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
October – December 2018
Net sales for the fourth quarter 2018 in business area Project Development amounted to SEK 1,904 million (2,205). Operating profit amounted to SEK 245 million (246).
January – December 2018
Net sales for 2018 in business area Project Development amounted to SEK 7,844 million (8,343). Operating profit amounted to SEK 785 million (804).
Capital employed in Project Development at the end of the year amounted to SEK 12,984 million (9,986). The increase is due to investments in project and development properties, higher activity in our own housing projects in Finland and Norway as well as investments in operations and investment properties in Property Development.
Distansen City Block
Solna
Capital employed
| MSEK | 31 Dec 2018 | 31 Dec 2017 | |
| Mkr | 31 dec 2018 | 31 dec 2017 | |
| Operations property | Driftsfastigheter | 915 | 1,036 |
| Investment property | Förvaltningsfastigheter | 589 | 871 |
| Project and development property | Projekt- och exploateringsfastigheter | 9,685 | 7,612 |
| of which housing development rights | varav bostadsbyggrätter | 5,394 | 5,116 |
| of which commercial development rights | varav kommersiella byggrätter | 656 | 627 |
| of which on going housing projects | varav pågående bostadsprojekt | 2,034 | 1,173 |
| of which on going commercial projects | varav pågående kommersiella projekt | 1,227 | 383 |
| of which completed projects | varav färdigställda fastigheter | 14 | 170 |
| of which other | varav övrigt | 360 | 143 |
| Participation in joint ventures | Andelar i joint ventures | 1,019 | 912 |
| Loans to joint ventures | Utlåning till joint ventures | 1,466 | 1,383 |
| Working capital and other | Rörelsekapital och övrigt | -690 | -1,828 |
| Total | Summa | 12,984 | 9,986 |
Key ratios
| Oct-Dec 2018 | Oct-Dec 2017 | Jan-Dec 2018 | Jan-Dec 2017 | ||
| Okt-dec 2018 | Okt-dec 2017 | Jan-dec 2018 | Jan-dec 2017 | ||
| Net sales, MSEK | Nettoomsättning, Mkr | 1,904 | 2,205 | 7,844 | 8,343 |
| of which Property Development | varav Fastighetsutveckling | 194 | 117 | 738 | 1,013 |
| of which Housing Development | varav Bostadsutveckling | 1,710 | 2,088 | 7,106 | 7,330 |
| Operating profit, MSEK | Rörelseresultat, Mkr | 245 | 246 | 785 | 804 |
| of which Property Development | varav Fastighetsutveckling | 69 | 6 | 170 | 98 |
| of which Housing Development | varav Bostadsutveckling | 176 | 240 | 615 | 706 |
| Operating margin, % | Rörelsemarginal, % | 12.9 | 11.2 | 10.0 | 9.6 |
| of which Property Development | varav Fastighetsutveckling | 35.6 | 5.1 | 23.0 | 9.7 |
| of which Housing Development | varav Bostadsutveckling | 10.3 | 11.5 | 8.7 | 9.6 |
| Capital employed at the end of the year, MSEK | Sysselsatt kapital vid årets utgång, Mkr | 12,984 | 9,986 | 12,984 | 9,986 |
| Orders received, MSEK | Orderingång, Mkr | 2,102 | 2,941 | 6,681 | 8,496 |
| Order backlog, MSEK | Orderstock, Mkr | 7,134 | 8,198 | 7,134 | 8,198 |
| Number of employees at the end of the year | Antal anställda vid årets utgång | 379 | 361 | 379 | 361 |
Housing development
October – December 2018
Net sales decreased by 18 percent in Housing Development due to the decline in the housing market and amounted to SEK 1,710 million (2,088). Operating profit amounted to SEK 176 million (240) and the operating margin was 10.3 percent (11.5).
The number of start-ups of our own developed homes during the fourth quarter amounted to 622 units (1,068) with a good geographic spread where most of the production starts are outside of the capital city areas. The number of sold homes was 660 (937). The slowdown on the tenant-owned housing market has affected even the fourth quarter as well through less activity in Sweden, particularly in Stockholm.
January – December 2018
Net sales decreased by three percent in Housing Development and amounted to SEK 7,106 million (7,330). Operating profit amounted to SEK 615 million (706) and the operating margin was 8.7 percent (9.6).
The number of start-ups of our own developed homes during the year amounted to 2,213 units (3,048) with a good geographic spread in Sweden as well as in Norway and Finland. The number of sold homes during 2018 was 1,825 (2,734). The number of own developed homes in production at the end of the year was 6,231 (6,333). The level of sold homes in production was 63 percent compared to 72 percent at year-end 2017. The number of repurchased homes per 31 December 2018 was 104 (33) and was spread over the three countries.
At the end of the year capital employed had increased in Housing Development due to higher investments in project and development property and greater activity in our own housing developments in Norway and Finland, which remain on the balance sheet until completion.
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 1,446 per 31 December 2018.
