ICA Real Estate building for the future

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1 ICA Real Estate building for the future Capital Markets Day 11 December 2015 Lena Boberg CEO ICA Real Estate

2 Building for the future ICA Real Estate as a generator of new ICA store locations ICA Sweden s main expansion will be in urban areas Broader role as community builder taking on larger projects, developing more than just ICA stores This is enabled by actively managing the property portfolio ICA Gruppen CMD

3 Solid returns in all our property portfolios strong performance in a booming real estate market Rolling 12 months, 2015 Sweden, incl Secore Norway Ancore Långeberga Total, with owner share Income return 6.6% 7.7% 6.5% 4.3% 6.6% Capital growth 5.4% 5.9% 3.3% 5.7% 5.2% Total return 12.0% 13.6% 9.8% 10.0% 11.8% Sweden Norway Ancore Långeberga 11.5 Bn 2.5 Bn 5.8 Bn 50% 1.8 Bn 50% Total with owner share 17.8 Bn Store Logistic Other Income return = net operating income / market value opening balance + investments Capital growth = market value growth investments / market value opening balance + investments Total return = sum of Income return and capital growth Rolling 12 months = valuations of Q2 (Ancore and Långeberga) and Q3 (Sweden and Norway) ICA Gruppen CMD

4 Supporting the core business creating value by developing, managing and investing Asset management of ~130 properties with a market value of ~ 20 Bn SEK in Sweden Develops market places and store properties for Bn SEK annually: New establishments Expansions and densifications Refurbishments Manages ~650 store lease agreements Manages owned and leased logistic properties Acquires and divests properties ICA Gruppen CMD

5 Expanding the scope Generator of new store locations in urban areas Greenfield store locations are soon history Need to expand scope to establish ICA stores in urban areas How we do this: Land and property banking: buy properties early to drive zoning plan Land commission tendering: offer municipalities more than just an ICA store Use 3-dimensional sectioning and / or cooperations: participate in larger project but only own store part ICA Gruppen CMD

6 Finding store locations earlier work pro-actively with land and property banking Prolonged time horizon The earlier you acquire the higher the potential returns White spots in ICAs store network or development areas ICA store location core but often as part of a larger development project Actively form zoning plans optimized for food retail Place-making together with municipality and other developers ICA Gruppen CMD

7 Offering more than just an ICA store be successful in land tendering competitions Land tendering competitions more common Need to offer more than just an ICA store to be competitive ICAs unique selling points: ICA one part with many roles; developer, property owner, property manager and store operator Truly long-term Can deliver more than just the ICA store: pharmacy, cafés, restaurants, gym, residential housing, public use premises ICA has a strong sustainability offer both centrally and locally The ICA retailer has a solid local commitment ICA Gruppen CMD

8 Building more than just an ICA store 3-dimensional sectioning and co-operations Building project divided by 3-dimensional sectioning is getting more common ICA store often engine / anchor of large building projects Enables ICA to take just the store part of the project Form co-operations for remaining parts of the project ICA Gruppen CMD

9 Driving densification in urban areas vision of developing the marketplace in Sollentuna Häggvik ICA Gruppen CMD

10 Marginally higher capital requirements Project pipeline defines future investment levels Historically cash flow from investments have been fully offset by cash flow from divestments. Land and property banking and larger projects lead to higher investment levels estimated at Bn SEK/year Ambition to limit capital requirements by forming co-operations, divesting building rights and 3-dimensional sectioning Capital requirements for a single project differ depending on for example execution and timing MSEK Historic net investments Divestments Investments Net investments *Incl. Norway & excl. Långeberga ICA Gruppen CMD

11 and somewhat higher risks that are effectively reduced Land and property banking and larger project leads to higher risk levels: 1. Zoning plan risks 2. Project risks (costs / income / time) 3. Asset management risks in a more diversified portfolio The risks are mainly reduced by: 1. Offer more than just a store 2. Dual source of returns: retail and property 3. Active strategy for each property / project ICA Gruppen CMD

12 Homogenous with sound geographical spread 10.5 bn SEK in wholly owned Swedish portfolio 86 Properties + some land plots ~ sqm ~85% ICA tenants Continuous divestment to JVs Grow with development projects Project pipeline includes for example: Maxi Södertälje, Glasberga Maxi Ulricehamn Kvantum Lund, Brunnshög Årsta ICA Maxi ICA Kvantum ICA Supermarket ICA Nära Warehouse/Production Development/Land Other store properties ICA Gruppen CMD

13 Successful JVs with solid pension fund managers vehicle to free up cash and retain influence Ancore (Alecta) Secore (AP1) 30 properties 5.8 Bn SEK 13 properties 1.1 Bn SEK ICA Maxi ICA Kvantum ICA Supermarket ICA Nära ICA Gruppen CMD

14 JV to buy back and extend a logistics property Långeberga Logistik AB Owned 50/50 with Alecta, but consolidated Logistics property outside Helsingborg Extended to103,000 sqm Very successful development project Market value 1.8 Bn SEK ICA Gruppen CMD

15 Divestment of Norwegian properties now started divesting in a strong property transaction market 75 properties, whereof 5 warehouses Book value of ~2 Bn NOK, market value assumed to be slightly higher Two-step process to maximize value: properties will be sold Core portfolio sold Q Good progress in step-one divestments 5 properties sold so far 6 properties are in the market ICA Gruppen CMD

16 Building for the future Unique position Expanded scope Sustainable and truly long term Dual revenue sources, retail and property Succesfull JV strategy Vehicles for continued active portfolio management Keeping the influence of the marketplaces Solid JV partners Divestments will continue Balance the investment levels Divestment of Norwegian properties in 2016 & 2017 ICA Gruppen CMD