interim report, january to september 2016 · interim report, january to september 2016 total...

Akelius Residential Property AB (publ)

Interim report, January to September 2016

• Rental income grew by 4.9 percent to SEK 3,351 million• Operating surplus grew by 5.4 percent to SEK 1,772 million• Change in property value SEK 7,874 million, 10.8 percent• Purchases of properties SEK 3,849 million• Sales of properties SEK 8,715 million

Growth compared to prior year for comparable properties• 4.2 percent rental income • 7.0 percent operating surplus

Summary 2016 2015 2016 2015 2015Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec

Rental income, SEK million 1,127 1,099 3,351 3,194 4,339

Operating surplus, SEK million 628 626 1,772 1,681 2,175

EBITDA, SEK million 611 604 1,700 1,622 2,072

Profit before tax, SEK million 3,052 2,137 8,091 4,777 9,206

Property fair value, SEK million 79,575 68,366 79,575 68,366 72,764

Number of apartments 45,755 51,614 45,755 51,614 51,231

Real vacancy residential, percent 0.8 1.1 0.8 1.1 1.3Rent level increase for comparable properties, percent 1.2 0.9 3.3 2.8 3.8

Loan-to-value, percent 43 50 43 50 48

Interest coverage ratio 5.0 3.5 5.0 2.7 3.0Earnings per share before and after dilution, SEK 0.81 0.54 2.12 1.23 2.33

2


Loan-to-value 43 percentVacancy rate drops. Increasing pace of upgrades. First purchase in Copenhagen. Financial ratios stronger than ever.Net letting SEK 99 millionIn 2016 we have welcomed 5,285 families to our upgraded apartments, and 5,045 have left. The real vacancy rate has thus dropped to 0.8 percent.Increasing pace of upgradesThe proportion of upgraded apartments is 40 percent, up 4 percentage points since the beginning of the year. We have upgraded 3,135 apartments, which is 23 percent more than last year.High demand in the marketProperties for sale are sold quickly. For our sale in Halmstad and Eskilstuna, it took one month between the first contact with the buyer to the signing of the binding contract.

High demand is pushing up property prices. We report an increase in value of 10.8 percent, of which 6.6 is due to a lower required yield, 1.0 was realized through sales and 3.2 is due to higher rental income.First purchase in CopenhagenShortly after the end of the period we bought our first property in Copenhagen, 216 apartments. We hope for more purchases. Copenhagen is our thirteenth metropolis. At the end of September, 79 percent of our apartments were in cities with more than one million inhabitants. Homes in metropolises are our security.Equity ratio up to 46 percentThe interest coverage ratio is 5.0, loan-to-value is 43 percent, secured loan-to-value is down to 29 percent, liquidity is up to SEK 9,062 million.

Pål Ahlsén, CEO and Managing director

xxxxxxx

Bodenhoffs Plads 2, Copenhagen

3


Property portfolio 2016-09-30

Lettable space, thousand sqm Fair value

CityResidential

units Residential Commercial Total SEK million SEK/sqmBerlin 12,311 775 64 839 18,107 21,572Stockholm 8,739 648 40 688 15,067 21,890Malmö 3,975 260 82 342 6,696 19,555Hamburg 4,201 234 13 247 6,684 27,072Toronto 3,114 163 1 164 4,655 28,447New York 1,013 75 - 75 4,379 58,101London 1,171 53 3 56 4,241 76,262Boston 586 38 - 38 2,533 66,293Montreal 1,397 105 - 105 1,972 18,747Paris 819 25 3 28 1,653 59,926Washington D.C. 435 33 - 33 826 25,168Other 7,994 503 84 587 12,763 21,759Total 45,755 2,912 290 3,202 79,575 24,852

Fair value, SEK million

Malmö6,696

Stockholm15,067

Berlin18,107

London4,241

Paris1,653

Washington D.C.826

New York4,379

Hamburg6,684

Boston2,533

Toronto4,655

Montreal1,972

4


Stockholm

Stockholm Malmö

Property portfolioRequired yield, percent 3.62 4.02Percent of fair value 19 8

Average rent SEK/sqm/year SEK/sqm/yearTotal portfolio 2015-10-01 1,190 1,239Sales 2 -Comparable portfolio 2015-10-01 1,192 1,239Increase in comparable portfolio 28 42- Increase in percent 2.4 3.4Comparable portfolio 2016-10-01 1,220 1,281Purchases - -Total portfolio 2016-10-01 1,220 1,281

Vacancy rate residential Percent PercentReal vacancy rate 0.1 0.0Apartments under upgrades 1.3 1.1Vacancy rate 1.4 1.1

Malmö

5


Berlin

Berlin Hamburg


Average rent EUR/sqm/month EUR/sqm/monthTotal portfolio 2015-10-01 7.04 9.85Sales - 0.06Comparable portfolio 2015-10-01 7.04 9.91Increase in comparable portfolio 0.52 0.33- Increase in percent 7.3 3.4Comparable portfolio 2016-10-01 7.56 10.24Purchases - -0.08Total portfolio 2016-10-01 7.56 10.16


Hamburg

6


Toronto

Toronto Montreal


Average rent CAD/sqft/month CAD/sqft/monthTotal portfolio 2015-10-01 1.91 1.32Sales - -Comparable portfolio 2015-10-01 1.91 1.32Increase in comparable portfolio 0.14 0.13- Increase in percent 7.2 10.0Comparable portfolio 2016-10-01 2.05 1.45Purchases - 0.11Total portfolio 2016-10-01 2.05 1.56


Montreal

7


London

London Paris


Average rent GBP/sqft/month EUR/sqm/monthTotal portfolio 2015-10-01 1.88 24.34Sales 0.28 -Comparable portfolio 2015-10-01 2.16 24.34Increase in comparable portfolio 0.19 0.74- Increase in percent 8.9 3.1Comparable portfolio 2016-10-01 2.35 25.08Purchases 0.15 -3.89Total portfolio 2016-10-01 2.50 21.19


