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Continued positive trend for real estate

With strong interim reports, positive real estate transactions and an unchanged long-term interest rate during the month, the favourable sentiment for real estate shares continued and the sector did well on the stock exchange. The trend of mergers and buyouts in the sector also continued.

During the month, Svenska Handelsfastigheter made a cash offer for Tre Kronor (grocery stores), one of the smaller holdings in the fund. At the time of writing, Trophi fastigheter (third AP fund) has presented a competing higher bid and Svenska Handelsfastigheter has subsequently raised its initial offer. We think the bid level is reasonable but we are sitting tight for the time being. Tre Kronor should also fit in well with Cibus, but given that the fourth AP fund is a major shareholder in both Cibus and Svenska Handelsfastigheter, there will probably not be a bidding war between these two.

On the theme of mergers and buyouts, Henrik Saxborn announced that he was resigning as CEO of Castellum. With a new CEO who is likely to have more interaction with the main owner and chairman Rutger Arnhult, the probability of a merger of the new Corem (including Klövern) with Castellum increases.

Many of the real estate companies have released their interim figures for the first quarter of the year. Their net asset value has increased by an annualised average of 15 percent (adjusted for dividends). During the first quarter, property values increased by an average of 1.3 percent. Property valuations have been supported by a strong transaction market that shows stable to declining required yields. The highest net asset value growth was reported by real estate companies with warehousing/logistics, with an annual increase averaging 33 percent. The corresponding figure for rental housing amounts to 18 percent and for offices 12 percent. Hotels are still having a tough time: Pandox’s net asset value fell by 10 percent year-on-year, and property values fell by 0.7 percent during the first quarter of this year.

Office properties have shown stable values in the direct market, and transactions in Stockholm’s inner city have been conducted at high levels in recent months. However, the rental market for offices has remained somewhat hesitant. Atrium, Klövern and Vasakronan reported negative net rentals, while Castellum, Fabege, Kungsleden and Wihlborgs reported positive net rentals during the quarter. Atrium, Castellum and Fabege launched buyback programmes following their reports.

The fund rose by almost 10 percent in April, making it one of the strongest in Sweden for the month. Among our portfolio holdings, Amasten and Samhällsbyggnadsbolaget performed best, while Entra and Magnolia performed worst. The positions in Balder and Samhällsbyggnadsbolaget made the largest positive contribution to our portfolio, while Magnolia and Entra had the most negative effect on returns.

We have made only minor adjustments to the portfolio this month. It is worth mentioning that we have increased somewhat in Castellum, Atrium Ljungberg and Skanska. We also participated in the discounted placement of treasury shares in Wallenstam. Mainly due to a strong share price after the rights issue, the weighting of Catena increased. We have continued to reduce somewhat in Sagax due to its strong share price and several insider sales. Slightly weaker share prices have led the percentages in Corem, Klövern and Entra to decrease somewhat.

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Fastighetsfond Norden A

Carnegie Fastighetsfond Norden is also available in the following share classs: B and C. Carnegie Fastighetsfond Norden is an equity fund that invests in Nordic listed real estate. The fund...

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