Mäster Samuelsgatan in central Stockholm, 45,000 sq.m. of modern commercial premises and homes are being created. Altogether, the office part of the project occupies six floors with 23,500 sq.m. of lettable space. In the autumn of 2001, E+T Förlag, Svenska Dagbladet, Vinnova, Mediacom and Anoto moved into their new premises. As well as offices, there are new retail spaces with Debenhams as the major tenant and 100 apartments, the vast majority of which are penthouse apartments with views over the rooftops of Stockholm. WIHLBORGS ANNUAL REPORT

12 Environment Environmental work within Wihlborgs is long-term and targeted. As a major property owner, Wihlborgs works continuously to reduce adverse environmental impact, and environmental issues form an integral part of both property administration and project development. Environmental policy and environmental goals Prioritised areas Wihlborgs works on in accordance with ISO are energy, water consumption and waste management. In addition, regular environmental inspection of properties and phasing-out of ozone-depleting refrigerants and built-in environmentally hazardous materials take place. The continued work on introducing ISO has resulted in a more environmentally oriented way of working within the organisation. In each area of administration, environmental targets are set which are regularly followed up and revised. Specific environmental programmes are drawn up for each project and major conversion. Award-winning garden Sundspromenaden, at the housing exhibition in Malmö. Energy Wihlborgs contract with Sydkraft relating to energy supplies and energy services has also included making energy administration and use of energy more efficient in Wihlborgs. A register of the energy consumption of the properties has been drawn up in the project. This means that problems can be discovered early on according to measuring is knowing principle, and can be rectified with simple adjustments to the energy system. The project has also encompassed a large number of general energy-saving measures. In addition, energy inspections of properties have been carried out with proposals for measures to reduce consumption. Extensive training has also been provided for Wihlborgs administrative and operational personnel in energy efficiency improvement. The possibility of measuring energy consumption through a statistical program has provided a more reliable basis for forecasting and budgets. Co-operation with Sydkraft has resulted in a saving of SEK 5 million annually in the Öresund region alone and has become a platform for Wihlborgs continued handling of energy issues. Sorting at source An overall decision to introduce sorting at source has been taken. Sorting at source has already been introduced in some areas. In other areas the technical conditions mean that careful investigations are required. The work on finding solutions to be able to offer sorting at source is continuing in Wihlborgs environmental policy: Introduce ISO Draw up environmental targets and action plans Improve the efficiency of the use of energy and water Prioritise environmentally friendly products/services Introduce sorting at source Produce environmental inspection reports Establish environmental programmes in conversions and new constructions Information to tenants Efforts by the tenants are also required if the environmental impact of a property is to be reduced. Wihlborgs has therefore introduced a poster campaign in which both commercial and residential tenants are provided with information on staircases or in lifts. The posters are replaced monthly and relate to various topics, everything from neighbourliness to energy saving. Environmental compatibility Wihlborgs draws up an environmental programme for every major conversion and new construction. The envi- 10 WIHLBORGS ANNUAL REPORT 2001

13 ronmental programme is based on Wihlborgs environmental policy and the environmental aspects prioritised in the project, and constitutes a governing document in the planning and construction phases. The purpose is to safeguard set environmental targets so that the necessary conditions are created for an environmentally sound building. The goals of the environmental programme are to Create a healthy indoor environment Minimise use of resources Avoid the use of substances hazardous to the envi - ronment and health The environmental programme and the environmental plan are not static documents but may change as the project progresses. Solutions for increased consideration of the environment are discussed and tested on the basis of the Wihlborgs environmental programme. It is a process-oriented way of working which leads to skills development which can then be utilised in future projects. At the end of each stage, a careful follow-up of how well the goals have been fulfilled is therefore made. Several Wihlborgs projects have also had increased requirements for consideration of the environment, for example Järla Sjö in Nacka, Reykjavik in Kista, Strandpromenaden at the Bo01 exhibition and the Submarine Hangar and Tyréns Building in Västra Hamnen in Malmö. Prize-winning environmental work Wihlborgs gained proof that its work on the environment and quality has produced results several times in At the housing exhibition in Malmö, Bo01, the Wihlborgs property Strandpromenaden won first prize, the Green Lance. The jury considered that it best met the criteria laid down for the prize: ecological, social and economic sustainability. For the courtyard environment, Wihlborgs also received a commendation in the competition Green Courtyards Wild Neighbours. Example of energy saving Stadsarkivet, Malmö Description of problem: High maintenance costs High electricity consumption Problem of meeting desired climate requirements (particular temperature and humidity in the various archives) Action taken: Replaced dehumidifiers which corresponded to the tenant s special climatic requirements Replaced humidification which provides 15% humidification capacity Optimised operation using computerised Instrumentation & Control (archives run through operation governed by need) Results: 35% lower electricity consumption Lower maintenance costs Climatic requirements met Before After Saving Electricity 923,832 kwh 604,198 kwh 319,634 kwh - 35 % Other Saved costs of time and materials SEK 30,000 Environmental goals for Strandpromenaden, Bo01: Create an energy- and water-efficient building Create a moisture-proof building Care in choice of materials and reduced use of adhesives, sealants, fillers and paints in comparison with conventional building Stadsarkivet, Malmö WIHLBORGS ANNUAL REPORT

