Akelius Residential Property AB (publ) interim report January to September summary Jul Sep Jul Sep Jan Sep Jan Sep Jan Dec Rental income, EUR million 120 116 353 345 469 Like-for-like growth in rental income, percent 0.8 4.6 3.1 5.1 5.1 Net operating income, EUR million 69 65 193 187 251 Like-for-like growth in net operating income, percent 6.0 7.1 7.3 9.0 10.7 Net operating income margin, percent 57.4 56.0 54.7 54.3 53.4 Adjusted net operating income margin, percent 68.6 68.2 68.6 68.2 68.0 EBITDA, EUR million 62 61 177 176 231 Profit before tax, EUR million 179 168 602 751 984 Property fair value, EUR million 11,981 10,151 11,981 10,151 10,624 Change in property fair value, percent 1.4 1.4 5.0 7.3 9.7 Number of apartments 49,370 45,909 49,370 45,909 47,177 Real vacancy residential, percent 1.2 0.8 1.2 0.8 0.9 Like-for-like rent level increase, percent 1.0 1.2 2.5 3.8 4.7 Loan-to-value ratio, percent 42 43 42 43 44 Interest coverage ratio, excluding realized value growth 2.0 2.0 1.9 2.1 1.9
safety first Our ambition is a BBB+ rating or higher. The rating should not be lower than BBB. To fulfil our ambition, we have adapted our finance policy. Loan-to-value ratio shall be lower than 40 percent from 2020. Today it is 42 percent. The previous maximum level was 50 percent. Interest coverage ratio excluding realized growth shall exceed 2.0 from 2020. Today it is 1.9. The previous minimum level was 1.8. 838 West End Avenue, Manhattan, New York real vacancy one percent Rent levels are rising. In Berlin for example, the new lease level is 13 percent higher than last year. In Toronto, the increase is 10 percent. The like-for-like net operating income increased by 7 percent, rental income by 3 percent. We have 4,000 vacant apartments ready for upgrading. Once completed, we will see rapid growth in income. property revaluation EUR 529 million Demand for real estate continues to be strong. Transaction volumes in the markets are high. The capitalization rates have however remained flat. Our property values rose by 5 percent, entirely driven by income growth. liquidity EUR 688 million Liquidity is more than twice as high as short-term debts. Interest rate hedges and debt maturities roughly average five years. Pål Ahlsén, CEO and Managing director 10 rue Elisa Borey, Paris
property portfolio September 30, fair value properties EUR 11,981 million London 860 Copenhagen 296 Malmö 941 Stockholm 2,065 Hamburg 888 Berlin 2,754 Toronto 818 Montreal 519 Boston 456 Paris 352 Cologne - Düsseldorf 310 Frankfurt - Mainz 253 Munich 192 New York 849 Washington D.C. 324 City Residential units Lettable space, thousand sqm Fair value Residential Commercial Total EUR million EUR/sqm Berlin 13,712 863 70 933 2,754 2,953 Stockholm 8,028 587 40 627 2,065 3,291 Malmö 4,063 266 83 349 941 2,696 Hamburg 4,289 239 11 250 888 3,547 London 2,225 87 11 98 860 8,798 New York 1,713 116 2 118 849 7,217 Toronto 4,023 218 4 222 818 3,686 Montreal 3,056 198 1 199 519 2,610 Boston 955 61-61 456 7,411 Paris 1,432 44 5 49 352 7,264 Washington D.C. 1,082 81 1 82 324 3,957 Cologne-Düsseldorf 1,726 101 7 108 310 2,871 Copenhagen 1,031 83 6 89 296 3,334 Frankfurt-Mainz 1,086 66 6 72 253 3,501 Munich 748 41 2 43 192 4,478 Other 201 15 38 53 104 1,935 Total 49,370 3,066 287 3,353 11,981 3,573 3
changes in the property portfolio upgraded apartments 20,731 upgraded apartments 42.0 percent 19,651 20,731 41.7-3.3 3.6 42.0 Sep 30 sales and purchases upgraded like-for-like Sep 30 sold during property purchases EUR 1,006 million Montreal 182 property sales EUR 299 million 299 Berlin 179 Washington D.C. 152 New York 129 Stockholm 104 Paris 90 London 69 166 81% Toronto 61 Hamburg 17 Boston 12 Munich 4 Cologne 3 Düsseldorf 2 Frankfurt 2 purchase price plus investments sales price 4
net letting January September number of residential units -1,048 rental value EUR -2.7 million 4,716 64.0 5,764 1,048 66.7 2.7 move out move in net letting move out move in net letting increase like-for-like in residential rental value 4.9 percent 413 14 20 419 399 48 467 4.9% Oct 1 sales Oct 1 change Oct 1 purchases Oct 1 like-for-like 5
like-for-like growth rental income 3.1 percent net operating income 7.3 percent 10.7 6.7 7.1 8.0 7.3 5.8 5.1 3.4 4.3 4.1 3.1 4.0 2013 2014 2015 2016 Jan-Sep 2013 2014 2015 2016 Jan-Sep real vacancy 1.2 percent 1.0 0.6 0.7 0.7 0.7 1.0 1.3 1.1 0.9 1.2 0.9 2009 2010 2011 2012 2013 2014 2015 2016 Oct 1 average 6
property return 9.2 percent annual property return percent 22 20 18 16 14 12 10 8 6 4 2 0 2012 Jan Dec 2013 Jan Dec 2014 Jan Dec 2015 Jan Dec 2016 Jan Dec Jan Dec Jan Sep income return value growth average annual property return fair value EUR 11,981 million Growth Jan Sep EUR million percent Fair value, Jan 1, 10,624 Revaluations 529 5.0 Investments 228 2.1 Purchases 1,006 9.5 Sales -299-2.8 Exchange difference -107-1.0 Fair value, Sep 30, 11,981 12.8 Net operating income 193 1.8 Total property return 722 Per annum: 9.2 capitalization rate 3.64 percent percent Capitalization rate Discount rate Jan 1, 3.60 5.59 Purchases 0.03 0.03 Sales 0.00 0.00 Like-for-like 0.00 0.00 Exchange difference 0.01 0.01 Sep 30, 3.64 5.63 change in value EUR 529 million EUR million Return, percent Cash flow 503 4.74 Required rate of return 13 0.12 Sales 4 0.04 Purchases 9 0.09 Total change in value 529 4.99 7
financing loan-to-value ratio 42 percent equity and hybrid capital ratio 48 percent 44 26 42 24 46 6 48 5 4 18 18 40 39 unsecured loans secured loans Sep 30 preferred equity ordinary equity Sep 30 hybrid bond interest expenses and liquidity EUR million cash uses and sources 12 months forward, EUR million 650 688 848 160 529 193 50 688 84 102 286 Jan Sep Sep 30 Jan Sep Sep 30 cash uses cash sources interest expenses liquidity contracted purchases investments short-term loans profit before tax and revaluation liquidity 8
