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I N V EST I N SW EDEN
Real Estate
One of Europe’s largest investment markets – 2009 edition
ISA1882_RealEstate2009_inlaga.indd 1 2009-02-18 15:03:51
key facts sweden
Official name
The Kingdom of Sweden
Kiruna
Political system
Constitutional Monarchy
Head of State Europe
King Carl XVI Gustaf
Luleå
Central government
Center-right majority
government, ruling since
the election in 2006.
General elections are held Umeå
every four years.
Östersund
GDP per capita
Prime Minister
$ 49,500
Fredrik Reinfeldt Sundsvall
(SEK 325,700/€ 33,890)
Population Source: IMD
9.2 million Sweden
Exchange rates
Gävle
Population density SEK 1 = € 0.10
22 per sq. km SEK 1 = $ 0.15
Uppsala
(Average 2008)
Västerås
Area Karlstad Stockholm
450,000 sq. km Currency Örebro
Eskilstuna
(174,000 sq. mi) 1 krona = 100 öre
Norrköping
Linköping
Time zone Largest cities (population*)
Borås
GMT + 1 hour Stockholm (1,922,404) Jönköping
Göteborg
(end October–end March) Göteborg (903,959)
Malmö (572,921) Växjö
GMT + 2 hour Halmstad
(end March–end October) * Greater metropolitan area Helsingborg
Karlskrona
Kristianstad
Lund
Malmö
ISA1882_RealEstate2009_inlaga.indd 2 2009-02-18 15:03:51
contents
Welcome
to Sweden!
2 Summary
4 Investment market
5 Investment market overview
6 Selected cross-border transactions 2008
8 Case: RREEF (Member of the
Deutsche Bank Group)
9 Case: Pembroke Real Estate
10 The Swedish economy
13 Key economic indicators
14 Business aspects
15 Gateway to investments in northern Europe
16 Case: Sustainable buildings
18 Fiscal aspects
21 Legal aspects
26 Major cities for investment
28 Stockholm
29 Göteborg
30 Malmö
31 Contacts
1
ISA1882_RealEstate2009_inlaga.indd 1 2009-02-18 15:03:56
summary
A major European investment market
International investors have been net buyers of Swedish real estate for the past decade,
including 2008. Sweden’s attractions build on the liquidity and transparency of its
investment market and the diversity and stability of the economy.
Foreign ownership of Swedish real estate A long time favorite for cross-border investment
SEK billion, by acquisition value Sweden has been one of Europe’s most favored markets for cross-
250 border investment for a number of years. Today, many of the largest
200 commercial property owners are international investors; several
150 with a multi-year investment history here. An investor-friendly and
100 efficient business environment, with professional participants in all
50 steps of the investment process, has contributed to making Sweden
0
a mature and sophisticated investment market. National institutional
2002 2003 2004 2005 2006 2007 2008 investors and private investors ensure high liquidity in the major
Source: DTZ
markets even in difficult times of the cycle.
Strong public finances Robust economy, sound banking sector
Current account and budget balance, % of GDP
Sweden is well placed to counter the effects of the current global
8
economic slowdown, having emphasized the need for strong public
6
finances for many years. Low levels of public debt means that there is
4
ample room to stimulate the economy. The Swedish budget for 2009,
2
already the most expansive in Europe, has been complemented with
0 further measures to cushion the effects of the financial crisis and
–2 improve the conditions for recovery. Importantly, the banking sector
Current account Budget Interest rates,
balance balance 10-year displays soundness at a time when this is declining in many other
Sweden Eurozone economies.
Source: Economist, February 2009
Sweden’s major export sectors Diversified and international economy
Distribution of exports by industry sector, Jan–Oct 2008
Swedish industry boasts large numbers of global brand names across
Machinery, 15%
a wide range of industry sectors. Ericsson, Ikea, SKF and Volvo are
Automotive products, 13%
Electrical products & telecom, 13% examples from the telecom, home furnishing, engineering and auto-
Chemicals & pharmaceuticals, 12% motive sectors. Other important sectors include financial services,
Minerals, 12% life sciences, pulp and paper, and retail. A strong presence of multi-
Forest products, 11%
Energy products, 8%
national companies, many with regional headquarters for northern
Other mechanical, 5% Europe located here, contributes to Sweden’s international business
Other, 11% environment.
Source: Statistics Sweden
2
ISA1882_RealEstate2009_inlaga.indd 2 2009-02-18 15:03:58
summary
Easy to do business International investor presence
A selection of foreign owners
Skilled professionals, smooth business procedures and receptivity to with property holdings in Sweden
international ownership makes Sweden an easy country to operate in.
Abu Dhabi Investment Authority (UAE)
Advisors have substantial experience in cross-border transactions and
AXA Real Estate Investment Managers (France)
there is a large pool of talented portfolio managers and facility manage-
ment firms. The legal system responds well to investor demands for Bank of Ireland Private Banking (Ireland)
security and cost-efficiency. A large share of property assets are owned Boultbee (UK)
by institutional investors and real estate companies, many of which are Citycon (Finland)
active buyers and sellers. Most documentation is in English. Commerz Real (Germany)
Credit Suisse (Germany)
Deka (Germany)
High transparency, low costs for transferring assets Deutsche Bank/RREEF (Germany)
Transparency is excellent, due to openness in public property records, DnB Nor (Norway)
a highly-evolved legal system and an abundance of easily accessible Doughty Hanson (UK)
market information. Investment performance indices are also in place.
Ejendomsinvest (Denmark)
Market transparency, the reliability of the legal system and common use
Eurocommercial (Netherlands)
of standardized documentation concur to reducing transactions costs.
All of the above contribute to making Sweden highly suited for cross- GE Real Estate (US)
border property investment. GIC Real Estate (Singapore)
GPT Halverton (Australia)
ING Real Estate (Netherlands)
Investea (Denmark)
IVG (Germany)
One of the world’s most competitive countries Klépierre (France)
Productivity improvements, low wage and price inflation and Sweden’s MEAG (Germany)
niche in high technology fields have benefited Swedish competitiveness Orion Capital Managers (UK)
for more than a decade, leading to extensive current account surpluses Pembroke Real Estate (US)
and a solid track record of growth. A stable and transparent business
Property Group (Denmark)
environment, a highly skilled workforce and a well-recognized capacity
SveaReal (Norway)
for innovation are other features of the economy. Sweden is also noted
for high levels of international trade; exports account for nearly 40 per- Unibail-Rodamco (France)
cent of GDP. International surveys regularly highlight Sweden as one of Valad Property Group (Australia)
the world’s most competitive countries. Vital (Norway)
3
ISA1882_RealEstate2009_inlaga.indd 3 2009-02-18 15:04:01
investment market
Good liquidity, substantial yield gap
The Swedish investment market was one of
Europe’s most solid in 2008, with continued
good liquidity and historically high trans-
action volumes. Foreign net acquisitions
remained positive.
