The Market Conditions Offer Attractive Opportunities; Kungsleden Interim Report January-September 2001.

Business Editors

STOCKHOLM, Sweden--(BUSINESS WIRE)--Oct. 24, 2001

Kungsleden

-- Three office and residential properties in Central Helsingborg from Skanska,
with a purchase price of SEK 180 m, and Kungsleden taking possession on 16 May
2001.

-- Two office premises in Gothenburg, acquired from SKF, with a purchase price
of SEK 106 m and floor-space of 29,000 m2, primarily office premises.

Kungsleden's Chief Executive Jens Engwall commented: "The 38 per cent increase in operating surplus shows the improvement in profitgeneration from the property holdings. In addition we divested 78 properties in this period resulting in an overall gain of SEK 62 m. The uncertain prevailing market conditions may offer attractive opportunities; Kungsleden has some SEK 1 bn of scope to make acquisitions. For the remainder of the year, Kungsleden will remain active on its transaction side, with the intention of enhancing the structure of the corporation's holding, and further consolidating Kungsleden's earnings capacity."

Kungsleden's business concept is to own and manage properties with a high and stable long-term property yield. Kungsleden is an active participant in the prevailing change processes on the Swedish property market, by utilizing and enhancing its competencies in structuring heterogeneous property holdings. This implies Kungsleden's property holding frequently changing through acquisitions and disposals. Kungsleden's property portfolio comprises 426 properties with a book value of approximately SEK 8.0 bn. The holding is located in a total of 132 municipalities, and is concentrated on the Swedish provinces of Gotaland and Svealand. Kungsleden has been quoted on the Stockholm Stock Exchange O-list since 14 April 1999.

Kungsleden (publ) interim report 1 January-30 September 2001

-- Profit before tax for the period amounted to SEK 319 (267) m,

corresponding to earnings per share of SEK 16.8 (14.4).

-- Kungsleden's operating surplus increased by 38 per cent to SEK

479 (346) m.

-- In the period, 78 properties were divested, generating SEK 804

m and profits of SEK 62 (20) m; 44 properties were acquired

for SEK 1,937 m.

-- Kungsleden is retaining its previous forecast of profit after

tax paid of SEK 360 m, equivalent to SEK 19.0 per share.

Kungsleden's business concept, vision and operations Kungsleden's business concept is to own and manage properties that generate high and stable long-term property yield. Kungsleden's vision is to utilize and develop its competencies in structuring heterogeneous property holdings. Kungsleden's dual operational focus is property management and trading. The corporation views the yield properties generate as its crucial performance measure, considering this more important than property type or geographical location. Kungsleden is a transaction-intensive corporation, with our property holding in frequent change as a consequence of acquisitions and disposals.

Profits

Kungsleden posted profit before tax of SEK 319 (267) m for the period January-September 2001. Last year's profits included non-recurring gains of SEK 75 m from the sale of interest rate swaps. Earnings per share were SEK 16.8 (14.4).

Capital gains from property disposals amounted to SEK 62 (20) m, with SEK 32 (16) m arising in the third quarter. The operating surplus for the period January-September 2001 amounted to SEK 479 (346) m, of which SEK 174 (146) m arose in the third quarter. Property yields from property management in the third quarter were 8.6 per cent; generally, Kungsleden's third quarter is its most profitable in terms of management, although the property portfolio's profitability has increased through the year.

Initially, the prevailing cyclical slowdown has exerted a favorable influence on profits through reduced interest rates, with the letting situation not changing notably recently. Kungsleden's diversification towards differing property types and geographical regions alleviates its dependency on the performance of any single corporation. Additionally, because rental contracts are signed for defined periods, usually three to five years on commercial contracts, changes to market rent levels do not exert an immediate impact on rental revenues. Rent revisions or relocations are only possible coincident with such contracts becoming due for re-negotiation, alleviating the risks of temporary economic downturns. During the forthcoming year, rental contracts worth SEK 158 m, or 13 per cent of total rental values, expire.

Cash flow for the period was SEK 246 (216) m, equivalent to SEK 13.0 (11.6) per share.

Net financial position and borrowing

Kungsleden's net financial position was SEK -203 (-81) m, with interest subsidies of SEK 0m.

Interest cover was 2.6 (4.3). Last year, Kungsleden's net financial position included SEK 75 m in capital gains from divested interest rate swaps.

Payment for properties from JM, with Kungsleden taking possession on 8 March, was transferred on 30 June 2001. New property acquisitions from JM, effective 7 June, will be paid on 7 December 2001.

Kungsleden's interest-bearing liabilities amounted to SEK 5,240 (4,365) m as of 30 September, including a bond issue totaling SEK 500 m. The average interest rate of the funding portfolio is 5.99 (5.60) per cent. The average fixing period was 2.6 (2.5) years. Kungsleden does not own any properties in foreign countries and has no foreign currency borrowing.