financing EBITDA EUR 232 million interest coverage ratio 2.8 301 realized value growth EBITDA 221 233 231 232 4.5 4.7 3.0 1.4 2.6 2.8 2.8 1.0 2.2 1.6 1.9 1.9 1.8 2.2 2015 2016 Oct Oct Sep Sep 2019 pro forma 2015 2016 Oct Sep Oct Sep 2019 pro forma current interest and debt coverage capacity Oct EUR million Oct Sep Sep 2019 pro forma 3 Rental income 478 554 1 Operating expenses -194-197 Maintenance -28-35 Net operating income 256 322 Central administrative and other items -24-21 2 EBITDA 232 301 Other financial income and expenses -4-3 Adjusted profit before tax and net interest 228 298 Net interest expenses -125-138 Interest coverage ratio excluding realized value growth 1.8 2.2 Realized value growth 127 - Interest coverage ratio 2.8 2.2 Net debt as per September 30, 5,099 5,099 Net debt/ebitda 22.0 16.9 Net debt/ebitda including realized value growth 14.2 16.9 1) Includes EUR 467 million in yearly in-place residential rent as of Oct 1,, EUR 40 million in rental income for commercial properties and parking, EUR -7 million in real vacancy for apartments and EUR 54 million in other income. 2) Excludes EUR 2 million in operational exchange differences and depreciation. 3) The Pro forma is based on the property portfolio s gross rent, real vacancy, estimated operating expenses and maintenance costs and central administration, during a normal year. 9
financing debt maturities EUR million 2,656 interest rate hedges, average interest rate EUR million and percent 2,614 2.20 861 820 891 809 286 461 29 4.32 570 2.88 198 4.48 1.94 31 year 0 1 1 2 2 3 3 4 4 5 >5 0 1 1 2 2 3 3 4 4 5 >5 fixed interest term 4.6 years debt maturities 5.1 years average interest rate 2.70 percent 4.2 4.5 4.3 5.7 4.5 5.0 5.3 5.6 4.6 5.1 3.94 3.44 2.62 2.58 2.70 2014 2015 2016 Sep 30 2014 2015 2016 Sep 30 fixed interest term debt maturities 10
Berlin acquired properties like-for-like properties Berlin Property portfolio Fair value, EUR million 2,754 Proportion of property fair value, percent 23 Capitalization rate, percent 3.40 Proportion upgraded apartments, percent 36 Average apartment size, sqm 63 Walk score 91 Average rent EUR/sqm/month Total portfolio Oct 1, 7.95 Sales 0.00 Like-for-like Oct 1, 7.95 Like-for-like increase 0.64 Increase in percent 8.0 Like-for-like Oct 1, 8.59 Purchases -0.08 Total portfolio Oct 1, 8.51 New lease level 16.25 Vacancy rate residential percent Real vacancy rate 1.5 Apartments being upgraded 6.5 Vacancy rate 8.0 11
Hamburg Munich acquired properties like-for-like properties Hamburg Munich Property portfolio Fair value, EUR million 888 192 Proportion of property fair value, percent 7 2 Capitalization rate, percent 3.77 3.61 Proportion upgraded apartments, percent 52 44 Average apartment size, sqm 56 55 Walk score 87 87 Average rent EUR/sqm/month EUR/sqm/month Total portfolio Oct 1, 10.59 12.62 Sales 0.00 - Like-for-like Oct 1, 10.59 12.62 Like-for-like increase 0.54 0.39 Increase in percent 5.1 3.0 Like-for-like Oct 1, 11.13 13.01 Purchases -0.04-0.02 Total portfolio Oct 1, 11.09 12.99 New lease level 15.51 18.75 Vacancy rate residential percent percent Real vacancy rate 1.3 2.5 Apartments being upgraded 3.8 4.6 Vacancy rate 5.1 7.1 12
Cologne - Düsseldorf Frankfurt - Mainz acquired properties like-for-like properties Cologne Düsseldorf Frankfurt Mainz Property portfolio Fair value, EUR million 310 253 Proportion of property fair value, percent 3 2 Capitalization rate, percent 3.77 3.84 Proportion upgraded apartments, percent 44 67 Average apartment size, sqm 58 61 Walk score 95 89 Average rent EUR/sqm/month EUR/sqm/month Total portfolio Oct 1, 9.26 11.05 Sales - - Like-for-like Oct 1, 9.26 11.05 Like-for-like increase 0.28 0.36 Increase in percent 3.0 3.3 Like-for-like Oct 1, 9.54 11.41 Purchases 0.05-0.04 Total portfolio Oct 1, 9.59 11.37 New lease level 13.07 14.35 Vacancy rate residential percent percent Real vacancy rate 1.0 1.6 Apartments being upgraded 8.0 6.2 Vacancy rate 9.0 7.8 13
London Paris acquired properties like-for-like properties London Paris Property portfolio Fair value, EUR million 860 352 Proportion of property fair value, percent 7 3 Capitalization rate, percent 4.13 4.06 Proportion upgraded apartments, percent 52 17 Average apartment size 422 sqft 30 sqm Walk score 86 97 Average rent GBP/sqft/month EUR/sqm/month Total portfolio Oct 1, 2.64 22.92 Sales - - Like-for-like Oct 1, 2.64 22.92 Like-for-like increase 0.03 2.17 Increase in percent 0.8 9.6 Like-for-like Oct 1, 2.67 25.09 Purchases 0.10-2.06 Total portfolio Oct 1, 2.77 23.03 New lease level 2.85 43.59 Vacancy rate residential percent percent Real vacancy rate 3.6 0.8 Apartments being upgraded 17.5 44.3 Vacancy rate 21.1 45.1 14
Stockholm Malmö acquired properties like-for-like properties Stockholm Malmö Property portfolio Fair value, EUR million 2,065 941 Proportion of property fair value, percent 17 8 Capitalization rate, percent 2.74 3.18 Proportion upgraded apartments, percent 47 51 Average apartment size, sqm 73 65 Walk score 66 91 Average rent SEK/sqm/year SEK/sqm/year Total portfolio Oct 1, 1,260 1,308 Sales 1 0 Like-for-like Oct 1, 1,261 1,308 Like-for-like increase 30 35 Increase in percent 2.4 2.7 Like-for-like Oct 1, 1,291 1,343 Purchases 2 0 Total portfolio Oct 1, 1,293 1,343 New lease level 1,514 1,578 Vacancy rate residential percent percent Real vacancy rate 0.0 0.0 Apartments being upgraded 2.2 1.2 Vacancy rate 2.2 1.2 15
Copenhagen New York acquired properties like-for-like properties Copenhagen New York Property portfolio Fair value, EUR million 296 849 Proportion of property fair value, percent 2 7 Capitalization rate, percent 3.01 4.22 Proportion upgraded apartments, percent 30 25 Average apartment size 80 sqm 732 sqft Walk score 95 97 Average rent DKK/sqm/year USD/sqft/month Total portfolio Oct 1, 930 2.72 Sales - - Like-for-like Oct 1, 930 2.72 Like-for-like increase 59 0.13 Increase in percent 6.3 4.9 Like-for-like Oct 1, 989 2.85 Purchases 0-0.05 Total portfolio Oct 1, 989 2.80 New lease level 1,603 5.18 Vacancy rate residential percent percent Real vacancy rate 0.1 1.9 Apartments being upgraded 4.9 14.2 Vacancy rate 5.0 16.1 16
Boston Washington D.C. acquired properties like-for-like properties Boston Washington D.C. Property portfolio Fair value, EUR million 456 324 Proportion of property fair value, percent 4 3 Capitalization rate, percent 4.30 4.74 Proportion upgraded apartments, percent 59 20 Average apartment size, sqft 693 810 Walk score 86 83 Average rent USD/sqft/month USD/sqft/month Total portfolio Oct 1, 3.41 1.87 Sales - - Like-for-like Oct 1, 3.41 1.87 Like-for-like increase 0.2 0.06 Increase in percent 5.9 3.3 Like-for-like Oct 1, 3.61 1.93 Purchases -0.01 0.35 Total portfolio Oct 1, 3.60 2.28 New lease level 3.89 2.06 Vacancy rate residential percent percent Real vacancy rate 1.9 3.3 Apartments being upgraded 15.6 27.6 Vacancy rate 17.5 30.9 17
