ALM Equity AB (publ): Annual Report 2022

2022

A N N U A L R E P O R T

We build companies that develop the property industry

INTRODUCTION
This is ALM Equity	3
The year in brief	4
Message from the CEO	5
THE BUSINESS
Vision, business concept, strategy
and basic values	7
Business model	8
Value creation in practice	9
MARKET
Driving forces and trends	11
Macro perspectives	13
The Swedish property market	13
The housing market	14

COMPANY PORTFOLIO
Company portfolio	16
SUSTAINABILITY REPORT	23
CORPORATE GOVERNANCE
REPORT
Board of Directors & auditors	39
Group management	40
This is how we work	41
Risks and risk management	45
FINANCIAL INFORMATION	54
SHAREHOLDER INFORMATION	103

ALM EQUITY ANNUAL REPORT 2022

INTRODUCTIONTHE BUSINESS   MARKET  COMPANY PORTFOLIO  SUSTAINABILITY  CORPORATE GOVERNANCE REPORT   FINANCIAL INFORMATION

This is ALM Equity

ALM Equity is an active company developer in the property sector. We create value by acquiring and refining assets for new operations and independent companies based on the market's future needs.

Share of estimated market value

Through active shareholding, ALM Equity develops and drives the initiatives that create maximum value. Our strength is being able to quickly adapt the portfolio, act and adjust in the event of changes, and dare to challenge and find new paths to profitable investments.

The company portfolio consists of everything from larger listed and unlisted companies to smaller growth companies in the property sector. Each company is run based on its conditions with independent management and financing to achieve long-term sustainable growth with maximum risk-adjusted return on equity.

Since ALM Equity was founded in 2006, we have worked alongside our companies to create and make visible significant values through, among other things, shareholding diversification and stock market listings.

At the end of the year, ALM Equity had an estimated market value of SEK 7.2 billion.

Estimated market value, SEK bn

14
12
10
8
6
4
2
0
2013	2014	2015	2016	2017	2018	2019	2020	2021	2022

Klövern 43.1% (SEK 3.1 bn)

Svenska Nyttobostäder 19.4% (SEK 1.4 bn) Aros Bostad 15.3% (SEK 1.1 bn)

ALM Småa Bostad 4.2% (SEK 0.3 bn) 2xA Entreprenad 6.9% (SEK 0.8 bn) Parent company's assets 11.1%

ALM Equity's holdings

Property management	Property management	Project development	Project development	Contracting	Digital services
Unlisted	Listed	Listed	Unlisted	Unlisted	Unlisted
46% Shareholding	44% Shareholding	23% Shareholding	100% Shareholding	80% Shareholding	50% Shareholding

Shareholding refers to nominal holding. The definition of estimated market value can be found on page 101. More information about the market valuation can be found in ALM Equity's quarterly reports.

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ALM EQUITY ANNUAL REPORT 2022

INTRODUCTIONTHE BUSINESS   MARKET  COMPANY PORTFOLIO  SUSTAINABILITY  CORPORATE GOVERNANCE REPORT   FINANCIAL INFORMATION

The year in brief

ALM Equity added an eventful year to its portfolio. A year of hard work where we took advantage of new business opportunities and built up the companies. We have continued to do what we say we will do - company development to make values visible.

Formed a joint property management company under the brand name Klövern with Corem Property Group. The deal included 24,000 building rights, of which 11,000 came from ALM Equity, at a value of SEK 4,355 million, corresponding to an initial shareholding of 49%. During the second half of the year, as a result of the market situation, Klövern adjusted property values and goodwill downwards, which resulted in a negative impact on ALM Equity's profit share of around SEK 790 million.

Became a major owner in Aros Bostad in return for the sale of around 1,500 building rights. The building rights were replaced with a combination of ordinary shares, preference shares and convertibles in the listed company Aros Bostadsutveckling AB. Twenty-threeprojects were handed over during the year, and the remainder will be transferred when contractual conditions are met. As of the end of the year, ALM Equity's shareholding in the company was 23% (30% including the convertibles) and will, after the completion of all projects, amount to 35%.

Sold 20% of 2xA Entreprenad to the CEO of the company in Q3. The

purpose of the transaction is to create a long-term incentive for continued growth in the company. More information in Note 36.

Revalued the holding in Svenska Nyttobostäder with a negative impact on earnings of SEK 1,500 million. The holding of ordinary shares in Svenska Nyttobostäder AB was revalued as a result of changed external factors that are judged to affect the company's operations.

Around SEK 30 million was added through the subscription of shares within the framework of the option scheme 2017/2022. The share capital increased by about SEK 850,000 and the number of ordinary shares by 85,090 which resulted in a dilution of around 0.3%.

