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

July – September 2018

Net sales for the third quarter 2018 in business area Project Development amounted to SEK 1,878 million (1,926). Operating profit amounted to SEK 165 million (174).

January – September 2018

Net sales for the period January-September 2018 in business area Project Development amounted to SEK 5,940 million (6,138). Operating profit amounted to SEK 540 million (558).

Capital employed in Project Development at the end of the period amounted to SEK 12,509 million (9,967). The increase is due to the acquisition of development rights, higher activity in our own housing projects in Finland and Norway as well as investments in operations and investment properties in Property Development. In addition, a slowdown in the housing market has entailed longer sales processes which has increased working capital.

Brf Kolla Trädgård

Kungsbacka

Capital employed

MSEK 30 Sep
2018
30 Sep
2017
31 Dec
2017
Mkr 30 sep
2018
30 sep
2017
31 dec
2017
Operations property Driftsfastigheter 1,147 900 1,036
Investment property Förvaltningsfastigheter 973 840 871
Project and development property
Projekt- och exploateringsfastigheter
8,981 7,429 7,612
of which housing development rights varav bostadsbyggrätter 5,662 5,041 5,116
of which commercial development rights varav kommersiella byggrätter 645 625 627
of which on going housing projects varav pågående bostadsprojekt 1,774 901 1,173
of which on going commercial projects
varav pågående kommersiella projekt
598 492 383
of which completed projects varav färdigställda fastigheter 10 190 170
of which other varav övrigt 292 180 143
Participation in joint ventures Andelar i joint ventures 980 933 912
Loans to joint ventures Utlåning till joint ventures 1,429 1,457 1,383
Working capital and other Rörelsekapital och övrigt -1,001 -1,592 -1,828
Total Summa 12,509 9,967 9,986

Key ratios

Jul-Sep
2018
Jul-Sep
2017
Jan-Sep
2018
Jan-Sep
2017
Oct-Sep
2017/2018
Jan-Dec
2017
Jul-sep
2018
Jul-sep
2017
Jan-sep
2018
Jan-sep
2017
Okt-sep
2017/2018
Jan-dec
2017
Net sales, MSEK Nettoomsättning, Mkr 1,878 1,926 5,940 6,138 8,145 8,343
of which Property Development varav Fastighetsutveckling 217 131 544 896 661 1,013
of which Housing Development varav Bostadsutveckling 1,661 1,795 5,396 5,242 7,484 7,330
Operating profit, MSEK Rörelseresultat, Mkr 165 174 540 558 786 804
of which Property Development varav Fastighetsutveckling 38 -3 101 92 107 98
of which Housing Development varav Bostadsutveckling 127 177 439 466 679 706
Operating margin, % Rörelsemarginal, % 8.8 9.0 9.1 9.1 9.7 9.6
of which Property Development varav Fastighetsutveckling 17.5 -2.3 18.6 10.3 16.2 9.7
of which Housing Development varav Bostadsutveckling 7.6 9.9 8.1 8.9 9.1 9.6
Capital employed at the end of the period, MSEK
Sysselsatt kapital vid periodens utgång, Mkr
12,509 9,967 12,509 9,967 12,509 9,986
Orders received, MSEK Orderingång, Mkr 1,361 965 4,579 5,555 7,520 8,496
Order backlog, MSEK Orderstock, Mkr 7,039 7,478 7,039 7,478 7,039 8,198
Number of employees at the end of the period
Antal anställda vid periodens utgång
377 351 377 351 377 361

Housing development

July – September 2018

Net sales decreased by seven percent in Housing Development and amounted to SEK 1,661 million (1,795). Operating profit amounted to SEK 127 million (177) and the operating margin was 7.6 percent (9.9).

The number of start-ups of our own developed homes during the third quarter amounted to 475 units (463) with a good geographic spread where most of the production starts are outside of the capital city areas. The number of sold homes was 402 (613). The slowdown on the tenant-owned housing market has affected the third quarter as well through less activity, particularly in Stockholm.

January – September 2018

Net sales increased by three percent in Housing Development and amounted to SEK 5,396 million (5,242). Operating profit amounted to SEK 439 million (466) and the operating margin was 8.1 percent (8.9). The operating margin for the latest rolling 12 month period was 9.1 percent compared to 9.6 for the entire year of 2017.

The number of start-ups of our own developed homes during the period amounted to 1,591 units (1,980) with a good geographic spread in Sweden as well as in Norway and Finland. The number of sold homes during period January-September 2018 was 1,165 (1,797). The number of own developed homes in production at the end of the period was 6,105 (5,327). The level of sold homes in production was 64 percent compared to 72 percent at year-end 2017. The number of repurchased homes per 30 September 2018 was 84 (50).

At the end of the period capital employed had increased in Housing Development due to acquired development rights and greater activity in our own housing developments in Norway and Finland, which remain on the balance sheet until completion. In addition, the slowdown in the housing market has lead to longer sales processes which has increased working capital.

The diagram shows when in time the housing projects in Norway and Finland are expected to be completed. The total number of ongoing own housing developments in Norway and Finland were 1,402 per 30 September 2018.