Development rights for housing
| Number, approx. | 31 Dec 2018 | 31 Dec 2017 | |
| Antal, cirka | 31 dec 2018 | 31 dec 2017 | |
| Development rights on our own balance sheet | Byggrätter i egen balansräkning | 21,300 | 20,700 |
| Development rights via joint ventures | Byggrätter via joint ventures | 5,000 | 4,800 |
| Development rights via options etc. | Byggrätter via optioner m.m. | 9,100 | 7,100 |
| Total | Totalt | 35,400 | 32,600 |
When in time ongoing housing projects in Norway and Finland will be completed
Own housing development construction
| Oct-Dec 2018 | Oct-Dec 2017 | Jan-Dec 2018 | Jan-Dec 2017 | ||
| Okt-dec 2018 | Okt-dec 2017 | Jan-dec 2018 | Jan-dec 2017 | ||
| Number of housing starts during the period | Antal under perioden produktionsstartade bostäder | 622 | 1,068 | 2,213 | 3,048 |
| Number of sold homes during the period | Antal under perioden sålda bostäder | 660 | 937 | 1,825 | 2,734 |
| Total number of homes under construction, at the end of the period | Totalt antal bostäder i produktion, vid periodens slut | 6,231 | 6,333 | 6,231 | 6,333 |
| Share of sold homes under construction, at the end of the period | Andel sålda bostäder i produktion, vid periodens slut | 63% | 72% | 63% | 72% |
| Number of repurchased homes in the balance sheet, at the end of the period | Antal bostäder i egen balansräkning, vid periodens slut | 104 | 33 | 104 | 33 |
Monopolet Condominiums
Södertälje
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.
October – December 2018
During the fourth quarter 2018 net sales were SEK 194 million (117) and operating profit was SEK 69 million (6). The increase in operating profit is due to improved profit in wholly and partly owned companies.
January – December 2018
During 2018 net sales were SEK 738 million (1,013) and operating profit was SEK 170 million (98). The increase in operating profit is primarily due to improved profit from wholly owned and partially owned companies. Profit from partly owned companies was SEK 101 million (72) during the year. 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 915 million (1 036) and investment property at SEK 589 million (871).
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.
Peab has divested Ångkraftverket 2 in Västerås which is rented by Steam Hotel and Kokpunkten Actionbad. Centur, owned equally by Peab and Balder, purchased the property. The hotel and water park was developed by Peab. The transaction had no material effect on operating profit but it reduced capital employed by around SEK 800 million.
All major property projects are presented in the table below.
Property projects
| Completed projects | Location | Area in m2 | Degree rented, % | Recognized value, MSEK | |||||
| Färdigställda projekt | Ort | Uthyrningsbar yta, m2 | Uthyrningsgrad, % | Bokfört värde, Mkr | |||||
| Businesspark | Ängelholm | Företagspark | Ängelholm | 60,800 | 90 | 241 | |||
| Businesspark | Ljungbyhed | Företagspark | Ljungbyhed | 76,100 | 61 | 91 | |||
| Offices | Helsinki | Kontor | Helsingfors | 9,300 | 100 | 276 | |||
| Tenancy | Malmö | Hyresrätt | Malmö | 4,600 | 100 | 142 | |||
| Offices | Sigtuna | Kontor | Sigtuna | 3,600 | 78 | 66 | |||
| Other completed projects | Övriga färdigställda projekt | 24 | |||||||
| Total | Summa | 840 | |||||||
| of which operations property | varav driftsfastigheter | 541 | |||||||
| of which investment property | varav förvaltningsfastigheter | 299 | |||||||
| Ongoing projects | Location | 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 | 287 | 453 | Q4-2019 | 53 |
| Offices | Malmö | Kontor | Malmö | 4,900 | 68 | 87 | 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 | 240 | 342 | Q1-2019 | 56 |
| Other ongoing projects | Övriga pågående projekt | 15 | |||||||
| Total | Summa | 664 | |||||||
| of which operations property | varav driftsfastigheter | 374 | |||||||
| of which investment property | varav förvaltningsfastigheter | 290 | |||||||
Peab’s partially owned company Acturum divests properties
Acturum signed a contract in December 2018 with Fastator and Offentliga Hus to sell all the remaining property. Acturum was founded by Peab and FAM – The Wallenberg Foundations’ holding company – as equal partners in 2013. The company acquired a property portfolio in Södertälje from Astra Zeneca which had decided to close up its research operations in the area. Acturum has since developed a number of properties and is now entering a new phase focused primarily on management. The transfer is planned for the second quarter of 2019 and Peab’s share of the revenue is expected to be at least SEK 120 million. The revenue will be recognized in the second 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.
Change in ownership of Tornet Bostadsproduktion
Ownership of Tornet has changed since Folksam, Peab and Balder acquired Riksbyggen’s shares in the company. Peab and Balder already owned 31 percent each and Folksam owned 19 percent. In December 2018 the remaining shareholders acquired Riksbyggen’s 19 percent shareholding so that ownership is equally divided, giving each shareholder a third of the company. Peab has accordingly acquired 2.3 percent of the shares in Tornet for the purchase price of SEK 17 million. In addition, the three shareholders have issued owner’s loans to Tornet for SEK 100 million each.
Significant joint ventures
Fastighets AB Centur
Own, manage and develop commercial property and housing.
Peab’s share: 50 percent
Partner: Balder
Location: Stockholm, the Mälardalen region, Gothenburg and the Öresund region
Recognized value on properties 31 December 2018 1): SEK 6,085 million (4,978)
Peab’s portion of unrecognized fair value exclusive tax 1): SEK 353 million (298)
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: 33 percent
Partner: Folksam and Balder
Location: Stockholm, the Mälaren region, Gothenburg and the Öresund region
Recognized value on properties 31 December 2018 1): SEK 3,428 million (2,830)
Peab’s portion of unrecognized fair value exclusive tax 1): SEK 212 million (166)
Major ongoing projects: Munkebäck, Gothenburg Rentable area 14,800 m2´, 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 31 December 2018: SEK 1,849 million (1,854)
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 December 2018: SEK 1,008 million (818)
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.