Stable investment market
Total real estate investments reached SEK 144 billion
(€ 15.0 billion/$ 21.9 billion) in 2008, the highest transac-
tion volumes recorded in Sweden. The figures include the
sale of the property company Vasakronan. Excluding this
transaction, total transaction volumes were down by 30
percent, which was still significantly less than the average
for European investment markets. Although financially
driven, opportunistic investors have left the market, activ-
ity by Swedish institutional and private investors as well
as international equity investors have sustained transac-
tion volumes. The high investment activity contributed key features
to Sweden’s position as Europe’s third-largest investment r&VSPQFTUIJSEMBSHFTUSFBMFTUBUFJOWFTUNFOUNBSLFU
market in 2008. r&VSPQFTàGUIMBSHFTUDSPTTCPSEFSJOWFTUNFOUMPDBUJPO
r)JHIMJRVJEJUZUISPVHIPVUUIFJOWFTUNFOUNBSLFUDZDMF
Foreign net investments still positive
Investments by international investors fell by 47 percent
to SEK 37 billion (€ 3.9 billion/$ 5.6 billion), a level equal
to the cyclical average for 2000–2008. Among the largest Substantial international ownership
acquisitions were Klépierre’s and ABP’s purchase of Steen By year-end 2008, international investors owned Swedish
& Ström Swedish retail properties and Pembroke Real real estate assets amounting to nearly SEK 220 billion
Estate’s purchase of office properties in downtown Stock- (€ 23 billion/$ 33 billion) by acquisition value, a doubling
holm. Large acquisitions (over SEK 1 billion/€ 0.10 bil- from five years earlier. Among the major international
lion/$ 0.15 billion) were also made by Aberdeen Property owners are Aberdeen Property Investors, DnB Nor,
Investors and Valad Continental Partners. Investors origi- GE Real Estate, ING Real Estate, Northern European
nating in Denmark, France and Norway were the largest Properties, SveaReal, Valad Property Group and Vital.
international investors. Divestments by international Dedicated international retail investors with holdings in
investors amounted to SEK 28 billion (€ 2.9 billion/$ 4.3 Sweden include AXA REIM, Boultbee, Citycon, Euro-
billion), contributing to positive net acquisitions for the commercial Properties, Klépierre, Protego and Unibail-
full year. Rodamco. Sweden’s sizeable economy, its geographical
position and good transport capabilities also make it a
Positive yield gap good choice for centralized distribution activities in
Following significantly decreasing interest rates towards Scandinavia. Major foreign owners include Acta, North-
the end of 2008, the trend of a narrowing yield gap for ern Logistic Property and Prologis. There is great diver-
prime office properties came to an abrupt halt. The result sity among investors, including property companies,
has been the largest positive gap for years between prime institutional investors and property funds. Investments
Stockholm office yields and long-term borrowing rates. have been made all over Sweden.
4
ISA1882_RealEstate2009_inlaga.indd 4 2009-02-18 15:04:04
investment market
investment market overview
Investment market overview
Investments by investor category Largest European investment markets 2008
SEK billion Share of total transactions
150
UK 23%
120 Germany 18%
Sweden 12%
90
France 10%
60 Netherlands 6%
Spain 5%
30 Norway 4%
Finland 3%
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 Others 19%
Listed property companies Property funds
Source: Cushman & Wakefield
Private property companies Retail syndicates/bond issuers
Institutional investors Other investors
Source: Leimdörfer
Investments by international investors Largest recipients of cross-border investment 2008
SEK billion Share of total European cross-border transactions
80
Germany 22%
70
UK 16%
60
France 12%
50
Spain 8%
40
Sweden 7%
30
Russia 6%
20
Norway 6%
10
Others 23%
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Cushman & Wakefield
Acquisitions Divestments Net investments
Source: Leimdörfer
Office yield gap Top ten investment cities
Stockholm CBD, percent Investment turnover 2008, € billion*
8
London 11,402
Paris 8,499
6
Madrid 3,696
Stockholm 3,081
4
Moscow 2,610
Berlin 2,063
2
Copenhagen 1,960
0 Munich 1,831
2000 2001 2002 2003 2004 2005 2006 2007 2008
Hamburg 1,605
Yield gap Office yield, Stockholm CBD Government bond, 5-years Brussels 1,577
Source: Leimdörfer * Excluding multi-city portfolio transactions,
where no single city breakdown is available.
Source: CB Richard Ellis
5
ISA1882_RealEstate2009_inlaga.indd 5 2009-02-18 15:04:05
investment market
selected cross-border transactions 2008
Selected cross-border transactions 2008
Seller Buyer Price, MSEK Area, m² Type
Landic Property, 161 properties across Sweden Consortium led by Ole Vagner, Denmark n/a 860,000 Mixed
Cardinal Capital Partners, two Nordea properties in Stockholm Pembroke Real Estate, US n/a 90,000 Office
Steen & Ström, 9 shopping centers across Sweden Klépierre, France and ABP, Netherlands n/a 190,000 Retail
Whitehall & Niam Fund III, 8 properties in Marievik, Stockholm Aberdeen Property Investors, Sweden 2,100 70,000 Office
Boultbee, 534 apartments in shopping center ‘Fältöversten’, Stockholm Tenant-owner association 1,100 39,700 Residential
Boultbee, 388 apartments in shopping center ‘Ringen’, Stockholm Tenant-owner association 800 48,300 Residential
Alecta, 34 properties across Sweden Valad Property Group, Australia 2,400 260,000 Office
RBS Nordisk Renting, office property in Göteborg Acta, Norway n/a 37,000 Office
GE Real Estate, 6 public properties in Norrköping and Nyköping Kungsleden, Sweden 955 89,300 Office
Stena, residential portfolio in Umeå Acta, Norway 850 85,000 Residential
Landic Property, 11 properties across Sweden Otium, Norway 903 53,800 Mixed
Annehem, 45 properties in southern Sweden Property Group, Denmark 708 69,000 Residential
M2 Gruppen, 1,018 apartments in Stockholm Patrizia Immobilien, Germany n/a 94,000 Residential
Bostaden i Vetlanda, mixed portfolio in Vetlanda Heimstaden, Norway 700 110,000 Mixed
KjempeStorFart, hotel property in Göteborg Home Properties, Norway 600 30,900 Hotel
Skanska, retail project in Burlöv German fund 585 37,000 Retail
GE Real Estate, office property in Södermalm, Stockholm Balder, Sweden and GE Real Estate, US 573 18,500 Office
Bonnier Cityfastigheter, retail property in Häggvik, Stockholm UBS Real Estate KAG, Germany n/a 17,500 Retail
London & Regional, the KappAhl headquarters KappAhl, Sweden 447 48,000 Office
Sveafastigheter, retail property in Kalmar German fund 420 27,000 Retail
SSF Real Estate/Lehman Brothers, 27 residential properties, Helsingborg Heimstaden, Norway 390 35,600 Residential
Byggvesta, shopping center ‘Filbytergallerian’ in Linköping Aberdeen Property Investors, Sweden 385 16,500 Retail
NR Nordic/Russia Properties, warehouse property in Mölndal, Göteborg London & Regional Properties, UK n/a 38,000 Warehouse
Sveafastigheter & Möller & Partners, retail park ‘Mölnvik’ in Värmdö iii-BVK EIS, Germany 360 16,500 Retail
Private investors, business park ‘Zakrisdals Företagscentrum’ in Karlstad Hammar Nordic, Sweden n/a 43,000 Office
NREP, retail park ‘Sisjö Entré’ in Göteborg Defo, Germany n/a 13,600 Retail
Private investors, 300 apartments in Vaxholm Heimstaden, Norway 330 n/a Residential
Diligentia, office property in Stockholm Schroders, UK n/a 6,500 Office
NEP & Lehman Brothers, office property ‘Sydsvenskanhuset’ in Malmö Catella Real Estate, Germany n/a 21,000 Office
Valad Property Group, mixed portfolio in Linköping and Norrköping Henry Ståhl Fastigheter, Sweden n/a 31,000 Mixed
Source: Leimdörfer, Newsec
International investor origin 2008 Type of premises by main use 2008 Type of investors 2008
Share of cross-border transactions Share of total transaction volume Share of total transaction volume
Denmark 18% Office 60% Institutional investors 39%
France 14% Residential 15% Property funds 17%
Norway 13% Retail 11% Private property
US 12% Industrial/storage 4% companies 14%
Netherlands 11% Hotel 1% Listed property
Germany 8% Other 9% companies 12%
Australia 6% Retail syndicates/
bond issuers 2%
Other 18%
Other investors 16%
Source: Leimdörfer Source: Leimdörfer Source: Leimdörfer
6
ISA1882_RealEstate2009_inlaga.indd 6 2009-02-18 15:04:05
investment market
i/BUJPOBMJOTUJUVUJPOBMJOWFTUPSTBOEBTJHOJà accounted for 82 percent of commercial property financ-
ing by year-end 2008, while foreign-owned financial insti-
DBOUBNPVOUPGQSJWBUFIJHIOFUXPSUIFOTVSF
tutions accounted for 18 percent.
