annual report 2019 - Cision · Akelius focuses on properties with the ability to generate a stable increase in rental income. Rental income is the most important value driver in real

Akelius Residential Property AB (publ)annual report 2019

52 rue Eugène Carrière, Paris

rue de la Montagne Sainte Geneviève, Paris

2

Akelius at a glance

- residential properties

- A and B locations in metropolitan cities

- loan-to-value 40 percent

2019 Jan-Dec

2018 Jan-Dec

2017 Jan-Dec

Rental income, EUR million 496 482 469

Like-for-like growth in rental income, percent 5.7 3.2 5.1

Net operating income, EUR million 255 259 251

Net operating income margin, percent 51.5 53.6 53.4

Like-for-like growth in net operating income, percent 2.9 5.1 10.7

Profit before tax, EUR million 464 634 984

Property fair value, EUR million 11,964 12,379 10,624

Number of apartments 44,226 50,407 47,177

Real vacancy residential, percent 1.1 1.4 0.9

Walk score 89 88 87

Rent potential, percent 55 56 50

Loan-to-value, percent 40 44 44

Cash uses to cash sources, percent 158 224 241

Interest coverage ratio 7.8 2.8 4.7

Interest coverage ratio, excluding realized value growth 2.0 1.8 1.9

Credit rating, Standard & Poor's BBB BBB BBB

Net asset value, EUR million 6,533 6,284 5,840

Number of employees 1,456 1,326 876

3

**) includes commercial lettable space of 244,000 sqm*) source: United Nations

Lettable space residential Fair value

Population growth

2020-2030*Walk score

City unitsthousand

sqmEUR

millionEUR/

sqm** percentBerlin 14,038 882 3,038 3,193 1 91London 2,242 88 951 9,106 10 86Hamburg 3,601 198 816 3,901 0 91Paris 1,550 48 402 7,559 6 97Europe 21,431 1,216 5,207 5,940 7 91

Stockholm 5,921 423 1,657 3,625 11 69Malmö 4,078 266 970 2,773 10 91Copenhagen 1,031 82 322 3,649 7 95

Scandinavia 11,030 771 2,949 3,349 9 79

New York 1,719 117 943 7,785 6 96Toronto 3,506 181 908 4,884 10 81Montreal 3,860 258 828 3,187 8 87Boston 974 63 541 8,342 6 90Washington D.C. 1,238 93 444 4,576 10 88North America 11,297 712 3,664 5,755 8 87

Other 468 25 144 5,560 7 93Total/Average 44,226 2,724 11,964 4,031 7 89

North America Europe Scandinavia

4

The audited statutory annual report, which consists of the directors’ report and the financial statements, include pages 70 to 157. Tables and graphs are based on internal data if no source is provided. In the event of a conflict in interpretation or differences between this report and the Swedish version, the Swedish version shall have priority.

table of contentsAkelius at glance 2loan-to-value below 40 percent 5Akelius 25 years 6Akelius’ business model 8 sustainability 12 99 percent residential properties 14 100 percent apartments in growing metropolitan cities 20 attractive locations 23 upgrades for better living 26transactions 32 EUR 181 million in purchased properties 33 EUR 1,616 million from sold properties 34property valuation 37property portfolio 39business digitalization 64customer service 66staff and education 68

director’s reportfinancing - safety first 70result for the year 83proposed appropriation of profits 85corporate governance report 86 CEO and Group management 89 the Board 90key figures 92

financial statementsconsolidated statement of comprehensive income 98consolidated statement of financial position 99consolidated statement of changes in equity 100consolidated statement of cash flows 101accounting principles and notes 102statement of comprehensive income for the Parent Company 139statement of financial position for the Parent Company 140statements of changes in equity for the Parent Company 141statements of cash flows for the Parent Company 142Parent Company accounting policies and notes 143signatures 157independent auditor’s report 158alternative performance measures 164definitions 166

5

table of contentsAkelius at glance 2loan-to-value below 40 percent 5Akelius 25 years 6Akelius’ business model 8 sustainability 12 99 percent residential properties 14 100 percent apartments in growing metropolitan cities 20 attractive locations 23 upgrades for better living 26transactions 32 EUR 181 million in purchased properties 33 EUR 1,616 million from sold properties 34property valuation 37property portfolio 39business digitalization 64customer service 66staff and education 68

director’s reportfinancing - safety first 70result for the year 83proposed appropriation of profits 85corporate governance report 86 CEO and Group management 89 the Board 90key figures 92

financial statementsconsolidated statement of comprehensive income 98consolidated statement of financial position 99consolidated statement of changes in equity 100consolidated statement of cash flows 101accounting principles and notes 102statement of comprehensive income for the Parent Company 139statement of financial position for the Parent Company 140statements of changes in equity for the Parent Company 141statements of cash flows for the Parent Company 142Parent Company accounting policies and notes 143signatures 157independent auditor’s report 158alternative performance measures 164definitions 166

Paris

loan-to-value below 40 percent Entering 2019 the financial goal was to improve the credit metrics, to facilitate a higher rating. Loan-to-value was reduced from 44 to 40 percent. The financial policy stipulates a maximum loan-to-value of 40 percent from 2020 and onwards. Current rating is BBB. The company strives for a BBB+ rating.

sales 15 percent above fair valueSigned sales amounted to EUR 1.7 billion in four major transactions. Properties in Germany, Canada and Sweden were sold. Buyers were listed property companies and institutions. The demand for well located, well maintained residential buildings is very high.

issue and redemption of equityIn October the company issued EUR 0.4 billion in class D ordinary shares. All issued preference shares, EUR 0.6 billion, were redeemed in December.

like-for-like income growth 6 percentLike-for-like rental income grew 6 percent thanks to upgrades, index and a reduction of vacancy. Vacancy decreased with 2 percentage points in the like-for-like portfolio.

interest coverage ratio 2.0Interest coverage ratio increased from 1.8 to 2.0. Main contributors were decreased loan-to-value, reduced cost of debt in-place and increased income.

rent cap in BerlinThe Berlin house of representatives voted in favour of the rent cap. The new regulation limits the rent depending on construction year and condition. The company’s initial analysis indicates that Akelius may have to reduce annual rent with EUR 20 million, corresponding to 4 percent of rental income 2019.

The rent cap will increase housing shortage. This is not what Berlin needs. Pål Ahlsén, CEO and Managing Director

6

Akelius 25 yearsfair value properties, EUR billion

10.6

9.2

8.0

6.1

3.6

2.4

1.3

2019 Efforts to improve the rating to BBB+ begin.Property holdings concentrated to twelve growing metropolitan cities. Issues ordinary shares of class D to twelve thousand investors. Redeems preference shares.

2018 Reaches 50,000 apartments.

2017Growth in existing metropolitan areas. Digitalization to increase efficiency. Clean the map concluded.

2016Clean the map is launched to increase the focus on metropolitan cities. Sale of properties in the western and northern Sweden and Rostock in Germany. Establishment in Copenhagen.

2015The company acquires its first properties in New York, Washington D.C. and Boston.

2014Starts to buy residential properties in Paris and Montreal.Issues preference shares.

2011Starts business in Toronto and London.

2006The company buys its first properties in Berlin and in Hamburg.

2003Buys the listed real estate company Mandamus. Becomes the largest private residential landlord in Sweden.

1994 Buys the first residential properties in the Swedish cities Helsingborg, Gothenburg and Trollhättan.

12.4

12.0

7

Oranienstraße, Berlin

district Kreuzberga prime location with a walk score of 99property Oranienstraße 16 on the rightacquired in 2015

8

Akelius’ business model

stable increase in rental incomeAkelius focuses on properties with the ability to generate a stable increase in rental income. Rental income is the most important value driver in real estate.Continually increasing revenues lead to growing net operating income.Together with constant low vacancy, these are the most important indicators for high profitability and low risk in real estate.Residential property is the most resilient type of property.

sustainable investmentsAkelius restores and upgrades older buildings in attractive locations.This consumes fewer resources and is cheaper than new construction.Increased quality leads to higher demand and rent.

An increasing number of people want to live centrally, in walkable locations, in an energy efficient, and in attractive apartments.Akelius upgrades apartments when the tenants have moved out.No one is obliged to accept higher quality and rent.

population growth limits riskAkelius concentrates on residential properties in growing metropolitan cities.The trend of people moving from rural to urban areas leads to high growth, especially in the most attractive cities.The growing demand for apartments leads to low downside risk and a potential for higher rent.

lower volatility,more opportunitiesAkelius operates in seven countries but only in twelve metropolitan cities and can therefore combine effective property management with diversification.Diversification leads to lower risk since changes are local. A negative event in one market is usually mitigated by events in another market.