14 Market overview A strong year for property despite the economic slowdown. GENERAL The international economic downturn during 2001 meant that Swedish GNP growth slowed down and stayed at around one percent (National Institute of Economic Research forecast). The IT and telecoms sectors in particular showed weak development during the year, leading to declining profitability and large job losses. The terror atrocities in the United States on 11 September exacerbated the uncertainty in the financial markets. However, a recovery followed on the stock markets during the last few months of the year, when the risk of further terror attacks appeared to have diminished and following powerful stimulation of the American economy was without doubt an eventful year for property players in Sweden. The rapid changes taking place in parts of the business community were also reflected in the activity of the country s property investors and landlords. It initially looked as though 2001 would set a new record for the number of transactions. There was a slowdown in activity from half-way through the year until November. The number of transactions with newly formed tenant-owner associations remained high in Tenants also joined together to buy their buildings outside the Stockholm market, where the level of conversion to tenant ownership remained high. The number of people employed in Swedish trade and industry set a record in Unemployment in the large cities was at its lowest for many years at the end of the first half. As production of business premises has been low for almost ten years, the proportion of vacant premises during the first quarter of 2001 was very low. The trend in the commercial rental market turned during the summer, following a number of warnings, principally in the telecommunications and IT industries. Demand for premises at first was only marginally affected. Despite major warnings and cutbacks, employment remained high. During the summer of 2001, the number of people employed in the City of Stockholm reached new highs. During the autumn, the proportion of vacant offices rose as a result of cutbacks. Swedish commerce showed continued high growth in Private consumption rose throughout the year. After the events of the autumn, however, a decrease in the growth of commerce was noted. Demand for retail premises was at a very high level in 2001 in all city areas. DEVELOPMENT OF VALUE The market value of properties is governed by a combination of changes in the net operating value of the properties and the requirements of the market for yield on investments in properties. The latter can be said to be a measure of the compensation for risk the investors require to purchase a property. At a very low yield level, expectations for growth in net operating profit are high. A clear increase in investors demands for yield was noted towards the end of This is natural in view of the lower rate of economic growth and the increasing uncertainty ahead of a future economic slowdown. Market value developed well from the mid-1990s to mid-2001 for all types of property. Three factors have been decisive in this favourable trend: The economic growth, with sharply rising employment and needs for premises Good access to relatively cheap financing A prolonged period of limited new production The slowdown towards the end of 2001 can be largely explained by a rapid decline in economic growth. For this reason, not all categories of property were affected. The development in the value of residential properties 12 WIHLBORGS ANNUAL REPORT 2001