IJHIMJRVJEJUZJOQSJNFNBSLFUTFWFOJOEJGàDVMU Swedish banks have largely avoided substantial losses
UJNFTPGUIFDZDMFu related to the US real estate market, but face increasing
challenges to credit quality following the economic down-
.BSUJO8FJLBNQ 7JDF1SFTJEFOU 33&&'*OWFTUNFOU
turn in the Nordic and Baltic economies. The combined
operating profits of Sweden’s four major banks (Handels-
Good supply of investment product banken, Nordea, SEB and Swedbank) was SEK 74.3 bil-
Office and retail property have been the most favored in- lion (€ 7.7 billion/$ 11.3 billion) in 2008. All recorded
vestment categories for international investors. The major- growth in corporate lending.
ity of investments have been made in the three largest met-
ropolitan areas of Stockholm, Göteborg and Malmö,
however international investments have been recorded all
over the country. There is good supply of high quality of-
fice buildings, due to both new construction and to sub- Lending secured by commercial property
SEK billion
stantial upgrading of buildings, particularly in Stockholm.
As a large share of property assets are owned by institu- 225
tional investors and real estate companies, many of which
are active buyers and sellers, there is generally good supply 150
of investment product.
75
Stockholm – one of Europe’s most liquid markets
0
Stockholm has been among Europe’s most important in- 2003 2004 2005 2006 2007 2008
vestment markets for real estate for a number of years, and Swedish financial institutions
Foreign-owned financial institutions*
has remained so in spite of the financial crisis. The city
Source: Statistics Sweden * With a branch in Sweden
was Europe’s fourth-largest investment market in 2008.
The major cities each offer distinct investment profiles.
Stockholm relies heavily on the business and financial sec- Property debt providers – a selection
tor for its economic output and is the major business hub Aareal Bank (Germany)
in Scandinavia and the Baltic countries. Göteborg’s posi- Danske Bank (Denmark)
tion is built on its industry base and logistics capabilities, DnB Nor (Norway)
being the home of some of the Nordic countries’ largest Eurohypo (Germany)
manufacturers and the largest port. Malmö benefits from Handelsbanken (Sweden)
its location in the Öresund region. In the ten-year period HBOS (UK)
ending 2007, Swedish commercial property delivered an- HSH N Bank (Germany)
Hypo Real (Germany)
nualized total returns of 10.1–12.4 percent, depending on
Nordea (Sweden)
asset class.
Nykredit (Denmark)
Royal Bank of Scotland (UK)
Stable domestic banking system
SBAB (Sweden)
The Swedish property financing market is dominated by SEB (Sweden)
a handful of domestic banks and complemented by a Swedbank (Sweden)
number of international banks. Data from Statistics Swe- Source: Catella, Leimdörfer
den, which assembles statistics on Swedish-based financial
institutions, show that Swedish financial institutions
7
ISA1882_RealEstate2009_inlaga.indd 7 2009-02-18 15:04:05
investment market
case: rreef (member of the deutsche bank group)
RREEF: “High liquidity throughout economic cycles”
RREEF, the alternative investment i4XFEFOJTPOFPG&VSPQFTNPTUBUUSBDUJWFNBSLFUTGPSSFBMFT
arm of Deutsche Bank Asset Man- UBUFJOWFTUNFOU EVFUPJUTUSBOTQFSBODZ UIFTUSBJHIUGPSXBSEOFTT
agement, has been an active inves-
BOEQSPGFTTJPOBMJTNPGUIFQBSUJDJQBOUTBOEHPPEMJRVJEJUZu
tor in Swedish real estate since 2001.
“Following a couple of years of over- .BSUJO8FJLBNQ 7JDF1SFTJEFOU 33&&'*OWFTUNFOU
heated price levels, valuations are
the crisis. “It is a stable market that develops pressure on rent levels as vacancy levels
starting to look attractive again,” in a promising way. We compare Malmö’s increase. However, we believe companies
says Martin Weikamp, Vice Presi- western harbor with Norra Älvstranden in will probably seek to relocate from suburban
dent, RREEF Investment Gmbh. Göteborg some six years ago.” locations to take advantage of new high qual-
Even though Sweden is currently strongly ity buildings in the city center.”