It is a competitive advantage to be established in many large markets. Liquidity in the property market is high, the access to business opportunities is huge and there are many different capital sources to choose from.

stable growing revenues

long-term value growth

limited downside risks

lower volatility

upgrading

residentialmetropolitan cities

attractive locations

diversification

9

growth for like-for-like properties, percent

2014

3.4

2015

4.3

2016

4.1

2017

5.1

7.1

4.0

8.0

10.7

2018

3.2

5.1

rental income

net operating income

average

2.9

5.7

2019

6.3

4.3

real vacancy 1.1 percent

2017

0.9

2009

1.0

2010

0.6

2011

0.7

2012

0.7

average

1.0

2018

1.4

2016

1.1

2015

1.3

2014

1.0

2013

0.7

2019

1.1

EBITDA EUR 227 million

2017

231

2011

147

2012

157

20182016

233

2015

221

2014

202

2013

174

236 227

2019

120131

20102009

10

long-term growthAkelius is a long-term investor in residential real estate. The aim is to grow the net asset value while limiting risk.

Profits are mainly retained in the company to support organic growth and maintain a strong financial situation.

Focusing on continuing trends like urbanizations, digitalization and sustainability along with investments in education and development is essential to long-term success.

11.5 percent total returnAkelius' total return on the properties has been 11.5 percent per annum on average for the last seven years.

The total return on the properties is the sum of net operating income and value growth.Akelius' view is that the total return is higher on properties with high value growth.

The main reason is that many investors prefer high short-term cash flow and may also have initial limited ambition, time or skills to select and manage properties with potential.Taken together, these factors result in a higher return on investments in properties with potential.

Profitability is one key factor for recovery and the ability to absorb effects of a crisis.A high total return therefore reduces the risk for Akelius and its investors.

Value growth is as effective as net operating income for growth in net asset value and for reducing leverage when needed.

Akelius holds attractive residential properties in several liquid property markets. The unrealized value growth on properties can thereby be converted into cash if the need arises.

rental growth leads to higher property valuesThe property value is the sum of future cash flows discounted to present value.Growth in revenues therefore leads to higher property values.

Population growth is the most important indicator in residential real estate for increasing revenues and a long-term increase in property values.The effect of population growth is often underestimated.

Small improvements each year add up to material progress that greatly benefits long-term investors.

reduced discount rates give higher property valuesThe recent trend towards lower interest rates has led to higher property values through lower discount rates on future cash flows.With time,these trends go up and down, corresponding to the conditions in financial markets.

If the property risk decreases due to the development of a city,a neighborhood or a property as such,the discount rate used to value the property decreases.

This development occurs independently of the movements in the financial markets and is therefore more permanent.

Akelius invests in properties, neighborhoods and cities with a positive development.The idea is to benefit from lower risk over time and capitalize on higher property values due to lower risk premiums.

11

property value EUR 11,964 million

2017

10,624

2010

3,154

2011

3,630

2012

4,115

2018

12,379

2016

9,171

2015

7,965

2014

6,068

2013

4,932

EUR, million

6,000

5,000

4,000

3,000

2,000

1,000

020162010 2011 20172015201420132012 2018

net asset value EUR 6,533 million

EUR, million

2,830

2009

11,964

2019

2019

average property return 11.5 percent

20181614121086420

2018Jan–Dec

2013Jan–Dec

2014Jan–Dec

income returnvalue growth

average annual property return

2015Jan–Dec

2016Jan–Dec

2017Jan–Dec

annual property return percent

2019Jan–Dec

2009

12

sustainabilityThe charitable organization Akelius Foundation holds 80 percent of Akelius Residential Property AB.

Dividends received by Akelius Foundation are donated to people in need, education or other humanitarian, philanthropic projects.Akelius Foundation is committed to preserving a financially stable and honorable organization without bribery, corruption or conflicts of interest.

Akelius has set targets aimed at developing its business in the right way.In 2019, Akelius began the implementation of a global sustainability management system.This system addresses all aspects of the business, encapsulating everything from environmentally efficient properties to sustainable operations.

Akelius contributes to well-functioning and sustainable communities.Akelius informs tenants and business partners of its Code of conduct.The internal training on sustainability and the Code of conduct is mandatory.

Akelius believes that the building of sustainable relationships with its employees, tenants, and suppliers creates long-term value for everyone.

Akelius publishes a sustainability report annually on akelius.com.

key focus points

main long-term goals

- minimum BBB rating, strive for BBB+ - loan-to-value maximum 40 percent

- reduce energy and water consumption by 15 percent until 2025

- reduce carbon emissions by 50 percent - recycling facilities in all properties

- all employees act in accordance with Akelius' values and the Code of conduct

- the best-educated staff in real estate - no discrimination or harassment

- the quality of properties shall contribute to the safety and health of tenants and society

- suppliers shall act in line with the Akelius Code of conduct

- no workplace accidents

- - - implement a management system based on the standards ISO 14001, ISO 45000, ISO 50001

- consider environmental, social and governance issues in all Board's decisions

financial

environment

social

governance

tool for tenants helping them reduce waste, energy and water consumption

long-term investments for lower environmental impact

better access and control of data

less use of resources

education

internal recruitment

honorable values

business customers technology employees

13

Alte Jakobstraße 75, Mitte, Berlin

126 residential units, 8,379 sqmprevious energy consumption 870 MWh per annumcurrent energy consumption 658 MWh per annumreal savings 19 percent

measurements - heating replacement - facade insulation - basement insulation - roof insulation

14

Skalitzer Straße 79, Kreuzberg, Berlin

99 percent residential propertiessecure incomeIncome from residential property is safe and predictable. Akelius' apartments are in high demand.Akelius can therefore make sure that all apartments are let according to the rental policy.A large volume of rental agreements com-bined with stable tenants limits the risk of material rent losses.

lower vacancyVacancies and rent levels fluctuate less for multifamily dwellings than for other types of properties. Demand for commercial space varies with the business sentiment. Regardless of their work situation,people need somewhere to live.

The population structure changes slowly, which reduces the vacancy risk even in a time of weak economic growth.

minor turnout costsResidential properties only need minor upgrades when a tenant moves out. Commercial properties, on the other hand, require larger investments for each new tenant.

During a recession,commercial properties are often required to provide large tenant incentives.Therefore, there is much less volatility in the residential property business.

stands the test of timeResidential buildings built with high quality are as beautiful and sought after today,as when they were built.

Hence, the need to demolish and replace them is less than for other types of properties.On the whole,tenants desire the same type of floorplans today as they did decades ago.

liquid assetsResidential properties in metropolitan cities are a more liquid asset class thancommercial properties. There are many different buyers of residential properties. From the tenants themselves to small private investors to large international funds.Residential properties can therefore be sold quickly if needed.

15

residential properties


office properties

office properties

nominal GDP per capita



office properties


development of new lease level in Germany

index

Source: Canada Mortgage andHousing Corporation, CBRE, the World Bank

Source: US Census Bureau, the World Bank, JLL

Source: Bullwiengesa AG, the World Bank

1990 1995 2000 2005 2010

100

160

220

2018

120

140

180

200

residential rent vs office rent

rent level development in Canada

index

rent level development in United States

index

1995

1995

2005

2005

50

100120

100

140160180

200220240260

150

2018

25

80

175

225

1990

1990

2000

2000

2010

2010

200

125

75

80

60

2018

16

rent control reduces risk90 percent of Akelius’ apartments are subject to some form of rent control.

Rent control normally occurs in markets with high demand for apartments.Rent control aims to protect tenants from swift rent increases.Controls limit the price that would result from a free market.

stable increase in revenuesInvestors in rent-controlled properties benefit from a stable increase in revenues.

Rents for current tenants in rent-controlled apartments are normally linked to an index that mirrors the inflation.In most jurisdictions where Akelius operates,it is possible to increase the rent to market level when there is a turnover of tenants.

For example,the average rent level in Sweden has not decreased since the current system was implemented in 1975.This makes rent-controlled residential properties easy to manage and turns them into secure cash flow generators.Stable cash flows result in lower volatility in asset values. These properties attract favourable financing throughout the business cycle.

security buffer 36 percentThe rent for rent-controlled apartments in metropolitan cities is below market rent.82 percent of Akelius' apartments have rents that are below market level.

On average, the market rent must drop by 36 percent before it is below Akelius' in-place rent.

real vacancy 1.1 percentApartments with below market rents are the last to become vacant.Rent control reduces the supply of rental apartments, as property developers may prefer other investments.

Another reason for the low supply is that the construction of new apartments struggles to keep up with the population growth in metropolitan cities.This is particularly true for central locations with a lack of space for new dwellings.The combination of growing metropolitan cities and below market rent provides for a high and predictable occupancy rate.

turnover 15 percentTenants are motivated to hold on to their rent-controlled apartment due to the favorable rental terms.

Tenants that moved out in 2019 stayed on average five years.The fear of losing a favorable apartment lease makes it unlikely for tenants to be late with their rental payments.The landlord benefits from a low risk of unpaid rents and a low cost due to turnover of tenants.

diversification reduces regulatory riskNew and adverse rent restrictions are a risk for landlords.Akelius mitigates this risk by diversifying its assets among several stable and developed metropolitan cities in different countries where substantial adverse changes in rent control are rare.Stricter rules in one city may have little effect on the total portfolio or may be offset by less strict rules in another city.

opportunity to sell to tenantsAnother opportunity arises in markets like Germany and Sweden,where apartments can be converted into condominiums that are priced at market rates.This further mitigates the risk of negative effects due to regulation.

