Kungsleden presents the third quarter for 2012

Welcome to Kungsleden

Third quarter 2012

Thomas Erséus, Chief Executive

Anders Kvist, Deputy Chief Executive

The quarter in brief

■ Net sales and gross profit decreased by 10% to to SEK 499 m and

SEK 347 m respectively in Q3 compared to 2011, due to a smaller

property portfolio

■ The profit/loss before tax was SEK -42 (247) m

■ The profit/loss after tax was SEK -13 (-173) m, or SEK -0.10 (-1.30)

per share. The deficit is sourced from unrealised value changes on

financial instruments

■ Strong equity ratio due to the sale of 41 properties for a value of

SEK 1,022 m

■ Profit for calculating dividends comparable to the previous year, and

was SEK 240 (239) m

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Post-balance sheet events

■ Statement of opinion from the Swedish Tax Agency questioning

indirect sales of properties through Dutch subsidiaries.

Reassessment of income would create a liquidity effect of SEK

1,650 m and affect equity negatively by SEK 1,700 m

■ Kungsleden will be appealing against this decision and does not

assess that the definitive outcome will be negative, and accordingly,

has not provisioned for it

■ With this case, and with current information, Kungsleden is not

aware of any further cases that could imply new tax claims

■ Three properties were sold for a total of SEK 84 m. The sales price

exceeds book value by SEK 10 m and acquisition cost by SEK 17 m

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Stable lettings market for commercial properties

■ Still-stable lettings market,

but affected by the surrounding world

■ Office rents back to pre-financial

crisis levels

■ Segmented office market, with

high demand in good locations

■ Low vacancies but variation between

sub-markets

Source: JLL, Newsec

| 4

Good progress of rents in Stockholm

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

2007 2008 2009 2010 2011 2012E 2013E 2014E

SEK/sqm

Office rents - Stockholm

Stockholm CBD Stockholm Central Stockholm Prime Suburb Rest of Greater Stockholm

Source: Newsec

Q3 2012

Good stability on other Swedish markets

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

2007 2008 2009 2010 2011 2012E 2013E 2014E

SEK/sqm

Office rents - Rest of Sweden

Göteborg Prime Göteborg Suburb Malmö Prime

Malmö Suburb Other Major Cities - Prime Rest of Sweden - Prime Source: Newsec

Q3 2012

Kungsleden’s lettings market remains stable

■ Increased activity on the lettings

market

■ New lettings of SEK 63 m*

■ Net lettings of SEK17 m**

■ Occupancy level 89.6 (88.3)%

* New lettings are annual rents for contracts signed in Jan-Sep 2012

** Net lettings are signed contracts less signed terminations

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Progress of Kungsleden’s property portfolio

■ Value creation through management

and enhancement of properties

– Property portfolio

– Operating net

– Occupancy

– Contract term

– New lettings

– Property yield

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Kungsleden’s commercial property portfolio

generating an average yield of 8.0%

Segment No. of properties

Area, 000

sq.m.

Book value, SEK m

Proportion of

commercial portfolio

Operating net, SEK m

Property yield

Average contract term

(year)

Industrial/warehouse 123 1 233 6,291 48% 532 8.5% 5.4

Office 82 562 4,262 32% 327 7.7% 3.5

Retail 57 269 2,116 16% 160 7.5% 4.7

Other commercial 19 76 581 4% 40 6.9% 5.9

Total 281 2,139 13,250 100% 1,059 8.0% 4.6

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Operating net per sq.m. up by nearly 25% since 2007

200

300

400

500

600

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2007 2008 2009 2010 2011 2012

Driftnetto per kvm

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Operating net per sq.m.

Increased occupancy and stable rents

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55

60

65

70

75

80

85

90

95

100

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800Economic occupancy, %

Rental revenues, SEK m

Rental revenues (left) Economic occupancy, % (right)

Average remaining contract term 4.6 years

5%

15%

29%

39%

72%

77% 79% 82% 83%

89% 92% 93%

99% 100%

10%

14%

10%

32%

5% 2%

3% 1%

6% 2% 2%

5% 1%

0

200

400

600

800

1 000

1 200

1 400

1 600

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 >2025

SEK m

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Continued positive net lettings for Kungsleden

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0

5

10

15

20

25

30

35

40

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2008 2009 2010 2011 2012

Net lettings (SEK m) Rolling 12 months (progress)

Summa

Property yields have increased with stable values

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00

01

02

03

04

05

06

07

08

09

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

Property yield, % Book value, SEK m

Book value (left) Property yield, % (right)

The transaction market in Sweden

■ A year-on-year decrease of 48% in transaction volumes

■ High share of sales value from office properties

■ In quarter-on-quarter terms, transaction volumes on logistics

properties increased by 10% and decreased by 21% on retail

properties

Source: JLL

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Kungsleden optimises property portfolio