RREEF was one of the first German real estate affected by the global financial crisis, there The impact on the Göteborg and Malmö
investors to enter Sweden, following its acqui- are a number of possible comfort factors. investment markets is harder to ascertain.
sition of the headquarters for the construction “Sweden has a high reliance on trade and “There are good arguments to invest into
company JM in 2001. Today, RREEF man- the sharp drop in exports is a concern. How- these cities, if the asset parameters are in
ages some 170,000 sq.m. of core office, retail ever, the weakened Swedish Krona might line with our investment strategy. Note that
and logistics stock, concentrated in the largest help in this respect. The fact that the finan- decreasing interest rates have contributed to
cities. “Sweden is one of our favorite markets,” cial and business sector contributes around the largest positive yield gap in 20 years for
says Martin Weikamp. “We have a stable 40 percent of Stockholm’s output is also wor- prime Swedish property. This is a strong argu-
team of business partners, which simplifies rying. But Stockholm has historically been a ment especially for institutional real estate
transaction processes significantly, and have volatile market and we believe it has learned investors and a helpful step to recovery.”
consistently positive experiences of counter- its lesson from previous downturns. We feel
parties. Importantly, the era of financially comfortable in the mid-term perspective.”
driven investments is over and valuations are Sweden has a fundamentally attractive rreef investment
now more in line with the requirements of property investment market. “The Swedish
a core and core plus investor.” economy is the largest of the Nordic coun- t5IFBMUFSOBUJWFJOWFTUNFOUBSNPG
According to Weikamp, all of Sweden’s larg- tries, and is robust due to its diversification Deutsche Bank Asset Management.
est investment markets are of interest. and lack of dependence on natural resources. t.PSFUIBO FNQMPZFFT HMPCBM
“Besides from Stockholm’s prominent posi- National institutional investors and a signifi- offices and € 59.7 billion under manage-
tion, Göteborg has a long-term positive out- cant amount of private high net-worth ensure ment. 88 percent of assets in real estate.
look, in spite of the current challenges. It has high liquidity in prime markets even in diffi- t33&&'*OWFTUNFOU(NCI (FSNBOZ JT
the largest port in Scandinavia, is the focal cult times of the cycle. This explains why responsible for core and core + investment
point for logistics activities in Northern Europe, Stockholm has remained one of Europe’s products.
and the Swedish government has just sup- most liquid markets during the crisis.” t)PMEJOHTJO4XFEFOBTTFUTBQQSPY
ported new port infrastructure investments.” Martin Weikamp believes prime office 170,000 sq.m. in Stockholm, Göteborg,
Malmö.
Weikamp says Malmö’s border location in property will be less affected by the down-
the Öresund region should help it through turn. “For Stockholm, we expect downward
8
ISA1882_RealEstate2009_inlaga.indd 8 2009-02-18 15:04:06investment market
case: pembroke real estate
Pembroke: “Sustainable growth opportunities”
When Pembroke decided to expand capitals, appear promising relative to most of Haug. “Our philosophy is to consider oppor-
their European peers.” tunities and invest in markets that have
its market coverage in Europe, the
Stockholm has a good opportunity to remain growth potential through multiple cycles.”
numbers pointed north. “We were competitive on a global basis, believes Haug, To Pembroke, the key investment drivers
specifically attracted to Stockholm thanks partly to a services-based economy going forward will pertain to the ability to pro-
because of the potential for sus- that comprises innovative industry sectors mote economic recovery and expand the eco-
tainable long-term growth,” says such as information technology and life sci- nomic potential of the market. “Real estate
ences. For property investors, the structure of investment should return to a focus on the
Johannes Haug, senior vice presi-
the Stockholm market also has several attrac- core fundamentals: quality of location, quality
dent and managing director for tive attributes. “The CBD is a very tightly- of buildings, and quality of assets. Our global
Europe, Pembroke Real Estate. defined, well-established and vibrant area. investment strategy has always focused on
these fundamentals, and our acquisitions in
As part of a portfolio acquisition, Pembroke Stockholm are a reflection of this strategy.”
acquired two properties in Stockholm in 2008 i0VSQIJMPTPQIZJTUPJOWFTUJO Haug says Pembroke has much appre-
located in Stockholm’s CBD near Kungsträd- NBSLFUTUIBUIBWFMPOHUFSN ciated the professionalism of local service
gården and Sergels Torg. Along with the pur- providers and property advisors. “While
chase of similar buildings in Oslo (Norway)
HSPXUIQPUFOUJBMUISPVHI researching the Swedish market, we were
and Helsinki (Finland), the acquisitions were NVMUJQMFDZDMFT5IJTIPMETUSVF graciously welcomed by leading local prop-
Pembroke’s first in the Nordic region. erty companies and fund managers, and
GPSPVSJOWFTUNFOUJO4XFEFOu
Johannes Haug says the Nordic invest- value their insights and recommendations.
ments were a natural step for Pembroke, +PIBOOFT)BVH 4FOJPS7JDF1SFTJEFOUBOE The relationships we developed have enabled
whose focus is on prime real estate opportuni- .BOBHJOH%JSFDUPSGPS&VSPQF us to become an active part of the local
ties in major cities worldwide that can offer investment community.”
enduring value. Several years ago, Pembroke
decided to expand its market coverage Importantly, its continued role as a major
beyond its original European investment mar- driver of economic activity for the Nordic pembroke real estate
kets of London, Paris and Brussels. region is supported by the City of Stockholm.”
t5IFSFBMFTUBUFJOWFTUNFOUBOEEFWFMPQ-
“We were attracted to the Nordics, and spe- Haug says long-term infrastructure projects
ment advisor for Fidelity Investments (FMR
cifically Stockholm, because of the potential such as Citybanan (the new railway tunnel LLC) and FIL (Fidelity International Limited).
for sustainable, long-term growth due to an beneath central Stockholm) should further
t.BOBHFTNPSFUIBO TRNPGDPN
attractive industry base, a transparent and improve Stockholm’s global competitiveness mercial and residential properties in Boston,
liquid investment market, and positive demo- and potential for sustainable economic growth. Brussels, Helsinki, London, Oslo, Paris,
graphics trends.” For Pembroke, a presence in the Nordic Stockholm, Tokyo and Washington, D.C.
In the short-term, Haug expects the Nordic markets also offers diversification benefits. t5XPQSPQFSUJFTJO4UPDLIPMN$#%
markets to be affected by the same global “The fact that Stockholm’s property market comprising 90,000 sq.m. and located on
economic issues affecting all property mar- has not been completely correlated with other Hamngatan near Kungsträdgården and on
kets. “However, the long-term fundamentals markets in this current cycle highlights the Sveavägen near Sergels Torg.
for Stockholm, as well as the other Nordic diversification benefits we are seeking,” says
9
ISA1882_RealEstate2009_inlaga.indd 9 2009-02-18 15:04:07the swedish economy
Meeting the challenges of a global downturn
As the effects of the financial crisis paralyze
economic activity, Sweden remains one of
Europe’s safest havens. In spite of a bleak out-
look in the near-term, strong institutions and
fundamentals provide for a solid recovery of
the Swedish economy.
Strong public finances, a sound banking system and a
well-performing economy cushioned Sweden through the
first tremors of the financial crisis, in 2007. As the unrest
spread from the US to Europe, Sweden was one of the last
countries to feel the impact. The major Swedish banks had
strong balance sheets, with relatively little exposure
to so-called toxic assets and the large-scale defaults that
initiated the crisis.