17

35

30

25

20

15

10

5

00 2 4 6 8 10

Berlin

Stockholm

Boston

Copenhagen

Hamburg

Paris

London

Malmö

Montreal

New YorkToronto

Washington D.C.

turnover

degree to which the rental market is free, index 1-10 according to Akelius estimations

82 percent of portfolio below market rent

52

9 912 18

>30 percent below

market rent

20-30 percent below

market rent

10-20 percent below

market rent

0-10 percent below

market rent

at market rent

The risk of lower rental income is small, when existing rents are below market rent.This is especially true in a diversified portfolio that includes properties in many growing metropolitan cities.

percent

percent

18

CityRent

systemNumber of

apartmentsContract length*

Rent increase

for existing contract

Without upgrading

With upgrading

Berlin control 14,038open-ended index limited yes***

Hamburg control 3,601open-ended index limited yes

Stockholm control 5,921open-ended

annual negotiation no yes**

Malmö control 4,078open-ended


Paris control 1,550 6 years index yes yes

Copenhagen

control 700open-ended

cost increase no yes**



free market 24

open-ended free yes yes

London


court ruling yes yes

control 9open-ended

annual negotiation yes yes

free market 2,206 1 year free yes yes

New York

control 41open-ended index limited limited

control 1,032open-ended index limited limited

free market 646 1 year index yes yes

Bostoncontrol 36

open-ended index no no

free market 938 1 year free yes yes

Washington control 711open-ended

index +2 percent yes** yes**

free market 527 free free yes yes

Toronto control 3,506open-ended index yes yes

Montreal control 3,860open-ended index yes yes

*) open-ended, tenant can move out two or three months after landlord has been given notice**) to a higher regulated rent, below market rent***) is proposed to be limited by a new regulation

residential rent system per metropolitan cityas at 2019-12-31 Rent increase

at turnover

19

Katarina Bangata 75, Södermalm, Stockholm

real vacancy zero percentaverage 670 applicants per apartment advertisementaverage tenancy 11.9 yearsthe current rent for an upgraded unit is SEK 3,109 per sqm per yearthe estimated market rent for an upgraded unit is SEK 4,000 per sqm per year

Rent increase at turnover

20

The Board of Directors and Chief Executive Officer of Akelius Residential Property AB (publ), company registration number 556156-0383, based in Stockholm, Sweden, hereby present their 2017 report for the Group and Parent Company.

London

100 percent apartments in growing metropolitan citieslow vacancyMetropolitan cities grow faster in terms ofpopulation and wealth.On average, the population in metropolitancities grows by eleven percent every decadecompared with seven percent in the country.

The main reason is that the economy of metropolitan cities is diversified and has greater job and education opportunities.Cities attract people by offering a wide range of culture and entertainment options.

These factors reduce the risk of vacancy.Low vacancy is the key to success in the real estate business.

stable rental incomeThe growing demand for urban housing is driven by the preference of young professionals for dense, diverse and interesting cities.

Akelius only owns properties in attractive metropolitan cities.These cities have a high standard of living and opportunities that attract an increasing number of people.

Berlin, Hamburg, Stockholm, Malmö, Paris, London, New York, Washington, Boston, Toronto, Montreal and Copenhagen combine the cultural, intellectual, political and economic centers of their respective countries.

These well-established metropolitan cities offer a more stable source of rental income.

7

11

citiescountries*

*Sweden, England, France, Denmark, United States, Germany and Canada

21

population growth depending on city size

United Kingdom

index

1995 2005 20102000 2018

Canada

index

metropolitan cities large cities

countrysidesuburbs to metropolitan cities small cities

92

9694

10098

104102

108106

112110

Sweden

index

85

85

130

130

125

125

120

120

115

115

110

110

105

105

100

100

95

95

90

90

1995

1995

2005

2005

2010

2010

2000

2000

2018

2018

Germany

index

1995 2005 20102000 2018

1121101081061041021009896

Source: Statistisches Bundesamt, Statistics Sweden, Office for National Statistics UK, Statistics Canada

22

Alte Schönhauser Straße, Berlin

district Mittea prime location with a walk score of 99view from property Alte Schönhauser Straße 9acquired in 2008

23

attractive locations100 percent of properties are in A and B locationsIn metropolitan cities, you will find buildings from different eras with varying architectures and history.Akelius has concentrated its property portfolio on attractive buildings.The property's attractiveness to prospective tenants is based on a combination of the property's architecture and location.

Akelius only holds properties in the locations known as premium, medium or affordable.These are the properties in A and B locations.

Akelius refrains from investing in C locations, areas where apartments become vacant first.Akelius also avoids the luxury segment with lower rent potential and limited demand which are more closely linked to the business cycle.

Attractive buildings in good and improving areas provide not only a limited down-side risk,but also good rental potential and liquidity.

These properties attract investors and creditors even when the economy is weak,making the investment safer.

share of property fair value in different locationspercent

B to B- locationsB+ to B locationsA+ to B+ locations

Berlin

Stockholm

Malmö

Montreal

New York

Paris

Hamburg

London

Copenhagen

Toronto

Boston

average

Washington D.C.

24

89 average walk score

Akelius is focusing its property portfolio on attractive locations,close to the city’s broad range of shops, schools and cultural events. The reason is that walkability is becoming a more and more important factor for tenants in the process of choosing a home.

A high walk score index creates possibilities for a healthier and more sustainable lifestyle. Demand is increasing for walkable neighborhoods with access to public transport and better commuting options.

health and happinessWalkability encourages people to travel by foot or bicycle rather than taking the car.This results in healthier and happier citizens.Less time commuting means more time for leisure.

environmentTransportation by foot or bicycle has no impact on the climate.

financesSpending less money on transport frees up the household income for other necessary or desired expenses, such as a home in a more central location.

social communityBeing able to move easily facilitates social life and community.

Tenants understand that the best investment in a home is also the most sustainable.This is the reason why people are willing to pay extra to live in Akelius' properties.

89 average walk score walkscore.com

0–24 car-dependent, almost all errands require a car

25–49 car-dependent, most errands require a car

50–69 somewhat walkable, some errands can be accomplished on foot

70–89 very walkable, most errands can be accomplished on foot

90–100 walker’s paradise, daily errands do not require a car

91

69

91 91 899097

889596

86 8187

Berlin

Stoc

kholm

Malmö

Hambu

rg

Lond

on

New Yo

rk

Toro

nto

Montre

al

Bosto

nPa

ris

Washin

gton

Cope

nhag

en

Akeli

us

25

28 rue Hermel, Paris

district in the 18th arrondissementa prime location with a walk score of 100view from the propertyacquired in 2014

26

99114

20182017

EUR 156 per sqm investments and maintenance

105

investments maintenance

89

upgrades for better living

Akelius restores and upgrades existing properties with a long-term perspective.Akelius is continuously improving the quality of the properties to meet the demand of prospective tenants.

Akelius upgrades apartments, common areas, building structure and exterior spaces.Upgrades are always optional.Akelius upgrades because prospective tenants appreciate high quality and because it is sustainable and profitable.

Akelius is very attentive to the design, the material used and the construction process.The first construction team kicked off more than five years ago. Today, two hundred people are working on upgrading the properties.This division includes construction managers, architects, kitchen planners, supply chain managers, energy managers, property developers and procurement specialists.

EUR 180 million on apartment upgradingAn increasing number of metropolitans seek rental accommodation of the same standard as newly-built condominiums.Akelius therefore upgrades its apartments.

Apartments were upgraded for an average of EUR 156 per square meter in 2019.A total of 21,080 apartments have now been upgraded,which corresponds to 48 percent of the total number of apartments.Of the remaining 52 percent, 48 percent of the apartments can be let at the same or a higher rent level without additional upgrading. 4 percent will require an upgrade when the current tenant moves out.

EUR 103 million on upgrading common areasAkelius upgrades common areas,such as stairs, elevators, entrances, gardens, facades and roofs.

EUR 185 million to improve efficiencyAkelius invests in energy efficiency, lighting, air conditioning and heating, in particular.

Akelius also makes sure to use all available space in the most efficient way.Therefore, attics and commercial spaces are converted into apartments whenever possible, sustainable and profitable.

EUR 31 million in maintenanceAkelius takes care of its properties.Maintenance includes both repairs and preventative work aimed at avoiding malfunctions.Maintenance costs amounted to EUR 10 per square meter per year.

147

9269

156

201920162015

10382

27

maintenance

attractive design that lastsWhy does Akelius have its own Architecture Department?

Akelius values the design of its apartments and properties.The Architecture Department is a team of in-house designers and architects striving to ensure consistency and high quality in planning and materials.It is our goal to continuously strengthen the Akelius design language.