Fixing periods, including bonds as of 30 September 2001

                   Loan, SEK m   Average interest, %
Floating interest  3,370         5.45
2003               120           8.47
2005               150           9.78
2006               350           6.06
2008               250           6.05
2009               100           6.12
2010               800           7.07
2011               100           6.26
Total              5,240         5.99

Tax

Tax paid for the period was SEK 0 (4) m. Deferred tax was SEK 88 (74) m, the consequence of RR's (the Swedish Financial Accounting Standards Council) new recommendations for accounting income taxes. More information is available in the section 'Revised accounting principles'. Property taxes amounted to SEK 33 (25) m and are included in the operating surplus.

Acquisitions and disposals

Kungsleden acquired 44 properties with floor-space of 262,000 m2 for a total purchase price of SEK 1,937 m in the period. These acquisitions were effected at an estimated pro forma property yield of 7.6 per cent. No properties were acquired in the third quarter.

Kungsleden made the following major acquisitions in the period:

-- Two property portfolios were acquired from JM, with Kungsleden

taking possession on 8 March 2001 and 7 June 2001. The total

purchase price was SEK 1,523 m. The majority of these

acquisitions were office premises located in Greater

Stockholm.

-- Three office and residential properties in Central Helsingborg from Skanska,
with a purchase price of SEK 180 m, and Kungsleden taking possession on 16 May
2001.

-- Two office premises in Gothenburg, acquired from SKF, with a purchase price
of SEK 106 m and floor-space of 29,000 m2, primarily office premises.

In the same period, Kungsleden divested 78 properties, with total floor- space of 127,000 m2, for a total of SEK 804 m, resulting in an overall gain of SEK 62 m. In terms of their sales price, these transactions were conducted at a pro forma property yield of 6.1 per cent. In the third quarter, Kungsleden divested 29 properties for a total of SEK 357 m, generating profits of SEK 32 m, transactions primarily comprising one bundled divestment of 20 properties in the region of Halmstad and Ljungby in south-west Sweden for a total price of SEK 250 m. These properties were divested proceeding Kungsleden's perception of their risk/return relationship.

Property holding

As of 30 September 2001, Kungsleden's holding comprises 426 properties with floor-space of 1,669,000 m2 and a book value of SEK 7,766 m, located in 132 municipalities. Of total property values, 90 per cent is located in 50 municipalities, with the three major city regions-Greater Stockholm, Greater Gothenburg and the Oresund region-representing 58 per cent of property values.

Kungsleden's orientation towards trading and restructuring implies that its property holding is classified as current assets, with one implication being that profits are not depreciated according to plan, but instead, each property is valued individually proceeding from the expected sales price, in accordance with the LOCOM principle (lower of cost and market). Value adjustment is effected at the end of each calendar year.

Earnings capacity

Kungsleden focuses on the creation of stable, high yields, implying that the corporation's property holding is in continual transformation through acquisitions and disposals.

In order to illustrate the earnings capacity of the holding, pro forma accounting of the holding was included in the Annual Report for 2000. A further statement, according to the same principles for the holding as of 30 September 2001, is included below. Acquisitions and disposals effected since 1 January 2001 resulted in an unchanged property yield of 8.3 per cent.

Financial structure

The closing balance of shareholders' equity was SEK 2,150 (2,024) m, or SEK 113.4 (109.1) per share, equivalent to an equity ratio of 25.5 (30.5) per cent. Share capital corresponds to SEK 47 m of total shareholders' equity. The share capital is divided between 18,958,620 shares, each with a nominal value of SEK 2.50.

Investments

Investments in existing properties were SEK 73 (48) m.

Human resources

The average number of employees in the period was 79 (77).

Parent company

Parent company profits after financial items amounted to SEK -2.2 (216) m. Liquid funds were SEK 0 (0) m as of 30 September 2001.

Revised accounting principles

From 2001 onwards, Kungsleden's accounting has been adapted to conform to RR's (the Swedish Financial Accounting Standards Council) recommendation regarding deferred tax (RR 9). The relevant comparative figures in the Income Statement and Balance Sheet have been adjusted accordingly.

RR's standard on accounting deferred taxes has exerted the following influence on Kungsleden's accounts: initially, Kungsleden accounts for the net of the temporary differences in properties and accumulated tax losses, both valued at a nominal 28 per cent tax rate. The resulting net was positive, with a value of SEK 277 m. This amount has been accounted as an adjustment to opening balances by posting a deferred tax receivable against an increase to non-restricted consolidated equity brought forward. In the interim period, Kungsleden has posted profits subject to deferred taxes of SEK 90 m, an amount accounted for as a reduction of the deferred tax asset.

Outlook

The corporation is retaining its forecast of profits after tax paid of SEK 360 m, equivalent to SEK 19.0 per share. The uncertain prevailing market conditions may offer attractive opportunities; Kungsleden has some SEK 1 bn of scope to make acquisitions. In addition Kungsleden analyses the market on an ongoing basis, taking necessary measures to ensure sustainably high and stable property yields.

For the remainder of the year, Kungsleden will remain active on its transaction side, with the intention of enhancing the structure of the corporation's holding, and further consolidating Kungsleden's earnings capacity.

JENS ENGWALL

Chief Executive

Kungsleden AB (publ)

This Report has not been subject to review by Kungsleden's Auditor.

Forthcoming financial reports

-- The Financial Statement for the financial year 2001 will be

published in February 2002.

-- The Annual Report for the financial year 2001 will be

published in March 2002.