Sweden's listed Hemsö, which specialises in commercial property with public sector tenants at home and in Germany and Finland, said 2017 net profit rose to SEK2.59bn (€263m) from €238m a year earlier. Domestic housing market worries in fourth quarter have not had an impact.
In a results release, Hemsö CEO Nils Styf said profit from 2017 property management rose 18% to SEK1.314bn (€133m). Change in the value of properties amounted to an increase of €171m, with realised changes, which were negative, coming as a result of lower yields in Sweden, Germany and Finland, but also attributed to completed projects and new leasings. The valuation yield across the portfolio at year end was 5.2%, down from 6.0% in 2016. Loan to value slipped slightly to 62.9%. Operating profit for the year dropped 1% to €134m.
Hemsö Fastighets reported rental income rising to €240m from €222m, profit from property management up to €133m from €113m, and the portfolio value rising by about €500m equivalent from 2016's €3.4bn. Several development projects with long leases were completed during the year which is the main reason Hemsö’s rental duration increased to over nine years, Styf added.
The group's portfolio is made up of nursing homes, educational facilities, health care and facilities rented by the justice system, including police stations. "Our vision is to be a long-term property partner to the public sector and we expect a sustained and stable need over time for further investment in properties for public use," Styf said.
The Swedish property market in the fourth quarter was characterised by concern over housing. "But we have not yet seen any impact on the public properties market," Styf said. "There is of course a risk that concern and falling prices will spread to other markets. But Hemsö’s markets are driven by the long-term need for public services, which remains high, and have not been subject to the same oversupply compared with some parts of the housing market. A turbulent market could also create attractive investment opportunities for Hemsö, with its strong capital structure."