What have you been working on lately?

Recently, Akelius unveiled a new design proposal for apartments called Model 2020.The proposal will update our previous design, which in some cases is ten years old.The new model will incorporate new technologies and sustainability standards, improve streamlining, and emphasize the Scandinavian design roots of Akelius.

How do you cooperate with otherdepartments in Akelius?

Design proposals must always be translatedinto actionable information.Together, the Construction and Architecture Departments write books that explain how to achieve the expected design and level of finish.

Training helps to educate local architects, construction managers, and asset managers about the guidelines. The Architecture Department also offers support for local teams who have questions about how to execute particular projects.

What is the next step for the Architecture Department?

In addition to renewing our apartment design,the coming months will also see new guidelines for external areas, facades, common areas, and art.The design of Akelius' offices is an especially important tool to transmit the values of our company.

The Architecture Department is collaborating with local teams on the preparation of new offices in at least five cities.

What is the ultimate goal?

Our goal is for an Akelius property to be recognizable as such, regardless of location.The hallmarks of our properties should be a consistent, timeless appearance and high quality that can last for many years to come.

Stephen Form Head of Architecture

Stephen Form, Head of Architecture

28

2651 16th Street, Columbia Heights, Washington

upgraded kitchensThe Akelius kitchens are fully integrated. Different finishes and appliances make each kitchen well suited to the various requirements of our growing portfolio. Yet the emphasis on simple geometries remains consistent.

Kitchen planners also ensure that apartments with difficult floorplans get the best kitchen possible. This effort, in turn, maximizes the value of each upgraded unit. At Akelius, we do all we can to provide better apartments to tenants.

timeless bathroom designThe bathroom is the second room to be outfitted in all Akelius apartments. An Akelius bathroom has a sleek and clean design.It is key to giving tenants a good impression. Bathrooms include a number of details which emphasize the quality of our construction and design.

Local architects and construction teams are increasingly confident in their execution of this design. Simultaneously, Akelius is improving the design based on feedback, aiming to furnish its tenants with an even better finish.

Rigaer Straße 4, Friedrichshain, Berlin

29

2651 16th Street, Columbia Heights, Washington

730 St Clarens Avenue, Old Toronto, Toronto

inviting common areasAkelius does not only upgrade apartments,but also the common areas.Residents and guests appreciate a beautiful entrance where historical ornaments have been preserved and restored.Tenants and their guests often use common areas.

2651 16th Street in Washington went through a comprehensive renovation.Besides apartment refurbishment,common areas were upgraded.Amenities now include a rooftop club room, rooftop fire pits and barbecue stations, a fitness center, a bike room and storage.

The lobby on 730 St Clares Avenue in Toronto was renovated in 2019.It was completely refurbished from the ceiling tiles to the floor tiles.The lobby received a new layout,floors were renewed and a security desk was added.New furniture and artwork were the finishing touches.Feedback has been good and tenants appreciate the new lobby.

30

facade renovationBuildings with beautiful facades give the city its face. Akelius upgrades facades with attention to detail, in keeping with the soul of the buildings, to give properties a pleasing first and lasting impression.Akelius applies the same design principles to all of the projects.

properly maintained landscapesLandscaping forms the first impression of a tenants' home.The landscape conveys the daily care with which Akelius treats its properties.Urban gardens are popular among tenants.

Akelius implemented tenant gardens in New York and Berlin.By implementing green spaces in properties,Akelius offers environmental, social and educational value to tenants.

379 Washington Ave, Brooklyn, New York

The Wallasey, Kalorama Triangle, Washington

31

68 Arodene Road, Clapham, London

upgrading in London68 Arodene Road is a Victorian era property in an A location in South London.Akelius bought the property as part of a portfolio deal in 2017.The property was vacant and in poor condition.The design and scope of the works on the building started already in 2018.

A full refurbishment was instructed, including

- restoring original external brickwork - structural work - creating three private gardens in the rear

- adding new drainage, electrics and plumbing

- restoring original stained-glass panels - fully refurbishment of units and common areas

The works on the site began in January 2019.The project's largest obstacle was space.The design with compact units took many revisions.The project was completed in June 2019.

The final spend on the property was EUR 1.2 million.Ninety percent of units were let by the end of July 2019.It was a great achievement to secure an income so soon after completion.Thanks to excellent cooperation between different teams,this property renovation is a success story.

one of the created private gardens

32

transactions

twenty years of experience

Akelius has over twenty years of experience in property management. Each regional office has an experienced transactions and valuation team that knows the market. The team prepares realistic assumptions for each location. Akelius carries out purchases and sales in the same proven manner in all countries.

Akelius is active in the property market and has accumulated considerable knowledge from the large number of transactions every year.

In 2019, the focus was to reduce the loan-to-value below 40 percent. Akelius sold properties for EUR 1,616 million and limited acquisitions to EUR 181 million.

During the last five years, Akelius acquired properties in metropolitan cities for a total of EUR 4,700 million and sold properties for EUR 4,225 million, mainly in medium-sized cities. The goal was to enhance the quality and diversification of the portfolio. It increases long-term returns and decreases volatility.

Sweden Germany Canada EnglandUnited States France Denmark Total

Invitation to buy, EUR million 1,570 7,928 162 3,525 10,457 3,500 333 27,475Indicative bids, EUR million 68 38 - 862 71 - 201 1,240- number of apartments 52 195 1 1,577 254 - 122 2,201- number of indicative bids - 12 1 7 4 - 1 25

Completed acquisitions*, EUR million 12 49 35 5 80 - - 181- number of apartments 26 248 203 1 156 - - 634- number of transactions 1 12 4 1 3 - - 21

2019 transactions

cherry picking in metropolitan cities

upgrade to better living

grow cash flow, increase property values

long-term ownership

sales at the right time

*) includes transaction costs

33

transactions

cherry-picked propertiesAkelius considers all offers carefully and prefers to cherry-pick individual properties.

Akelius picks properties according to the ten-year rule. A secure and increasing return over ten years is more important than short-term profits.

634 apartments purchasedProperty purchases amounted to EUR 181 million during 2019 for a total of 51,627 square meters. The average capitalization rate for purchased properties was 4.15 percent.

Number of apartments

Total area in sqm

Capitalization rate,

percent

Acquisition price,

EUR millionBerlin 215 15,142 4.09 42Washington D.C. 156 15,226 4.50 64Montreal 179 12,513 4.38 30Stockholm 26 2,248 1.96 13Boston* - 2,100 4.25 16Hamburg 24 1,539 4.08 5Toronto 24 1,336 4.00 4London** 1 793 4.41 5Other 9 730 4.00 2Total 634 51,627 4.15 181

EUR 181 million in purchased properties

stable countries

growing metropolitan cities with a

soul

attractive locations

potential in rent

meets return requirements

cherry-picked

property

2019 acquisitions

*) commercial property**) including commercial property

34

EUR 1,616 million from sold properties

The sales in recent years follow the ambition to increase the credit rating to at least BBB+,concentrate the properties to growing metropolitan cities and continue to improve the average location within each selected city.

In 2019, Akelius sold all properties in Düsseldorf, Munich, Cologne and the Frankfurt-Rhine metropolitan region. Akelius also sold developed properties in Toronto, Stockholm and Hamburg.Akelius sold 24 condominiums to tenants in Hamburg during 2019.

15 percent above fair valueAkelius sold properties for EUR 1,616 million in 2019.The net sales of properties amounted to EUR 1,598 million, including EUR 18 million in transaction costs.Sales prices in 2019 were 15 percent above fair value at the beginning of the year.

During the last five years, sales amounted to EUR 4,225 million, which was 12 percent above fair value at the beginning of the corresponding year.

realized gain EUR 673 millionThe realized gain is the net sales price less acquisition costs and investments.Realized gain is an indication of quality in acquisitions, property management and divestments.

During the last five years, Akelius had EUR 1,626 million in realized gains.During this period, the average sales price was 67 percent higher than the sum of acquisition costs and investments.

liquid assetsWell-managed residential properties in metropolitan cities are sought after by many types of investors.

The average time from project start to the signing of the sales agreement was six months in 2019.Akelius' properties provide good liquidity.

2019

1,616

300

2018

737

957

615

201720162015

realized gain investments acquisition price

divestmentsEUR million

35

75 percent higher sales prices versus acquisition price plus investments

acquisition- price plus investments

sales price

75%

1,616

926

this year's divestments

CityNumber of

apartments

Total area, square meters

Purchase price +

investments, EUR million

Sales price, EUR million

Fair value beginning of

the year,EUR million

Stockholm 2,142 216,164 249 477 476Frankfurt 1,086 72,613 198 304 256Düsseldorf 955 60,361 124 202 165Hamburg* 769 46,050 93 172 129Toronto 626 42,197 88 119 105Cologne 630 40,035 85 144 125Munich 450 27,236 60 145 106Berlin 24 1,191 14 25 19Other 200 13,634 15 28 27Sales 6,882 519,481 926 1,616 1,408Southern Germany 467 25,525 71 126 101Toronto 37 1,719 4 6 4Berlin 19 1,028 3 2 3Contracted sales 523 28,272 78 134 108

*) including condominium sales

property sales 15 percent above fair value

fair value at the beginning of the year

sales price

15%

1,750

1,516

36

Ralf Spann, Head of Europe, to the right

low risk for the buyer increases the priceHow would you describe the sales in Germany in 2019?