Toronto Montreal acquired properties like-for-like properties Toronto Montreal Property portfolio Fair value, EUR million 818 519 Proportion of property fair value, percent 7 4 Capitalization rate, percent 4.19 4.38 Proportion upgraded apartments, percent 43 36 Average apartment size, sqft 584 699 Walk score 81 91 Average rent CAD/sqft/month CAD/sqft/month Total portfolio Oct 1, 2.13 1.66 Sales - - Like-for-like Oct 1, 2.13 1.66 Like-for-like increase 0.02 0.04 Increase in percent 1.1 2.1 Like-for-like Oct 1, 2.15 1.70 Purchases -0.04-0.01 Total portfolio Oct 1, 2.11 1.69 New lease level 3.01 1.92 Vacancy rate residential percent percent Real vacancy rate 1.2 2.1 Apartments being upgraded 8.4 14.1 Vacancy rate 9.6 16.2 18
result rental income EUR 353 million Rental income was EUR 353 (345) million, an increase of 2.6 percent compared to the same period in. Like-for-like growth in rental income was EUR 8 million (13), or 3.1 percent (5.1). During the period, 21,116 rental contracts with an annual rent of EUR 207 million were renewed or renegotiated. The new yearly rent is EUR 211 million, an increase of 2.1 percent. The real vacancy rate increased by 0.3 percentage points to 1.2 percent. The vacancy rate for residential units was 9.5 percent (6.0). 87 percent (86) was due to upgrades or planned sales of apartments. net operating income EUR 193 million Property expenses totaled EUR 160 million (158). EUR 19 million was attributable to maintenance, corresponding to EUR 8 per square meter and year. Like-for-like growth in net operating income was 7.3 percent (9.0). Net operating income margin was 54.7 percent (54.3). Adjusted net operating income margin was 68.6 percent (68.2). Adjusted net operating income excludes income from operating expenses included in the rent invoiced to the tenants, such as utility expenses and property taxes. It highlights the ongoing earning capacity from property management related to rental services only. increase in property value 5.0 percent The increase in property value was EUR 529 million (668), 5.0 percent (7.3). The growth in value was utmost due to increasing cash flow. See table on page 7. net financial items EUR -98 million Interest expenses were EUR -102 million (-84). EUR 10 million is related to hybrid capital. Financial derivatives affected earnings by EUR 7 million (3). Other financial items amounted to EUR -3 million (-3). profit before tax EUR 602 million Profit before tax was EUR 602 million (751). The increase in the fair value of properties had a positive impact on the profit. tax expenses EUR 128 million Tax expenses totaled EUR 128 million (117). EUR 126 million was deferred tax, mainly due to unrealized gains on properties. Deferred tax in Sweden is reported at the lower tax rate of 20.6 instead of 22 percent. Deferred tax liability therefore decreased by EUR 20 million. Akelius has no ongoing tax disputes. 19
property portfolio fair value EUR 11,981 million The fair value was EUR 11,981 million, which is equivalent to EUR 3,573 per square meter. The average capitalization rate was 3.64 percent. It was 0.04 percentage points higher than at the beginning of the year, due to purchases in North America. property purchases EUR 1,006 million Property purchases amounted to EUR 1,006 million (999) during the period. The average capitalization rate for purchased properties was 3.90 percent. property investments EUR 228 million Investments in properties totaled EUR 228 million (197), corresponding to EUR 92 (80) per square meter on an annual basis. 44 percent of the total investments were due to apartment upgrades. property sales EUR 299 million In total, Akelius sold properties for EUR 299 million (735). EUR 286 million were properties located in Sweden and EUR 13 million located in Germany. Income from the sale of properties totaled EUR 4 million and transaction costs amounted to EUR 4 million. Well-kept residential properties are attractive investments for many types of investors and provide a liquidity reserve during the entire business cycle. financing equity and hybrid capital ratio 48 percent Akelius issued a EUR 499 million hybrid bond on April 5. The hybrid bond has a maturity of 60 years and is considered risk capital. Equity increased by EUR 448 million to EUR 5,349 million during the period. The equity and hybrid capital ratio amounted to 48 percent. loan-to-value ratio 42 percent Loans excluding hybrid bond increased during the period by EUR 366 million to EUR 5,113 million. The loan-to-value ratio decreased by 2 percentage points to 42 percent since the year end. The secured loans were EUR 2,151 million, compared to EUR 1,933 million end of. Secured loan-to-value ratio was 18 percent, unchanged since the year-end. The secured loans were borrowed from 36 banks in seven countries. Unsecured loans include 10 listed bonds and loans from related companies. debt maturities 5.1 years Loans have an average maturity of 5.1 years, compared to 5.6 years at the end of. EUR 286 million matures within one year. The average loan-to-value ratio on short-term loans was 36 percent. Short-term loans consist of borrowings from 9 banks and of capital market financing. interest rate hedge 4.6 years EUR 2,614 million had a fixed interest rate term of more than five years and EUR 891 million had a fixed interest rate term of less than one year. The average interest rate was 2.70 percent. On average, the underlying interest rate is secured for 4.6 years, compared to 5.3 years at the end of. liquidity EUR 688 million Available funds in the form of liquid assets and credit facilities totaled EUR 688 million. The fair value of the unencumbered properties was EUR 5,376 million. 20