15 Riksäpplet, Haninge WIHLBORGS ANNUAL REPORT

16 MARKET OVERVIEW and commercial premises with a large proportion of retail outlets was only affected marginally. The greatest changes in value took place in the central business district (CBD) of Stockholm. For most other markets, the effect was unchanged value levels or slightly declining values. Interest in industrial and warehousing properties increased during the latter half of the 1990s. Demand for efficient logistics space has grown in line with the rapid rise in consumption. In the best communication locations in the large cities, the difference between office and warehousing space has been almost eliminated. This is clearly noticeable in the development of the value of industrial properties with a combination of offices/warehousing and sometimes production. The trend during 2001 was the same in all the metropolitan areas. RENTAL MARKET The rental income from both residential and commercial properties continued to rise, despite rent levels on new contracts stagnating or falling. The rapid growth in rental values for commercial properties over the last five-year period means that the average rental income will continue to climb, despite the peak values falling. This is clearest in the market in Greater Stockholm, where the level of new contracts despite the slowdown exceeds the rental level three and five years ago. Mkr The largest listed property companies Market value of properties Stock-market value Drott Wihlborgs Hufvudstaden* Castellum Tornet JM* Kungsleden* Wallenstam * Market values according to Tidningen Aktiespararen/Forum Fastighetsekonomi Sept 2001 Source: Forum Fastighetsekonomi AB Commercial premises offices Stockholm region The greatest change in 2001 took place in Stockholm City, where the highest rent levels fell from around SEK 6,000 per sq.m. per year to around SEK 5,000 per sq.m. Most rental contracts are renegotiated after three or five years, which means that delays occur. The development in rent levels for offices in the outer areas of Stockholm has been overshadowed by that for the inner city. New production has, however, been Armaturen, Lund Landstingsmannen, Stockholm Slagthuset, Malmö 14 WIHLBORGS ANNUAL REPORT 2001

17 MARKET OVERVIEW Median rent for offices in best location Commercial properties, price trend Stockholm Malmö Helsingborg Stockholms inner city Malmö inner city Kr/kvm Kr/kv ;1 1995;2 1995;3 1995;4 1996;1 1996;2 1996;3 1996;4 1997;1 1997;2 1997;3 1997;4 1998;1 1998;2 1998;3 1998;4 1999;1 1999;2 1999;3 1999;4 2000;1 2000;2 2000;3 2000;4 2001;1 2001;2 2001;3 2001;4 Source: Forum Fastighetsekonomi AB Source: Forum Fastighetsekonomi AB Rented apartment blocks, price trend according to purchaser category, Stockholm Rented apartment blocks, price trend according to purchaser category, Öresund Stockholm inner city, Brf * Stockholm outer city, Brf * Stockholm inner city, Other Stockholm outer city, Other Malmö, Brf * Helsingborg, Brf * Malmö, Other Helsingborg, Other Kr/kvm Kr/kvm Source: Forum Fastighetsekonomi AB Source: Forum Fastighetsekonomi AB * Brf=Tenant-owner associations Järnlodet, Stockholm Svea, Helsingborg Röros, Kista WIHLBORGS ANNUAL REPORT

18 MARKET OVERVIEW greater, and new construction is taking place for example in Kista. There is great variation in rent levels for the outer areas and suburbs of Stockholm. It can generally be said that the rent levels in the northern parts are slightly higher than for equivalent units in southern Greater Stockholm. In areas in the outer parts of the city, rent levels in the range of SEK 1,500-3,500 occurred on new contracts. Peak levels in the northern surrounding municipalities occurred during the first part of With the exception of Kista, the trend was for development to stagnate. In Kista, rent growth was reduced and a fall in rents was initiated when Ericsson and Nokia announced large-scale cutbacks and gave notice to leave premises. Öresund region On the office rental market in Malmö, growth in rent came to a halt during the second half of The level of SEK 1,500/sq.m. was passed for new contracts in central Malmö during 1999/2000. During 2001, a smaller number of contracts were signed at levels of up to SEK 2,000 sq.m. The office rental market in the Öresund Region is divided into a number of sub-markets. Lund shows the Stockholm region Stockholm County, which contains 20 per cent of the Swedish population and 25 per cent of the country s private companies, showed continued strong development during the year. During the year, the population increased by 17,000 to just over 1.8 million. The county accounted for two-thirds of the increase in the population of the country. Despite the economic slowdown, demand for labour remained strong in Stockholm County in The number of people in employment increased by two per cent during the year. However, the number given notice of termination rose during the last few months of the year. (Source: Stockholm County Administrative Board etc.) sharpest rise in rents in the region since The region s highest office rents are in the Ideon area. The Malmö market was affected during the late 1990s by continued relatively high vacancy rates. During 2001, however, almost the same rent levels were obtained as in Lund. The office market in Helsingborg developed positively Slagthuset, Malmö 16 WIHLBORGS ANNUAL REPORT 2001