Focus on crisis management
As the crisis unfolded, however the credit crunch became key features
a reality in Sweden as well. Facing higher borrowing costs r4USPOHQVCMJDàOBODFT
and increasing difficulties obtaining credit in international r*OOPWBUJWF XFMMQFSGPSNJOHFDPOPNZ
financial markets, Swedish multinationals turned to the r)JHIMZJOUFSOBUJPOBMCVTJOFTTFOWJSPONFOU
domestic market, thereby draining it of remaining liquidity
at the expense of small- and medium-sized companies.
The mounting inflationary pressure that had led the Cen- Facilitating recovery
tral Bank of Sweden (the Riksbank) to gradually increase After a period of rapid growth, the Swedish economy
the repo rate soon evaporated. Anticipating the need for showed signs of weakness even before the onset of the
urgent measures and acting in conjunction with other cen- crisis. Sweden’s growth rate stalled in the beginning of
tral banks, the Riksbank lowered the rate from 4.75 percent 2008 due to a slackening in domestic consumption and
to 1.00 percent between October 2008 and February 2009. demand in major export markets. Higher risk premiums,
In October 2008, the Swedish government launched tighter lending terms and falling asset prices created by
an extensive program to guarantee bank loans and inject the financial crisis quickly worsened the state of the real
liquidity. A new fund was created that could be used to economy. Consumption and corporate investment were
buy shares in banks at risk of default. The government held back further, making full-year growth in 2008 stop
also raised the guarantee on bank deposits. In February short at 0.8 percent.
2009, the government introduced a bank recapitalization Over the course of 2008/2009, the government has
scheme valued at SEK 50 billion (€ 5.2 billion/$ 7.6 bil- adopted measures to counteract the economic downturn
lion) to increase bank lending. The scheme, aimed at sol- by additional public expenditures amounting to 1.3 percent
vent banks, is intended as a complement to private capital, of GDP, one of the most ambitious programs in Europe.
with capital injections taking the form of either equity or Given Sweden’s robust public finances, the measures can be
hybrid capital. Sweden’s measures build on experiences taken without abandoning the target of 1 percent govern-
gained during the Swedish banking crisis in the early ment budget surplus over the economic cycle.
1990s, the handling of which is regarded as a role model The low level of the repo rate combined with falling
by international experts. risk premiums mean that monetary policy will be strongly
10
ISA1882_RealEstate2009_inlaga.indd 10 2009-02-18 15:04:09the swedish economy
expansionary in the period to 2010, although inflation is of swedish origin
still expected to plummet in the years ahead. The com-
bined fiscal and monetary policy will dampen the down-
turn, but not enough to avoid negative growth in 2009 of
1 percent or more. The economy is expected to recover
with a growth rate of 2 percent in 2010 and shift into
higher gear in 2011.
Competitive now and in the future
Looking beyond the current crisis, fundamentals suggest
that Sweden will remain an innovative, well-performing
economy with high capacity to adjust to changing condi-
tions. Sweden’s core industries (automotive, chemicals,
energy, heavy manufacturing, pharmaceuticals/biotech,
pulp and paper, steel) are world-class and drive demand
for sophisticated services and advanced technologies.
Over the past decade, Swedish manufacturing industry
Sweden’s largest companies
has posted one of the fastest productivity growth rates in Sales 2007, SEK billion
the world. Volvo Group, automotive 285.4
A strong presence of multinational companies is both Ericsson, mobile systems 187.8
the result and the driving force of Sweden’s highly inter- Vattenfall, energy 143.6
national business environment. Companies of Swedish Skanska, construction 138.8
origin include AstraZeneca, Ericsson, H&M, Ikea, OMX, Sony Ericsson, mobile communications 122.3
SCA, Scania, Securitas and Volvo. Foreign-owned compa- Volvo Cars, cars 106.9
nies employ a quarter of the private sector workforce. Be- SCA, pulp & paper 105.9
tween 2003 and 2007, Sweden was the world’s 17th largest Electrolux, household appliances 104.7
Telia Sonera, telecommunications 96.3
recipient of foreign direct investment (FDI), accounting for
Sandvik, metals technology 86.3
a total inflow of $ 71 billion (€ 49 billion).
Scania, automotive 84.5
ICA, retail 82.3
Solid platform for growth
Source: Invest in Sweden Agency
Sweden’s fiscal and monetary policies have contributed
to maintaining a macroeconomic environment conducive
to growth. Government spending limits are set and
agreed with Parliament. The independent Riksbank has and 80 percent of imports. Major trading partners are
maintained price stability with an inflation target set at Germany, the US, the UK and the neighboring Scandina-
2 percent over the economic cycle. A number of structural vian countries. Moreover, Swedish companies have sub-
reforms, deregulations and privatizations have been stantial interests in Central and Eastern Europe and in
undertaken. The national pension system was reformed Asia, notably China, where some 400 Swedish companies
already in the mid 1990s. At 39 percent, the government are established.
debt is among the lowest in Europe. With an average Global competitiveness surveys regularly give Sweden
annual growth rate of 3 percent in the last decade, Sweden top rankings, with high marks for R&D, innovation, the
has outperformed the Euro zone by almost 1 percentage corporate taxation regime, infrastructure and public sector
point per year. efficiency. The annual 4 percent of GDP expenditures on
Sweden’s economy is deeply integrated into the Euro- R&D contribute to Sweden’s position as the number one
pean economy, which accounts for 70 percent of exports in innovation performance among European countries.
