Business area Project Development

Business area Project Development, which contains Housing Development and Property Development, creates sustainable and vibrant urban environments with residential and commercial property. The business area is responsible for the Group’s acquisition, management and divestment of property as well as project developments that generate contract work for the other business areas. Project development takes place in wholly owned companies or in cooperation with other partners via joint ventures.

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. In cases where no divestment is planned property may remain in the Group for a long period of time in order to generate rental and appreciation revenues or a combination of both.

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

Net sales for the first quarter 2018 in business area Project Development amounted to SEK 2,287 million (2,212). Operating profit was SEK 201 million (222).

Capital employed in Project Development at the end of the period amounted to SEK 10,867 million (8,731).

Haninge Park

Haninge

Capital employed

MSEK 31 Mar
2018		 31 Mar
2017		 31 Dec
2017
Mkr 31 mar
2018		 31 mar
2017		 31 dec
2017
Operations property Driftsfastigheter 1,050 933 1,036
Investment property Förvaltningsfastigheter 988 703 871
Project and development property Projekt- och exploateringsfastigheter 7,708 6,285 7,612
   of which housing development rights    varav bostadsbyggrätter 5,266 4,241 5,116
   of which commercial development rights    varav kommersiella byggrätter 604 504 627
   of which on going housing projects    varav pågående bostadsprojekt 1,035 813 1,173
   of which on going commercial projects     varav pågående kommersiella projekt 497 249 383
   of which completed projects    varav färdigställda fastigheter 132 321 170
   of which other    varav övrigt 174 157 143
Participation in joint ventures Andelar i joint ventures 913 697 912
Loans to joint ventures Utlåning till joint ventures 1,387 1,483 1,383
Working capital and other Rörelsekapital och övrigt -1,179 -1,370 -1,828
Total Summa 10,867 8,731 9,986

Key ratios

Jan-Mar
2018		 Jan-Mar
2017		 Apr-Mar
2017/2018		 Jan-Dec
2017
Jan-mar
2018		 Jan-mar
2017		 Apr-mar
2017/2018		 Jan-dec
2017
Net sales, MSEK Nettoomsättning, Mkr 2,287 2,212 8,418 8,343
   of which Property Development    varav Fastighetsutveckling 156 659 510 1,013
   of which Housing Development     varav Bostadsutveckling  2,131 1,553 7,908 7,330
Operating profit, MSEK Rörelseresultat, Mkr 201 222 783 804
   of which Property Development    varav Fastighetsutveckling 50 90 58 98
   of which Housing Development     varav Bostadsutveckling  151 132 725 706
Operating margin, % Rörelsemarginal, % 8.8 10.0 9.3 9.6
   of which Property Development    varav Fastighetsutveckling 32.1 13.7 11.4 9.7
   of which Housing Development     varav Bostadsutveckling  7.1 8.5 9.2 9.6
Capital employed at the end of the period, MSEK Sysselsatt kapital vid periodens utgång, Mkr 10,867 8,731 10,867 9,986
Orders received, MSEK Orderingång, Mkr 2,061 1,375 9,182 8,496
Order backlog, MSEK Orderstock, Mkr 8,275 6,705 8,275 8,198
Number of employees at the end of the period Antal anställda vid periodens utgång 367 349 367 361

Housing Development

Net sales in Housing Development increased to SEK 2,131 million (1,553). Operating profit increased to SEK 151 million (132) but the operating margin contracted to 7.1 percent (8.5). A broader geographic spread in ongoing housing projects has affected the operating margin. In the latest rolling 12 month period the operating margin amounted to 9.2 percent compared to 9.6 percent for the entire year of 2017.

The number of start-ups of our own developed homes during the first quarter was 557 units (549) with a good geographic spread in both Sweden, Norway and Finland. The number of sold homes was 372 (515). In some partial markets an excess supply of homes in a higher price range has occurred which, together with tougher financing terms for homes, leads to longer sales processes. Peab develops and builds homes throughout Sweden as well as large parts of Norway and Finland. Peab mainly builds homes in the mid-priced segment and we see that there is still a big need for new housing in this range. During the first quarter we experienced a low level of sales in Stockholm while we had a more normal activity in many areas of Sweden, Norway and Finland. The number of own developed homes in production at the end of the period was 6,265 (4,486). The level of sold homes in production was 68 percent (69). The number of repurchased homes per 31 March 2018 was 50 (44).