19 MARKET OVERVIEW in Levels of SEK 1,200-1,500 sq.m. were reached in the centre. The rate of growth decreased during the second half. The difference between office rents in the best locations and in good external locations is not as marked in the Öresund region as on the Stockholm market. There are a large number of examples of modern properties with a good location for communication outside the best location which yield equally high or higher rents than offices in the city centre. Rent levels are dictated by the possibility of efficient utilisation of premises and access to car parking for employees. Demand for premises remained good in Greater Copenhagen in 2001, although signs of stagnation were visible in the market. Interest in expensive local premises appears to have declined, while demand for good premises in secondary locations remained strong. industrial and warehouse premises Stockholm region Rental development for industrial units is affected by the rate of economic growth. The highest rent levels are to be found in and around Stockholm. Rent levels of up to SEK 1,000 sq.m. were paid for the hottest properties in A normal level in the range of SEK per sq.m. has been established for most sub-markets. Öresund region There is some variation in the Öresund Region, but the trend was clear in A rent level of up to SEK 850 per sq.m. has been established in the market for industrial premises in Malmö and Lund. The level of SEK is lower for equivalent units in Helsingborg. retail premises Retail rents can be negotiated on terms similar to those for office or industrial premises. The alternative is for them to have a rent based on the store s sales. These turnover-based rents are generally adjusted annually on the basis of the previous year s turnover in the store concerned. There are wide variations depending on the type of retail outlet. Stockholm region For a store with a sales floor area of around sq.m., the highest level in the country not surprisingly is in the best retail location in Stockholm. Individual turnover-based contracts were signed in 2001 with rent levels in excess of SEK 10,000 per sq.m. A normal Stockholm level for smaller stores in the city is in the range of SEK 5,000-8,000 per sq.m. Öresund region The population of the Öresund Region comprising Skåne in Sweden and Zealand in Denmark is 3.2 million. The region constitutes one of Europe s larger centres for research and education. The population of Skåne totalled just over 1.1 million at the turn of the year. The population increased by 0.5% or 7,400 during This is the sharpest increase in population since Immigration into Skåne from Denmark has more than doubled since the opening of the Öresund Bridge. It is estimated that nearly 2,000 people moved across the Sound during the year, the vast majority to the municipality of Malmö or municipalities around Malmö. Construction of the Citytunnel will begin in 2003, linking the railway line north of Malmö with the line to Copenhagen, Ystad and Trelleborg. It is estimated that the tunnel will be completed in 2008 and that it will result in the labour market becoming even more mobile and dynamic. Employment in Skåne increased marginally during 2001, and the rate of increase has slowed down considerably in comparison with The number given notice of termination increased during the latter part of the year. However, the number of jobs has not yet started to fall. (Source: Region of Skåne etc.) WIHLBORGS ANNUAL REPORT

20 MARKET OVERVIEW Öresund region In the Öresund Region, store rents moved up a notch when the old pattern of Swedes shopping in Denmark was partially replaced by flows in the opposite direction. In Malmö, retail rents have increased in line with a rapid rise in demand. The highest retail rents in the region during 2001 were just below SEK 5,000 per sq.m. RESIDENTIAL The number of vacant residential properties in Greater Stockholm is extremely small. New production is largely geared towards tenant-ownership properties. Demand for residential properties in Malmö rose sharply in A further increase in demand is expected in Pricing for residential properties takes place in a regulated system. Despite this, it is possible to speak of trends in rent levels. The negotiations take place locally and result in differing development in different regions. It can generally be said that a continued trend towards differentiation within the framework of existing systems was characteristic of In Stockholm, this may lead to rent varying in a single building as the tenants can choose their standard individually. The country s highest residential rent levels in connection with new production are in the Öresund Region. Apartments have been let at rent levels of up to SEK 1,700 per sq.m. per year. At the same time, a politically directed orientation towards higher rent levels in central locations and lower in outer areas has had some effect. Rent levels in excess of SEK 1,100 per sq.m. are not uncommon for refurbishment of centrally located apartment blocks. Rent negotiations in Stockholm and Malmö resulted in rises averaging 2 per cent and 1.2 per cent respectively from 1 January (Source: Forum Fastighetsekonomi and Wihlborgs) Dragonen, Malmö 18 WIHLBORGS ANNUAL REPORT 2001