Paris

8


New York

New York Boston


Average rent USD/sqft/month USD/sqft/monthTotal portfolio 2015-10-01 2.16 -Sales - -Comparable portfolio 2015-10-01 2.16 -Increase in comparable portfolio 0.09 -- Increase in percent 4.2 -Comparable portfolio 2016-10-01 2.25 -Purchases -0.01 3.30Total portfolio 2016-10-01 2.24 3.30


Boston

9


Letting and upgrades

Net lettingNumber of residential units

Net lettingYearly rental value, SEK million

Apartment upgradesShare of upgraded apartments, percent

Apartment upgradesNumber of upgraded apartments

2015

-12-31

2016

-09-

30 Jan-Sep 2015

Jan-Sep 2016

23%

2,543

3,135

Move inMove out

5,045

5,285

474

573

Net letting Move inMove out Net letting

24099

Sales

Upgr

ades

curre

nt

portf

olio

36 40-1 5

10


Total property return

SEK millionGrowth Jan-Sep

percentFair value, 2016-01-01 72,764Revaluations 7,874 10.8Investments 2,030 2.8Purchases 3,849 5.3Sales -8,715Translation difference 1,773 2.4Fair value, 2016-09-30 79,575 9.4Operating surplus 1,772 2.4

SEK million Per annumTotal property return 9,646 18.1

Annual property return Percent

2010 Jan–Dec

18

16

14

12

10

8

6

4

2

02011

Jan–Dec2012

Jan–Dec2013

Jan–Dec2014

Jan–Dec2015

Jan–Dec2016

Jan–Sep

Income return Value growth Average

11


Result for the period

Operating surplus SEK 1,772 million Rental income amounted to SEK 3,351 million, an increase of SEK 157 million compared to the same period of 2015. 41 percent of the growth is attributable to the purchase of new properties and 59 percent to increased rents on comparable properties. The real vacancy rate decreased by 0.5 percentage points to 0.8 percent. The vacancy rate for residential was 4.9 percent, of which 83 percent was due to upgrades or planned sales of apartments.Property expenses amounted to SEK 1,579 million, compared to SEK 1,513 million in the same period of 2015. SEK 264 million was attributable to maintenance, corresponding to an average annual expense of SEK 104 per square meter. The operating surplus margin was 52.9 percent, compared to 52.6 percent in the same period last year.

Increase in property value 10.8 percent The increase in property value was SEK 7,874 million, 10.8 percent, compared to SEK 3,933 million, 6.8 percent, in the same period of 2015. The growth in value is mostly due to a lower required yield.

Net financial items SEK -1,394 millionInterest expenses were SEK 884 million, compared to SEK 921 million in the same period of 2015. Financial derivatives affected earnings by SEK -488 million, compared to SEK 258 million, mainly due to a decrease in interest rates. Other financial items amounted to SEK -22 million, compared to SEK -37 million.

Profit before tax SEK 8,091 millionProfit before tax was SEK 8,091 million, compared to SEK 4,777 million in the same period of 2015, and was positively impacted by an increase in the fair value of properties.

Tax expenses SEK 1,515 millionTax expenses amounted to SEK 1,515 million, compared to SEK 980 million in the same period of 2015. SEK 1,454 million refers to deferred tax, mainly due to unrealized gains on properties. The Group has no ongoing tax disputes.

Rental income, comparable propertiesSEK million

Operating surplus, comparable propertiesSEK million

Real vacancy ratePercent

Jan-Sep 2015

Jan-Sep 2016

Jan-Sep 2015

Jan-Sep 2016

2016-01-01 2016-10-01

0.5

1.3

0.8

7.0%1,318

1,411

4.2%2,199

2,291

12


Required yield PercentOpening, 2016-01-01 4.33Purchases 0.02Sales -0.04Comparable -0.30Exchange rate differences 0.00Closing, 2016-09-30 4.01

Property purchases SEK 3,849 million Property purchases amounted to SEK 3,849 million, compared to SEK 8,854 million in the the same period of 2015. The average required yield was 4.34 percent.

Property investments SEK 2,030 millionInvestments in properties totaled SEK 2,030 million, compared to SEK 1,464 million in the same period of 2015. Investments were equivalent to SEK 797 per square meter on an annual basis. Of total investments, 39 percent refers to apartment upgrades.

Property sales SEK 8,715 million We have sold in Sweden for SEK 7,341 million, in Germany for SEK 847 million and in England for SEK 527 million. In total, we sold properties for SEK 8,715 million, compared to SEK 3,232 million in the same period of 2015. Sales prices were 12 percent higher than the fair value at the beginning of the year and generated net income of SEK 763 million, including SEK 78 million in transaction costs.Well-kept residential properties are attractive investments for many types of investors and are a liquidity reserve throughout the business cycle.

Fair value SEK 80 billionThe fair value was SEK 79,575 million, which is equivalent to an average of SEK 24,852 per square meter. The average required yield for the entire portfolio was 4.01 percent, which is 0.32 percentage points lower than at the beginning of the year.

Property portfolio

SalesSEK million

Purchases SEK million

Purchase Fair value Sale price price plus beginning investments of the year

8,715

Purchases per sqmSEK 000s/sqm Required yield

Germany

Canada

France

United States

706050

40302010

percentSEK 000s

5.0

4.5

4.0

3.5

12%32%

7,7705,881

New York

Montreal

Boston

Washington

Hamburg

Berlin

Düsseldorf

Paris

847

777

590

480

340

316

182

299

Others 18

13


FinancingEquity to assets ratio 46 percent Equity increased by SEK 6,395 million to SEK 37,062 million during the period and the equity to assets ratio increased from 41 to 46 percent.

Loan-to-value 43 percent Interest-bearing debt decreased during the period by SEK 1,566 million to SEK 34,389 million. The loan-to-value ratio has decreased by 5 percentage points since 2015-12-31.Secured loans were SEK 23,796 million, compared to SEK 27,126 million at the end of 2015. The secured loan-to-value decreased from 36 to 29 percent. The ambition is a secured loan-to-value of less than 25 percent. The secured loans have been borrowed from 36 banks in six countries.Unsecured loans encompass three listed bonds, commercial papers and loans from related companies. Unsecured loans increased during the period by SEK 1,764 million to SEK 10,593 million, fully in line with the ambition to increase our presence in the capital market.