other financial information parent company The Parent Company s profit before tax was SEK 963 million (-225) or EUR 94 million (-23). Financial income includes mainly currency exchange gains on currency derivatives and external and internal loans in foreign currency. On April 11,, an issue of common shares took place and dividends were paid in accordance with resolutions passed at the Annual General Meeting. The parent company issued 126,229,740 common shares at a subscription price of SEK 68 per share, totaling SEK 8,584 million, or EUR 809 million. On the same date, dividends of SEK 2.8 per share were paid to the holders of common shares, totaling SEK 8,584 million, or EUR 809 million. Additionally, a dividend of SEK 5 per preference share was or will be paid on the record dates pursuant to the Articles of Association: May 4,, August 3,, November 5, and February 5, 2019, totaling SEK 377 million, or EUR 37 million. cash flow EUR -3 million Operating cash flow before the change in working capital was EUR 77 million (98). Cash flow from investing activities was EUR -851 million (-541). Cash required for the acquisition of properties is secured before the agreements are signed. Profitable but non-mandatory upgrades can be stopped within a three-month period. Cash flow from financing activities was EUR 773 million (565). New ordinary shares were issued for EUR 809 million. Dividends of EUR 27 million were paid to the holders of preference and dividends of EUR 809 were paid to the holders of common shares. preference shares The total number of preference shares was 18,835,606, equivalent to EUR 585 million reported in equity. Preference shares represent 0.61 percent of the total number of shares in Akelius Residential Property AB. On September 30,, the price paid per preference share was SEK 341.5. third quarter Profit before tax for the quarter amounted to EUR 179 million (168). Net income from the change in fair value of properties impacted the profit with EUR 150 million (136). Rental income increased to EUR 120 million (116). Property costs amounted to EUR 51 million (51). Net operating income was EUR 69 million (65). Net financial items totaled EUR -33 million (-29). Cash flow amounted to EUR -9 million (108). Cash flow generated from operations was EUR 33 million (34). Net cash flow from investing activities amounted to EUR -473 million (-319). Financing activities had a positive effect on cash flow of EUR 431 million (393). rating In, Standard and Poor s confirmed the investment grade rating BBB with a stable outlook for Akelius Residential Property AB and its unsecured debt. The rating for Akelius Residential Property AB s hybrid bond is BB+. staff 1,214 people were employed as at September 30 compared to 876 at the end of. related party transactions Net debt from related parties decreased by EUR 30 million. Akelius acquired EUR 100 million in properties minus EUR -36 million in net assets from Giannis Beta Ltd, a related party company. Akelius sold shares in subsidiaries to Giannis Beta Ltd for EUR 48 million. Both transaction were cash netted. All transactions were on market terms and property values were confirmed by CBRE. significant events after the end of the reporting period Akelius has issued five-year senior unsecured bonds amounting to SEK 1,000 million and a new loan of USD 250 million with an average maturity of nine years. Anders Lindskog, ordinary board members, takes over being the chairman. 21
consolidated statement of comprehensive income Jul Sep 3 months Jul Sep 3 months Jan Sep 9 months Jan Sep Jan Dec 9 months 12 months EUR million Rental income 120 116 353 345 469 Operating expenses -45-42 -141-133 -185 Maintenance -6-9 -19-25 -33 Net operating income 69 65 193 187 251 Central administration -6-4 -20-13 -22 Other income and expenses -1-3 - - Net income from the revaluation and disposal of investment properties* 150 136 524 661 877 Operating profit 212 197 700 835 1,106 Interest expenses -31-30 -92-84 -117 Interest expenses hybrid bond -5 - -10 - - Other financial income and expenses -1-1 -3-3 -5 Change in fair value of derivative financial instruments 4 2 7 3 - Profit before tax 179 168 602 751 984 Tax -33 3-128 -117-178 Profit for the period/year 146 171 474 634 806 Items that will be reclassified to profit or loss: - Translation differences 2-69 58-132 -156 - Change in the hedging of currency risk 35 33-125 80 38 - Tax attributable to the hedging of currency risk -7-8 28-18 -8 - Revaluation reserve - - 1-1 Comprehensive income for the period/year 176 127 436 564 681 Profit attributable to: - owners of the Parent Company 143 170 469 627 802 - owner of the hybrid loans - - - 4 3 - non-controlling interests 3 1 5 3 1 Total comprehensive income attributable to: - owners of the Parent Company 173 127 431 557 676 - owner of the hybrid loans - - - 5 4 - non-controlling interests 3-5 2 1 Earnings per share before and after dilution, EUR 0.04 0.05 0.14 0.20 0.25 * EUR 4 million is related to the realized gain/loss from the disposal of investment properties in Jan Sep, EUR 43 million in Jan Sep and EUR 45 million in Jan Dec. Transaction costs amounted to EUR 4 million in Jan Sep, EUR 6 million in Jan Sep and EUR 9 million in Jan Dec. 22
consolidated statement of financial position Sep 30 Sep 30 Jan 1 EUR million Assets Intangible assets 7 6 6 5 Investment properties 11,943 10,121 10,345 8,847 Owner-occupied property 38 31 35 - Tangible fixed assets 5 4 4 4 Derivative financial instruments - - 3 - Deferred tax assets 1-1 1 Financial assets 4 1 7 - Total non-current assets 11,998 10,163 10,401 8,857 Trade and other receivables 102 91 85 47 Derivative financial instruments 1 6 3 1 Cash and cash equivalents 13 115 16 14 Assets held for sale* - - 244 325 Total current assets 116 212 348 387 Total assets 12,114 10,375 10,749 9,244 Total equity 5,349 4,785 4,901 4,279 Interest-bearing liabilities 4,827 4,156 4,431 3,129 Hybrid bond 499 - - - Derivative financial instruments 47 94 100 141 Deferred tax liabilities 941 824 838 698 Provisions 1 11 - - Other liabilities 14-15 7 Total non-current liabilities 6,329 5,085 5,384 3,975 Interest-bearing liabilities 286 394 316 853 Derivative financial instruments 10 16 7 10 Provisions 2-2 - Trade and other payables 138 95 110 98 Liabilities held for sale - - 29 29 Total current liabilities 436 505 464 990 Total equity and liabilities 12,114 10,375 10,749 9,244 Interest-bearing liabilities - unsecured loans 2,962 2,269 2,814 1,737 - secured loans 2,151 2,281 1,933 2,245 Subtotal 5,113 4,550 4,747 3,982 - hybrid bond** 499 - - - Total 5,612 4,550 4,747 3,982 * attributable to investment properties. ** the hybrid bond is considered by the rating agencies as risk capital. It reduces interest-bearing liabilities when calculating the loan-to-value ratio. 23
