ALM Equity AB (publ): Interim report January - September 2021

Q3

I N T E R I M R E P O R T

JA NUA RY- SEP TE M BER 2 021

EVENTS DURING THE QUARTER

• ALM Equity's current bondholders approved the proposal that the company's subsidiaries should have the opportunity of using the capital market as a complement to existing sources of financing.
• Fredrik Arpe, currently CEO of Järntorget, took on the role of business area manager for the Property Management business area and is now part of ALM Equity's Group Management in his role as Deputy CEO.

CONSOLIDATED KPIS

EVENTS AFTER THE END OF THE PERIOD

• An Extraordinary General Meeting resolved to distribute 3,188,961 ordinary shares in
  Svenska­ Nyttobostäder AB to ALM Equity's ordinary shareholders.
• On behalf of ALM Equity, Erik Penser Bank has compiled an independent market valuation of Svenska Nyttobostäder's ordinary shares.
• ALM Equity and Corem Property Group AB have signed a letter of intent for the joint development of rental accommodation for self-management.
  Initially with a building rights portfolio of around 24,000 residential units.

Summary	2021	2020	2021	2020	2020
	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec
Net sales, SEK m	615	215	1,540	908	1,759
Profit/loss for the period, SEK m	98	40	216	184	229
Return on equity (ordinary shares), %	1	1	0	2	4
Equity/assets ratio, %	38	40	38	40	40
Cash and cash equivalents, SEK m	1,242	542	1,242	542	722
Equity	4,856	3,729	4,856	3,729	3,790
Balance sheet total, SEK m	12,802	9,208	12,802	9,208	9,465

Key figures per share	2021	2020	2021	2020	2020
	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec
Adjusted net asset value*, per ordinary share, SEK	948	N/A	948	N/A	N/A
Share price on the closing day, SEK	786	640	786	640	700
Earnings per ordinary share, SEK	2.55	1.14	0.43	8.61	10.58

• Adjusted net asset value is based on the actual net asset value adjusted for the estimated market value of the operations at ALM Equity. For further information on how this value is produced, see page 4.

CEO'S STATEMENT

Expanding our management business

The acquisition of Järntorget has been successful, both commercially and culturally. We are pleased with our new, skilled, colleagues and hope that everyone from Järntorget feels at home with us. After an intensive autumn with the integration of Järntorget, I can now tell you more about the next exciting project.

Following the acquisition, we analysed the potential of our ­overall building rights portfolio. In addition to the building rights being ­delivered to Nyttobostäder, we have identified around 11,000

building­ rights in Stockholm that are suitable to be managed

­properties. These are the basis for the joint management company that we now intend to form with Corem. With a joint building rights portfolio of 24,000 residential units, the new company will become one of Sweden's largest residential property managers over the next ten years. The initial portfolio is estimated to have an operating income of over SEK 2 billion when it is fully developed. Our goal, together with Corem, is to list the company on the stock market in 2022 to create a good capital structure and give it the conditions for further expansion.

RESTRUCTURING OF PROJECT DEVELOPMENT

Part of the Project Development business area will be included in the formation of the new property management company. The remaining part will focus on completing deliveries to Svenska

Nyttobostäder­and the private customer market in the Stockholm area with a portfolio comprising of almost 3,000 residential units, of which 222 were in production in Q3. This business has the same focus as JM, Besqab, Aros Bostad and various other companies. The Project Development business area is therefore continuing to develop the business that was once the basis of ALM Equity

- housing development for the private market.

PROMOTING EXTERNAL CONTRACTORS

The Construction Management business area is currently busy ­delivering to Group companies, but gradually the aim is to also

expand­ via external assignments. We see great potential in ­developing this business area through acquisitions, both to increase capacity and perform backward integration.

DIVIDEND DISTRIBUTION

After the end of the quarter, we decided on a dividend on elements of the holding in Svenska Nyttobostäder. We reduced ownership by 5.2%. The intention is to reduce ALM Equity's controlling influence so as not to consolidate the holding in Svenska Nyttobostäder. Our holding then becomes a financial asset, and we can show the values that are created more clearly. With a broader spread of ownership, there will be more trading in the shares and therefore better liquidity and more accurate pricing, which will benefit our shareholders.

external­ shoots, which when they have grown are planted in larger pots where they can bear fruit that our owners can harvest. The

businesses­ become successful when they develop independently. We take responsibility as the main owner to ensure that we deliver

according to the plan that was the basis for the spin-off.

Our valuations of our operations show how value is gradually created; the total value has increased by SEK 1.8 billion from Q1 to Q3. The change is largely due to two factors: SEK 1.1 billion from unrealized values, primarily in the Project Development business area, a part coming from the acquisition of Järntorget and

SEK 0.7 billion from newly issued shares.

I am extremely grateful to all the employees who work hard to build the business and to the owners and financiers who show ­confidence in us. I promise not to disappoint you, so full speed ahead!