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■ No properties purchased in January-September 2012

■ 44 properties sold for SEK 1,115 m

■ Sales were at a property yield of 6.7%

■ 39 of the 44 properties were public

properties in Härnösand sold to

Hemsö for SEK 912 m. This sale

increased equity by SEK 39 m

and the equity ratio by 2%

■ Two industrial properties in southern Poland were sold for EUR 12.5 m

■ All sales conducted in line with book value

■ Positive trend, with continued positive good sales in fourth quarter

■ Earnings capacity of remaining portfolio is 8.0%

Income Statement

SEK m

2012

Jan-Sep

2011

Jan-

Sep Δ, %

Rental revenues 1,400 1,283

Sales revenues, modular buildings 216 214

Net sales 1,616 1,497 8

Property costs -400 -361

Production costs, modular buildings -197 -195

Gross profit 1,019 941 8

Trading net 17 34

Sales and administration costs -185 -184

Profit/loss from participations in Hemsö 135 295 -54

Net financial items -449 -427

Unrealised value changes, properties 2 87

Unrealised value changes, financial instruments -51 -401

Profit before tax 488 345 41

Tax -1,059 -10

Net profit after tax -571 335 n/a | 17

• Lower profit from

Hemsö due to lower

unrealised value

changes on

properties

• Net sales and gross

profit up by 8% due

to a larger property

portfolio

Income Statement, wholly owned properties

SEK m

2012

Jan-Sep

2011

Jan-Sep Δ %

Rental revenues 1,209 1,102 10

Property costs -368 -330

Gross profit 841 772 9

Trading net 17 25



Unrealised value changes, properties 47 92

Unrealised value changes, financial

instruments -39 -314

Profit before tax 346 55 530

Tax -72 -10

Net profit 274 45 509

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Income Statement Nordic Modular

SEK m

2012

Jan-Sep

2011

Jan-Sep Δ %

Rental revenues modules 191 181

Sales revenues, modular buildings 216 214

Net sales 407 395 3

Property costs modules -32 -31

Production costs, modular buildings -197 -195

Gross profit 178 169 5

Trading net 0 9



Unrealised value changes, properties -45 -5


instruments -4 -34

Profit before tax 36 53 -33

Tax -9 -14

Net profit after tax 27 39 -30

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Income Statement Hemsö

SEK m

2012

Jan-Sep

2011

Jan-Sep Δ %

Profit/loss from participations in Hemsö 135 295 -54

Net financial items -5 9


instruments -8 -53

Profit before tax 122 251 -51

Tax 3 11

Net profit after tax 125 262 -52

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Profit from property management up by 17%

2012 2011

SEK m Jan-Sep Jan-Sep

Gross profit 1,019 941



Profit from property management 385 330

Realised items

Trading net on sale 17 34

Realised value changes, properties 32 11

Deduction for deferred tax on sale -3 0

Realised value changes, financial instruments -81 -31

Realised items -35 -14

Profit for calculating dividends from Hemsö 180 143

Taxes payable -345 -25

Profit for calculating dividends 185 462

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Earning assets

30 Sep 2012 Return, %

Properties 14,779 8.0

Participations in Hemsö 1,157 8.0

Long term-receivables, Hemsö 1,500 7.0

Vendor note receivables 241 7.0

Total earning assets 17,677 7.9

Ave. interest,

%

Equity 6,774

Interest-bearing liabilities 9,764 6.8

Working capital (other items are a net debt) 1,139 0.0

Total funding 17,677

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Financial position in summary

SEK m 2012 2011

ASSETS 30 Sep 31 Dec

Goodwill 201 201

Properties 14,779 14,788

Machinery and equipment 14 15

Participations in Hemsö 1,157 1,084

Long-term receivables, Hemsö 1,500 1,500

Deferred tax asset - 1,020

Other long-term receivables 241 443

Fixed assets 17,892 19,051

Inventories 16 17

Short-term receivables 244 240

Assets held for sale—properties - 905

Assets held for sale—other assets - 14

Cash and bank balances 330 684

Current assets 590 1 860

TOTAL ASSETS 18,482 20,911

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Financial position in summary

SEK m 2012 2011

EQUITY AND LIABILITIES 30 Sep 31 Dec

Equity 6,774 7,719

Liabilities to credit institutions 8,165 8,154

Bondloans (unsecured) 1,599 1,599

Liabilities related to assets held for sale - 901

Interest-bearing liabilities 9,764 10,654

Provisions 110 431

Deferred tax liability 53 1

Derivatives 1,100 1,156

Other non interest-bearing liabilities 681 890

Liabilities related to assets held for sale - 60

Non interest-bearing liabilities 1,944 2,538

TOTAL EQUITY AND LIABILITIES 18,482 20,911

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Maturity structure, credits

As of 30 September 2012

Utilised

credits,

SEK m

Un-utilised

credits, SEK

m

Total credits,

SEK m

2012 227 260 487

2013 678 - 678

2014 1,241 - 1,241

2015 5,605 900 6,505

2016 2,013 - 2,013

Total 9,764 1,160 10,924

Average conversion term, years 2.5 2.4

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Maturity structure, fixed interest periods

