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Improved profit with a growing portfolio
Balder’s positive development continued during 2019, as evidenced by, among other things, an increased profit from property management. This increase is generated by both the existing portfolio and new investments, associated companies and net financial income.
During 2019, the profit from property management increased by 22% and the net asset value by 23%. A long-term increase in the profit from property management/earning capacity is the single most important financial goal for us. To succeed over time with a good rate of increase requires not only that our current property portfolio performs well, but also that we find new investments with reasonable returns in relation to any risk we must take.
We have made the assessment until now that the best yield for Balder’s shareholders is achieved through re-investing the profit generated. The objective remains the same for the future, and I am optimistic with regard to the possibility over time of being able to find investments with a reasonably good yield.
Several major investments during the year
During the year we made a large number of investments in investment properties, internally managed projects and development properties. These include the acquisition of centrally located investment properties and one well-situated residential building right in Gothenburg, as well as properties in both Stockholm and Helsinki.
It was also very pleasing at the beginning of the year to be able to complete our first acquisition in the UK, a market that we have had our eyes on for a while. This first acquisition was also supplemented by another acquisition later on in the year.
We have noticed an increase in interest in our tenant owner projects in Gothenburg, which can be seen in apartments being sold out in many projects. At Frölunda Park, Brf Sjöstjärnan was completed and all tenants moved into the 130 apartments. The next stage of development has started, with occupancy planned during the current year.
Exciting partnerships under way
The ground was broken during the year for Clarion Hotel Draken, a partnership between Balder, Nordic Choice Hotels and Folkets Hus in Gothenburg. It feels great to be involved in such an exciting and important project, and I am convinced that this will be good not only for those living and working in the area, but also for the city as a whole.
We also became a new partner and half-owner of the company that will be developing Kungens kurva to create a complete city district with around 3,500 new homes, schools, shops and services. KF Fastigheter, the other partner in this project, is a company we already know well, including through our collaboration on part of Backaplan. Kungens kurva is also an exciting place that will take on an important role in relieving the pressure on Stockholm’s city centre with, among other things, homes and communications. We already have a strong relationship with Huddinge Municipality and I look forward to further extending it.
We have for many years been gradually building up our project organisation and our portfolio of ongoing and future projects. It feels very good to have this investment opportunity and I believe that we will create great values there over time.
Increased commitment to sustainability
Balder is a long-term property owner that assumes responsibility for the business’s impact on not only the economy and the environment, but also on social issues. We are continuing to work on the development of our areas and have a high level of social engagement with a focus on security and well-being, children, young people and employment.
During the year we signed the Global Compact, the UN’s principles for companies regarding human rights, labour rights, anti-corruption and the environment.
We have noticed a continued increase in engagement for sustainability-related issues from our stakeholders, for example from investors. Last spring we developed a Green Bond framework and issued our first green bond in order to finance green, energy-efficient buildings.
Stable group of associated companies
The property-related associated companies delivered consistently good profits from property management and positive changes in value. This year’s disappointment was Collector, which following major one-off items produced a zero profit figure, accompanied by a number of ‘crisis headlines’. Crisis is a relative term, and spontaneously I personally would think of repeated, massive losses. But since its stock exchange introduction in 2015, Collector has so far generated a total profit of SEK 1.7 billion after tax.
The outbreak of the new coronavirus has had an incredibly strong impact on society and on the world’s stock exchanges in recent times. Sweden and the world at large have for some time been taking a number of measures aimed at delaying the spread of the virus. It is at present impossible to say when the spread will have reached its peak or when this will be over. The coronavirus is currently affecting all business activity, although different industries are affected to varying degrees.
Balder is of course also affected by the ongoing concerns, but has a strong balance sheet, very good cash flow and a stable customer structure in six countries, with 60% of our rental income coming from about 40,000 homes. It is our assessment that Balder has a strong base on which to move forward, but the company is monitoring the development of the coronavirus extremely closely and is in continuous contact with both tenants and financiers. Balder’s annual report for 2019 was written before the outbreak of the coronavirus, and the annual report does not therefore reflect the financial concerns that now prevail.
Balder as a company and investment platform is getting better and better as time passes. On behalf of myself and the shareholders, I would like to take this opportunity to extend a great, heartfelt thank-you to all of you in the Balder family for your wonderful efforts during the year.
Chief Executive Officer