Capital tied up 5.6 years Interest-bearing debt was tied up for an average of 5.6 years, compared to 5.7 years at the end of 2015. Loans that mature within one year amount to SEK 5,328 million. The refinancing risk is mitigated by strong liquidity, highly diversified funding and a low loan-to-value.

Interest rate hedge 4.7 years SEK 11,928 million had a fixed interest rate term of more than five years and SEK 8,941 million had a fixed interest rate term of less than one year. The average interest rate of 2.82 percent was 0.62 percentage points lower than at the end of 2015. The average interest rate hedge was 4.7 years, as compared to 4.3 years at the end of 2015.

Liquidity SEK 9,062 million Available funds in the form of cash and unutilized credit facilities totaled SEK 9,062 million. The unleveraged share of the properties’ fair value corresponded to SEK 55,779 million.

Average interest ratepercent

Interest coverage ratiotimes

Realized value growth

5.0

2.3 EBITDA

Secured loans

Unsecured loans

Loan-to-valuepercent

2015-12-31 2016-09-30

48

14

29

12

36

43

3.94

3.56

2.82

3.44

Dec2014

Sep2015

Dec2015

Sep2016

Jan-Sep 2016

Pro forma 12 months

See page 20 for more information

14


Cash flow for the periodOperating cash flow increased by SEK 438 million to SEK 730 million, compared to the same period of 2015. The period’s net selling of properties has led to a net cash flow from investing activities of SEK 3,537 million, compared to SEK -6,558 million in the same period of 2015. Cash flow required for acquisitions of properties is secured before signing acquisition agreements. Profitable but non-mandatory upgrades can, if needed, be stopped within a three-month period. Cash flow from financing activities was SEK -4,363 million, compared to SEK 6,387 million in the same period of 2015. During the period, we issued new shares for SEK 4,036 million. We paid dividends to the holders of preference shares for a total of SEK 282 million and to the holders of common shares for SEK 5,045 million.

Parent CompanyThe Parent Company’s profit before tax increased by SEK 1,375 million to SEK 1,858 million, which is attributable to dividends received of SEK 2,000 million and negative changes in the fair value of derivative financial instruments of SEK -335 million, compared to SEK 510 million and SEK 105 million for the same period of 2015. During the period the company started a EUR 200 million commercial paper program.

Assets and liabilities held for saleAkelius has signed an agreement for the sale of properties in Eskilstuna and Halmstad, 1,763 apartments, with the closing date in March 2017. As of 2016-09-30, the disposal group consisted of investment properties of SEK 2,734 million and deferred taxes of SEK 251 million.

Third quarterNet income for the quarter amounted to SEK 2,518 million, compared to SEK 1,608 million in the same quarter of 2015, and has been impacted by a change in the fair value of derivative financial instruments of SEK -11 million, compared to SEK -95 million, and properties of SEK 2,728 million, compared to SEK 1,955 million.During the third quarter, rental income increased to SEK 1,127 million, compared to SEK 1,099 million the same quarter of 2015, and property costs increased to SEK 499 million, compared to SEK 473 million, which resulted in an improvement in the operating surplus to SEK 628 million, compared to SEK 626 million. Net financial items totaled SEK -283 million, compared to SEK -419 million in the same quarter of 2015, and include the change in the fair value of derivatives.

Akelius reported in other comprehensive income of SEK -117 million for the changes in value of currency derivatives and exchange rate differences on external loans in foreign currency defined as hedging instruments and SEK 25 million for deferred taxes. Translation differences for foreign group companies amounted to SEK 435 million for the quarter.

Cash flow during the third quarter amounted to SEK -11 million, compared to SEK 283 million for the same quarter of 2015. Cash flow generated from operations was SEK 478 million. Net cash flow from investing activities amounted to SEK 3,942 million. Financing activities had a negative effect on cash flow of SEK -4,431 million. During the quarter dividends were paid to the holders of preference shares for a total of SEK 94 million.

Other financial information

15


Preference sharesThe total number of preference shares amounted to 18,835,606, equivalent to SEK 6,020 million reported in equity. Preference shares represent 0.64 percent of the total number of shares in Akelius Residential Property AB. On 2016-09-30, the price paid per preference share was SEK 321.5.

A dividend of SEK 5 per preference share will be paid on the record dates pursuant to the Articles of Association: 2016-11-04 and 2017-02-03, in total SEK 188 million.

Akelius ratingIn March 2016, Standard and Poor s confirmed the investment grade rating BBB- with a stable outlook. Listed bonds have a BB+ rating.

PersonnelAt the end of the period there were 695 people employed in the Group, compared to 588 at the end of 2015.

Related party transactionsNet debt from related parties has decreased by SEK 422 million. In addition to these transactions, transactions occurred with companies in the Akelius Foundation Group. The scope and focus of these operations have not changed significantly during the quarter. All transactions were executed on market terms.

Events after balance sheet dateWe purchased our first properties in Copenhagen at the beginning of October, 216 apartments. Additionally, mid- October, we signed an agreement for the sale of 31 properties in Halmstad and Eskilstuna in Sweden for SEK 2.8 billion, which is 30 percent higher than the fair value at the beginning of the year.

Pål Ahlsén,CEO, Managing Director

Stockholm, Sweden, 2016-10-24, Akelius Residential Property AB (publ)

The interim report has not been examined by the company’s auditors.

