ALM Equity AB (publ): Year-end Report 2021

Q4

Y E A R - E N D R E P O R T

JA NUA RY- DECEM BER 2021

EVENTS DURING THE QUARTER

• ALM Equity and Corem Property Group AB signed a letter of intent for the joint development of rental accommodation for self-management. The initial building rights portfolio will be around 24,000 rental units.
• An Extraordinary General Meeting resolved to distribute 3,188,961 ordinary shares in Svenska Nyttobostäder AB (publ) to ALM Equity's ordinary shareholders.
• ALM Equity sold 3,850,000 ordinary shares in Svenska Nyttobostäder AB (publ) at a price of SEK 101 per share, with a sales value of around SEK 389 million. Following the sale, ALM Equity holds 45% of the capital and 49% of the voting rights in Svenska Nyttobostäder.
• ALM Equity reclassified its holding in Svenska Nyttobostäder as an associated company, which led to a profit of SEK 3.1 billion for the quarter, attributable to the valuation of the acquisition at fair value.

EVENTS AFTER THE END OF THE PERIOD

• ALM Equity and Corem Property Group signed an agreement to form a joint management company with the Klövern brand. The deal comprises around 24,000 building rights, of which around 11,000 are from ALM Equity. The transaction is expected to result in a profit of around SEK 2 billion, which will be realized during the first half of 2022.
• ALM Equity decided to integrate the Financing business area's operations into the Group staff unit.
• The Board of Directors proposes a dividend of 1 preference share per 100 ordinary shares through a bonus issue instead of a cash dividend, corresponding to a redemption value of
  SEK 1.20 (1.20) per ordinary share.
• The Board further proposes a cash dividend of SEK 8.40 (8.40) per preference share to be paid at SEK 2.10 (2.10) quarterly.

CONSOLIDATED KPIS

	2021	2020	2021	2020
Summary	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net sales, SEK m	556	851	2,096	1,759
Profit/loss for the period, SEK m	3,207	45	3,423	229
Return on equity (ordinary shares), %	51	1	54	4
Equity/assets ratio, %	54	40	54	40
Cash and cash equivalents, SEK m	1,954	722	1,954	722
Equity, SEK m	7,154	3,790	7,154	3,790
Balance sheet total, SEK m	13,132	9,465	13,132	9,465

	2021	2020	2021	2020
Key figures per share	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Adjusted net asset value*, per ordinary share, SEK	986	N/A	986	N/A
Stock market price on the balance sheet date, SEK	986	700	986	700
Earnings per ordinary share before dilution, SEK	307.80	1.94	314.42	10.53

*Adjusted net asset value is based on the actual net asset value adjusted for the estimated market value of ALM Equity's activities. For further information on how this value is calculated, see page 5.

CEO'S STATEMENT

Corporate construction continues to create value

We ended this intense and successful year by ­

re-clarifying how our business model creates value.

We have developed our value creation over many years and we do our best to make this visible through, for example, the formation and listing of Svenska Nyttobostäder. When we reduced our ownership in Q4 and no longer saw ourselves as controlling the company, value creation was also fully visible in our reported earnings.

After the end of Q4, we launched our next corporate construction phase, a joint management company, this time together with Corem Property Group. ALM Equity develops, builds and realizes values in companies. This is our business model - and we will not settle down.

WE RELEASED AND REALIZED SEK 3 BILLION

In Q4, we distributed ordinary shares in Svenska Nyttobostäder to ALM Equity's shareholders and sold part of our holding. In total, just over seven million ordinary shares in Svenska Nyttobostäder have gained new owners. For Svenska Nyttobostäder, this means wider ownership and better conditions for trading and liquidity in the shares, which in itself is positive. For us, this means that we hold 45% of the capital and 49% of the votes in the company. Based on this, we have made the assessment that our influence has decreased, and we have thus reclassified the holding as an associated company, which means that we no longer consolidate Svenska Nyttobostäder's operations. In accounting terms, these transactions and the reclassification resulted in a profit for the quarter of around SEK 3.1 billion for ALM Equity. It is an important step in how we view our role. We must be strong owners who contribute ideas, business and capital to create opportunities for our companies to stand on their own two feet in the long-term.

The transaction improves ALM Equity's financial position with better key figures. It is increasingly important for Svenska Nyttobostäder to be classified as an associated company, giving it better conditions to be judged on its own merits, strengthen its own credit rating and thereby reducing its financing costs in the long run.

