Changes in the portfolio in the year
Reginn’s portfolio has developed considerably from the company’s listing in 2012 if one looks to the size, diversification, and quality. The value of the property portfolio has almost four folded in the past five years, or from the listing of the company. The growth has mostly been driven by investments in profitable properties and properties companies. The year 2017, however, was characterized largely by internal growth, i.e. investment and restructuring of the company’s properties. Investment in the company’s properties was almost equal to investment in purchased properties or portfolios. The valuation of Reginn increased by 14 billion ISK in 2017. The assessment change was almost 3 billion ISK and a new investment of 12 billion ISK. Properties were sold for about 1 billion ISK.
In 2017, Reginn acquired 55% of shares in FM-hús ehf. which owns and operates school buildings in Hafnarfjördur and Garðabær. Through FM-Hús ehf. Reginn also purchased Reykir Properties ehf. in Akureyri along with another property in Akureyri. These investments, together with other smaller properties, account for 6.5 billion ISK.
Investments in Reginn’s properties have never been more extensive than in 2017, totaling 5.8 billion ISK. The major part was the restructuring of Smáralind and leasing space upgrading of ZARA and H & M in the west part of Smáralind as well as renewal of entrances and more. Construction of a new comprehensive sports hall by Egilshöll began during the year and is scheduled for completion in August this year.
Assessment Change - Discussions and Methods
- The property portfolio is evaluated at fair market value in accordance with International Financial Reporting Standards and supported by cash flow analysis as is customary for properties companies.
- The company's revenues are tied to long-term lease contracts, which are indexed, and therefore the revenues and cash flow change in line with changes in the index.
- The yield required on equity and interests of debts are updated based on the market situation. The assessment change is therefore a normal entry of property value increase of the investment properties and the largest part of the company's long-term debt is indexed.
- The calculation of an assessment change is based on models and procedures that have been verified by an independent consultant. The auditors of the Company and the Audit Committee have discussed and reviewed the fair market valuation.
Property valuation by categories
The investment strategy of Reginn takes into account both risks and business opportunities. A clear investment policy has been followed, by which the weight of business categories such as retail and services have reduced from being about half of the portfolio five years ago.
The weight of retail and services is now near 35% of the value of the Reginn’s portfolio. Office and commercial properties are now little over 28%. Parallel with investment in a new property category, a change was made to the property categorization of Reginn. Schools have been moved under the category, Sports - education and recreation properties. The company's main investments were in this category, which is why it grows between years and is now over 15% of Reginn’s portfolio.
Size of property categories
The square metre size of the largest property categories, i.e. retail and services on the one hand and office properties on the other hand, are now - each - about one third of the portfolio. These are the main pillars of the portfolio. In terms of square metres, hotels and the tourism industry are still a very low percentage of Reginn’s portfolio, but as shown above, the nature of the properties is such that their value is more than twice as high per square metre but generally in other categories.