21 Customer meeting From left, Leif Svensson, project manager and Joakim Ewetz, letting manager, both from Wihlborgs, together with Niklas Bergenblad, CEO of Eyescream. The profile surfaced in the Submarine Hangar To us, the premises are an important part of the brand. The Submarine Hangar, with its special character, reinforces and clarifies our identity as an advertising agency. So says Niklas Bergenblad, CEO of Eyescream We wanted an open-plan solution, and Wihlborgs came up with an exciting proposal in the Submarine Hanger. It has worked very well. The conversion of Ubåtshallen, the Submarine Hangar, with a total floor area of 15,000 sq.m., is part of the great transformation of Västra Hamnen in Malmö. Old shipyard premises are being renovated to become modern premises, and new office buildings are being erected at the same time. Wihlborgs has built new head offices for both Sigma and Tyréns in the area. The largest tenants in Ubåtshallen are Orange Sverige, a leading telecoms operator which has decided to move its head office to Malmö, and the Mediagymnasiet school of media studies in Malmö. WIHLBORGS ANNUAL REPORT

22 Share data Share capital Wihlborgs share capital at 31 December 2001 amounted to SEK 3,121.2m, divided into 312,118,429 series B shares which carry one vote per share. The par value is ten Swedish kronor per share. Debenture loans In connection with Wihlborgs acquisition of Klövern Fastigheter AB, a debenture loan to a total nominal amount of SEK 745.4m was issued. Each subordinated debenture is issued in the denomination of SEK and runs with a fixed annual interest rate of SEK 5.83 per cent. Trading in the subordinated debentures takes place via the Stockholm Stock Exchange. The repayment date for the nominal amount is 15 December Dividend According to Wihlborgs dividend policy, the dividend is to be not less than 40 per cent and not more than 60 per cent of the net income. The dividend for the 2000 financial year amounted to SEK 0.70 per share, corresponding to 47 per cent of the net income. For 2001, the Board proposes that the Annual General Meeting approve a dividend of SEK 0.80 per share, corresponding to 47 per cent of net income. Buy-back and reverse split The Board proposes that the Annual General Meeting authorise the Board to buy back at the next Annual General Meeting Wihlborgs shares corresponding to a maximum of 10 per cent of outstanding shares. The Board also proposes that the Annual General Meeting decide on a consolidation of shares, a reverse split, in which five shares are consolidated into one share, 1:5. Warrants A total of 58,115,670 warrants designated warrants II have been issued in the acquisition of Klövern Fastigheter AB. Each warrant gives entitlement to new subscription of one series B share in Wihlborgs. The subscription price is SEK 20. The warrants expire on 20 December The warrants are listed on the Stockholm Stock Exchange. If all the warrants II are fully utilised, the number of shares will increase by 45,569,574 from 312,118,429 to 357,688,003, which corresponds to an increase in the share capital of SEK 455.7m and an increase in shareholders equity of SEK 911.4m. Listing on the O list of the Stockholm Stock Exchange Wihlborg shares were moved from the A list to the O list on 17 December Listing on the O list is regarded by the Board as advantageous to Wihlborgs shareholders, as inheritance and gift tax are lower than on the A list. Shareholders Wihlborgs had 24,221 shareholders on 31 December At 31 January 2002, the number had increased after distribution of Wihlborg shares in TMT One AB to 26,774. The largest shareholder was Investment AB Öresund, with 9 per cent of the share capital and votes. The ten largest shareholders accounted for 41 per cent of the ownership of Wihlborgs. The principal shareholder Bergaliden AB disposed of the whole of its shareholding of 30.2 per cent in Wihlborgs in April The proportion of foreign shareholders increased during 2001 from 12 per cent to 17.5 per cent. Over the two years from 31 December 1999 to 31 December 2001, foreign ownership increased by ten percentage points, from 7.5 per cent to 17.5 per cent. The shares in 2001 The Wihlborgs share price rose by 9.2 per cent during 2001, from SEK 13 to SEK per share. Carnegie s Real Estate Index fell by 6.4 per cent and the Affärsvärlden General Index declined by 16.7 per cent over the same period. The lowest share price during the year was SEK and the highest SEK The stock market capitalisation at the turn of the year was SEK 4.4 billion, making Wihlborgs one of the largest listed property companies in Sweden. During the year, Wihlborgs shares to a total value of SEK 3,667m were traded. The average value traded per day of stock market trading was SEK 14.7m. Shares are traded in blocks of 1,000 shares. 20 WIHLBORGS ANNUAL REPORT 2001