Development rights for housing

Number, approx. 30 Sep
2018
30 Sep
2017
31 Dec
2017
Antal, cirka 30 sep
2018
30 sep
2017
31 dec
2017
Development rights on our own balance sheet Byggrätter i egen balansräkning 22,000 19,100 20,700
Development rights via joint ventures Byggrätter via joint ventures 5,600 4,000 4,800
Development rights via options etc. Byggrätter via optioner m.m. 7,900 7,900 7,100
Total Totalt 35,500 31,000 32,600

When in time ongoing housing projects in Norway and Finland will be completed

Own housing development construction

Jul-Sep
2018
Jul-Sep
2017
Jan-Sep
2018
Jan-Sep
2017
Oct-Sep
2017/2018
Jan-Dec
2017
Jul-sep
2018
Jul-sep
2017
Jan-sep
2018
Jan-sep
2017
Okt-sep
2017/2018
Jan-dec
2017
Number of housing starts during the period
Antal under perioden produktionsstartade bostäder
475 463 1,591 1,980 2,659 3,048
Number of sold homes during the period
Antal under perioden sålda bostäder
402 613 1,165 1,797 2,102 2,734
Total number of homes under construction, at the end of the period
Totalt antal bostäder i produktion, vid periodens slut
6,105 5,327 6,105 5,327 6,105 6,333
Share of sold homes under construction, at the end of the period
Andel sålda bostäder i produktion, vid periodens slut
64% 71% 64% 71% 64% 72%
Number of repurchased homes in the balance sheet, at the end of the period
Antal återköpta bostäder i egen balansräkning, vid periodens slut
84 50 84 50 84 33

Brf Regissören

Trollhättan

Property development

Net sales and operating profit from operations are derived from acquisitions, developing, 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.

July – September 2018

During the third quarter 2018 net sales were SEK 217 million (131) and operating profit was SEK 38 million (-3). The increase in operating profit is due to improved profit in wholly and partly owned companies as well as capital gains from property divestitures.

January – September 2018

During the period January-September 2018 net sales were SEK 544 million (896) and operating profit was SEK 101 million (92). Profit from partly owned companies was SEK 75 million (59) during the period. 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.

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 1,147 million (900) and investment property at SEK 973 million (840).

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.

Peab has signed a rental agreement with the gym chain Actic that will move its headquarters and open a new gym in a new building in Ulriksdal, Solna. The total 2,600 square meters will consist of 1,150 square meters office space and the rest will be a gym on two floors. Peab will invest around SEK 280 million in the eleven story building. The three top floors will be offices and a gym and the other eight floors will be a garage with 475 parking spaces. The building is expected to be completed in the summer of 2020.

All major property projects are presented in the table below.

Property projects

Completed projects Location Rentable area in m2 Degree rented, %
Recognized value, MSEK
Färdigställda projekt Ort Uthyrningsbar
yta, m2
Uthyrningsgrad, %
Bokfört värde, Mkr
Hotel Västerås Hotell Västerås 14,500 100 509
Businesspark Ängelholm Företagspark Ängelholm 60,800 90 240
Businesspark Ljungbyhed Företagspark Ljungbyhed 76,100 60 77
Offices Helsinki Kontor Helsingfors 9,300 100 278
Offices Sigtuna Kontor Sigtuna 3,600 78 66
Other completed projects
Övriga färdigställda projekt
368
Total Summa 1,538
of which operations property varav driftsfastigheter 848
of which investment property varav förvaltningsfastigheter 690
Ongoing projects Location Rentable area in m2 Degree rented, % Recognized value, MSEK Total investment at completion, MSEK Timepoint of completion
Level of completion, %
Pågående projekt Ort Uthyrningsbar
yta, m2
Uthyrningsgrad, % Bokfört värde, Mkr Beslutad investering, Mkr Tidpunkt färdigställande
Färdigställande-grad, %
Offices Solna Kontor Solna 12,400 100 238 453 Q4-2019 53
Offices Malmö Kontor Malmö 4,900 68 61 185 Q1-2020 33
Offices Helsingborg Kontor Helsingborg 4,500 100 35 117 Q1-2020 30
Offices and parking Helsinki Kontor och parkering Helsingfors 7,600 27 192 342 Q1-2019 56
Offices and parking Solna Kontor och parkering Solna 2,600 100 8 281 Q2-2020 3
Other ongoing projects Övriga pågående projekt 48
Total Summa 582
of which operations property varav driftsfastigheter 299
of which investment property varav förvaltningsfastigheter 283

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 30 September 2018 1): SEK 5,145 million (4,862)
Peab’s portion of unrecognized fair value exclusive tax 1): SEK 324 million (279)
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 30 September 2018 1): SEK 3,244 million (2,558)
Peab’s portion of unrecognized fair value exclusive tax 1): SEK 190 million (135)
Major ongoing projects: Munkebäck, Gothenburg Rentable area 14,800 m, Kungsängen, Upplandsbro Rentable area 8,800 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 30 September 2018: SEK 1,852 million (1,847)

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 30 September 2018: SEK 940 million (785)
Major ongoing projects: 29 floor office building, The Point, Rentable area 20,000 m2

1) Valued at market price 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.