We disposed of two portfolios in Germany for more than EUR one billion. There was huge demand from national and international investors. The market has not seen comparable portfolios in the past in terms of quality.Quality in terms of apartment upgrades, location and input data for due diligence.

To give two examples, we were able to provide all tenants' files in digital form along with detailed information on upgraded apartments, such as floorplans, components and year of upgrade.

What are Akelius' strengths when selling properties?

One of Akelius' strengths is preparation.It is essential to know your portfolio, including all its potential by heart.The market pays extra for potential.

Akelius is transparent.If you can lower the risk for the buyer, they are willing to pay an extra premium.Therefore, it is beneficial to lower the risk for the buyer.

Since Akelius has been very active as a buyer in the past, we know exactly what is important to the buyer.

Akelius is able to give the highest transparency possible to buyers, as we can transfer all the data digitally.

What were the takeaways from the divestments?

Preparation is key. Prepare yourself to introduce the properties to third parties.Realize potential yourself and show the remaining potential to buyers.Keep competition high.

How was the feedback from the buyers?

We received great feedback.The buyer of the second portfolio was a very experienced peer.When we handed over the second portfolio, the buyer mentioned that she had never seen such a handover before.I got a little nervous and asked why.She said it was the best prepared handover she has experienced in years.We were happy to hear that.

Ralf Spann Head of Europe

37

property valuationstrong market knowledgeEach city is unique,requiring individual considerations.The transaction teams are based locally in each city, close to the market.

Akelius conducts internal property valuations quarterly on all properties.In this process, Akelius' staff reviews the price per square meter, gross rent multiplier and capitalization rate per property.Akelius submits a lot of indicative bids in many transactions, which also constitute an additional source of knowledge.See page 32.

The realized prices of the property sales also provides valuable information about capitalization rates and prices per square meter.

valuation at fair valueThe value of the properties is based on internal valuations. The valuation is made according to IFRS 13 level 3.See page 106.

The estimated future cash flows are based on existing rental income and operating and maintenance costs, adjusted for expected changes in rental and vacancy levels. The fair value of the properties is the sum of the discounted cash flows during the calculation period and the residual value.

estimated cash flowFuture rental levels for residential properties are based on actual rents,adjusted for potential rental growth calculated based on investments and inflation.Rent levels for commercial properties are estimated based on the indexed rent levels.Vacancies are reassessed on the basis of the current vacancy situation for each individual property and adjusted to the market vacancy level,

taking into account the property’s individual characteristics.

Operating expenses, property administration and running maintenance are calculated according to current market conditions and adjusted for inflation.Utility costs, realty tax and leasehold fees are based on actual charges. Specific planned future upgrades are included in the projections for each individual property.

capitalization and discount rateThe capitalization rate is assessed using the property transactions completed in the market,invitations to buy and sell, and by looking at comparable properties.

The capitalization rate is determined by adding real interest rates and risk premiums.The risk premium covers market risk and property-related risk based on the building’s location and the prevailing housing supply and demand.

The discount rate used is the capitalization rate plus the inflation assumed.On December 31 2019, the average capitalization rate was 3.67 percent and the discount rate was 5.66 percent.See the sensitivity analysis on page 81.

external valuation 1.3 percent higher than internal valuationAkelius engages external parties to review the whole portfolio every third year.In 2019, primarily CBRE reviewed 247 properties out of 950 properties owned, corresponding to 26 percent of the number of properties and 22 percent of the fair value.The external valuation was EUR 35 million (25) or 1.3 percent (0.3) above Akelius internal valuation.

38

Sweden Germany Canada EnglandUnited States France

Den-mark Average

Capitalization rate, percentOpening 3.02 3.52 4.26 4.14 4.33 4.06 2.99 3.67Purchases -0.01 0.00 0.00 0.00 0.01 0.00 0.00 0.01Sales -0.14 -0.06 -0.01 0.00 0.00 0.00 0.00 -0.02Like-for-like 0.02 -0.02 -0.04 -0.01 0.03 0.00 -0.04 0.00Translation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01Closing 2.89 3.44 4.21 4.13 4.37 4.06 2.95 3.67

Discount rate, percentOpening 5.01 5.52 6.26 6.14 6.32 6.06 4.98 5.66Purchases -0.01 0.00 0.00 0.00 0.01 0.00 0.00 0.01Sales -0.13 -0.06 -0.01 0.00 0.00 0.00 0.00 -0.02Like-for-like 0.02 -0.02 -0.04 -0.01 0.04 0.00 -0.04 0.00Translation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01Closing 4.89 5.44 6.21 6.13 6.37 6.06 4.94 5.66

Copenhagen

capitalization and discount rate,percent

39

property portfolioHundred percent of the portfolio is located in metropolitan cities such as Berlin, Hamburg, Paris, London, Toronto, Montreal, New York, Boston, Washington D.C., Stockholm, Malmö and Copenhagen.

fair value of property EUR 11,964 millionshare in percent

Berlin 25

Stockholm 14

Malmö 8

Montreal 7

New York 8

Paris 3

Hamburg 7

London 8

Copenhagen 3

Toronto 8

Boston 5

4Washington D.C.

40

Kaiserdamm 21, Charlottenburg, Berlin

a prime segment with a walk score of 9116 residential units, 2,205 sqm7 commercial units, 944 sqmacquired in 2014

41

Berlin

2019 2018 2017 2016Property portfolioNumber of apartments 14,038 13,817 12,781 12,313Average apartment size, sqm 63 63 63 63Proportion upgraded apartments, percent 42 37 35 33

Opening balance, EUR million 2,854 2,390 2,017 1,544Change in fair value, EUR million 50 178 207 384Investments, EUR million 95 92 83 69Purchases, EUR million 42 194 93 20Sales, EUR million -3 - -10 -Translation difference, EUR million - - - -Closing balance, EUR million 3,038 2,854 2,390 2,017Share of fair value, percent 25 23 22 22Capitalization rate, percent 3.39 3.39 3.41 3.66

Average rent, EUR/sqm/monthTotal portfolio, Jan 1 8.64 8.06 7.63 7.22Sales 0.00 - - -Like-for-like portfolio, Jan 1 8.64 8.06 7.63 7.22Increase in like-for-like portfolio 0.70 0.63 0.51 0.41- Increase in percent 8.1 7.9 6.7 5.7Like-for-like portfolio, Dec 31 9.34 8.69 8.14 7.63Purchases -0.01 -0.05 -0.08 0.00Total portfolio, Dec 31 9.33 8.64 8.06 7.63New lease level 14.66 16.42 14.83 12.58

Vacancy rate residential, percentReal vacancy rate 0.9 1.5 1.5 1.0Apartments being upgraded 3.2 6.3 5.5 3.3Vacancy rate 4.1 7.8 7.0 4.3

acquired properties like-for-like properties

walk score: 91/100

sold properties or signed sales

42

Steindamm 14, Mitte, Hamburg

a prime segment with a walk score of 998 residential units, 941 sqm1 commercial unit, 965 sqmacquired in 2011

43

Hamburg walk score: 91/100


Opening balance, EUR million 903 828 724 633Change in fair value, EUR million 55 42 91 72Investments, EUR million 24 21 21 22Purchases, EUR million 5 26 28 37Sales, EUR million -171 -15 -35 -40Translation difference, EUR million - - - -Closing balance, EUR million 816 903 828 724Share of fair value, percent 7 7 8 8Capitalization rate, percent 3.67 3.77 3.78 4.17

Average rent, EUR/sqm/monthTotal portfolio, Jan 1 11.25 10.70 10.23 9.89Sales 0.29 - 0.01 0.04Like-for-like portfolio, Jan 1 11.54 10.70 10.24 9.93Increase in like-for-like portfolio 0.45 0.55 0.45 0.41- Increase in percent 3.9 5.2 4.4 4.1Like-for-like portfolio, Dec 31 11.99 11.25 10.69 10.34Purchases -0.01 -0.07 0.01 -0.11Total portfolio, Dec 31 11.98 11.18 10.70 10.23New lease level 15.31 15.77 14.51 13.29


acquired properties like-for-like properties sold properties or signed sales

44

Gloucester Placeprime segment

A+ location,15 one-room and2 two-room apartments,

117 Warwick Road, West Kensington, London

a prime segment with a walk score of 9420 residential units, 3,096 sqftacquired in 2017

45

London

like-for-like properties

walk score: 86/100

2019 2018 2017 2016Property portfolioNumber of apartments 2,242 2,244 2,148 1,224Average apartment size, sqft 422 422 420 479Proportion upgraded apartments, percent 63 54 45 55

