Business area Project Development

  • Business area Project Development is responsible for the Group’s acquisition, development, maintenance and management as well as divestment of residential 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

October – December 2017

Operative net sales for the fourth quarter 2017 in business area Project Development amounted to SEK 2,509 million (2,385). Operative operating profit amounted to SEK 267 million (257).

January – December 2017

Operative net sales for 2017 in business area Project Development amounted to SEK 8,629 million (7,639). Operative operating profit increased to SEK 811 million (622).

 

 

Reclassification of property

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 year amounted to SEK 10,024 million (10,281).

Capital employed

MSEK 31 Dec
2017		 31 Dec
2016
Mkr 31 dec
2017		 31 dec
2016
Operations property Driftsfastigheter 1,036 –
Investment property Förvaltningsfastigheter 871 –
Project and development property Projekt- och exploateringsfastigheter 6,439 7,007
  of which housing development rights   varav bostadsbyggrätter 5,116 4,125
  of which commercial development rights   varav kommersiella byggrätter 627 675
  of which projects under construction   varav projekt under uppförande 383 736
  of which completed projects   varav färdigställda fastigheter 170 1,246
  of which other   varav övrigt 143 225
Participation in joint ventures Andelar i joint ventures 912 682
Loans to joint ventures Utlåning till joint ventures 1,383 1,694
Working capital and other Rörelsekapital och övrigt -617 898
Total Summa 10,024 10,281

 

Key ratios

Oct-Dec
2017		 Oct-Dec
2016		 Jan-Dec
2017		 Jan-Dec
2016
Okt-dec
2017		 Okt-dec
2016		 Jan-dec
2017		 Jan-dec
2016
Operative net sales 1), MSEK Operativ nettoomsättning 1), Mkr 2,509 2,385 8,629 7,639
   of which Property Development    varav Fastighetsutveckling 117 148 1,013 1,385
   of which Housing Development 1)    varav Bostadsutveckling 1) 2,392 2,237 7,616 6,254
Operative operating profit 1), MSEK Operativt rörelseresultat 1), Mkr 267 257 811 622
   of which Property Development    varav Fastighetsutveckling 6 20 98 89
   of which Housing Development 1)    varav Bostadsutveckling 1) 261 237 713 533
Operative operating margin 1), % Operativ rörelsemarginal 1), % 10.6 10.8 9.4 8.1
  of which Property Development    varav Fastighetsutveckling 5.1 13.5 9.7 6.4
  of which Housing Development 1)    varav Bostadsutveckling 1) 10.9 10.6 9.4 8.5
Capital employed at the end of the period, MSEK Sysselsatt kapital vid periodens slut, Mkr 10,024 10,281 10,024 10,281
Orders received, MSEK Orderingång, Mkr 2,941 3,661 8,496 8,245
Order backlog, MSEK Orderstock, Mkr 8,198 6,853 8,198 6,853
Number of employees at the end of the period Antal anställda vid periodens utgång 361 321 361 321

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

Housing development

October – December 2017

Continued strong demand on the housing market has had a positive effect on both net sales and operating profit for the fourth quarter. Operative net sales increased by seven percent and amounted to SEK 2,392 million (2,237). Operative operating profit increased to SEK 261 million (237) and the operative operating margin improved to 10.9 percent (10.6).

The number of start-ups of our own developed homes during the fourth quarter amounted to 1,068 units (1,003) with a good geographic spread. The number of sold homes was 937 (575). During the fourth quarter, which is seasonally a strong quarter, activity has been low in Stockholm while a lot has been going on in other areas of Sweden as well as in Finland.

January – December 2017

Continued strong demand on the housing market has had a positive effect on both net sales and operating profit in 2017. Operative net sales amounted to SEK 7,616 million (6,254), an increase of 22 percent. Operative operating profit increased to SEK 713 million (533) and the operative operating margin improved to 9.4 percent (8.5).

The number of start-ups of our own developed homes has increased during the year and amounted to 3,048 units (2,651) with a good geographic spread. The number of sold homes during the year was 2,734 (2,044). The number of own developed homes in production at the end of the year was 6,333 (4,381). The level of sold homes in production was 72 percent compared to 69 percent at year-end 2016. The number of repurchased homes per 31 December 2017 was 33 (50).