Other financial information

16


Consolidated statement of comprehensive income

SEK million

2016 Jul-Sep

3 months

2015 Jul-Sep

3 months

2016 Jan-Sep

9 months

2015 Jan-Sep

9 months

2015 Jan-Dec

12 monthsRental income 1,127 1,099 3,351 3,194 4,339Operating expenses -410 -384 -1,315 -1,222 -1,756Maintenance -89 -89 -264 -291 -408Operating surplus 628 626 1,772 1,681 2,175

Central administration -30 -23 -92 -66 -112Other income and expenses 9 -2 9 10 9Net gain from the revaluation of investment properties* 2,728 1,955 7,796 3,852 7,905Operating profit 3,335 2,556 9,485 5,477 9,977Interest income - 1 2 2 4Interest expenses -266 -313 -884 -921 -1,277Other financial income and expenses -6 -12 -24 -39 -31Change in fair value of derivative financial instruments -11 -95 -488 258 533Profit before tax 3,052 2,137 8,091 4,777 9,206Tax -534 -529 -1,515 -980 -2,035Profit for the period / year 2,518 1,608 6,576 3,797 7,171Items that may be reclassified to profit or loss:Translation difference 435 101 960 -153 -610Change in hedging of currency risk -117 - -297 - -Tax attributable to hedging currency risk 25 - 65 - -Comprehensive income for the period / year 2,861 1,709 7,304 3,644 6,561Profit attributable to: - owners of the Parent Company 2,469 1,580 6,450 3,717 7,055 - non-controlling interests 49 28 126 80 116

Total comprehensive income attributable to: - owners of the Parent Company 2,763 1,650 7,076 3,517 6,443 - non-controlling interests 98 59 228 127 118

Earnings per share before and after dilution, SEK 0.81 0.54 2.12 1.23 2.33

*) SEK 78 million refers to transaction costs for Jan-Sep 2016, SEK 81 million for Jan-Sep 2015 and SEK 121 million for Jan-Dec 2015.

17


Consolidated statement of financial position

SEK million2016

30 Sep2015

30 Sep2015

31 DecAssetsIntangible assets 41 20 27Investment properties 76,841 68,366 69,963Tangible fixed assets 38 28 32Derivative financial instruments - - 25Deferred tax assets 12 40 8Financial assets 10 109 109Total non-current assets 76,942 68,563 70,164

Trade and other receivables 520 857 808Derivative financial instruments - 11 12Cash and cash equivalents 140 401 238Assets held for sale* 2,734 - 2,802Total current assets 3,394 1,269 3,860

Total assets 80,336 69,832 74,024

Equity and liabilitiesTotal equity 37,062 27,773 30,667

Interest-bearing liabilities 29,061 32,222 32,108Derivative financial instruments 1,895 2,174 1,983Deferred tax liabilities 5,324 3,325 4,175Other liabilities 61 35 49Total non-current liabilities 36,341 37,756 38,315

Interest-bearing liabilities 5,328 3,282 3,847Derivative financial instruments 74 16 2Trade and other payables 1,280 1,005 1,035Liabilities held for sale 251 - 158Total current liabilities 6,933 4,303 5,042

Total equity and liabilities 80,336 69,832 74,024

Borrowings - unsecured 10,593 9,008 8,829 - secured 23,796 26,496 27,126Total 34,389 35,504 35,955

*) SEK 2,734 million was attributable to investment properties on 2016-09-30 and SEK 2,801 million on 2015-12-31.

18


Consolidated statement of cash flows

SEK million

2016 Jul-Sep

3 months

2015 Jul-Sep

3 months

2016 Jan-Sep

9 months

2015 Jan-Sep

9 months

2015 Jan-Dec

12 monthsOperating surplus 628 627 1,772 1,681 2,175Central administration -29 -21 -91 -59 -112Other income and expenses 9 -1 6 1 -Reversal of depreciation and impairment losses 6 3 10 7 10Interest paid -345 -342 -992 -942 -1,213Income tax paid -1 -2 -8 -7 -5Cash flow before changes in working capital 268 264 697 681 855Change in current assets 30 -24 -68 -105 76Change in current liabilities 180 -138 101 -284 43Cash flow from operating activities 478 102 730 292 974Investments in intangible assets -14 -3 -18 -9 -17Investment in properties -813 -639 -2,030 -1,464 -2,216Acquisition of investment properties -179 -2,959 -3,849 -8,854 -12,093Acquisition of net assets 33 12 637 835 792Proceeds from sales of investment properties 5,089 2,250 8,715 3,232 5,755Proceeds from sale of net assets -214 528 -309 -10 -10Purchase and sale of other assets 40 -463 391 -288 -393Cash flow from investing activities 3,942 -1,274 3,537 -6,558 -8,182New share issue - - 4,036 1,974 1,974Shareholder contribution - 2 8 23 22Loans raised 1,358 7,943 8,692 16,039 19,026Repayment of loans -5,681 -6,520 -11,203 -11,418 -13,385Purchase and sale of derivative instruments -14 75 -569 21 -26Dividend -94 -45 -5,327 -252 -445Cash flow from financing activities -4,431 1,455 -4,363 6,387 7,166Cash flow for the period / year -11 283 -96 121 -42Cash and cash equivalents at beginning of year 155 116 238 278 278Translation difference in cash and cash equivalents -4 2 -2 2 2Cash and cash equivalents at end of period / year 140 401 140 401 238

19


Consolidated statement of changes in equity

SEK millionShare capital

Share premium

Currency translation

reserveRetained earnings Total

Non- controlling

interestsTotal

equityBalance at 2015-01-01 1,737 8,485 782 10,183 21,187 1,396 22,583Acquired minority - - - - - 22 22Redistribution - - - -52 -52 52 -Hybrid loan - - - - - -73 -73Dividend - - - -377 -377 - -377Share issue 4 1,971 - - 1,975 -1 1,974Profit for the period - - - 3,717 3,717 80 3,797Other comprehen-sive income - - -199 - -199 46 -153Balance at 2015-09-30 1,741 10,456 583 13,471 26,251 1,522 27,773Hybrid loan - - - - - -25 -25Group contribution - - - 3 3 - 3Tax on group contribution - - - -1 -1 - -1Profit for the period - - - 3,338 3,338 36 3,374Other comprehen-sive income - - -413 - -413 -44 -457Balance at 2015-12-31 1,741 10,456 170 16,811 29,178 1,489 30,667Acquired minority - - - - - 8 8Dividend - - - -5,421 -5,421 -91 -5,512Share issue 29 4,007 - - 4,036 558 4,594Profit for the year - - - 6,451 6,451 126 6,577Other comprehen-sive income - - 561 65 626 102 728Balance at 2016-09-30 1,770 14,463 731 17,906 34,870 2,192 37,062