KLÖVERN WILL BE ONE OF SWEDEN'S LARGEST ...

In the previous report, I was able to tell you about the exciting deal we planned with Corem Property Group. This work has continued, and on 25 February, we announced the joint management deal.

We decided to take the opportunity to build a joint company and build on Klövern, a strong brand with a focus on the development and management of space-efficient managed properties in the Stockholm and Mälardalen regions. We will initially own 49% and Corem Property Group 51%.

Joakim Alm, CEO, ALM Equity

The deal means that during the first half of the year we will report a capital gain of around SEK 2 billion after the transfer of our 11,000 building rights.

In addition to the building rights, our contribution is a capital injection of SEK 900 million and an opportunity for some of our wonderfully skilful employees in Project Development to create the core of the new company. They will then have the opportunity of building up their own project development organization within the new partnership, which will be responsible for developing and completing the 24,000 building rights that will be included in the portfolio in connection with the deal.

We expect that the new management company Klövern to be one of Sweden's largest property managers within 10 years.

The next step is for the joint company to consolidate its structure and develop the property portfolio with a view to being listed on the stock exchange. ALM Equity will then, through the Property Management business area, become the majority owner of two listed property companies.

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ALM Equity

PROPERTY		PROJECT			CONSTRUCTION		DIGITAL SERVICES
MANAGEMENT		DEVELOPMENT			MANAGEMENT
				BUSINESS AREA
BUSINESS AREA		BUSINESS AREA			BUSINESS AREA

ALM Equity	ALM Bostad	2A Entreprenad	Your Block
Own Management
Svenska	Småa	Bomodul
Nyttobostäder
Klövern	Järntorget
	Abacus
			Group company
			Associated companies

BACK TO OUR ROOTS IN PROJECT DEVELOPMENT

The deal with Corem Property Group to build up the joint company Klövern means that the Project Development business area will transfer 11,000 building rights to this company and then indirectly to the Property Management business area. In addition to the remaining delivery to Svenska Nyttobostäder, there are around 2,000 building rights left, which will be developed for the private market with certain commercial elements. We know this business - it's where we come from. We also see future company development opportunities here, but let me come back to that.

Besides delivering the remaining 4,400 or so residential units to Svenska Nyttobostäder by 2025, the Project Development business area will also continue to work with larger, more complex projects that also include commercial properties. A focus with great potential, that we believe is now sufficiently mature to lock into our business portfolio.

Building a structure for growth in Construction Management Following the integration of Järntorget, we have also begun building a structure to achieve growth in the Construction Management business area. In the coming years, they will have major commitments for deliveries to both Svenska Nyttobostäder and opportunities to deliver to the new company Klövern and future residencies to the private market. We believe that there are good opportunities to develop and create growth in this type of business, especially our eco-friendly modular business in Bomodul.

WE ARE COMPANY BUILDERS AND VALUE CREATORS

We acquired Småa and then Järntorget. We listed Svenska Nyttobostäder and will soon be the owner of another large, listed, property company. We see the needs, take on trends, look for opportunities and package our assets in new business.

I was asked the other day how, after the launch of Svenska Nyttobostäder, we were able to "conjure up" another 11,000 building rights suitable to form the basis for a new property management company. After all, only 4,500 were added in connection with the acquisition of Järntorget. Of course, this does not happen by itself. Certainly about 500 have been added from new land allocations, but above all we have made an incredible effort to go through the entire portfolio and process each individual building right. This means that by doing this we have found all 11,000 building rights which now means we have the opportunity of being part of the journey to develop one of the largest listed property companies. I am really proud that in just over a year we will have made more than SEK 5 billion visible to our shareholders through our management transactions.

We may not be able to continue delivering billion-kronor profits every quarter in future, but we will continue to develop businesses and pick out value. With my fantastic employees and the trust shown in us by our owners and financiers, my ambition is that we will continue to develop value for ALM Equity's shareholders.

Joakim Alm, CEO

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This is ALM Equity

ALM Equity develops and invests in business in the property sector. The business is structured in five business areas with independent companies and brands in property management, project development, construction management, financing and digital services.

VISION

ALM Equity will be the most profitable and innovative Group in certain parts of the Swedish property sector.

