Selvaag Bolig chair Olav H Selvaag says that the transaction will make it possible to refine the company’s core business and make the value of its assets visible.
“Selvaag Bolig is a housing developer. We therefore want to focus on this and are accordingly separating off the land bank into a separate company. We believe that this will make it easier to price the company properly, because value creation in day-to-day operations will become more visible,” Selvaag says.
Urban Property is buying most of Selvaag Bolig’s existing land portfolio on the basis of an updated market valuation calculated by independent valuers. The added value is in line with the assessment communicated when Selvaag Bolig’s interim results were presented in February 2019. Urban Property will also have a pre-emptive right to all new land Selvaag Bolig wants to develop. The properties will be repurchased by Selvaag Bolig in stages.
Selvaag Bolig CFO Sverre Molvik says that the transaction will substantially reduce the amount of capital tied up in the company and establish a long-term and strategic financing collaboration which strengthens its competitiveness when making future land purchases.
“We’ll still have access to the same plots of land as before, but will buy these in as developments progress. We’ll continue our existing acquisition activity, but Urban Property will own the land until it’s ready for construction," Molvik explains.
“That’ll be advantageous in terms of both the amount of capital we have tied up and opportunities for growth, since the capital will now be tied up in Urban Property instead of with us. This will also contribute to a more efficient financing of our business and thereby improve our ability to deliver value to both customers and shareholders.”
Selvaag Bolig’s ambition will still be to pay high and stable dividends to its owners. The company has paid NOK 14.30 per share in dividend since 2013. The total annual dividend in 2018 was NOK 4.50. A dividend of NOK 2.00 has been paid for the first half of 2019.
“We’ll continue to create value, which benefits our owners both through the development of the share price and the payment of dividend twice a year. When the transaction has been implemented, we’ll also pay an extraordinary dividend of NOK 22.00 per share," Molvik says.
“In future, our capacity to pay ordinary dividend in relation to profits could potentially also improve. We can expect to have a higher return on equity, and will no longer need to devote retained earnings to buying land.”
CEO Rolf Thorsen says that the collaboration with Urban Property will improve Selvaag Bolig’s access to new land, equip the company for further growth and concentrate greater attention of the core business.
“This transaction will both equip us for growth and make it possible for us to increase our focus on operations. That’s very positive both for us and for our owners,” Thorsen says.
Urban Property is a new corporate structure which has been established to purchase and own Selvaag Bolig’s sites. Its owners will be Oslo Pensjonsforsikring AS, Equinor Pensjon, Selvaag AS and Rema Etablering Norge AS.