consolidated statement of cash flows 24 Jul Sep 3 months Jul Sep 3 months Jan Sep 9 months Jan Sep 9 months Jan Dec 12 months EUR million Net operating income 69 65 193 187 251 Central administration -7-4 -20-13 -22 Other income and expenses - - 2 1 1 Reversal of depreciation and impairment losses 1-2 1 2 Interest paid -38-30 -99-76 -98 Income tax paid - - -1-2 -3 Cash flow before changes in working capital 25 31 77 98 131 Change in current assets -2 1-8 -9-18 Change in current liabilities 10 2 6-12 -2 Cash flow from operating activities 33 34 75 77 111 Investments in intangible assets -1-1 -3-2 -2 Investment in properties -90-73 -228-197 -288 Acquisition of investment properties -363-596 -9061-997 -1,297 Acquisition of net assets2 - -5 30 7 19 Proceeds from sale of investment properties - 410 299 735 737 Proceeds from sale of net assets3-3 -32-31 -45-45 Purchase and sale of other assets -16-22 -124-42 -33 Cash flow from investing activities -473-319 -851-541 -909 New share issue - 7 809 1,050 1,043 Acquisition of minority shares1 - - 1-1 Loans raised 692 881 2,019 1,762 2,192 Repayment of loans -227-465 -1,187-1,139-1,356 Repayment of hybrid loans - -1 - -228-227 Purchase and sale of derivative instruments -25-15 -33-9 22 Dividend ordinary shares - -3-809 -841-838 Dividend preference shares -9-11 -27-30 -38 Cash flow from financing activities 431 393 773 565 799 Cash flow for the period/year -9 108-3 101 1 Cash and cash equivalents at beginning of the period/year 22 8 16 14 14 Translation differences in cash and cash equivalents - -1 - - 1 Cash and cash equivalents at end of period/year 13 115 13 115 16 1)The acquisition of EUR 100 million in investment properties minus EUR -36 million in net assets was offset with the acquisition of EUR 48 million in minority shares. The transactions with Giannis Beta, a related party company, were on market terms. 2) mainly related to a discount received for deferred tax and the acquisition of loans. 3) mainly related to a discount provided for deferred tax. 4) including EUR -7 million in prepayment for the acquisition and EUR -4 million in transaction cost for sold properties.
consolidated statement of changes in equity EUR million Share capital Attributable to the owners of the Parent Company Share premium Currency translation reserve Retained earnings Total Hybrid loans Non controlling interests Total equity Opening balance Jan 1, 185 1,272 98 2,495 4,050 210 19 4,279 EUR conversion 11 47-126 69 1 - -1 - Adjusted opening balance 196 1,319-28 2,564 4,051 210 18 4,279 Profit for the period - - - 627 627 4 3 634 Other comprehensive income - - -70 - -70 1 - -69 Total comprehensive income - - -70 627 557 5 3 565 Repurchase of hybrid loans - - - -13-13 -214 - -227 Dividend - -857 - -19-876 -4 - -880 Share issue 8 1,035 - - 1,043 - - 1,043 Acquired minority - - - - - - 1 1 Closing balance Sep 30, 204 1,497-98 3,159 4,762-3 22 4,781 Profit for the period - - - 175 175 - -2 173 Other comprehensive income - - -56 - -56 - - -56 Total comprehensive income - - -56 175 119 - -2 117 Dividend - - - - - 3-3 Closing balance, 204 1,497-154 3,334 4,881-20 4,901 Profit for the period - - - 469 469-5 474 Other comprehensive income - - -39 1-38 - - -38 Total comprehensive income - - -39 470 431-5 436 Acquired minority - - - - - - 49 49 Dividend - -755 - -91-846 - - -846 Share issue 7 802 - - 809 - - 809 Closing balance Sep 30, * 211 1,544-193 3,713 5,275-74 5,349 *) attributable to preference share holders 1 652-68 - 585 - - 585 25
condensed statement of comprehensive income for the Parent Company Jul Sep 3 months Jul Sep 3 months Jan Sep 9 months Jan Sep Jan Dec 9 months 12 months SEK million Central administration -19-15 -46-33 -34 Financial income 443 351 2,112 976 1,383 Financial expenses -388-390 -1,005-1,305-1,426 Change in the fair value of derivatives 87 3-98 137 130 Appropriations - - - - 198 Profit before tax 123-51 963-225 251 Tax -22-9 -34-43 -68 Profit for the period/year 101-60 929-268 183 Comprehensive income 101-60 929-268 183 condensed statement of financial position for the Parent Company 30 Sep 30 Sep 31 Dec SEK million Intangible assets 2 2 2 Shares in subsidiaries 13,372 13,183 13,372 Receivables from Group companies 51,216 45,305 49,834 Prepaid expenses and accrued income from Group companies 1,217 641 163 Deferred tax assets 420 479 454 Other assets 146 186 201 Cash and cash equivalents 5 985 5 Total assets 66,378 60,781 64,031 Total equity 16,392 15,389 15,840 Interest-bearing liabilities 39,970 25,717 29,937 Interest-bearing liabilities from Group companies 9,132 18,928 17,471 Derivative financial instruments 351 399 406 Other current liabilities 533 348 368 Other current liabilities from Group companies - - 9 Total equity and liabilities 66,378 60,781 64,031 26
secured and unsecured loans Interest rate hedge, EUR million Interest rate hedge Average interest rate, percent Duration, Share, Debt maturities, Share, years percent EUR million percent 0 1 891 4.32 17 286 6 1 2 570 2.88 11 861 17 2 3 198 4.48 4 461 9 3 4 809 1.94 16 820 16 4 5 31 2.92 1 29 1 5 6 571 1.41 11 504 10 6 7 1,207 2.10 24 1,216 23 7 8 322 1.94 6 388 8 8 9 179 3.99 4 174 3 9 10 220 2.72 4 174 3 > 10 115 4.26 2 200 4 Total 5,113 2.70 100 5,113 100 segment information Jan Sep, EUR million Europe Scandinavia North America Total Rental income 160 108 85 353 Operating expenses -60-40 -41-141 Maintenance -8-8 -3-19 Net operating income 92 60 41 193 Revaluation of investment properties 195 198 136 529 Total property return 287 258 177 722 Total property return, percent 7.8 10.0 11.0 9.2 Net operating income margin, percent 57.3 55.5 48.6 54.7 Property fair value 5,609 3,407 2,965 11,981 Jan Sep, EUR million Europe Scandinavia North America Total Rental income 144 132 69 345 Operating expenses -55-46 -32-133 Maintenance -7-14 -4-25 Net operating income 82 72 33 187 Revaluation of investment properties 324 263 81 668 Total property return 406 335 114 855 Total property return, percent 13.7 13.2 9.0 12.6 Net operating income margin, percent 57.2 54.4 48.1 54.3 Property fair value 4,691 3,382 2,078 10,151 27
