Interim Report January - March 202311 May 2023 12:30 CET

GROUP

RESULTS

Property management

Net revenue from property management excluding intra-Group rents of SEK 48.5 million (50.3) totalled SEK 502.9 million (448.7) for the period. The increase was attributable primarily to indexation as well as higher gross rents related to new leases and renegoti- ations. Since early 2022, net revenue was charged with vacant premises attributable to the entire Inom Vallgraven 12 block in Gothenburg being emptied for the Johanna project. Operating expenses amounted to SEK -172.2 million (-160.7). Operating expenses increased during the period, mainly related to higher energy costs. Gross profit was SEK 330.7 million (288.0) excluding intra-Group rents.

The sales-based rent supplement is reported during the fourth quarter.The sales-based rent supplement for the preceding year totalled SEK 12.0 million, of which the NK properties accounted for SEK 9.9 million. Apart from the sales-based rent supplement, there are no other material seasonal variations in rents.

The property management results for each business area are reported on page 9.

Other segments

Other segments comprise NK Retail and other operations. Other operations consist of Cecil Coworking, NK e-commerce and the parking business in Parkaden.

Net revenue for NK Retail amounted to SEK 177.5 million (164.1). Costs excluding intra-Group rents of SEK -29.5 million (-33.7) were SEK -177.3 million (-162.9). Gross profit for NK Retail excluding intraGroup rental costs was SEK 0.2 million (1.2). Sales for NK Retail are impacted by seasonal variations, with the first quarter of the year normally being the weakest and the fourth quarter the strongest.

Net revenue for other operations amounted to SEK

34.3 million (31.0). Costs excluding intra-Group rents of SEK -19.0 million (-16.6) were SEK -20.9 million (-17.1). Gross profit excluding intra-Group rental costs was SEK 13.4 million (13.9).

For further information, see Segment Reporting on page 9.

Other profit and loss items

Central administration totalled SEK -13.0 million (-12.8). Unrealised changes in value of investment properties totalled SEK -906.4 million (227.0).

For further information, see pages 4-5.

Financial income and expense

Net financial income and expense totalled SEK

-52.2 million (-38.0). Interest income was SEK 1.8 million (0.0). Borrowing costs totalled SEK -48.2 million (-32.4) and interest expenses for leasing, primarily ground rents, totalled SEK -5.8 million (-5.6). The increase in financial expenses for borrowing was largely attributable to a higher average interest rate. For further information, see pages 5-6.

Tax

The Group's tax for the period was SEK 127.9 million (-99.3), of which SEK -26.5 million (-19.1) in current tax and SEK 154.4 million (-80.2) in deferred tax. The change in deferred tax can be attributed to the period's negative unrealised changes in the value of the property holdings.

Net profit or loss for the period

The consolidated net result was SEK -499.4 million (380.0). The decrease can be attributed to the pe- riod's negative unrealised changes in the value of the property holdings.

PROPERTY HOLDINGS

The fair value of the Hufvudstaden property holdings is based on an internal valuation, where classification takes place on level 3 according to IFRS 13. The assessed value as at March 31, 2023 was SEK 48,909 million (49,547 at year-end). The decrease can be attributed to negative unrealised changes in value of the property holdings but was partially offset by investments during the period. Rentable floor space totalled approximately 386,100 square metres (386,600 at year-end).

The total rental vacancy rate as at March 31, 2023 was 8.5 per cent (7.0 at year-end) and the total floor space vacancy rate was 13.0 per cent (11.2 at year- end). The rental vacancy rate, excluding current development projects (EPRA vacancy rate), totalled 5.4 per cent (4.0 at year-end). The increase in the rental vacancy rate, excluding current development projects, was primarily attributable to a couple of office tenants relocating. New leases have already been signed for several of these spaces.

Acquisitions and investments

Total investments for the period amounted to SEK 283.8 million (203.3).

At present, current and planned projects are worth approximately SEK 3 billion. Major projects are presented in the table below.

Reconstruction of Vildmannen 7 in Bibliotekstan is now in its final phase. Work with the façades is complete and the building is now weatherproof. Interior work with installations, bathrooms and plumbing systems as well as retail premises continues. Outside the building, the street environment is being restored. All office spaces of approximately 2,900 square metres have been leased to Cirio Law Firm. Several leases for retail spaces have been signed, including with Chanel Fragrance and Beauty Boutique and A.P.C., each of about 100 square metres. The new building will offer highly modern and efficient offices as well as attractive stores in a unique environment. Accession to premises will begin in July this year.

In the Hästhuvudet 13 property, at the Sveavägen and Kungsgatan intersection in Stockholm, a major redevelopment of approximately 3,100 square metres of office space and upgrade of technical installations is being undertaken. The project is expected to be completed around the turn of the year 2023/2024.

The extensive redevelopment and expansion of the Johanna project continues at the Inom Vallgraven 12 block in Gothenburg. During the quarter, work with planning, sheet piling, foundation and frame as well as new window openings was carried out. Environmental remediation and an archaeological investigation were completed. The first of two cranes was erected in the block.

The project comprises a total of approximately 44,000 square metres gross area and rentable floor space is expected to increase by approximately 11,600 square metres. Completion is expected late 2025 or early 2026.