Opening balance, EUR million 878 780 473 530Change in fair value, EUR million -20 -7 11 15Investments, EUR million 44 20 13 36Purchases, EUR million 5 93 301 21Sales, EUR million -1 - - -55Translation difference, EUR million 45 -8 -18 -74Closing balance, EUR million 951 878 780 473Share of fair value, percent 8 7 7 5Capitalization rate, percent 4.13 4.14 4.16 4.11

Average rent, GBP/sqft/monthTotal portfolio, Jan 1 2.77 2.75 2.55 2.07Sales 0.00 - - 0.30Like-for-like portfolio, Jan 1 2.77 2.75 2.55 2.37Increase in like-for-like portfolio 0.11 0.01 0.08 0.14- Increase in percent 3.6 0.3 3.3 5.9Like-for-like portfolio, Dec 31 2.88 2.76 2.63 2.51Purchases - 0.01 0.12 0.04Total portfolio, Dec 31 2.88 2.77 2.75 2.55New lease level 3.10 2.84 2.61 2.63


46

33 rue Lamarck, 18th arrondissement, Paris

a prime segment with a walk score of 10020 residential units, 1,157 sqm1 commercial unit, 46 sqmacquired in 2018

47

Paris walk score: 97/100

2019 2018 2017 2016Property portfolioNumber of apartments 1,550 1,546 1,100 941Average apartment size, sqm 31 31 29 29Proportion upgraded apartments, percent 28 18 17 9

Opening balance, EUR million 380 245 193 109Change in fair value, EUR million 1 -8 8 2Investments, EUR million 21 19 13 6Purchases, EUR million - 124 31 76Sales, EUR million - - - -Translation difference, EUR million - - - -Closing balance, EUR million 402 380 245 193Share of fair value, percent 3 3 2 2Capitalization rate, percent 4.06 4.06 4.16 4.20

Average rent, EUR/sqm/monthTotal portfolio, Jan 1 22.79 23.40 20.99 22.52Sales - - - -0.02Like-for-like portfolio, Jan 1 22.79 23.40 20.99 22.50Increase in like-for-like portfolio 2.67 1.97 3.08 0.38- Increase in percent 11.7 8.4 14.9 1.7Like-for-like portfolio, Dec 31 25.46 25.37 24.07 22.88Purchases 0.15 -2.58 -0.67 -1.89Total portfolio, Dec 31 25.61 22.79 23.40 20.99New lease level 40.64 42.65 43.85 44.12



48

Odengatan 104, Norrmalm, Stockholm


49

Stockholm walk score: 69/100


Opening balance, EUR million 2,017 2,149 1,783 1,441Change in fair value, EUR million 26 55 247 375Investments, EUR million 54 41 34 47Purchases, EUR million 13 102 146 57Sales, EUR million -416 -241 - -67Translation difference, EUR million -37 -89 -61 -69Closing balance, EUR million 1,657 2,017 2,149 1,783Share of fair value, percent 14 16 20 19Capitalization rate, percent 2.69 2.84 2.85 3.23

Average rent, SEK/sqm/yearTotal portfolio, Jan 1 1,304 1,268 1,241 1,195Sales 5 1 - 8Like-for-like portfolio, Jan 1 1,309 1,269 1,241 1,203Increase in like-for-like portfolio 46 35 25 30- Increase in percent 3.5 2.7 2.1 2.5Like-for-like portfolio, Dec 31 1,355 1,304 1,266 1,233Purchases 1 - 2 8Total portfolio, Dec 31 1,356 1,304 1,268 1,241New lease level 1,604 1,530 1,489 1,430


acquired properties like-for-like properties sold properties or signed sales

50

Friisgatan 8, Norr, Malmö


51

Malmö


walk score: 91/100


Opening balance, EUR million 949 926 820 672Change in fair value, EUR million 13 42 94 152Investments, EUR million 23 19 17 27Purchases, EUR million - - 21 -Sales, EUR million - - - -Translation difference, EUR million -15 -39 -26 -32Closing balance, EUR million 970 949 926 820Share of fair value, percent 8 8 9 9Capitalization rate, percent 3.23 3.20 3.16 3.45

Average rent, SEK/sqm/yearTotal portfolio, Jan 1 1,350 1,329 1,286 1,244Sales - - - -Like-for-like portfolio, Jan 1 1,350 1,329 1,286 1,244Increase in like-for-like portfolio 48 21 45 42- Increase in percent 3.5 1.6 3.5 3.4Like-for-like portfolio, Dec 31 1,398 1,350 1,331 1,286Purchases - - -2 -Total portfolio, Dec 31 1,398 1,350 1,329 1,286New lease level 1,604 1,582 1,555 1,504


52

Amagerbrogade 100, Amager Vest, Copenhagen

a prime segment with a walk score of 974 residential units, 484 sqm3 commercial units, 389 sqmacquired in 2017

53

Copenhagen


walk score: 95/100

2019 2018 2017 2016Property portfolioNumber of apartments 1,031 1,031 1,031 216Average apartment size, sqm 80 80 80 71Proportion upgraded apartments, percent 38 32 24 -

Opening balance, EUR million 300 277 44 -Change in fair value, EUR million 15 16 22 -Investments, EUR million 8 7 4 -Purchases, EUR million - - 204 44Sales, EUR million - - - -Translation difference, EUR million -1 0 3 0Closing balance, EUR million 322 300 277 44Share of fair value, percent 3 2 3 -Capitalization rate, percent 2.95 2.99 3.09 3.42

Average rent, DKK/sqm/yearTotal portfolio, Jan 1 1,011 936 916 -Sales - - - -Like-for-like portfolio, Jan 1 1,011 936 916 -Increase in like-for-like portfolio 54 75 48 -- Increase in percent 5.4 8.0 5.3 -Like-for-like portfolio, Dec 31 1,065 1,011 964 -Purchases - - -28 916Total portfolio, Dec 31 1,065 1,011 936 916New lease level 1,635 1,610 1,664 1,617


54

150 Fermanagh Ave, Old Toronto, Toronto


55

Toronto walk score: 81/100


Opening balance, EUR million 837 688 516 469Change in fair value, EUR million 94 85 56 26Investments, EUR million 34 19 15 21Purchases, EUR million 4 75 134 -Sales, EUR million -119 - - -Translation difference, EUR million 58 -30 -33 -Closing balance, EUR million 908 837 688 516Share of fair value, percent 8 7 6 6Capitalization rate, percent 4.14 4.18 4.22 4.27

Average rent, CAD/sqft/monthTotal portfolio, Jan 1 2.13 2.07 2.07 1.93Sales 0.11 - - -Like-for-like portfolio, Jan 1 2.24 2.07 2.07 1.93Increase in like-for-like portfolio 0.18 0.09 0.10 0.14- Increase in percent 8.0 4.4 4.5 7.2Like-for-like portfolio, Dec 31 2.42 2.16 2.17 2.07Purchases -0.01 -0.03 -0.10 -Total portfolio, Dec 31 2.41 2.13 2.07 2.07New lease level 3.57 3.12 2.76 2.70


acquired properties like-for-like properties sold properties or asset held for sale

56

1 Rosemount Avenue, Westmount, Montreal


57

Montreal walk score: 87/100


Opening balance, EUR million 650 306 221 100Change in fair value, EUR million 59 34 27 8Investments, EUR million 41 17 15 17Purchases, EUR million 30 315 57 97Sales, EUR million - - - -Translation difference, EUR million 48 -22 -14 -Closing balance, EUR million 828 650 306 221Share of fair value, percent 7 5 3 2Capitalization rate, percent 4.29 4.35 4.46 4.57

Average rent, CAD/sqft/monthTotal portfolio, Jan 1 1.68 1.68 1.57 1.33Sales - - - -Like-for-like portfolio, Jan 1 1.68 1.68 1.57 1.33Increase in like-for-like portfolio 0.07 0.03 0.10 0.12- Increase in percent 3.7 1.7 6.1 8.8Like-for-like portfolio, Dec 31 1.75 1.71 1.67 1.45Purchases -0.02 -0.03 0.01 0.12Total portfolio, Dec 31 1.73 1.68 1.68 1.57New lease level 2.01 1.90 1.88 1.81



58

179 St. Botolph Street, Back Bay, Boston


59

Boston walk score: 90/100

2019 2018 2017 2016Property portfolioNumber of apartments 974 974 920 862Average apartment size, sqft 692 691 697 710Proportion upgraded apartments, percent 73 59 50 42

Opening balance, EUR million 480 394 390 173Change in fair value, EUR million 15 29 13 11Investments, EUR million 21 14 11 3Purchases, EUR million 16 22 30 186Sales, EUR million - - - -Translation difference, EUR million 9 20 -50 17Closing balance, EUR million 541 480 394 390Share of fair value, percent 5 4 4 4Capitalization rate, percent 4.24 4.26 4.34 4.37

