Sweden's Hufvudstaden Posts Loss From Write Downs

STOCKHOLM-A 6% markdown in the property portfolio of Swedish listed firm Hufvudstaden, controlled by the Lundberg group, brought a 2009 net loss of SEK357 million (€36.2 million), its second annual deficit in a row but 20% narrower than 2008. Operating profit ticked 4.6% higher and the group CFO told PIE that prospects for a profit this year are good, with letting activity picking up now.

The group, which manages just over SEK18 billion (€1.82 billion) of office and retail property in central locations of Stockholm and Gothenburg, is to recommend an increase in the ordinary dividend to SEK2.10 per share from SEK1.90 last year. It reported an operating result before changes in value of SEK915 million (€92.7 million), mainly attributable to higher rents and lower maintenance costs. Though the portfolio depreciation, lower than the nearly 9% in 2008, pushed it into loss, the net result was also strongly supported by a sharp decrease in taxation – to just SEK121 million as against SEK576 million for 2008.

Hufvudstaden Head of Finance and board member Magnus Jacobson told PIE that the prospects for 2010 are quite positive: “There are two components for 2010: In yields, we believe they have increased through 2008 and 2009 and that we are at the top of the levels now. The other component is rents and there we think we are at or close to the bottom and there is not that much left for further decreases… We don’t see another loss for 2010. If you take away those value changes the most likely outcome is a return to profit this year.”

Hufvudstaden has net asset value per share of around SEK62 at the end of 2009, and the stock is currently trading on the exchange at around SEK55, around an 11% discount. The end-2008 NAV had been SEK66. At end-2009, the average yield across the portfolio was 5.3%, while the rental vacancy level rose to 6.2% from 5.3% at end-2008. Its equity ratio at end-December was little changed at 55%, and the net loan-to-value ratio also unaltered at 16%.

Jacobson said trading in the first quarter of 2010 has continued a more positive tone seen already late last year. “We are at or close to the bottom of the rent downturn so we can already see more action in the rental markets now,” he said. “Therefore we should be able to reduce vacancies with rents still at good levels so we are quite positive about 2010. We hope to also be able to decrease the vacancy level. Occupiers started to move in late 2009 and we can see now at the start of 2010 that there is much more interest in space that at this time last year.”