11
ISA1882_RealEstate2009_inlaga.indd 11 2009-02-18 15:04:12the swedish economy ISA1882_RealEstate2009_inlaga.indd 12 2009-02-18 15:04:18
the swedish economy
Key economic indicators
SEK bn Annual change (%)
2007 2007 2008* 2009** 2010**
Supply and demand
GDP at market prices 3,061 2.5 0.8 –0.9 1.9
Household consumption 1,430 3.0 0.9 0.4 2.6
Public consumption 793 0.4 0.9 1.1 1.8
Gross investment 582 7.5 3.8 –5.8 0.1
Exports of goods and services 1,609 5.7 2.8 –1.3 4.0
Imports of goods and services 1,374 9.4 3.7 –2.2 4.1
Prices
Inflation (KPIX) 1.2 2.5 0.8 1.1
Production
Goods and service industries 2,111 3.4 0.9 –1.1 1.7
Employment
Unemployment rate (% of workforce) 6.2 6.1 7.9 9.0
Labor market program (% of workforce) 1.9 1.7 2.2 2.4
Public fincance
Government expenditure (% of GDP) 49.9 50.1 52.2 52.8
Government net lending (% of GDP) 3.7 2.2 –1.3 –2.5
Government debt (% of GDP) 40.7 38.6 39.0 40.8
Balance of payments
Current account (% of GDP) 8.4 7.2 6.7 6.6
Interest rates
Repo rate (end of year %), set by the Central Bank of Sweden 4.00 2.00 1.00 1.00
Bond rate (10-year, end of year %) 4.3 3.0 3.3 3.9
Sovereign credit rating Standard & Poor’s AAA
* Preliminary figures ** Forecast 1 SEK = € 0.10, $ 0.15 Source: National Institute of Economic Research; Central Bank of Sweden, December 2008
Inflation rate GDP growth Foreign-owned companies in Sweden
2004–2008, average annual change, percent 2004–2008, average annual change, percent 2007, employees in thousand
Finland 1.6 Finland 3.6 US 108
Sweden 1.7 Sweden 3.0 UK 83
Netherlands 1.7 Netherlands 2.6 Finland 59
Norway 1.9 US 2.5 Germany 54
Denmark 2.0 UK 2.3 Denmark 50
Germany 2.1 Norway 2.3 Norway 48
France 2.2 Euro area 2.0 France 44
UK 2.3 France 1.9 Netherlands 43
Euro area 2.4 Denmark 1.8 Switzerland 24
US Germany Luxembourg 21
3.3 1.8
Source: National Institute of Economic Research; Source: National Institute of Economic Research; Source: Swedish Institute for Growth Policy Studies
Eurostat; OECD, 2008 Eurostat; OECD, 2008 (figures for 2008 are preliminary) (ITPS), 2008
Corporate income tax World’s most competitive countries Most innovative nations
2009, percent 1. US 1. Sweden
France 34.4 2. Switzerland 2. Switzerland
Italy 32.5 3. Denmark 3. Finland
Germany 30
4. Sweden 4. Israel
Spain 30
5. Singapore 5. Denmark
UK 28
Sweden 26.3 6. Finland 6. Japan
Finland 26 7. Germany 7. Germany
Netherlands 25.5 8. Netherlands 8. UK
Denmark 25 9. Japan 9. US
Ireland 12.5
10. Canada 10. Luxembourg
Source: Öhrlings PricewaterhouseCoopers, 2009 Source: World Economic Forum “Global Source: European Commission “European
Competitiveness Report 2008–2009”, 2008 Innovation Scoreboard 2007”, 2008
13
ISA1882_RealEstate2009_inlaga.indd 13 2009-02-18 15:04:21business aspects
Transparent, efficient and professional
Sweden’s real estate market is recognized for
its professionalism, low transaction costs and
investor-friendly business procedures. Trans-
action processes are straight-forward and
built on mutual respect.
A smooth investment market
Sweden is recognized as one of Europe’s smoothest mar-
kets for property investment, with short lead times to deal
conclusion. In addition to the efficiency of advisory servic-
es, low taxes, use of standardized documentation (often in
English) and simple handling of mortgages and title regis-
trations are factors that contribute to facilitating and
speeding transaction processes and reducing transaction
costs. Transfer tax, if applicable, is low.
i*OCVTJOFTTSFMBUJPOTIJQTSFMJBCJMJUZJTBDSVDJBM
key features
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CVTJOFTTQBSUOFSTBOEDPVOUFSQBSUJFTBSFDPO r4NPPUIBOESFMJBCMFUSBOTBDUJPOQSPDFTTFT
r&BTZBDDFTTUPFYUFOTJWFBOESFMJBCMFNBSLFUJOGPSNBUJPO
TJTUFOUMZQPTJUJWFu
r.JOJNBMUSBOTBDUJPOSJTLT
.BSUJO8FJLBNQ 7JDF1SFTJEFOU 33&&'*OWFTUNFOU
financial information with regard to asset portfolios,
High-quality service providers which has also had positive effects on the level of portfolio
Foreign investors usually praise the quality of local advi- disclosure by non-listed companies. All companies report
sors and business partners. There are numerous transac- in compliance with International Financial Reporting
tion advisors, law firms with dedicated real estate practic- Standards (IFRS).
es as well as specialists focusing on asset and/or property
management, tenant representation and facility manage- National property index
ment. Having a trusted group of advisors for legal, tax, Some 15 large property owners contribute data to the SFI/
technical and valuation issues significantly simplifies and IPD Swedish Property Index. The index, established in
shortens transaction processes. 1997 and covering all asset classes, has resulted in both a
comprehensive database for measuring income return and
High transparency total returns in the Swedish property market, as well as
Sweden has a strong tradition of information openness, the introduction of valuation standards common to other
both from official sources and from property companies’ European markets.
reporting. Authorities such as the National Land Survey
(Lantmäteriet), district courts and local fiscal authorities i5IFSFMBUJPOTIJQTXFEFWFMPQFEJO4XFEFO
provide detailed property information, often online. Par- IBWFSBQJEMZFOBCMFEVTUPCFDPNFBOBDUJWF
ties can trust public information – compensation is award-
QBSUPGUIFMPDBMJOWFTUNFOUDPNNVOJUZu
ed for losses incurred related to incorrect information in
the Land Register. Listed companies provide abundant +PIBOOFT)BVH 4FOJPS7JDF1SFTJEFOU 1FNCSPLF3FBM&TUBUF
14
ISA1882_RealEstate2009_inlaga.indd 14 2009-02-18 15:04:23business aspects
Gateway to investments in northern Europe
Population, GDP and GDP growth, 2008
Population, GDP at current Real GDP growth
million prices, € billion rate, percent
Sweden 9.2 332.6 1.0
Denmark 5.5 235.7 0.7
Finland 5.3 190.2 2.4
Norway 4.7 325.3 1.9
Lithuania 3.4 32.9 3.8
Latvia 2.3 22.7 –0.8
Finland Estonia 1.3 16.5 –1.3
Note: Population figures are for January 1, 2008. GDP and GDP growth figures
Norway are forecasts.
Sweden
Source: Eurostat
Estonia
Ownership Swedish commercial properties
Denmark Latvia Estimated market value 2008, SEK 864 billion
Lithuania (€ 86 billion / $ 131 billion)
Institutions and foreign owners 49%
Listed companies 16%
Germany Poland Municipal housing &
public companies 13%
Private owners 15%
The Nordic property market comprises markets in Sweden, Denmark, Finland and Housing co-ops 5%
Norway – stable countries with sizeable investment markets, high liquidity and Owner occupier 2%
transparency. Sweden, the largest country, is the natural base for property invest-
ment in the region and has seen the largest inflow of capital. Source: Newsec
The largest property owners in Sweden recognitions for sweden in 2008
Aberdeen Property Investors, UK ING Real Estate, Netherlands
EU’s most innovative nation
Acta, Norway Kungsleden, Sweden
The European Commission names Sweden as the most innovative
AFA Fastigheter, Sweden Landic Property, Iceland
country in the European Union (February).
Alecta, Sweden Niam, Sweden
Akademiska Hus, Sweden Nordisk Renting, UK Best country for foreign direct investment
Akelius, Sweden Norrporten, Sweden A group of Chinese authorities and agencies names Sweden as the
AMF Pension, Sweden Northern European Properties, UK most attractive country for foreign direct investment (April).
Atrium Ljungberg, Sweden Property Group, Denmark The world’s most networked economy
Balder, Sweden SEB Trygg Liv, Sweden Sweden is placed second in a global study of the world’s most
Boultbee, UK Stena Fastigheter, Sweden networked economies (April).