Peab develops and builds homes throughout Sweden as well as in most parts of Norway and Finland. Peab mainly builds homes in the middle-priced segment and we see that there is still great needs for new housing in this range. In some areas there is an excess supply of newly produced, more expensive homes. This, together with tougher financing terms and greater uncertainty, has meant it currently takes longer to sell homes than before, primarily in some parts of the Stockholm region. There has been a high level of production starts and sales during the fourth quarter. While activity has been low in Stockholm there is a lot going on in other areas of Sweden as well as in Finland.

Development rights for housing

Number, approx. 31 Dec
2017		 31 Dec
2016
Antal, cirka 31 dec
2017		 31 dec
2016
Development rights on our own balance sheet Byggrätter i egen balansräkning 20,700 17,300
Development rights via joint ventures Byggrätter via joint ventures 4,800 3,900
Development rights via options etc. Byggrätter via optioner m.m. 7,100 7,200
Total Totalt 32,600 28,400

Own housing development construction

Oct-Dec
2017		 Oct-Dec
2016		 Jan-Dec
2017		 Jan-Dec
2016
Okt-dec
2017		 Okt-dec
2016		 Jan-dec
2017		 Jan-dec
2016
Number of housing starts during the period Antal under perioden produktionsstartade bostäder 1,068 1,003 3,048 2,651
Number of sold homes during the period Antal under perioden sålda bostäder 937 575 2,734 2,044
Total number of homes under construction, at the end of the period Totalt antal bostäder i produktion, vid periodens slut 6,333 4,381 6,333 4,381
Share of sold homes under construction, at the end of the period Andel sålda bostäder i produktion, vid periodens slut 72% 69% 72% 69%
Number of repurchased homes in the balance sheet, at the end of the period
Antal återköpta bostäder i egen balansräkning, vid periodens slut
 33 50 33 50

Vallastaden

Linköping

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.

October – December 2017

During the fourth quarter 2017 net sales were SEK 117 million (148) and operating profit was SEK 6 million (20). No major property transactions have occurred during the quarter.

January – December 2017

During the year net sales were SEK 1,013 million (1,385) and operating profit was SEK 98 million (89).

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 were divested during the first quarter. 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 during the first quarter 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. The second quarter 2016 included the partial sales of properties in Hyllie, Malmö with an underlying property value of SEK 777 million which affected operating profit by SEK 104 million. The total effect on profit of divestitures of property and joint venture companies in 2017 amounted to SEK 94 million compared to SEK 136 million in 2016.

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

The capital employed in Property Development  includes real estate for a reported value of SEK 1,036 million which consists in part of an office building in Helsinki, Finland, office buildings in a business park in Ängelholm as well as an office building in Solna under construction. Investment property amounts to SEK 840 million and consists primarily of a hotel in Västerås, 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. Peab will gather all its operations in Stockholm in this office building. The office building will be ready to move into in the fourth quarter of 2019.

Peab is investing EUR 30 million in the second office building in Sockenbacka Business Park in Helsinki. Peab completed Ultimes Business Garden I in 2016 and it is fully occupied with several different renters in addition to Peab, which has its headquarters in Finland there. The second office building, Ultimes Business Garden II, is a seven story high office building with about 7,900 m2 office space for rent and 150 parking spaces. Construction has begun and the building will be ready in the beginning of 2019. Peab intends to develop a total of six office buildings in the area over time, comprising some 50,000 m2.

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 of property that effect reported values in joint venture companies are not recognized 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.

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 Dec 2017 1): SEK 4,978 million (4,682)

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 Mälardalen region, Gothenburg and the Öresund region
Book value on properties 31 Dec 2017 1): SEK 2,830 million (2,234)

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 Dec 2017: SEK 1,854 million (1,870)

Point Hyllie Holding AB

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

Peab’s share: 50 percent
Partner: Volito
Geography: Hyllie, Malmö
Book value on properties 31 Dec 2017: SEK 818 million (709)

1) Valued at fair value in joint ventures. Changes in market values of property that effect reported values in joint venture companies are not recognized in Peab’s profit.