key figures 28 Sep 30 2016 2015 2014 Equity Equity, EUR million 5,349 4,901 4,279 3,357 2,373 Equity ratio, percent 44 46 46 41 38 Equity and hybrid capital ratio, percent 48 46 46 41 38 Return on equity, percent 9 19 37 29 9 EPRA NAV, EUR million 6,345 5,840 5,127 4,027 2,888 Net operating income Rental income, EUR million 353 469 472 464 396 Growth in rental income, percent 2.6-0.6 1.8 17.1 13.2 Like-for-like growth in rental income, percent 3.1 5.1 4.1 4.3 3.4 Net operating income, EUR million 193 251 244 232 207 Growth in net operating income, percent 3.2 4.4 6.3 15.6 19.2 Like-for-like growth in net operating income, percent 7.3 10.7 8.0 4.0 7.1 Net operating income margin, percent 54.7 53.4 51.7 50.1 52.2 Adjusted net operating income margin, percent 5 68.6 68.0 66.2 - - Interest-bearing liabilities Loan-to-value ratio, secured loans, percent 18 18 24 36 47 Loan-to-value ratio, percent 42 44 43 48 51 Unencumbrance ratio 1.88 1.63 1.18 1.00 9.24 Interest coverage ratio 3.3 4.7 4.5 3.0 1.7 Interest coverage ratio excluding realized value growth 1.9 1.9 1.9 1.6 1.5 Average interest rate, percent 2.70 2.58 2.62 3.44 3.94 Fixed interest term, years 4.6 5.3 4.5 4.3 4.2 Debt maturities, years 5.1 5.6 5.0 5.7 4.5 Properties Number of apartments 49,370 47,177 46,516 51,231 47,896 Rentable area, thousand sqm 3,353 3,228 3,236 3,587 3,472 Real vacancy rate, residential, percent 1.2 0.9 1.1 1.3 1.0 Vacancy rate, residential, percent 9.5 6.6 5.0 4.3 3.2 Fair value, EUR per sqm 3,573 3,292 2,834 2,220 1,748 Capitalization rate, percent 3.64 3.60 3.82 4.33 4.72 Change in capitalization rate 1, percent 0.00-0.22-0.49-0.36 0.01 Fair value of properties opening balance, EUR million 10,624 9,171 7,965 6,068 4,932 Change in fair value, EUR million 529 886 1,343 857 155 Investments, EUR million 228 288 316 237 207 Purchases, EUR million 1,006 1,297 643 1,293 1,064 Sales, EUR million -299-737 -957-615 -119 Exchange difference, EUR million -107-281 -139 125-171 Fair value of properties closing balance, EUR million 11,981 10,624 9,171 7,965 6,068
key figures Sep 30 2016 2015 2014 Properties, Sweden Average residential rent, SEK/sqm/year 1,307 1,287 1,246 1,184 1,156 Growth in average residential rent 2, percent 2.5 2.4 2.6 2.6 3.7 Growth in rental income 3, percent 2.5 3.8 1.9 3.0 3.5 Growth in net operating income 3, percent 8.4 10.8 2.4 1.8 8.0 Fair value, EUR per sqm 3,018 2,821 2,421 1,877 1,566 Capitalization rate, percent 2.94 3.00 3.43 4.30 4.78 Number of apartments 12,292 13,808 17,381 23,520 24,407 Vacancy, percent 1.9 1.1 1.2 1.5 1.5 Real vacancy, percent 0.0 0.0 0.1 0.1 0.4 Fair value of properties opening balance, EUR million 3,205 3,382 3,472 3,108 2,996 Change in fair value, EUR million 183 376 712 313 92 Investments, EUR million 47 65 104 92 102 Purchases, EUR million 103 167 55 114 228 Sales, EUR million -286-692 -805-290 -118 Translation difference, EUR million -141-93 -156 135-192 Fair value of properties closing balance, EUR million 3,111 3,205 3,382 3,472 3,108 Properties, Germany Average residential rent, EUR/sqm/month 9.36 8.98 8.56 8.13 7.77 Growth in average residential rent 2, percent 6.2 5.7 5.0 5.1 5.4 Growth in rental income 3, percent 3.9 2.6 6.3 6.0 3.1 Growth in net operating income 3, percent 5.6 2.8 10.3 3.9 5.8 Fair value, EUR per sqm 3,127 2,941 2,583 2,078 1,760 Capitalization rate, percent 3.53 3.54 3.84 4.35 4.72 Number of apartments 21,561 20,463 19,932 20,307 19,423 Vacancy, percent 7.5 6.5 4.8 4.9 4.5 Real vacancy, percent 1.5 1.3 1.1 2.0 1.6 Fair value of properties opening balance, EUR million 3,924 3,363 2,725 2,225 1,739 Change in fair value, EUR million 189 360 542 399 43 Investments, EUR million 90 119 103 80 71 Purchases, EUR million 207 127 90 188 372 Sales, EUR million -13-45 -97-167 - Exchange difference, EUR million - - - - - Fair value of properties closing balance, EUR million 4,397 3,924 3,363 2,725 2,225 29
key figures Sep 30 2016 2015 2014 Properties, Canada Average residential rent, CAD/sqft/month 1.91 1.92 1.89 1.79 1.83 Growth in average residential rent 2, percent 1.6 4.4 6.7 3.6 6.6 Growth in rental income 3, percent 3.7 9.5 7.0 4.1 7.0 Growth in net operating income 3, percent 5.4 28.2 29.0 25.1-17.8 Fair value, EUR per sqm 3,177 2,968 2,743 2,345 2,292 Capitalization rate, percent 4.27 4.29 4.36 4.37 4.55 Number of apartments 7,079 5,500 4,513 3,999 2,823 Vacancy, percent 12.5 3.9 7.1 11.1 6.7 Real vacancy, percent 1.6 0.6 3.4 3.6 2.7 Fair value of properties opening balance, EUR million 994 737 532 361 197 Change in fair value, EUR million 86 83 33 65 16 Investments, EUR million 16 30 37 21 15 Purchases, EUR million 244 189 90 137 120 Sales, EUR million - - - -12 - Exchange difference, EUR million -3-45 45-40 13 Fair value of properties closing balance, EUR million 1,337 994 737 532 361 Properties, United States Average residential rent, USD/sqft/month 2.85 2.77 2.51 2.26 - Growth in average residential rent 2, percent 6.5 4.1 4.2 - - Growth in rental income 3, percent - 10.7 - - - Growth in net operating income 3, percent 8.8 63.6 - - - Fair value, EUR per sqm 6,240 5,758 5,929 5,339 - Capitalization rate, percent 4.35 4.36 4.42 4.47 - Number of apartments 3,750 3,127 2,309 1,534 - Vacancy, percent 20.7 17.3 10.6 9.8 - Real vacancy, percent 2.3 2.2 1.7 2.8 - Fair value of properties opening balance, EUR million 1,199 979 597 - - Change in fair value, EUR million 50 27 41 3 - Investments, EUR million 46 44 30 2 - Purchases, EUR million 293 278 267 582 - Sales, EUR million - - - - - Exchange difference, EUR million 40-129 44 10 - Fair value of properties closing balance, EUR million 1,628 1,199 979 597-30
key figures Sep 30 2016 2015 2014 Properties, England4 Average residential rent, GBP/sqft/month 2.77 2.75 2.55 2.07 1.74 Growth in average residential rent 2, percent 0.8 3.3 5.9 11.5 11.3 Growth in rental income 3, percent 5.8 16.2 7.5 15.1 5.9 Growth in net operating income 3, percent 11.4 15.4 15.4 23.0 9.3 Fair value, EUR per sqm 8,798 8,689 8,274 7,407 5,634 Capitalization rate, percent 4.13 4.16 4.11 4.22 4.36 Number of apartments 2,225 2,148 1,224 1,404 1,153 Vacancy, percent 21.1 14.7 12.4 8.0 7.8 Real vacancy, percent 3.6 2.0 3.7 2.8 2.1 Fair value of properties opening balance, EUR million 780 473 530 357 200 Change in fair value, EUR million 3 11 15 78 26 Investments, EUR million 11 13 36 40 24 Purchases, EUR million 69 301 21 181 92 Sales, EUR million - - -55-146 -1 Exchange difference, EUR million -3-18 -74 20 16 Fair value of properties closing balance, EUR million 860 780 473 530 357 Properties, France Average residential rent, EUR/sqm/month 23.03 23.40 20.99 22.50 21.31 Growth in average residential rent 2, percent 9.6 14.9 1.7 15.7 - Growth in rental income 3, percent 8.9-1.4 11.9 - - Growth in net operating income 3, percent 3,757.9-7.1 241.1 - - Fair value, EUR per sqm 7,264 6,883 6,411 6,857 6,382 Capitalization rate, percent 4.06 4.16 4.20 4.21 4.11 Number of apartments 1,432 1,100 941 467 90 Vacancy, percent 45.1 46.4 46.2 35.3 34.4 Real vacancy, percent 0.8 1.3 3.7 1.3 - Fair value of properties opening balance, EUR million 245 193 109 17 - Change in fair value, EUR million 3 8 2-1 -2 Investments, EUR million 14 13 6 2 - Purchases, EUR million 90 31 76 91 19 Sales, EUR million - - - - - Exchange difference, EUR million - - - - - Fair value of properties closing balance, EUR million 352 245 193 109 17 31