Attributable to owners of the Parent company

20


SEK million Jan-Sep 2016Oct 2015- Sep 2016

Pro forma, 12 months

revenue and cost at balance sheet

dateRental income 3,351 4,496 4,361Operating expenses -1,315 -1,849 -1,731Maintenance -264 -381 -309Operating surplus 1,772 2,266 2,321Central administration, other revenue and expenses, excluding depreciation -72 -116 -96EBITDA 1,700 2,150 2,225Net interest expense -882 -1,236 -955Other financial income and expenses -24 -16 -33Profit before tax and revaluation 794 898 1,237Realized value growth 2,756 3,663 -Interest coverage ratio 5.0 4.7 2.3Interest coverage ratio excluding realized value growth 1.9 1.7 2.3Net debt as per 2016-09-30 34,219 34,219 34,219Net debt/EBITDA 15.1 15.9 15.4Net debt/EBITDA including realized value growth 5.8 5.9 15.4

Realized value growth Akelius manages and develops residential properties with the ability to generate a stable and growing operating surplus. A higher operating surplus leads to value growth for our properties. Part of the business model is to realize value growth, which is here defined as sales revenue, less acquisition value and investments. Profit before tax and revaluation including realized value growth is a good indicator of the ability to generate cash flow.

Pro formaOperating surplus and value growth are reinvested in current and new properties. This leads to a growing operating surplus. It is therefore more appropriate to analyze the business based on the situation on the balance sheet date.

The pro forma figures are 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. The interest expenses are based on net debt on the balance sheet date, calculated according to the average rate at balance sheet date. The average exchange rate for the past year has been used. No tax has been calculated as it relates largely to deferred tax, which does not affect cash flow.

The pro forma figures are not a forecast for the coming twelve months as they contain no estimate of rent, vacancy, currency exchange rate, future property purchases and sales or interest rate changes.

Additional information on the financial key figures

21


Segment information

Jan-Sep 2015, SEK millionRental income 1,671 1,128 395 3,194Operating expenses -594 -430 -198 -1,222Maintenance -193 -61 -37 -291Operating surplus 884 637 160 1,681Revaluation of investment properties 1,467 1,960 506 3,933Total property return 2,351 2,597 666 5,614Total property return, percent 10.7 16.7 12.9 13.2Property fair value 30,987 24,955 12,424 68,366

Jan-Sep 2016, SEK million Sweden Germany Other TotalRental income 1,532 1,149 670 3,351Operating expenses -545 -425 -345 -1,315Maintenance -159 -60 -45 -264Operating surplus 828 664 280 1,772Revaluation of investment properties 3,760 3,488 626 7,874Total property return 4,588 4,152 906 9,646Total property return, percent 19.7 22.8 7.5 18.1Property fair value 28,837 30,480 20,258 79,575

Interest-bearing liabilities

DurationYears

Interest rate hedge

SEK million

Interest rate hedge

Average interest rate, percent

Share, percent

Capital tied up SEK million

Share, percent

0-1 8,941 0.75 26 5,328 151-2 1,500 1.85 4 5,946 172-3 3,003 3.83 9 3,917 113-4 6,034 3.47 18 7,238 214-5 2,983 4.67 9 953 35-6 2,230 4.05 6 433 16-7 712 4.49 2 132 07-8 1,413 4.02 4 241 18-9 2,657 2.75 8 1,618 59-10 2,541 1.95 7 3,977 12> 10 2,375 4.60 7 4,606 14Total 34,389 2.82 100 34,389 100

22


Statement of comprehensive income for the Parent Company

SEK million

2016 Jul-Sep

3 months

2015 Jul-Sep

3 months

2016 Jan-Sep

9 months

2015 Jan-Sep

9 months

2015 Jan-Dec

12 monthsAdministrative expenses -23 -17 -32 -52 -38Other income and expenses - -1 - - -Operating profit -23 -18 -32 -52 -38Profit from shares in subsidiaries - 500 2,000 510 943Financial income 255 267 906 640 868Financial expenses -196 -191 -681 -720 -1,032Change in fair value of derivatives -14 -80 -335 105 291Profit before appropriations 22 478 1,858 483 1,032Appropriations - - - - 95Profit before tax 22 478 1,858 483 1,127Tax -27 -16 155 -24 -45Profit for the period / year -5 462 2,013 459 1,082Comprehensive income -5 462 2,013 459 1,082

23


Statement of financial position for the Parent Company

SEK million2016

30 Sep2015

30 Sep2015

31 DecAssetsIntangible assets 3 8 1Total intangible assets 3 8 1

Shares in subsidiaries 13,183 13,165 13,164Receivables from group companies 21,626 3,579 9,231Deferred tax assets 485 350 331Total financial assets 35,294 17,094 22,726Total non-current assets 35,297 17,102 22,727Receivables from group companies 10,349 14,420 20,182Derivative financial instruments - - 12Other current receivables 9 13 1Prepaid expenses and accrued income 3 154 192Cash and cash equivalents 2 218 74Total current assets 10,363 14,805 20,461Total assets 45,660 31,907 43,188

Equity and liabilities

Total equity 14,741 13,491 14,114

Interest-bearing liabilities 7,950 9,711 9,112Interest-bearing liabilities, group companies 17,266 7,708 17,379Derivative financial instruments 637 567 474Total non-current liabilities 25,853 17,986 26,965

Interest-bearing liabilities 4,551 56 1,855Interest-bearing liabilities, group companies 219 - 74Derivative financial instruments 66 - -Trade payables - 1 2Other current liabilities 190 335 105Accrued expenses and prepaid income 40 38 73Total current liabilities 5,066 430 2,109Total equity and liabilities 45,660 31,907 43,188

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Other information

Basis of presentationStatement of complianceThe Akelius Residential Property Group’s Interim report has been prepared in accordance with IAS 34, Interim Financial Reporting. 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 accounting policies applied in the preparation of the interim report are consistent with those used in the preparation of the Group’s annual financial statements for the year 2015.

