Business area Project Development

Business area Project Development is responsible for the Group’s acquisition, development, maintenance and management as well as divestment of housing and commercial property. The ability to understand and predict society’s and customers’ needs and demands regarding location and design is what makes it successful when it comes to developing attractive and sustainable housing and property.

Project Development takes place in wholly owned projects or in cooperation with other partners through joint ventures. The business area is run in two segments  – Housing Development and Property Development.

Housing Development develops all kinds of housing such as apartment buildings in tenancy ownership, ownership and rental form as well as single homes.

Operations in Property Development revolve around the acquisition, development, maintenance and management as well as the divestiture of commercial property.

Peab’s primary ambition is to work with development projects on our own balance sheet. Collaboration with other partners via joint ventures may take place from time to time during a project. The goal is to create capital efficient developments with partners that bolster business and profit generation.

Net sales and profit

Operative net sales for the first quarter 2017 in business area Project Development amounted to SEK 2,203 million (1,376). Operative operating profit increased to SEK 218 million (78).

After a revision of Peab’s property portfolio it was decided that some property previously reported as project and development property, i.e. inventory properties, will instead be classified as operations property or investment property, in the case where there is no plan to divest the property and it is expected to remain in the Group for the foreseeable future. The properties are owned for the purpose of income from rent or appreciation or a combination of both. For this reason, as of 1 January 2017 properties for a total recorded value of SEK 619 million have been reclassified as operations property and properties for a total value of SEK 629 million have been reclassified as investment property.

Capital employed in Project Development at the end of the period amounted to SEK 8,782 million (10,043).

Hamnen and Strandpromenaden

Sundbyberg

Capital employed

MSEK 31 Mar 2017 31 Mar 2016 31 Dec 2016
Operations property 933 – –
Investment property 703 – –
Project and development property 5,472 6,903 7,007
   of which housing development rights 4,241 3,804 4,125
   of which commercial development rights 504 539 675
   of which projects under construction 249 796 736
   of which completed projects 321 1,609 1,246
   of which other 157 155 225
Participation in joint ventures 697 722 682
Loans to joint ventures 1,483 1,833 1,694
Working capital and other -506 585 898
Total 8,782 10,043 10,281

Key ratios

Jan-Mar
2017		 Jan-Mar
2016		 Apr-Mar
2016/2017		 Jan-Dec
2016
Operative net sales 1), MSEK 2,203 1,376 8,466 7,639
   of which Property Development 659 76 1,968 1,385
   of which Housing Development 1) 1,544 1,300 6,498 6,254
Operative operating profit 1), MSEK 218 78 762 622
   of which Property Development 90 4 175 89
   of which Housing Development 1) 128 74 587 533
Operative operating margin 1), % 9.9 5.7 9.0 8.1
   of which Property Development 13.7 5.3 8.9 6.4
   of which Housing Development 1) 8.3 5.7 9.0 8.5
Capital employed at the end of the period, MSEK 8,782 10,043 8,782 10,281
Orders received Housing Development, MSEK 1,375 1,773 7,847 8,245
Order backlog Housing Development, MSEK 6,705 4,895 6,705 6,853
Number of employees 349 302 349 321

1) According to the percentage of completion method (IAS11).

Housing development

Continued strong demand on the housing market has had a positive effect on both net sales and operating profit for the first quarter. Operative net sales for the first quarter 2017 in Housing Development amounted to SEK 1,544 million (1,300). Operative operating profit increased to SEK 128 million (74) and the operative operating margin improved to 8.3 percent (5.7). The operative operating margin improved to 9.0 percent during the latest rolling 12 month period compared to 8.5 percent for the entire year of 2016.

The number of start-ups of our own developed homes has increased during the first quarter and amounted to 549 units (542) with a good geographic spread. The number of sold homes during the first quarter 2017 was 515 (496). The number of own developed homes in production at the end of the period was 4,486 (4,074). The level of sold homes in production was unchanged with 69 percent compared to year-end 2016. The number of repurchased homes per 31 March 2017 was 44 (56).