Development rights for housing

Number, approx. 31 Mar
2018		 31 Mar
2017		 31 Dec
2017
Antal, cirka 31 mar
2018		 31 mar
2017		 31 dec
2017
Development rights on our own balance sheet Byggrätter i egen balansräkning 20,300 17,000 20,700
Development rights via joint ventures Byggrätter via joint ventures 5,400 4,200 4,800
Development rights via options etc. Byggrätter via optioner m.m. 7,700 7,600 7,100
Total Totalt 33,400 28,800 32,600

Own housing development construction

Jan-Mar
2018		 Jan-Mar
2017		 Apr-Mar
2017/2018		 Jan-Dec
2017
Jan-mar
2018		 Jan-mar
2017		 Apr-mar
2017/2018		 Jan-dec
2017
Number of housing starts during the period
Antal under perioden produktionsstartade bostäder
 557 549 3,056 3,048
Number of sold homes during the period Antal under perioden sålda bostäder 372 515 2,591 2,734
Total number of homes under construction, at the end of the period
Totalt antal bostäder i produktion, vid periodens slut
 6,265 4,486 6,265 6,333
Share of sold homes under construction, at the end of the period
Andel sålda bostäder i produktion, vid periodens slut
 68% 69% 68% 72%
Number of repurchased homes in the balance sheet, at the end of the period
Antal återköpta bostäder i egen balansräkning, vid periodens slut
 50 44 50 33

Huvudsta Strand

Solna

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 2018 net sales in Property Development were SEK 156 million (659) and operating profit was SEK 50 million (90). The first quarter last year included divestitures of assets in Arenastaden to Fabege, which affected net sales by SEK 577 million but had no effect on operating profit. The first quarter last year also included a capital gains effect of SEK 75 million attributable to the divestiture of joint venture companies to Catena.

Our partially owned companies continue to develop well and profit in the first quarter from partially owned companies amounted to SEK 35 million (28).

In cases where no divestiture is planned properties can remain in the Group for a considerable length of time in order to garner rent and appreciation revenue or a combination of both. Included in the capital employed in Property Development are operations property for a reported value of SEK 1,050 million and investment property at SEK 988 million. During the first quarter Peab made the decision to gather all the offices in the Öresund region into the new Peab Center in Hyllie in Malmö, and invest around SEK 200 million in the new office building, the first of five planned in the project The Gate. All major development projects are presented in the table below.

Varvsstaden

Malmö

Property projects

Completed projects Location Rentable area in m2 Degree rented, %
Recognized value, MSEK
Completed projects Ort Rentable area in m2 Degree rented, % Recognized value, MSEK
Hotel Västerås Hotel Västerås 14,500 100 515
Business park Ängelholm Business park Ängelholm 60,800 90 242
Business park Ljungbyhed Business park Ljungbyhed 76,100 61 73
Offices Helsinki, Finland Offices Helsinki, Finland 9,300 100 281
Offices Sigtuna Offices Sigtuna 3,600 78 67
Apartments for rent Sigtuna Apartments for rent Sigtuna 3,300 100 97
Other completed projects Other completed projects 346
Total Total 1,621
of which operations property of which operations property     876
of which investment property of which investment property     745
Ongoing projects Location Rentable area in m2 Degree rented, % Recognized value, MSEK Total investment at completion, MSEK Timepoint of completion
Level of completion, %
Ongoing projects Location Rentable area in m2 Degree rented, % Recognized value, MSEK Adopted investment, MSEK Timepoint of completion
Level of completion, %
Offices Solna Offices Solna 12,400 100 148 453 Q4-2019 33
Offices Malmö Offices Malmö 4,900 69 26 185 Q1-2020 14
Offices Helsingborg Offices Helsingborg 4,500 100 35 117 Q1-2020 30
Offices and parking Helsinki, Finland Offices and parking Helsinki, Finland 7,600 27 117 342 Q1-2019 27
Other ongoing projects Other ongoing projects 91
Total Total 417
of which operations property of which operations property     174
of which investment property of which investment property     243

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.

Significant joint ventures

Fastighets AB Centur

Own, manage and develop commercial property and housing.

Peab’s share: 50 percent
Partner: Balder
Location: Stockholm, Gothenburg and the Öresund region
Recognized value on properties 31 March 2018 1): SEK 5,085 million (4,809)
Peab’s portion of unrecognized fair value exclusive tax 1): SEK 328 million (275)
Major ongoing projects: Hotel Stay-at Varvsstaden, Malmö Rentable area 3,900 m2, Lyckholms, Gothenburg Rentable area 6,400 m2 

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
Location: Stockholm, the Mälaren region, Gothenburg and the Öresund region
Recognized value on properties 31 March 2018 1): SEK 2,959 million (2,363)
Peab’s portion of unrecognized fair value exclusive tax 1):  SEK 167 million (131)
Major ongoing projects: Munkebäck, Gothenburg Rentable area 14,800 m2´, Kungsängen, Upplandsbro Rentable area 7,900 m2 and several apartment building projects in Västerås, Helsingborg, Malmö and Örebro.

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
Location: Lund
Recognized value on properties 31 March 2018: SEK 1,848 million (1,865)

Point Hyllie Holding AB

Develop, own and manage the office property The Point as well as own and manage the hotel property Värdshuset 5 (Operator Quality Hotel View)

Peab’s share: 50 percent
Partner: Volito
Location: Hyllie, Malmö
Recognized value of properties 31 March 2018: SEK 843 million (706)
Major ongoing projects: 29 floor office building, The Point, Rentable area 20,000 m2

1) Valued at fair value in joint venture companies. The market prices on properties that affect the recognized values in joint venture companies are not recognized in Peab’s profit.