BUSINESS CONCEPT

ALM Equity will invest and develop business in the Swedish property sector based on the future needs of the market. Through active owner- ship, ALM Equity drives the initiatives that are judged to create the highest risk-adjusted return on equity for each individual business, and at the next level creates the maximum risk-adjusted return on equity for shareholders.

OBJECTIVE

Maximize risk-adjusted return on equity within each business through a flexible business model with an adaptable financing model and with a sustainable investment strategy.

PROFIT/LOSS PER BUSINESS AREA JANUARY-DECEMBER 2021	(ACCORDING TO SEGMENT REPORTING)*
Property Management	Project Development	Construction Management

93%	5%	2%
SEK 3,553 MILLION	SEK 188 MILLION	SEK 91 MILLION
SHARE OF ADJUSTED NET ASSET VALUE**
Property Management	Project Development	Construction Management
27%	45%	11%

SEK 3.3 BILLION

SEK 5.5 BILLION

SEK 1.4 BILLION

• Profit per business area excluding appropriations and tax.
• Adjusted net asset value is based on the actual net asset value adjusted for the estimated market value of ALM Equity's activities. For further information on how this value is calculated, see pages 5 and 29.
  In addition to the values in the business areas, the parent company is valued at SEK 2.0 billion, corresponding to 17% of the total net asset value.

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AFFÄRSOMR ÅDE

Market valuation and adjusted net asset values

The holding in Svenska Nyttobostäder has its market value assessed continually after the listing in 2020, which makes the values created in that transaction visible. From 2021, value created in other holdings in the Group will also be made visible through external valuation carried out by PwC.

Estimated market values (SEK billion)	31/12/2021	30/09/2021	30/06/2021	31/03/2021
Property Management business area	3.3	3.8	3.8	3.8
Project Development business area	5.5	5.1	4.7	4.1
Construction Management business area	1.4	1.3	1.1	1.1
Parent company's assets	2.0	1.6	1.7	1.0
Total market value	12.2	11.8	11.3	10.0

The market value is distributed between ALM Equity's shareholders as follows: SEK 1.7 billion to

preference­ shareholders and SEK 10.5 billion to ordinary shareholders.

This corresponds to an adjusted net asset value per ordinary share of SEK 986, which is the same as the share price on 31 December 2021. Since the previous quarter, ALM Equity's shareholders have received dividends corresponding to

SEK 367 million and the market value has increased by SEK 0.4 billion. At the same time, the share price has risen to SEK 986 per ordinary share, which corresponds to the same level as the adjusted net asset value. A possible reason why the share price rose sharply during the quarter may be the letter of intent signed with Corem Property Group during the period. No such effects are included in the substance evaluation.

The year's total unrealized value changes in the market valuation of SEK 1.5 billion from the activities are attributable to ordinary shareholders.

The remainder comes from new issues where around SEK 0.3 billion in ordinary share capital and

SEK 0.4 billion in preference share capital has been added.

VALUATION METHOD

In the Property Management business area, the holding in Svenska Nyttobostäder has been valued at the share price as of 31 December 2021. No value has been attributed to the management business in the other part of the ALM Property Management business area, where there are agreements for the acquisition of around 1,000 managed properties. Nor has any value been attributed to the Digital Services business area.

For the Project Development and Construction Management business areas, the holding has been valued externally by PwC, which has carried out a discounted cash flow valuation. The result of the discounted cash flow valuation has been reconciled using a relative valuation based on price-­related key figures for comparable companies.

For the Project Development business area, a required return on equity of 11.9% has been applied up to and including 2027. For 2028 onwards, a return requirement of 14.9% has been used to reflect a greater risk in the future building rights portfolio. This valuation takes into account the fact that there is co-ownership in the form of preference shareholders who have invested in parts of the projects.

For the Construction Management business area, a required rate of return of 13.2% was used throughout the period. In the valuation, the sole customer is assumed to be ALM Småa Bostad in an ongoing business relationship. As a result, the customer concentration has not been considered in the valuation.

The valuation is updated quarterly based on updated forecasts and assumes a value interval of +/- 5% where the value is adjusted when the return value increases/decreases by at least 5% from the initial valuation which was carried out with a value date of 31 December 2021.

The valuation is based on assumptions about future development from facts and the prevailing world situation at the time of the valuation, it is not to be seen as a forecast. This means that it is not established values that are ­promised to fall, but they can change based on events that affect the operations.

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