Development rights for housing

Number, approx. 31 Mar
2017		 31 Mar
2016		 31 Dec
2016
Development rights on our own balance sheet 17,000 17,100 17,300
Development rights via joint ventures 4,200 4,300 3,900
Development rights via options etc. 7,600 6,600 7,200
Total 28,800 28,000 28,400

Own housing development construction

Jan-Mar
2017		 Jan-Mar
2016		 Apr-Mar
2016/2017		 Jan-Dec
2016
Number of housing starts during the period 549 542  2,658 2,651
Number of sold homes during the period 515 496 2,063 2,044
Total number of homes under construction, at the end of the period 4,486 4,074  4,486 4,381
Share of sold homes under construction, at the end of the period 69% 81% 69% 69%
Number of repurchased homes in the balance sheet, at the end of the period 44 56 44 50

Hamnen, Strandpromenaden

Sundbyberg

Property development

Net sales and operating profit from operations are derived from acquisitions, development, maintaining and managing wholly owned property, shares in the result from partly owned companies as well as capital gains/losses from the divestiture of completed projects and shares in partly owned companies.

During the first quarter 2017 net sales in Property Development were SEK 659 million (76) and operating profit was SEK 90 million (4). Operating profit included capital gains of SEK 75 million from the divestment of Peab’s participation in joint venture companies to Catena. Peab and Catena have for a long time collaborated on four development properties in Skåne owned as 50/50 companies, which have now been divested.

In December 2016 Peab and Fabege agreed that Peab would in January 2017 sell a number of assets in Arenastaden and Ulriksdal in Solna. The transactions took place on 12 January 2017 and the divestments in Ulriksdal affected net sales by SEK 577 million. The transactions had no net effect on profit since the divestitures in Ulriksdal had a positive effect of SEK 180 million on profits while the divestitures of the assets in Arenastaden had a negative effect of SEK 180 million.

Profit from partially owned companies has improved compared to the corresponding period last year.

In capital employed in Property Development operations property are included for a booked value of SEK 933 million and consist in part of an office building in Helsinki, Finland and office buildings in a business park in Ängelholm. Investment property amounts to SEK 703 million and consists primarily of a hotel in Västerås under construction, commercial premises in Sigtuna and Märsta as well as a business park in Ljungbyhed.

Peab has decided to invest SEK 453 million in a new office building in Ulriksdal in Solna. The office building will be nine stories tall with around 12,500 m2 office space and is the first of five to be built in Ulriksdal. The office building will be ready to move into in the fourth quarter of 2019.

Significant joint ventures

Peab’s significant joint venture companies Fastighets AB Centur, Tornet Bostadsproduktion AB, Fastighets AB ML4 and Point Hyllie Holding AB are developing well and via them Peab has built up considerable indirect holdings in investment property and development property for both commercial and residential purposes. Ongoing returns are in the form of shares in the profit from joint ventures recognized in operating profit and interest income on lending. Changes in market values that effect booked values in joint venture companies are not reported in Peab’s profit.

Point Hyllie Holding AB has decided to build The Point, a 29-story office building in city district Hyllie in Malmö. The Point will have 20,000 m2 in office space and the ground floor will contain shops, a lobby and lounge. Construction began in April 2017 and the building will be ready to move into at the end of 2019.

Racketcentrum

Jönköping

Racketcentrum

Jönköping

Significant joint ventures

Fastighets AB Centur

Own, manage and develop commercial property and housing.

Peab’s share: 50 percent
Partner: Balder
Geography: Stockholm, Gothenburg and the Öresund region
Book value on properties 31 March 2017: SEK 4,809 million (4,432)

Tornet Bostads­produktion AB

Build and manage attractive and environmentally friendly rentals in larger cities in Sweden.

Peab’s share: 31 percent
Partner: Riksbyggen, Folksam and Balder
Geography: Stockholm, the Mälaren region, Gothenburg and the Öresund region
Book value on properties 31 March 2017: SEK 2,363 million (1,886)

Fastighets AB ML4

Own and manage the research facility Max IV. The facility is rented to Lund University.

Peab’s share: 50 percent
Partner: Wihlborgs
Geography: Lund
Book value on properties 31 March 2017: SEK 1,865 million (1,869)

Point Hyllie Holding AB

Develop the office property The Point and own and manage the hotel property Värdshuset 5.

Peab’s share: 50 percent
Partner: Volito Fastigheter AB
Geography: Hyllie, Malmö
Book value on properties 31 March 2017: SEK 706 million (–)