Allocation of input values in ALM Småa Bostad's remaining building rights portfolio. As a result of changed external factors and market conditions, a valuation of the remaining building rights portfolio was carried out, which resulted in an allocation of minus SEK 525 million in Q2, of which SEK 200 million was returned in connection with the annual accounts when following up on values.

Events after the end of the year

An extraordinary general meeting of Svenska Nyttobostäder decided on changes to the company's capital structure and financing model. The change, initiated by ALM Equity, together with other shareholders, involves an offer to all preference shareholders to convert each preference share into two ordinary shares. Furthermore, it was decided to change conditions for the agreed deliveries from ALM Småa Bostad, where investors' commitment for contributions for future properties takes the form of ordinary shares instead of preference shares and that the building rights that have not started production are immediately sold at a market value of around SEK 1.3 billion. The decision means that ALM Equity's shareholding will be reduced from 43.5% to 37.5% at full acceptance level. More information in Note 36.

Provided a credit facility of SEK 80 million to Svenska Nyttobostäder via the subsidiary which aims to provide a financing space until it is replaced by payment from their proposed rights issue of SEK 250 million, estimated to take place during May/June 2023.

Signed a letter of intent regarding new co-owner of Klövern. An international investor intends to acquire 25% of the shares in Klövern at a value of SEK 1,350 million and invest a further SEK 3,000 million in future construction. The deal is planned to be concluded in Q2 2023.

Consolidated KPIs

Summary	2022	2021
Revenue, SEK m	6,902	2,906
Profit/loss for the period, SEK m	-576	3,423
Return on equity, ordinary shares %	-10	54
Equity/assets ratio, %	50	54
Cash and cash equivalents, SEK m	1,073	1,954
Equity, SEK m	5,756	7,154
Balance sheet total, SEK m	11,518	13,132
Key figures per share
Share price on the closing day, SEK	525	986
Adjusted net worth per ordinary share, SEK	558	986
Earnings per ordinary share before dilution, SEK	-79	314

sek 6.8 bn		sek 7.2 bn		sek 6.3 bn
Market value	Estimated market value	Shares in associated
			companies

Definition of estimated market values can be found on page 101. More information about the market valuation can be found in ALM Equity's quarterly reports.

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ALM EQUITY ANNUAL REPORT 2022

INTRODUCTIONTHE BUSINESS   MARKET  COMPANY PORTFOLIO  SUSTAINABILITY  CORPORATE GOVERNANCE REPORT   FINANCIAL INFORMATION

Like a handbrake on the Autobahn

The property industry drove into 2022 at a good speed and with confidence high. We had a property index that had risen by more than 90% on the stock market since April 2020, a key interest rate of 0% and a Riksbank (Swedish Central Bank) that had happily fuelled the market for several years. We couldn't blame Putin for everything, because we had set the stage for it, but after the completely senseless invasion of Ukraine, 2022 became a very turbulent year with major supply problems, rapidly rising inflation and the most brutal policy rate hikes in 40 years. I've been around for a while, but I've never experienced a sharper slowdown in the market. Now it's up to us to prove how adaptable we and our sector colleagues are.

We do business even in a year like 2022

If you have already built a good foundation beforehand, you can do business even in a year like 2022. Both the establishment of the new Klövern and our entry as the largest owner in one of Greater Stockholm's largest housing developers, Aros Bostad, were the results of previous deals. After the acquisitions of Småa in 2017 and Järntorget in 2021, we did a thorough review of the building rights portfolio which led us to identify untapped potential which we then used to create the new property management company, Klövern.

Of the portfolio that remained, we saw that a large part would be well suited for tenant-owned apartments and detached houses. Aros Bostad is an unusually skilled housing developer and it was a perfect match both in terms of culture and portfolio which meant that in October we became the largest owner in the company. At the same time, we therefore got a market valuation of the building rights portfolio.

We adjust our speed a little,

fend off problems and accelerate when the direction is right again."

Our aim was to also list Klövern, but today's financial climate hardly has the optimal conditions. At the same time, capitalizing on Klövern is a necessity in order to be able to realize the values that lie in the building rights portfolio, and we are therefore actively working with various opportunities instead of sitting and waiting for better times.

Adaptability is the prerequisite for survival

Like Darwin, I am convinced that it is the ability to adapt that selects the survivors. Our success has always been our ability to adapt to new circumstances. A good example was when we switched from the private market to the property management market in 2018 after a couple of years of murderous regulation from the Financial Supervisory Authority. Now we are once again in a situation where we have had to pull a financial and structural handbrake to quickly turn around and steer in a new direction.

During the autumn, we initiated a restructuring of financing and operations in Svenska Nyttobostäder. When we laid the foundations for them, we created a delivery and financing model of properties where the project development risk was placed outside the company and the financing consisted of newly issued preference shares. In today's interest rate climate, this model is no longer financially sustainable and therefore, together with the other owners and the company, we have laid the foundation for a new structure where the project risk is transferred to

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