The figures in this interim report have been rounded up or down, 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.Estimates and assessmentsEstimates and assessments are evaluated continuously based on empirical factors and other aspects, including anticipation of future events that are reasonable under the prevailing circumstances. The same principles are followed in the interim reporting as in the previous annual report.Derivative instrumentsDerivative instruments consist mainly of interest rate swaps. Estimates of the fair value of derivatives are based on Level 2 of the fair value hierarchy. Compared to 2015, no transfers have occurred between the different levels of the hierarchy, and no significant changes have been made regarding the valuation method.

Cash flow in the derivative contracts is compared to the cash flow that would have been received if the contracts had been concluded at market prices on the closing date. The difference in cash flow is discounted using an interest rate that takes into account counterparty credit risk. The present value obtained is reported in the balance sheet at fair value. Changes in fair value for interest rate swaps are recognized in the income statement without the application of hedge accounting. Currency derivativesAs of 2016-04-01 Akelius has defined currency derivatives as hedging instruments and reported the change in fair value of currency derivatives in other comprehensive income. Previously hedge accounting applied only for external loans.Valuation of propertiesThe fair value of all properties is assessed by internal valuations on the closing date. The valuations are based on a cash flow model for each individual property, with separate assessments of future earning ability and required rates of return. The cash flow model is based on actual income and expenses adjusted for a normalized future cash flow. Assets held for saleFair value measurement is based on the purchase price stated in the signed purchase agreement between buyers and sellers when agreements have been signed, minus the remaining cost to put the properties in the condition agreed. The purchase price is considered to belong to Level 1 of the fair value hierarchy in IFRS 13.

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New accounting principlesThe following standards, amendments to standards and interpretations have been issued but are not yet effective for annual periods beginning on 2016-01-01. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.

IFRS 9 – Financial InstrumentsIFRS 9 introduces new requirements for the classification and measurement of financial assets. Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and to add new requirements to address the impairment of financial assets and hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after 2018-01-01, with early adoption permitted.

IFRS 15 – Revenue from Contracts with CustomersIFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. IFRS 15 is effective for annual reporting periods beginning on or after 2018-01-01, with early adoption permitted. At this time, the impact of the above publications is not expected to be material to the Group.

IFRS 16 – LeasesIFRS 16 establishes a new accounting model based on the right to use an asset. Subject to EU endorsement, the standard will be effective for reporting periods beginning on or after 2019-01-01. The impact on the financial statements has yet to be evaluated.

Risks and uncertaintiesThe operational risks are limited through concentrating the property portfolio to residential properties in metropolitan areas. Strong residential rental markets in Sweden, Germany, Canada, England, France and the United States reduce the risk for long-term vacancies. In order to further reduce the risk, or variations in cash flow, 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 on the Group s equity to assets ratio. No material changes in the company’s assessment of risks have occurred since the publication of the 2015 annual report.

Other information

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Key figures2016

30 Sep2015

31 Dec2014

31 Dec2013

31 Dec2012

31 DecEquity ratioEquity, SEK million 37,062 30,667 22,583 15,169 9,970Equity to assets ratio, percent 46 41 38 33 27Return on equity, percent 24 29 9 24 27Net asset value to assets ratio, percent 55 50 47 41 37Operating surplusRental income, SEK million 3,351 4,339 3,602 3,025 2,780Growth in rental income, percent 4.9 20.5 19.1 8.8 7.1Growth in rental income for comparable properties, percent 4.2 4.3 3.4 5.8 4.4Operating surplus, SEK million 1,772 2,175 1,882 1,579 1,409Growth in operating surplus, percent 5.4 15.6 19.2 12.1 2.4Growth in operating surplus for comparable properties, percent 7.0 4.0 7.1 6.7 4.1Interest-bearing liabilitiesLoan-to-value, secured loans, percent 29 36 47 49 53Loan-to-value, percent 43 48 51 56 59Interest coverage ratio 5.0 3.0 1.7 1.5 1.3Interest coverage ratio excluding realized value growth 1.9 1.6 1.5 1.2 1.2Average interest rate, percent 2.82 3.44 3.94 4.75 4.85Fixed interest term, year 4.7 4.3 4.2 5.0 5.4Capital, tied up, year 5.6 5.7 4.5 4.6 5.0PropertiesNumber of apartments 45,755 51,231 47,896 41,319 35,443Rentable area, thousand sqm 3,202 3,587 3,472 2,992 2,576Real vacancy rate residential, percent 0.8 1.3 1.0 0.7 0.7Vacancy rate residential, percent 4.9 4.3 3.2 2.6 2.0Fair value of properties, SEK millionOpening balance 72,764 57,736 44,104 35,437 32,352Change in fair value 7,874 8,026 1,412 1,582 2,671Investments 2,030 2,216 1,881 1,531 1,493Purchases 3,849 12,093 9,678 6,901 1,663Sales -8,715 -5,755 -1,084 -1,801 -2,383Exchange differences 1,773 -1,552 1 745 454 -359Closing balance 79,575 72,764 57,736 44,104 35,437Fair value, per sqm 24,852 20,284 16,629 14,736 13,755Required yield, percent 4.01 4.33 4.72 4.75 4.73Change in required yield1, percentage -0.30 -0.36 0.01 -0.01 -0.28