Castellum, Sweden SveaReal, Norway On top-3 list for international trade
Diligentia, Sweden Unibail-Rodamco, France Sweden ranks as the world number three in openness to international
DnB Nor, Norway Vasakronan, Sweden trade and investment, following Hong Kong and Singapore (June).
Fabege, Sweden Valad Property Group, Australia
A world competitiveness leader
GE Real Estate, US Vital, Norway
Sweden retains its place as the world’s fourth most competitive
Hufvudstaden, Sweden Wallenstam, Sweden
country, according to the World Economic Forum (October).
Humlegården, Sweden Wihlborgs, Sweden
Source: Newsec
15
ISA1882_RealEstate2009_inlaga.indd 15 2009-02-18 15:04:23business aspects
case: sustainable buildings
Sustainable buildings: Sweden in the forefront
To improve sustainability perform- development at Vasakronan, Sweden’s largest Development, Swedish property developers
property company. “This goes hand in hand have come a long way in holistic property
ance of buildings is highly prioritized
with the increased focus on sustainability construction. “Stringent environmental poli-
in Sweden, due to strong environ- among tenants.” cies have long since been in place. Aspects
mental awareness and pressure such as waste handling, soil contamination
from tenants, property developers and the use of environmentally certified
i4VSQSJTJOHMZMBSHFTBWJOHTDBOCF building materials are taken very seriously.”
and owners/investors alike.
NBEFTPMFMZUISPVHIDPOTUBOU “Not least,” Hellman says, “property devel-
opers know how to create energy-efficient
DIFDLJOHVQPOQSPQFSUJFTBOECZ
Sweden is a country that fully embraces sus- buildings with good indoor environmental
tainability, as a result of environmentally con- PQUJNJ[JOHPQFSBUJOHTZTUFNTu quality.” According to Hellman, the major
scious policymaking and a comprehensive challenge for the industry, in Sweden and
#P.BUUTPO 5FDIOJDBM%JSFDUPS #SPTUBEFO
approach to a wide range of sustainability Europe as a whole, is to establish a uniform
challenges facing cities and industries. Today, sustainable building certification system. NCC
Sweden is a European leader in energy use Denell says the development of city districts was the first European property developer to
from renewable sources, partly thanks to pio- like Hammarby Sjöstad in Stockholm and become a corporate Green Building partner,
neering waste-to-energy developments and Western Harbor in Malmö showcases Swed- committing itself to at least 75 percent Green
extensive build-up of district heating/cooling ish know-how in sustainable urban planning, Buildings in new developments.
systems in Swedish municipalities. adding that the greatest benefit to the envi-
In 2001, the Swedish Energy Agency and ronment is to renovate and densify in the
the largest commercial property owners set up existing cityspaces. Kungsbrohuset
Belok, a collaborative program that focuses on Vasakronan is currently undertaking its T
development projects in the areas of energy most comprehensive renovation project to Hötorget
efficiency and sustainability. The purpose is to date, the upgrading of an office property at
speed up the implementation of new systems Vasagatan in central Stockholm, and is
Area: Stockholm
and products. applying a number of features to improve its City West
Sergels Torg T
The European Union’s Green Building sustainability performance, including solar T
World Trade
de
Program, set up in 2004 to improve the heating, sedum roofing and modern ventila- Cooling
C enter
Center
energy efficiency of non-residential buildings tion, climate and lighting systems. At the Lake Klara
Heating T
in Europe, has been rapidly implemented in nearby Kungsbrohuset, developed by Jern- Stockholm
St
Stoc
Sttock Central
kholm Cent Station
J
Sweden. By early 2009, Swedish property husen, secure bicycle storage and dressing
owners and developers accounted for nearly rooms with showers are features that will
50 percent of all buildings approved by the contribute to reducing overall carbon dioxide
program. emissions from the building and its users. Riddarfjärden
“The Green Building program has created The property developer NCC is behind sev-
Kungsbrohuset in Stockholm, to be finished by
a movement in Sweden that challenges and eral Green Buildings sold to international real early 2010, will be one of Europe’s most energy-
inspires property owners and developers,” estate investors. According to Jonny Hellman, efficient buildings, thanks in part to the recycling
says Anna Denell, head of environmental environmental director at NCC Property of excess heat from the nearby Central Station.
16
ISA1882_RealEstate2009_inlaga.indd 16 2009-02-18 15:04:31business aspects
case: sustainable buildings
i5IF(SFFO#VJMEJOHQSPHSBNIBT “This certification enables us to do just that.” Sweden leads green building
Given the significantly larger stock, improv- certification in Europe
DSFBUFEBNPWFNFOUJO4XFEFO Share of total number of certified buildings
ing sustainability performance is even more
UIBUDIBMMFOHFTBOEJOTQJSFTQSPQ important for existing buildings. The property
Sweden 45%
FSUZPXOFSTBOEEFWFMPQFSTu company Brostaden is a case in point. Bro- Rest of Europe 55%
staden was the first corporate partner of the
Anna Denell, Manager Development and EU Green Building program, meeting the Source: European Green
Environment, Vasakronan requirement that 30 percent of the portfolio Building Programme,
February 2009
qualifies as Green Buildings.
Citycon, a Finnish property owner with a For the past ten years, Brostaden has
presence in Sweden since 2005, says Swed- worked to improve energy efficiency in its 90
ish norms and regulations for sustainability properties, principally built in the 1970s and Swedish Green Building Partners
in the construction process are stricter than 1980s. According to Bo Mattson, technical – a selection
in other markets in northern Europe. The director, these achievements have little to do Brostaden (Corporate Partner)
company aims for the highest level of sus- with advanced new technology. “We purely Fabege
tainability certification in its development apply tested solutions. Surprisingly large Folksam
project at Liljeholmstorget in Stockholm, savings can be made solely through constant Jernhusen
choosing the US system LEED. “As a prop- checking up on properties and by optimizing JM
erty owner, we want to make our contribution operating systems.” The energy use in Brosta- NCC (Corporate Partner)
to the environment and to sustainable con- den’s properties is some 30 percent below the Peab
struction,” says Dieter Sand, project director. Swedish average for commercial properties. Skanska
Eco-cities: the Swedish model
Swedish cities have integrated the planning of transport and traf-
fic, water and sewage treatment, waste collection, employment
and housing to create increasingly sustainable cities with low car-
bon footprints. Examples are found in all of Sweden’s largest cities.
The city districts of Hammarby Sjöstad in Stockholm and Western
Harbor in Malmö, both constructed in former industrial areas, are
some of the world’s foremost sustainable city concepts. By 2030,
Stockholm aims to be completely carbondioxide neutral.
www.alvstranden.com www.hammarbysjostad.se
www.malmo.se/sustainablecity Hammarby Sjöstad, Stockholm Western Harbor, Malmö
17
ISA1882_RealEstate2009_inlaga.indd 17 2009-02-18 15:04:39fiscal aspects
Fiscal system suited for property investment
Sweden has an uncomplicated taxation struc-
ture and competitive corporate taxes. Sweden
applies participation exemption, has no thin
capitalization rules and allows full deduction
for interest in most cases.