Property value and net asset value

At the end of each quarter, Hufvudstaden carries out an internal valuation of each individual property. The purpose of the valuation is to assess the fair value of the property holdings. To assure the quality of the valu- ation, external valuations of parts of the property holdings are obtained at least once a year. A continuous update is made during the year of the internal valuation of the properties in order to take account of purchases, sales and investments. Hufvudstaden also examines on a continuous basis whether there are other indications of changes in the fair value of the properties. These indications could take the form, for example,

of major leases, terminations, and material changes in the yield requirements.

In the light of the above, the unrealised change in value of the property holdings for the period was SEK -906.4 million (227.0). The total value of the property holdings as at March 31, 2023 was SEK 48.9 billion, including investments for the period. The unrealised change in value is mainly due to higher yield require- ments.

The average yield requirement increased by 4 basis points compared to the fourth quarter of 2022 and stood at 3.8 per cent at the above valuation (3.7 at year-end).

Valuation method

Valuation of the property holdings is carried out by assessing the fair value of each individual property. The valuation is made using a variation of the location price method, known as the net capitalisation method. The method involves setting the market's yield requirement in relation to the net operating income of the proper- ties. In the case of other project properties and undeveloped land, the valuation is based on a completed building with a deduction of construction costs, as well as financial expenses and the cost of vacant space that arose during the construction period.

The yield requirement is based on information compiled about the market's yield requirement for actual purchases and sales of comparable properties in similar locations. If few or no deals have been concluded in the property's sub-area, transactions in the adjoining area are analysed. Even transactions that have yet to be finalised or other impacting factors provide guidance on market yield requirements.

The yield requirement can vary between different regions and different sub-areas within the regions.

Account is also taken of the type of property, the technical standard, the construction of the building, and major investment requirements. For leasehold proper- ties, the calculation is based on a yield requirement that is 0.20 percentage points higher than for equivalent properties where the land is freehold. The net operating income of the properties is based on market rent revenue, the long-term rental vacancy rate, and normalised operating and maintenance costs. If there is greater uncertainty than normal, this is offset by increased direct yield requirements in the valuation.

When carrying out the valuation, the following yield requirement figures for office and retail properties have been applied:

Yield requirements, property valuation1)

1. Valuation date: March 31, 2023.

Sensitivity analysis

Fair value is an estimation of the probable sales price on the market at the time of the valuation. However, the price can only be set when a transaction has been completed. In the case of an external property valua- tion, a range is often given to indicate the degree of uncertainty surrounding the estimates of fair value. The value range is usually +/- 5 per cent but can vary de- pending, among other things, on the market situation, the technical standard of the property, and investment requirements.

Hufvudstaden's property holdings are valued at SEK

48.9 billion, with a degree of uncertainty of +/- 5 per cent, would mean that the estimated fair value varies by +/- SEK 2.4 billion. Below are the key factors that in- fluence the valuation and the consequent impact on profit or loss before tax.

Sensitivity analysis, property valuation1)

Change, +/- Impact on profit or loss before tax, +/-

1)Valuation date: March 31, 2023.

Net asset value

Based on the valuation of the property holdings, the net reinstatement value (EPRA NRV) is SEK 39.4 billion or SEK 195 per share. Net tangible assets (EPRA NTA) were SEK 37.1 billion or SEK 183 per share following a deduction of estimated actual deferred tax liabilities. This assessment is made in the light of current tax legislation, which means that properties can be sold via a limited company without tax implications. The estimated actual deferred tax has been assumed to be 5 per cent.

Net asset value, March 31, 2023

1. Deferred tax according to the balance sheet related to in- vestment properties and right-of-use assets attributable to ground rents.

RENTAL MARKET

The office rental market in Stockholm City remained stable, with good demand on mainly modern and flexible offices in the best locations. Vacancy levels remained within the normal range and in Stockholm's most attractive locations - Bibliotekstan, Norrmalmstorg/Hamngatan, and the Hötorget area - market rents for modern offices were estimated at SEK 6,700-9,200 per square metre and year, excluding the property tax supplement. Demand in the market for retail premises was stable and several leases were signed. The market rents for retail premises in prime commercial locations were in the range of SEK 11,000-24,000 per square metre and year, excluding the property tax supplement.

In the central sub-markets of Gothenburg, the demand was mainly for modern and flexible office prem- ises. Vacancies were higher than the normal range and market rents in the most attractive locations were between SEK 3,200-4,000 per square metre and year, excluding the property tax supplement. For retail premises in central commercial locations, market rents were between SEK 3,000-13,000 per square metre per year, excluding the property tax supple- ment.

The Group's renegotiations for office premises have developed positively, while renegotiations for retail premises led to lower rents.

FINANCING

Hufvudstaden's financing requirements are met through a number of the major Nordic banks and the capital mar- ket. Total borrowings as at March 31, 2023 amounted to SEK 9,500 million (9,000 at year-end).Interest-bearing net debt was SEK 9,074 million (8,547 at year-end). In addition, the lease liability according to IFRS 16 amounted to SEK 714 million (712 at year-end), and total net debt was SEK 9,788 million (9,259 at year-end). In addition to outstanding loans, there are unutilised loan commitments amounting to SEK 5,000 million.

Hufvudstaden has an MTN programme totalling SEK 12,000 million, and a commercial paper programme amounting to SEK 3,000 million. The outstanding amount in bonds was SEK 6,000 million and there was SEK 1,000 million in commercial paper. Hufvudstaden ensures that at any point in time there are unutilised loan assurances to cover all outstanding commercial paper. As at March 31, 2023, cash and cash equivalents and unutilised loan commitments amounted to SEK 5,426 million, which covers all maturities for the next three years.