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Key figures2016

30 Sep2015

31 Dec2014

31 Dec2013

31 Dec2012

31 DecProperties SwedenAverage residential rent, SEK /sqm/year 1,231 1,184 1,156 1,114 1,074Growth in average residential rent2, percent 1.9 2.6 3.7 5.8 5.0Growth in rental income3, percent 2.0 3.0 3.5 5.5 3.8Growth in operating surplus3, percent 1.5 1.8 8.0 3.3 5.2Fair value, SEK million 28,837 31,727 29,571 26,797 23,456Fair value, SEK per sqm 20,593 17,148 14,899 14,115 13,809Required yield, percent 3.83 4.30 4.78 4.84 4.79Number of apartments 17,283 23,520 24,407 23,867 21,707Vacancy rate residential, percent 1.3 1.5 1.5 2.2 2.4Real vacancy rate residential, percent 0.1 0.1 0.4 0.6 0.9Properties GermanyAverage residential rent, EUR /sqm/month 8.48 8.13 7.77 7.71 7.52Growth in average residential rent2, percent 4.0 5.1 5.4 5.6 5.6Growth in rental income3, percent 6.3 6.0 3.1 6.8 6.8Growth in operating surplus3, percent 8.7 3.9 5.8 13.7 1.0Fair value, SEK million 30,480 24,892 21,171 15,549 11,981Fair value, SEK per sqm 23,388 18,986 16,752 15,398 13,649Required yield, percent 3.94 4.35 4.72 4.64 4.64Number of apartments 19,937 20,307 19,423 15,769 13,736Vacancy rate residential, percent 4.3 4.9 4.5 2.4 1.4Real vacancy rate residential, percent 0.9 2.0 1.6 0.9 0.4Properties Canada4

Average residential rent, CAD /sqft/month 1.87 1.79 1.83 1.94 2.01Growth in average residential rent2, percent 5.6 3.6 6.6 7.7 11.2Growth in rental income3, percent 6.2 4.1 7.0 20.6 -Growth in operating surplus3, percent 32.0 25.1 -17.8 56.4 -Fair value, SEK million 6,627 4,859 3,432 1,758 1,074Fair value, SEK per sqm 24,652 21,424 21,808 20,710 22,026Required yield, percent 4.40 4.37 4.55 4.47 4.52Number of apartments 4,511 3,999 2,823 1,683 1,046Vacancy rate residential, percent 7.0 11.1 6.7 4.0 3.3Real vacancy rate residential, percent 1.6 3.6 2.7 1.7 1.5

1) For comparable properties. The property portfolio in England was purchased from fellow subsidiaries in March 2014. The table for 2016-09-30 shows the development as if the properties had been owned since 2014-01-01.

2) Growth from period start to period end for comparable portfolio.3) Growth for the period compared to the previous year’s period for comparable portfolio.

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Key figures2016

30 Sep2015

31 Dec2014

31 Dec2013

31 Dec2012

31 DecProperties England5

Average residential rent, GBP /sqft/month 2.50 2.07 1.74 1.55 1.54Growth in average residential rent2,percent 5.1 11.5 11.3 0.1 13.7Growth in rental income3, percent 10.4 15.1 5.9 29.0 -Growth in operating surplus3, percent 23.0 23.0 9.3 31.7 -Fair value, SEK million 4,241 4,840 3,395 1,792 1,580Fair value, SEK per sqm 76,262 67,660 53,606 36,430 32,730Required yield, percent 4.14 4.22 4.36 4.64 4.53Number of apartments 1,171 1,404 1,153 870 870Vacancy rate residential, percent 15.4 8.0 7.8 6.0 8.2Real vacancy rate residential, percent 5.1 2.8 2.1 4.1 4.6Properties FranceAverage residential rent, EUR /sqm/month 21.19 22.50 21.31 - -Growth in average residential rent2,percent 2.4 15.7 - - -Growth in rental income3, percent 66.3 - - - -Growth in operating surplus3, percent 202.0 - - - -Fair value, SEK million 1,653 995 166 - -Fair value, SEK per sqm 59,926 62,640 60,732 - -Required yield, percent 4.20 4.21 4.11 - -Number of apartments 819 467 90 - -Vacancy rate residential, percent 44.1 35.3 34.4 - -Real vacancy rate residential, percent 1.0 1.3 - - -Properties United StatesAverage residential rent, USD /sqft/month 2.39 2.26 - - -Growth in average residential rent2, percent 3.4 - - - -Growth in rental income3, percent - - - - -Growth in operating surplus3, percent - - - - -Fair value, SEK million 7,738 5,451 - - -Fair value, SEK per sqm 52,855 48,769 - - -Required yield, percent 4.44 4.47 - - -Number of apartments 2,034 1,534 - - -Vacancy rate residential, percent 14.4 9.8 - - -Real vacancy rate residential, percent 2.4 2.8 - - -

4) The property portfolio in Toronto, Canada, was purchased from a fellow subsidiary at the end of 2013. The tables above show the development as if the properties had been owned since 2012.

5) The property portfolio in England was purchased from fellow subsidiaries in March 2014. The tables above show the development as if the properties had been owned since 2012.

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Definitions

Comparable portfolio The properties owned during the periods being compared. This means that properties acquired or sold during any of the periods being compared are excluded.

Capital tied up, year Volume-weighted remaining term of interest-bearing liabilities and derivatives on the balance sheet date. Illustrates the company’s refinancing risk.

EBITDA Operating surplus plus central administrative expenses, other income and expenses with add back of depreciation and impairment charges.Highlights current cash flow capacity from property management.

Equity to assets ratio Equity in relation to total assets. Highlights the company’s financial stability.

Interest rate hedge total loans, year

Volume-weighted remaining term for interest rates on interest-bearing liabilities and derivatives on the balance sheet date. Illustrates the company’s financial risk.

Interest coverage ratio Operating surplus plus central administrative expenses, other income and expenses, other financial income and expenses, realized value growth with add back of depreciation and impairment charges, in relation to net interest.Illustrates the company’s sensitivity to interest rate changes.

Interest coverage ratio, excluding realized value growth

Operating surplus plus central administrative expenses, other income and expenses, other financial income and expenses with add back of depreciation and impairment charges, in relation to net interest. Illustrates the company’s sensitivity to interest rate changes.