Average rent, USD/sqft/monthTotal portfolio, Jan 1 3.59 3.42 3.26 3.29Sales - - - -Like-for-like portfolio, Jan 1 3.59 3.42 3.26 3.29Increase in like-for-like portfolio 0.16 0.20 0.14 0.03- Increase in percent 4.2 5.7 4.4 0.8Like-for-like portfolio, Dec 31 3.75 3.62 3.40 3.32Purchases - -0.03 0.02 -0.06Total portfolio, Dec 31 3.75 3.59 3.42 3.26New lease level 4.03 3.90 3.67 3.41



60

838 West End Avenue, Manhattan, New York


61

New York walk score: 96/100


Opening balance, EUR million 924 658 495 371Change in fair value, EUR million -58 32 12 30Investments, EUR million 59 31 18 22Purchases, EUR million - 166 208 51Sales, EUR million - - - -Translation difference, EUR million 18 37 -73 20Closing balance, EUR million 943 924 658 495Share of fair value, percent 8 7 6 5Capitalization rate, percent 4.31 4.22 4.26 4.32

Average rent, USD/sqft/monthTotal portfolio, Jan 1 2.85 2.77 2.27 2.16Sales - - - -Like-for-like portfolio, Jan 1 2.85 2.77 2.27 2.16Increase in like-for-like portfolio 0.19 0.15 0.10 0.12- Increase in percent 6.5 5.4 5.0 5.6Like-for-like portfolio, Dec 31 3.04 2.91 2.37 2.28Purchases - -0.06 0.40 -0.01Total portfolio, Dec 31 3.04 2.85 2.77 2.27New lease level 5.25 5.19 4.50 4.15



62

The Century2651 16th Street, Columbia Heights, Washington D.C.


63

Washington D.C. walk score: 88/100

2019 2018 2017 2016Property portfolioNumber of apartments 1,238 1,082 673 435Average apartment size, sqft 807 810 775 812Proportion upgraded apartments, percent 60 22 26 17

Opening balance, EUR million 337 147 93 52Change in fair value, EUR million 7 7 3 -Investments, EUR million 31 24 15 5Purchases, EUR million 63 148 51 32Sales, EUR million - - - -Translation difference, EUR million 6 12 -15 4Closing balance, EUR million 444 337 147 93Share of fair value, percent 4 3 1 1Capitalization rate, percent 4.65 4.73 4.83 5.10

Average rent, USD/sqft/monthTotal portfolio, Jan 1 2.30 1.88 1.71 1.52Sales - - - -Like-for-like portfolio, Jan 1 2.30 1.88 1.71 1.52Increase in like-for-like portfolio 0.20 0.08 0.10 0.10- Increase in percent 8.4 4.1 5.4 6.7Like-for-like portfolio, Dec 31 2.50 1.96 1.81 1.62Purchases -0.02 0.34 0.07 0.09Total portfolio, Dec 31 2.48 2.30 1.88 1.71New lease level 2.65 2.25 1.98 1.76



64

business digitalizationIn recent years, Akelius has put a lot of effort into digitalizing the company.All processes will be connected by one click. Data should always be accessible easily and at any time. Akelius currently employs staff of 40 nationalities to digitalize Akelius and build Akelius' applications.

Why does Akelius build its own applications?

The Technology Department develops the applications needed by the departments, allowing them to work in the most optimal way.We are a global company in the residential real estate world and need global tools.Software companies that supply applications for the industry follow their customers.If the customers are not global, the suppliers' applications are not global. As we cannot easily deploy these applications, we need to develop our own tools internally.

Do you think you can do this better than software companies?We know how we want to run our business.We can set the right requirements for it. Of course, hiring the right skills is key. With access to a strong international tech start-up market such as Berlin, we attract highly skilled developers.

We can give them access to our apartments and provide them with financial stability, which start-ups normally cannot.We believe that internal staff take a long-term view of whatever they do and are passionate about building our company for the future.

How many applications have been built?

We have deployed about twenty applications and twenty more are under development.We have applications to cover all processes needed to run a residential property business in seven countries. This includes applications for tenant services, property management, property transaction and upgrades. In the end we want to decommission external software. The users would then have our intranet as the go-to workspace where they can manage their working day.

What about smart buildings?

We are now building the infrastructure for our smart building concept.On top of this, we must create the first applications, such as package lockers, entry systems, smart metering and intercoms.Pilot projects are already in place in several buildings in several countries.

Andreas Wallén, Chief Business Development Officer

Andreas Wallén, Chief Business Development Officer

65

inspection applicationThe application is used for property inspections. Inspections are sent digitally to internal systems or subcontractors.

It replicates the paper-based checklist and allows the use of a smartphone to record inspection data, capture defects and take photographs, whether online or offline. It increases efficiency in the inspection process. No steps are missed and all data is collected.

offer applicationAkelius receives ten thousand offers per year. The offer application collects all data. Data is then used to provide a better understanding of the market.

It improves the transaction process and gives Akelius an advantage in future negotiations with sellers.

inspection application

repairs and maintenance

accounting

apartment search

applying for an apartment

tenant screening

security deposit

move in and out

service center

rent collection

offer application

property valuation

investment application

tender and procurement

supplier order

supply chain

construction follow-up

tenant services

property management

property transactions

property upgrades

66

customer serviceAkelius' business model defines that the company upgrades apartments for a better living.At the same time,it is important to provide excellent customer service to match the better living concept.Tenants that live in sought-after locations with high standards, and hence pay higher rents, expect a high level of service.

local service center in every countryA vital part of service is availability when a problem arises. Quick response times and optimum solutions for the tenants' needs are some of Akelius' top priorities.Last year, Akelius succeeded with the goal to launch a service center in every country and improve accessibility. Each local service center knows the properties and works closely with the property managers.In 2019, the Customer Department finetuned the efforts to provide even better customer service.

digitalized onboarding is the keyOnboarding of new tenants is one of the most important touchpoints.Getting off to a good start with a new customer is critical.

It is important that a service center acts upon issues immediately and does as promised. By developing applications and collecting best practices from different teams throughout the company, the service center is developing a common and more digitalized onboarding process.Today, the agents can answer 60 percent of the questions immediately.

32 seconds queue timeAll service centers work in the same application and they fulfill 50,000 inquiries per month.On average, out of all inquiries, 46 percent are inbound calls, 21 percent are outbound calls and 33 percent are e-mails.Service centers pick up 97 percent of all phone calls,often less than 20 seconds.The queue time is 32 seconds.The long-term trend in 2019 was that the number of inbound calls decreased.

In the future,digitalization will be even more important.The demands and behaviors due to new technologies will affect Akelius future service offerings.In order to sustain continuous improvements to Akelius' customer services, the company constantly adapt to new trends. The departments work together to fulfil future needs.

2019

Average phone call, minutes:seconds 3:15

Queue time, minutes:seconds 0:32

Abandoned call rate, percent 5.4

All inquiries per year 631,271

Average inbound calls per month 24,430

Average outbound calls per month 10,704

Average emails per month 17,541

e-mailsoutbound calls

inbound calls

67

service centers' rating keeps risingService centers in North America encountered several changes and challenges at the beginning of 2019.One of the decisions was to close down the Toronto Service Center. The Montreal Service Center now gives support to both cities.

What was the reason for that?

We implemented a common application in both service centers which made it possible to share calls between cities. This helped us to reduce the call abandon rate and become less dependent on the third party service agency.As a next step, it made sense to merge the two centers.

Agents in Montreal had a learning curve.They had to learn new residential laws and regulations.

How did you make sure that the employees had the right knowledge?

It took many hours of training and active knowledge sharing between the two centers.Agents found auditing calls and providing a constant feedback very helpful.

Canada established a Google review program to improve ratings and encourage tenants to leave a review.

Was there any effect on the rating after the establishment of the program?

Yes, with this program, Akelius Canada Ltd.'s rating saw an increase from 3.2 to 3.5 stars. Akelius Montreal now has 3.6 stars.

How will the work proceed in the service center in the future?

We recently hired a new service center manager for North America with over 19 years of experience in the service industry.

Our main tasks are to elevate our customer service level and lead the teams towards achieving this goal.We will keep training our agents with help from the Customer Department and Business School.

Together with the teams,we will improve the application and add new functions.

Shelly Lee Head of North America

Shelly Lee, Head of North America

e-mails

68

staff and education A working environment needs to support the well-being of the employees. Akelius takes care of the staff while provides education and opportunities.

How does Akelius provide a healthy and creative working environment?

We make sure to offer a quick integration in our company culture, education and a lot of opportunities including job rotation and internal recruitment for higher positions. We also provide many employee benefits such as health insurance.

Can you explain what you mean with quick integration?

All new employees take the Welcome to Akelius course within six months of joining us. Focus is on the company's philosophy and business strategy and on basic real estate economics. A broad understanding of the company and the real estate business leads to better decisions, higher efficiency and higher quality in their work.

Why is internal recruitment and job rotation so important at Akelius?