As of 30 september 2012

Loans,

SEK m

Interest

derivativ

es,

SEK m

Ave.

interest,

derivatives,

%

Ave. interest,

loans and

derivatives, years

Average fixed

interest term,

years

2012 9,764 - -

2013 - -

2014 800 3.9

2015 2,400 4.2

2016 500 3.9

2017 500 4.1

2018 3,650 4.2

2019 800 3.5

2020 800 3.7

2021 400 3.8

Total 9,764 9,850 6.8 5.0

Market valuation of loans and

derivatives 1,097

Total 10,861

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Key figures

30 Sep 2012 30 Dec 2011 30 Sep 2011

Financial

Return on equity, % -10.5 8.5 6.1

Equity ratio, % 36.7 36.9 34.2

Loan to value ratio, properties, % 66.1 67.9 69.8

Loan to value ratio on all credits in

relation to earning assets (properties,

participations and receivables,

Hemsö and vendor note receivables),

% 55 55 57

Interest coverage ratio, multiple 2.0 2.3 2.2

Share

Equity per share, SEK 49.60 56.50 54.40

Profit after tax per share, SEK -4.20 4.70 2.50

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Strategic review

■ For some time, Kungsleden has been working on a strategic review

■ The review is driven by fundamental changes in the property market

and the desire to concentrate its business

■ The new strategy is intended to clarify how Kungsleden creates

shareholder value

■ Strategy work involves a review of segments, geography and

financial targets, as well as dividend policy

■ The new strategy will be presented fully in the first quarter of 2013

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Strategic review

■ Review not yet complete, but the following conclusions are

available:

– Management of wholly owned properties has been a strong value

creator for Kungsleden over time

– Kungsleden is moving towards concentrating its wholly owned

properties, focusing on growth regions in Sweden

– Against the above background, Hemsö and Nordic Modular—

profitable businesses in their own right—will be sold when market

conditions are right

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Kungsleden’s tax position

■ In recent years, the Swedish Tax Agency and courts have altered

their view of how law and practice should be interpreted in several

tax segments

■ Kungsleden continuously assesses the risk of definitive negative

outcomes in the various proceedings, and after consultation with

independent tax experts, provisions for feared negative outcomes

■ Kungsleden’s opinion is that the company has fully complied with

the laws and practice in place when submitting each tax return

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21 outstanding tax cases

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Tax proceedings

■ Statement of opinion received from the Swedish Tax Agency

questioning the indirect sale of properties through Dutch subsidiaries. A

reassessment of income could generate a liquidity effect of SEK 1,650

m and affect equity negatively by SEK 1,700 m

■ Kungsleden will be appealing against this decision and does not assess

that the definitive outcome will be negative, and accordingly, has not

provisioned for it

■ With this case, and with current information, Kungsleden is not aware of

any further cases that could imply new tax claims

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Estimate of maximum negative tax effects

■ If all proceedings are ruled against the company, the estimated

maximum effect on equity is SEK 3,080 m in addition to provisioning of

SEK 1,050 m already made

■ Estimated maximum outstanding negative liquidity effects including tax

surcharges and interest, SEK 3,200 m

■ Liquidity requirement arises over several years finance possible from

trading cash flows and the funds freed up from the concentration of

Kungsleden's strategy

■ The Board of Directors is proposing no share dividend for 2012 with the

aim of increasing Kungsleden's financial strength

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Estimate of tax effects

SEK m Effect on equity Liquidity effect

Provision, Q2 2009 325 0

Provision, Q2 2012 725 260

Deposited in anticipation of ruling - -100

Total provisioned tax cases 1,050 160

Un-provisioned tax cases 3,080 3,200

Deposited in anticipation of ruling - -160

Total 4,130 3,200

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Summary and outlook

■ Stable lettings market and stable property values

■ Valued-creating management and enhancement through:

– Good tenants with long contracts

– Stable rents and increased occupancy

– Increased net lettings

■ Stronger equity ratio through sales

■ Strong cash flow and good liquidity

■ Strategic review towards concentrating business

■ Estimated worst-case scenario and well prepared for potential tax

rulings

■ Estimate of SEK 300 m for the full year 2012 reiterated, but no dividend

proposed

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Questions?

Kungsleden presents the third quarter for 2012

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