key figures Sep 30 2016 2015 2014 Properties, Denmark Average residential rent, DKK/sqm/year 989 936 916 - - Growth in average residential rent 2, percent 6.3 5.3 - - - Growth in rental income 3, percent 2.2 - - - - Growth in net operating income 3, percent -9.9 - - - - Fair value, EUR per sqm 3,334 3,129 2,836 - - Capitalization rate, percent 3.01 3.09 3.42 - - Number of apartments 1,031 1,031 216 - - Vacancy, percent 5.0 6.1 1.9 - - Real vacancy, percent 0.1 0.6 - - - Fair value of properties opening balance, EUR million 277 44 - - - Change in fair value, EUR million 15 22 - - - Investments, EUR million 4 4 - - - Purchases, EUR million - 204 44 - - Sales, EUR million - - - - - Exchange difference, EUR million - 3 - - - Fair value of properties closing balance, EUR million 296 277 44 - - 1) Like-for-like capitalization rate. 2) Like-for-like growth on a rolling 12-month period. 3) Like-for-like growth for the period compared to the same period in the previous year. 4) The property portfolio in England was acquired from fellow subsidiaries in March 2014. The tables above show the development as if the properties had been owned since January 1, 2014. 5) Adjustment for revenue from operating expenses invoiced to the tenants in Germany, France, Canada, United States and Sweden amounted to EUR 72 million for Jan Sep and EUR 70 million for Jan Sep. 32
alternative performance measures Reconciliation for the purposes of the Guidelines published by the European Securities and Markets Authority (ESMA) is set out below: EUR million Sep 30 Sep 30 Equity 5,349 4,785 4,901 Deferred tax 940 823 838 Derivative financial instruments 56 104 101 EPRA NAV 6,345 5,712 5,840 Total interest-bearing liabilities 5,612 4,550 4,747 Hybrid bond -499 - - Cash and liquid assets -13-115 -16 Pledged cash assets -1-5 -1 Net debt 5,099 4,430 4,730 Total assets 12,114 10,375 10,749 Cash and liquid assets -13-115 -16 Pledged cash assets -1-5 -1 Total assets minus cash, pledged cash and liquid assets 12,100 10,255 10,732 Loan-to-value ratio, percent 42 43 44 Net debt 5,099 4,430 4,730 Less senior unsecured debt -2,962-2,269-2,814 Secured debt minus cash, pledged cash and liquid assets 2,137 2,161 1,916 Total assets minus cash, pledged cash and liquid assets 12,100 10,255 10,732 Loan-to-value ratio, secured loan, percent 18 21 18 Equity 5,349 4,785 4,901 hybrid bond 499 - - Equity and hybrid bond 5,848 4,785 4,901 Total asset 12,114 10,375 10,749 Equity ratio, percent 44 46 46 Equity and hybrid capital ratio, percent 48 - - 33
alternative performance measures EUR million Sep 30 Unencumbered assets Intangible assets 7 Unencumbered properties 5,376 Tangible fixed assets 5 Deferred tax 1 Financial assets 4 Trade and other receivables 102 Derivative financial instruments 1 Unencumbered assets 5,496 Unsecured debt 2,962 less debt from Akelius Apartment and Akelius Spar, up-front fees and repurchased SEK bond -28 less cash and cash equivalents -13 Net unsecured senior debt 2,921 Unencumbered asset ratio 1.88 EUR million Jan Sep Jan Sep Percent growth Rental income 353 345 2.6 Exchange differences - -13 Service revenue -28-26 Purchases and sales -49-38 Like-for-like rental income 276 268 3.1 Net operating income 193 187 3.2 Exchange differences - -6 Purchases and sales -21-20 Like-for-like net operating income 172 161 7.3 Proceeds from the sale of properties 299 735 Costs of sale -4-6 Acquisition costs -111-286 Accumulated investments -54-116 Realized value growth 130 327 34
other information basis of presentation The Akelius Residential Property Group s Interim report has been prepared in accordance with IAS 34, Interim Financial Reporting and the Swedish Annual Accounts Act. The financial statements of the Parent Company, Akelius Residential Property AB, corporate identity number 556156-0383, have been prepared in accordance with the Swedish Annual Accounts Act and the accounting standard RFR 2, Accounting for Legal Entities. Disclosures in accordance with IAS 34 Interim Financial Reporting are submitted both in the notes and in other sections of the interim report. The figures in this interim report have been rounded, while the calculations have been made without rounding. As a result, the figures in certain tables and key figures may appear not to add up correctly. accounting principles new Group reporting currency As of January 1,, the Group s reporting currency is Euro. The Parent Company s functional currency is Swedish kronor, same as in. Unless otherwise stated, all amounts are reported in EUR million for the Group and SEK million for the Parent Company. new segment reporting Operating segments are reported in accordance with the internal reporting submitted to the CEO, who is the highest executive decision maker. The organization has changed and consists of three regions as of : - The Scandinavian region: Stockholm, Malmö, Copenhagen and other cities in Sweden. - The European region: Berlin, Hamburg, London, Paris and other cities in Germany. - The North American region: New York, Washington D.C., Boston, Montreal and Toronto. Each region is material to the Group and is therefore reported separately. IFRS 15 Revenue from Contracts with Customers IFRS 15, Revenue from Contracts with Customers is applied to the financial year that began on January 1,. Akelius income includes three parts: - Rental income includes the customary rent charged, including indexation, additional charges for investments and property tax. Rental income is recognized in the period in which the tenant uses the premises, in accordance with IAS 17 Leases. - Service income refers to all other additional charges in the form of extra services, such as heating, cooling, waste removal, water, snow removal. - Other services, such as use of the laundry room and gym, are also recognized when the service is performed. Revenue income related to IFRS 15 included EUR 72 million in service income and EUR 2 million in other income. In Germany and France, Akelius rental agreements relate to net cold rents and operating costs. For the vast majority of the operating costs of the tenancy agreement, Akelius acts as the principal on the basis of the provisions in IFRS 15. Akelius has the power to provide these goods and services and therefore has a performance obligation vis-à-vis the tenant. Additionally, Akelius retains the risk related to vacancies. As of, operating expenses will no longer be offset against the corresponding revenues. The application of IFRS 15 has given rise to an adjustment for between rental income and operating expenses as stated in the table below, in EUR million: Jan Dec Jan Sep Jan Jun Jan Mar 42 26 17 10 Such adjustment has no effect on equity as of the beginning of the comparative year. Adjustment for prior years in EUR million are the following: 2016 2015 2014 38 38 31 35
