Long-term development strengthens society

Hemsö has long-term tenants in the public sector, which provides stable and predictable rental income, while the risk of vacancies and rental losses remains low.

I am also proud of the progress we’ve made in digitalization and sustainability. The vision for digitalization is that it will contribute to reduced climate impact and savings of 50 SEK per square meter by 2030. Hemsö’s climate goal is to achieve net-zero greenhouse gas emissions across the entire value chain (scope 1, 2, and 3) by 2040. Hemsö’s employees are highly engaged in these areas. In December, we achieved our goal of reducing energy usage per square meter in our Swedish property portfolio to below 100 kWh. In 2024, we reduced energy consumption by 8 percent in Sweden and 7 percent in Finland, as well as reduced our greenhouse gas emissions by 25 percent.

Long-term commitment is rewarded in many ways

Hemsö started the year by signing a 20-year lease agreement with the city of Helsinki for Vallila Primary School, which accommodates 350 students from grades 1–6. The school building, built in 1902, was designed by architect Theodor Höijer, a leading architect in the Finnish neo-renaissance movement. The building will undergo extensive renovations to meet the modern educational environment requirements while preserving its architectural values.

This is not the first time Hemsö in Finland has undertaken the complex task of renovating and refurbishing historically significant buildings. They have developed valuable expertise that many municipalities lack. This is where Hemsö can create value in partnerships with municipalities. In addition to reducing environmental impact, there is also long-term sustainability in refurbishing rather than building new. Vallila will now continue to offer school places for many generations to come.

The importance of long-term commitment is also reflected in the new criteria from the credit rating agency Fitch Ratings, which places greater emphasis on ownership support from the Third Swedish National Pension Fund (Tredje AP-fonden), known for its long-term focus and stability. In the first quarter, Fitch Ratings upgraded Hemsö’s credit rating from A+ to AA- with stable outlook. Hemsö also holds an A- credit rating with stable outlook from Standard and Poor’s. For increased transparency and service to our investors, Hemsö has also chosen to include Moody’s, which has assigned Hemsö a long-term credit rating of A3 with stable outlook.

Areas with potential and needs

In the second quarter of the year, Hemsö’s Finnish project portfolio continued to grow. A 20-year lease agreement was signed with the Southwestern Finland Welfare Area (Varha). A new care facility, specifically designed for addiction treatment, is under development at the Tallbacken hospital area in Turku.

In Germany, Hemsö signed a 20-year lease agreement with the municipality of Rangsdorf, which selected Hemsö through a public procurement process. In 2025, the development of a new municipal middle school with space for 220 students will begin at an exciting urban development site – Rangsdorf’s former airfield outside Berlin. In addition to the school, Hemsö will also develop a sports field, sports hall, and youth center.

Common to all the markets where Hemsö operates is the significant need to both renovate existing schools and develop new ones. While the school-age population is decreasing in Sweden, Finland, and Germany, many municipalities still face a shortage of school places. This is where Hemsö can make a difference by assisting municipalities with the expertise they need in owning, developing, and managing educational properties.

Cautious optimism in the industry

In the third quarter, the market began to normalize, and a sense of cautious optimism emerged in the real estate sector. In addition to falling interest rates and inflation, property values started to rise again.

In Sweden, Hemsö celebrated the full leasing of the community property Capella in Gothenburg. The last available space was leased to Academedia, which signed a ten-year lease for 1,500 square meters, adapted for 380 students. The property now houses two high schools, an art school, a ballet school, and healthcare services.

Another highlight during the quarter was the start of the school year at Järva Gymnasium, which welcomed its first students in August to the newly established school at Campus Tensta. I had the pleasure of meeting some of the students during a ceremony at Pilparken on the campus. Pilparken, like the buildings, is rated blue and has been carefully renovated.

Continued Stable Tenant Demand

The success of Hemsö’s operations in Germany continued during the fourth quarter. In October, Hemsö entered into a joint venture with Austrian Real Estate (ARE). ARE is a wholly owned subsidiary of the real estate company Bundesimmobiliengesellschaft (BIG), which is fully owned by the Austrian state.

Both ARE and Hemsö have deep expertise in the development and management of schools. Together, we form an experienced player in the school segment and a strong partner to municipalities in Germany. The first joint project is a new municipal school in central Cologne. The school will have a leasable area of 23,000 square meters, accommodating 1,000 students aged 11 to 18. A 25-year lease agreement has been signed with the city of Cologne. Construction is set to begin in the summer of 2025.

In the same quarter, another lease agreement was signed for a new construction project in Germany. This time, a 20-year lease agreement with DRK-Kreisverband Essen e.V., a part of the German Red Cross. Hemsö is developing a new nursing home and short-term care facility with a leasable area of 6,000 square meters and 116 places in the city of Essen.

Hemsö Strengthens the Backbone of Society

We have the capital and organizational resources to continue investing in social infrastructure in collaboration with the public sector. Backing us are our long-term owners, the Third Swedish National Pension Fund (Tredje AP-fonden) and Sagax, who will provide 2 billion SEK in equity over time when opportunities for investment in new social infrastructure arise.

I am confident that Hemsö’s experience and specialized expertise will be of great help to many municipalities with what they cannot do on their own but need and want our assistance with.

Together, we strengthen the backbone of society.

Nils Styf, vd