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Definitions

Loan-to-value, total loans Net debt divided by total assets minus cash, pledged cash and liquid assets. Illustrates the company’s financial risk.

Loan-to-value, secured loans Net debt reduced by unsecured interest-bearing debt divided by total assets minus cash, pledged cash and liquid assets. Illustrates the company’s financial risk.

Net asset value to assets ratio Equity, deferred tax and derivatives in relation to total assets minus cash, pledged cash and liquid assets. Provides an alternative measure of the company’s financial stability.

Net financial items The net of interest income, interest expenses, other financial income and expenses and changes in fair value of derivatives. Measures the net of financial operations.

Net letting The sum of agreed contracted annual rents for new lets for the period less terminated annual rents.

Net debt Interest-bearing debts minus cash, pledged cash and liquid assets. Illustrates the company’s financial risk.

Operating surplus Rental income less property costs. Highlights the ongoing earnings capacity from property management.

Operating surplus margin Operating surplus in relation to rental income. Highlights the ongoing earnings capacity from property management.

Other income and expenses Items from secondary activities such as capital gains on disposals of fixed assets other than investment properties, income and expenses from temporary services rendered after the sale of properties.

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Property costs This item includes direct property costs such as operating expenses, utility expenses, maintenance costs, leasehold fees and property taxes.

Property portfolio Investment property and investment property classified as assets held for sale.

Realized value growth Proceeds from the sale of investment properties minus acquisition costs, accumulated investments and costs of sale. Illustrates realized value growth of properties sold.

Real vacancy rate The total number of vacant apartments less the number of apartments vacant due to renovation work or planned sales, in relation to the total number of apartments. Real vacancy is measured on the first day after the month end.

Rental income Rental value less vacancies, rent discounts.

Return on equity Comprehensive income divided by opening equity. Shows the return offered to the owners’ invested capital.

Annual property return Gain from the revaluation of investment properties and operating surplus on an annual basis in relation to the fair value of the properties at the beginning of the year. Illustrates the total return on the property portfolio.

Vacancy rate The number of vacant apartments in relation to the total number of apartments. Vacancy is measured on the first day after the month end.

Current yield Net operating income on an annual basis in relation to the fair value of the properties at the beginning of the year. Measures the yield on the property portfolio.

Required yield The expected eternal yield from property portfolio.

Definitions

32


Alternative performance measures Reconciliation for the purposes of the Guidelines published by the European Securities and Markets Authority (ESMA) is set out below:

SEK million 2016

30 Sep2015

30 Sep2015

31 DecEquity 37,062 27,773 30,667Deferred taxes 5,312 3,285 4,167Derivatives 1,969 2,179 1,949Net asset value 44,343 33,237 36,783Total assets 80,336 69,832 74,024Cash and liquid asset -140 -401 -238Pledged cash assets -30 -108 -358Total assets minus cash, pledged cash and liquid assets 80,166 69,323 73,428Net asset value to assets ratio, percent 55 48 50

Total interest-bearing liabilities 34,389 35,504 35,955Cash and liquid assets -140 -401 -238Pledged cash assets -30 -108 -358Net Debt 34,219 34,995 35,359Total assets minus cash, pledged cash and liquid assets 80,166 69,323 73,428Loan to value, percent 43 50 48

Net Debt 34,219 34,995 35,359Less unsecured debt -10,593 -9,008 -8,829Secured debt 23,626 25,987 26,530Total assets minus cash, pledged cash and liquid assets 80,166 69,323 73,428Loan to value, secured loan, percent 29 37 36

2016 Jan-Sep

2015 Jan-Sep

Percent Growth

Rental income 3,351 3,194 4.9Exchange differences - -17 -Purchases and sales -1,060 -978 -Rental income for comparable properties 2,291 2,199 4.2

Operating surplus 1,772 1,681 5.4Exchange differences - -8 -Purchases and sales -361 -355 -Operating surplus for comparable properties 1,411 1,318 7.0

Proceeds from the sale of properties 8,715 3,232 -Costs of sale -78 -81 -Acquisition costs -4,615 -1,894 -Accumulated investments -1,266 -352 -Realized value growth 2,756 905 -

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Akelius in briefHead officeSvärdvägen 3ABox 104, S-182 12 Danderyd+46 (0) 8 566 130 00akelius.com

SwedenRosenlundsgatan 50Box 38149100 64 Stockholm+46 (0)10-722 31 00akelius.se

GermanyLeipziger Platz 14D-10117 Berlin+49 (0) 30 7554 110akelius.de

Canada289 Niagara StreetToronto M6J 0C3+1 (416) 214-2626akelius.ca

EnglandCoin House2 Gees CourtLondon W1U 1JA+44 (0) 2 078 719 695akelius.co.uk

France67 Boulevard Haussmann75008 Paris+33 1 40 06 85 00akelius.fr

United States3 Post Office Square4th FloorBoston, MA 02109akelius.us

DenmarkFrederiksborggade 15c/o Regus Business Centre1360 Copenhagen Kakelius.dk

Apartments for metropolitans83 percent of the portfolio is located in Berlin, Hamburg, Paris, London, Toronto, Montreal, New York, Boston, Stockholm and Malmö.

Better livingOur mission is to provide our current and future tenants with better living, by continuously upgrading our buildings and our service.

Acquire via cherry pickingWe prefers to make smaller acquisitions of exactly the right properties - to cherry pick - rather than a smaller number of larger acquisitions of not quite the right properties.

Strong capital structure, low refinancing risk We have agreements with thirty-six banks, listed preference shares. Akelius is Sweden’s largest listed property company. We have seventeen thousand shareholders.

First-class personnelMore than 170 employees have graduated in Residential Real Estate Management from Akelius University.

Financial calendar

Year-end report 2016 2017-02-06

Annual Report 2016 2017-03-17

Interim report Jan-Mar 2017 2017-04-28

interim report, january to september 2016 · interim report, january to september 2016 total...

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