other information IFRS 9 Financial Instruments IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 introduces a new model for the classification of financial instruments based the type of contractual cash flows of the instrument and the business model. The model includes operational simplifications for lease and trade receivables. Akelius receives a significant amount of prepayments from tenants. IFRS 9 therefore has no significant impact on the Group s financial position. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges, as the standard currently does not address accounting for macro hedging. The Group will continue to apply IAS 39, and it is therefore assessed that IFRS will not have a significant impact on the financial performance or position of the Group. risks and uncertainties Operational risks are limited by concentrating the property portfolio to residential properties in metropolitan areas. Strong residential rental markets in Sweden, Germany, Canada, England, France, the United States and Denmark reduce the risk of long-term vacancies. To reduce the risk or variations in cash flow further, interest rates are secured on a long-term basis. Access to capital from a large number of banks and through the capital market mitigates the refinancing risk. Overseas investments are hedged to reduce the impact of currency movements related to the Group s equity-to-assets ratio. There have been no material changes in the company s assessment of risks since the publication of the annual report. new accounting principles IFRS 16 Leasing IFRS 16 Leases shall apply from January 1, 2019. The standard has an impact on the lessee as no distinction is made between operational and finance leases. The lessor s accounts will essentially remain unchanged. IFRS 16 will affect the Group s accounts of the leases where the company is a lessee. Among other things, the Group s lease agreement will be reported in the balance sheet, thereby increasing the balance sheet total. The income statement will be affected by the Group having increased financial costs and reduced leasing charges in operating profit. The assessment is that the introduction of the standard will have a limited impact on the financial reports, as the Group is primarily a lessor. Pål Ahlsén, CEO, Managing Director Stockholm, Sweden, October 22,, Akelius Residential Property AB (publ) The interim report has not been reviewed by the company s auditors. 36
definitions adjusted net operating income margin Net operating income in relation to rental income excluding income from operating expenses included in the rent invoiced to the tenants, such as utility and property taxes. It highlights the ongoing earning capacity from property management related to rental services only. adjusted profit before taxes Profit before taxes adjusted for depreciations, impairments, expenses for property sales, net interest expenses, change in value of properties, exchange rate differences in the profit before taxes, change in value of derivative instruments and change in value of available-for-sale investments and liquid financial assets. annual property return Gain from the revaluation of investment properties and net operating income on an annual basis in relation to the fair value of the properties at the beginning of the year. It illustrates the total return on the property portfolio. capitalization rate Rate of return used in assessing the terminal value of property in the fair value assessment. Defined as the expected return when net operating income and property prices remain constant. debt maturities, years Volume-weighted remaining term of interest-bearing liabilities and derivatives on the balance sheet date. It illustrates the company s refinancing risk. debt coverage capacity Profit before tax and revaluation, including realized value growth. Net operating income and realized value growth are reinvested into existing and new properties. This leads to a growing operating surplus. The pro forma is based on the property portfolio s gross rent, real vacancy, estimated operating expenses and maintenance costs during a normal year, as well as central administrative expenses. Interest expenses are based on net debt on the balance sheet date calculated at the currency rate on the balance sheet date. No tax has been calculated as it relates mainly to deferred tax. The pro forma is not a forecast for the coming twelve months. It contains no estimates of rental, vacancy, currency exchange, future property purchases and sales or interest rate changes. discount rate Rate of return used in assessing the present value of future cash flow and terminal value in the fair value assessment of properties. Defined as the expected return on the property. EBITDA Net operating income plus central administrative expenses, other income and expenses with add-back of depreciation and impairment charges and operating exchange rate differences. It highlights current cash flow capacity from property management. EPRA NAV Equity, deferred tax and derivatives. equity ratio Equity in relation to total assets. It highlights the company s financial stability. income return Net operating income on an annual basis in relation to the fair value of the properties at the beginning of the year. It measures the yield on the property portfolio. interest rate hedge total loans, year Volume-weighted remaining term of interest rates on interest-bearing liabilities and derivatives on the balance sheet date. It illustrates the company s financial risk. interest coverage ratio Adjusted profit before taxes in relation to net interest expenses. It illustrates the company s sensitivity to interest rate changes. liquid financial assets Debt securities and equity securities traded on a regulated market and with an investment grade rating. 37