Investments normally through holding company
Investments in Swedish property can be made through a
limited liability company (“AB”), a non-resident company,
or a partnership. Investors normally adopt either a resi-
dent or a non-resident holding company structure, for
example a holding company owning stock in one or more
subsidiary companies. Creating presence through acquir-
ing an off the shelf company takes one to two days, estab-
lishing a limited liability company takes a little longer.
Mostly indirect transactions
Capital gains tax exemption normally applies for Swedish key features
corporate entities for gains related to the disposal of r$PNQFUJUJWFMFWFMTPGDPSQPSBUFJODPNFUBY
shares. These rules, in combination with the fact that real r5BYFYFNQUJPOPOHBJOTSFMBUFEUPUIFEJTQPTBMPGTIBSFT
estate transfer tax is not levied on indirect transfers of real r/PUSBOTGFSUBYJGEFBMJTNBEFJODPNQBOZTUSVDUVSF
estate, have resulted in transfers of real estate properties
being made mostly through indirect transactions. A poten-
tial investor is therefore likely to be offered to acquire made for tax purposes. Interest expenses on externally
shares in a Swedish company holding the target property. borrowed funds, as well as property-related expenses, are
tax-deductible for resident and non-resident companies
Use of special purpose companies and partnerships owning Swedish property. Certain ex-
Even if an investor is offered to acquire a property in a direct penses, such as costs relating to the acquisition of proper-
transaction, the investment would more likely be effected ty, refurbishment costs and interest incurred during con-
through a Swedish special purpose company. This simplifies struction, must be added to the acquisition cost of the
the holding and increases flexibility in a later disposal. The property and depreciated accordingly.
owner of Swedish property may use an intracompany reor-
ganization by partial division to transfer the property to the Tax depreciation and actual latent capital gains tax
special purpose company. No transfer tax is levied on a Property should be carried at its initial purchase price.
property transfer through partial division. Should the prop- An annual depreciation rate for tax purposes of between
erty be transferred to the special purpose company through 2 and 5 percent (depending on the usage of the building)
a direct asset transfer, transfer tax would be levied. of the acquisition cost is allowed with respect to buildings.
Parts of the building may be classified as building equip-
Competitive corporate taxes ment and may be depreciated according to the same rules
Sweden’s corporate income tax rate is 26.3 percent, but the as machinery and equipment. The depreciation rate for tax
effective tax rate is lower due to the possibility of deferring purposes does not have to correspond with the book de-
taxation of profit. Computation of taxable income is based preciation. Depreciation is not allowed for land. The tax
on statutory accounts, to which certain adjustments are basis on a property will remain unchanged in case of an
18
ISA1882_RealEstate2009_inlaga.indd 18 2009-02-18 15:04:41fiscal aspects
indirect acquisition. Thus, no “step-up” in tax basis will cation to the reserve can be released at the discretion of the
be achieved for depreciation or capital gain tax purposes. company, for example to cover a net operating loss. The re-
An investor should be aware that there is a “latent capi- serve must be released to taxable income at the latest in the
tal gain” related to the property. The seller most often sixth year after it was added to the reserve. A taxable inter-
makes an intra-group transfer of the property into the spe- est income is calculated on the total amount of reserves allo-
cial purpose vehicle below market value which results in a cated by the beginning of the financial year. For financial
latent tax issue in the special purpose vehicle. There are year 2009 the interest rate amounts to 2.08 percent.
transaction examples where the buyer has been able to ne-
gotiate a price reduction for the latent tax, but far from in Profit transfer possibility for group companies
all transactions as a number of investors can manage the Each company within a group constitutes a separate taxa-
latent tax issue in their own structure. ble entity. The group, as such, is not taxed. However, the
group relationship is taken into account in various ways,
Tax allocation reserve to smooth profit variations one example being the special tax regime concerning
Swedish tax legislation offers a general option to set up a “group contributions”. These entail a straight transfer of
reserve, which can best be described as a “tax allocation profits between two group companies; a transfer that is
reserve”, in addition to an excess depreciation reserve. This deductible for the transferring company and taxable for
option is intended, for example, to allow companies the pos- the receiving company. Such transfers are reflected as
sibility to carry back losses to offset previous years’ profits, year-end accruals in the annual accounts of both com-
since Swedish tax legislation does not contain a specific loss panies and are executed by way of transfer of funds. An
carry-back provision. The reserve is based on a company’s important requirement to qualify for “group tax relief”
annual taxable income. One-fourth of the taxable income is that more than 90 percent of the common ownership
may be appropriated to this reserve. A particular year’s allo- has existed for the entire fiscal year.
Dividends often exempt from withholding tax
sweden’s holding company regime
Dividends distributed by a nonlisted resident company to
t4XFEFOJTBNPOH&VSPQFTNPTUGBWPSBCMFKVSJTEJDUJPOTGPSIPMEJOH a foreign company are exempt from withholding tax, pro-
companies, a result of participation exemption rules in combination vided that the recipient would be exempt from taxation
with other tax rules and case law. had the company been resident in Sweden. Thus, dividends
t$BQJUBMHBJOTBOEEJWJEFOETGSPNCVTJOFTTSFMBUFETIBSFTBSFFYFNQU on nonlisted shares are exempt from withholding tax.
from tax. The definition of business related shares is generous
For listed shares, the ownership must be at least 10 per-
compared to other countries.
t"QQMJFTUPTIBSFTIFMEJO PSEJWJEFOETSFDFJWFEGSPN DPNQBOJFTJO
cent of the voting power and shares must have been held at
Sweden and abroad. least one year at the time of the dividend. The recipient has
to qualify as a “foreign company” according to Swedish
Qualification for tax exemption
Unlisted shares Always tax exempt – ie. no qualification time or tax legislation. Tax exemption on dividend distributions
minimum holding of votes or capital. may also be available under a tax treaty, if exemption is
Listed shares Must hold at least 10 percent of the voting rights or not available under domestic law. In cases where with-
must be held in the course of the holder’s business. holding tax will be levied, the ordinary tax rate is 30 per-
Must be held at least one year.
cent, but it is often reduced by provisions in a double tax
Other competitive tax rules treaty. No withholding tax or branch profits tax is appli-
t-PXFGGFDUJWFDPSQPSBUFUBYSBUF
cable to permanent establishments operating in Sweden.
t*OUFSFTUTGVMMZEFEVDUJCMFGPSUBYQVSQPTFT
t/PUIJODBQJUBMJ[BUJPOSVMFT
t/PXJUIIPMEJOHUBYFTPOJOUFSFTUT Tax exemption for capital gains
t/PTUBNQUBYPSDBQJUBMEVUJFTPOTIBSFDBQJUBM Nonlisted shares are exempt from capital gains taxation.
t&YUFOTJWFEPVCMFUBYUSFBUZOFUXPSL For listed shares, exemption requires at least a 10 percent
ownership of the voting rights and a minimum one year
19
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