DEVELOPING BUSINESSES

It is one year since the listing of Svenska Nyttobostäder andJoakim Alm, CEO we have already laid the foundation for another management

­transaction with the potential to become even larger. This is how we create shareholder value. You could compare ALM Equity to a greenhouse. We let our businesses grow, sometimes with

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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-SEPTEMBER 2021 (ACCORDING TO SEGMENT REPORTING)

Property Management

Project Development

Construction Management

15%	71%	14%
SEK 71 M	SEK 332 M	SEK 63 M
SHARE OF ADJUSTED NET ASSET VALUE*
Property Management	Project Development	Construction Management
32%	44%	11%

SEK 3.8 BN

SEK 5.1 BN

SEK 1.3 BN

• Adjusted net asset value is based on actual net asset value adjusted for the estimated market value of the activities at ALM Equity. For further information on how this value is produced, see page 4. In addition to the values in the business areas, the parent company is valued at SEK 1.6 billion, corresponding to 13% of the total net asset value.

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Market valuation and adjusted net asset values

The holding in Svenska Nyttobostäder will be continuously market-valued after the listing in 2020, which will make the values created in that transaction visible. Currently, values created in other Group holdings are also made visible through external valuations carried out by PwC.

Estimated market values (SEK billion)	30/09/2021	30/06/2021	31/03/2021
Property Management business area	3.8	3.8	3.8
Project Development business area	5.1	4.7	4.1
Construction Management business area	1.3	1.1	1.1
Parent company's assets	1.6	1.7	1.0
Total market value	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 10.1 billion to ordinary shareholders.

This corresponds to an adjusted net asset value per ordinary share of SEK 948, which corresponds to a discount of 21% compared with the share price on 30 September 2021

During Q3, the total market value increased by SEK 0.5 billion, which was through unrealized surplus values from the operations. The year's total change in value comes from SEK 1.1 billion in unrealized changes in value from the operations attributable to ordinary shareholders. The remainder comes from new issues where approximately 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 30 September 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 approximately 1,000 managed properties. Nor has any value been attributed for 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 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 the year 2027. For 2028 ­onwards, a return requirement of 14.9% has been used to reflect greater risk in the future building rights port­ folio. This valuation takes into account 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 2020.

The valuation is based on assumptions about future developments based on the facts and the surrounding global situation that prevails today; it is not to be seen as a forecast. This means that it is not established values that are promised as an outcome, but they can change based on events that affect the activities.

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Property Management business area

The Property Management business area acquires and manages space-­ efficient properties in locations close to good transport links in Greater

Stockholm­ . The business area includes ownership in the listed subsidiary Svenska ­Nyttobostäder AB (publ).

The core expertise of the business is in buying newly-produced properties, creating

­tenant-­adapted concepts and managing these. Svenska Nyttobostäder has been listed on the NASDAQ First North Growth Market since 2020. The business area owns 58% of Svenska Nyttobostäder and its entire activities are consolidated. In addition to the business included in Svenska Nyttobostäder, there are a small number of managed residential units and an acquisition agreement of almost 1,000 units that will be for self-management.

SVENSKA NYTTOBOSTÄDER

Svenska Nyttobostäder is a listed property company. Svenska Nytto- bostäder owns and manages newly-produced residential properties in locations close to good transport links in Stockholm. Tenants are private individuals, companies and authorities. Svenska Nyttobostäder has a management portfolio of around 5,750 apartments, which will be taken over on an ongoing basis until 2025, when the portfolio is expected to generate a net operating income of around SEK 600 million.

THIRD QUARTER 2021

	2021	2020	2021	2020	2020
	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec
Rental income, SEK m	34	34	97	75	104
Net operating income, SEK m	24	20	69	44	70
Change in value of investment
properties, SEK m	37	14	78	66	80
Leverage, %	67	70	67	70	70
Number of employees	9	10	9	10	9

32%

Share of adjusted net asset value*

• Adjusted net asset value is based on the actual net asset value adjusted for the estimated market value of the operations at ALM Equity.

For further information on how this value is produced, see page 4.

Property Management portfolio

Number of managed units

6,870

Completed 1,399

In production 1,832

Contracted 3,639

Property value*, SEK m

14,622

EVENTS DURING THE QUARTER

• ALM Equity appointed a new business area manager, Fredrik Arpe, who has been given the assignment to develop the business area further by expanding its self-management portfolio with new business and managing ALM Equity's ownership in Svenska Nyttobostäder.
• Svenska Nyttobostäder took over
  280 units, of which 276 are residential units and four are commercial premises, in Barkarby, Järfälla.

EVENTS AFTER THE END OF THE PERIOD

• After the end of the period, a land allocation was obtained in Järfälla for the development of 13,000 m2 of commercial space.
• On behalf of ALM Equity, Erik Penser Bank has compiled a market valuation of Svenska Nyttobostäder's ordinary shares. The valuation shows a value of SEK 141.60 per ordinary share, which is SEK 30.60 higher per ordinary share than the current share price as of 24 November 2021.

Completed 3,435

In production 3,653

Contracted 7,534

• Estimated value at completion.
  Estimated­ property value for agreed units and units in production.

Estimated net operating income, SEK m

717

Completed 157

In production* 183

Contracted* 377

• Estimated annual net operating income for agreed units and units in production.

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