Akelius wants to maximize the expertise available in the company. Rotating high-quality personnel ensures growth and better coordination between departments. We therefore offer many opportunities for advancement to new positions, regardless of the employee’s starting position.

All vacant positions are first announced internally. Internal recruitment is faster and more effective compared to external recruitment.This also applies to management positions. 100 percent of our department and regional managers have been recruited from previous positions within Akelius.

In 2019, Akelius provided education to nearly all employees, why so much focus on education?Education is key to Akelius. Internal education does not only help us to train the employees to do better work, it helps us retain talent. Throughout the year, all staff receive training specific to their role. Training is delivered through a mix of self-studies, conferences and tests. We prepare all training materials in-house as we have internally specialized expertise and resources.

Akelius also offers an MBA program in residential real estate. The goal is to raise the level of knowledge of our business and communication skills. It helps staff reach their potential and improves inter-departmental cooperation.Education also helps Akelius to manage risks associated with safety and security, sustainability, and corruption.

Kristina Jansson Head of Staff

Kristina Jansson, Head of Staff

69

number of employees

students at Akelius Business Schoolnumber of MBA students

age distributionaverage number of employees

women men

18-35 36-50 51-65

336

375

166

296

55

115

employees with new positions within Akeliusnumber of employees

2012/ 2013

2014/ 2015

2015/ 2016

2016/ 2017

3730

2017/ 2018

59

2016

36

2017

57

2018

123

2015

588

2016

734

2017

876

2018

1,326

27

36

2019

1,456

134

2019 2018/ 2019

59

70

policy 2019

Credit ratingmin BBB,

strive for BBB+ BBB

Loan-to-value ratio, percent below 401 40

Secured loan-to-value ratio, percent below 25 14

Unencumbered asset ratio, percent min 150 187

Interest coverage ratio, times2 min 2.01 2.0

Liquidity, EUR million min 300 841

Cash uses to cash sources min 1.0 1.58

1 from 20202 excluding realized value growth

financing — safety firstAkelius puts safety first when selecting assets and liabilities. Akelius invests in properties with the ability to generate a steadily increasing cash flow. In combination with long-term financing, Akelius increases the stability in the cash flow and equity ratio.Attractive residential properties in steadily growing metropolitan cities support good liquidity and good access to funding.

striving for BBB+ or betterThe credit rating agency Standard & Poor’s has assessed Akelius’ credit rating to BBB. The business risk profile is considered to be in the upper end of strong,based on very low country risk, low industry risk and a strong competitive position. The financial risk is considered to be significant. Akelius is striving for a rating of BBB+ or better. Akelius aims for an excellent business risk and an intermediate to significant financial risk.

financial policyThe financial policy aims to ensure capital supply, reduce financial risks and minimize the impact of financial crises.

The Group shall be able to withstand

- a 25 percent drop in property values

- an interest rate increase of five percentage points

- effects of exchange rate fluctuations

The Board of Directors and the Chief Executive Officer of Akelius Residential Property AB (publ), company registration number 556156-0383, based in Stockholm, Sweden, hereby present their 2019 report for the Group and Parent Company.

Akelius’ credit rating,Standard & Poor’s

BBB-

BBB+

2015 2020target

BBB

2019

71

equity and hybrid capital ratio 50 percent

ordinary equity preferred equity hybrid bond

47

37

5

Dec 312018

Dec 312019

equity and hybrid capital ratio 50 percentThe class D ordinary shares, D-shares, are held by nine thousand shareholders and are listed on Nasdaq First North Growth Market.Akelius issued D-shares for the first time in October 2019. 220 million D-shares were issued for EUR 385 million. The amount of D-shares is limited to thirty percent of the total amount of ordinary shares in the company.Each D-share carries one-tenth vote.Each class A ordinary share, A-share, carries one vote.Akelius A-shares are not listed. The outstanding preference shares were redeemed in December 2019.

subordinated hybrid bond

Akelius considers the hybrid bond as risk capital due to the subordination to other debt, the ultra-long duration and the possibility to defer interest payments.Akelius uses hybrid bonds to lower the financial risk.A low loan-to-value on maturing loans reduces the refinancing risk.The possibility to defer interest payments increases the financial flexibility.

Standard & Poor's gives the hybrid bond fifty percent equity content and therefore considers it to be risk capital.

A-shares D-shares Total sharesShare,

percentVotes,

percent

Akelius Foundation* 2,713,037,769 - 2,713,037,769 80 84Hugo Research Foundation* 319,180,914 - 319,180,914 9 10Grandfather Roger Foundation* 159,590,457 - 159,590,457 5 5

Other owners - 220,000,000 220,000,000 6 1

Total 3,191,809,140 220,000,000 3,411,809,140 100 100

5

50

46

4

hybrid bond

Nominal volume, EUR million 500

Maturity date 2078-10-05

First reset date 2023-10-05

Subordinationsubordinated to

senior debt

Optional coupon deferral yes

Listed yesYield to first call date*, percent 1.99

*) as at 2019-12-31

*) through holding companies

72

dividend policy

Akelius strives for continuous dividends on its shares.This is enabled by high financial resilience based on a prudent financing structure and a diversified portfolio of residential properties with the ability to generate increasing rental income.

Reinvestment of dividends on A-shares through share issues supports organic growth and has been beneficial for the shareholders.

D-shares are entitled to five times the total dividend on the A-shares,

however not more than a capped amount of EUR 0.10 per D-share and year.Dividend on D-shares are paid quarterly.

If for a certain year a dividend of less than the capped amount has been paid on the D-share, the cap for the next year will be increased by an amount corresponding to the difference between the cap and the actual amount paid,until this difference has been paid.

EUR million 2017 2018 2019 e2020*

Share issue, A-shares 1,043 809 - -

Share issue, D-shares - - 385 -

Dividend, A-shares -838 -809 - -192

Dividend, D-shares - - - -22

Net contribution common shares 205 0 385 -214

Dividend, preference shares -38 -37 -32 -

Redemption, preference shares - - -607 -

Net contribution, equity 167 -37 -254 -214

net asset valueThe net asset value is the sum of equity, deferred taxes and value of derivatives.The net asset value per share amounted to EUR 1.91 as at 2019-12-31 compared to EUR 1.96 previous year.

net asset valueEUR million

6,284

5,370

30

2018 2019

884

6,533

5,526

61946

common equity

value of derivativesdeferred tax

*) the mandate to issue D-shares may be utilized

73

low refinancing risk

Akelius’ refinancing risk is mitigated by

- diversified borrowing through 12 bonds and loans from 31 banks

- capital tied up for 5.4 years - 40 percent loan-to-value ratio

- liquidity EUR 841 million - unencumbered assets of EUR 5,932 million - residential properties

- diversification through assets in twelve metropolitan cities in seven countries

- BBB credit rating

A low loan-to-value is a cornerstone to low refinancing risk.

It increases the probability to refinance maturing debt and decreases the probability of default during the term of the loan due to market movements.

In the real estate sector, borrowers need to agree to a maximum leverage to creditors. Akelius may not increase debt if leverage is above 60 percent and may not have leverage above 65 percent.

Akelius' loan-to-value would be 53 percent with a 25 percent decrease in property values.

unsecured loans secured loans

loan-to-value percent

48

2015 2016 2017 2018

12

36

43

19

24

42

24

18

44

25

19

40

26

14

2019 current property values-25 percent

loan-to-value sensitivity percent

53

40

debt maturities years

5.75.0

5.6

2015 2016 2017 2018

5.7 5.4

2019

unsecured debt secured debt

debt maturities EUR million per year

590

2020 2021 2022 2023

259

775

118

642

2024

2,473

>2024

74

low liquidity riskliquidity EUR 841 millionAkelius Financial Policy stipulates that liquidity should be at least EUR 300 million.At the end of 2019, liquidity amounted toEUR 841 million (461),including EUR 27 million in cash and liquid assets and EUR 814 million in unutilized credit facilities.The unutilized credit facilities are provided by eight banks with an average duration of 1.6 years. Credit facilities that are intended to be kept are extended at least one year prior to maturity.

maturity EUR million

2020 72

2021 722

2022 21

cash uses and sourcesThe objective is that cash sources are greater than cash uses. Cash uses include investments, contracted purchases and short-term loans.Cash sources include liquidity, contracted sales and profit before tax and revaluation.

By the end of 2019, the cash sources were 158 percent of the cash uses.

The upgrading of apartments can be stopped with a lead time of up to three months.Akelius estimates the investments to a maximum of EUR 50 million during such period and EUR 15 million per year thereafter.

Cash flow from operating activities based on pro forma included in cash sources amounted to EUR 167 million.

unutilized credit facilities

liquidity

contracted sales

profit before tax and revaluationinvestments

short-term loans

contracted purchases

cash uses cash sources

661

1,047

50

590

21

841

39167

cash uses and cash sources EUR million

2019

cash and liquid assets

unutilized credit facilities

461

liquidity EUR million

841

448

814

755

739

2018

721

707

843

817

201720162015

75

liquid assetsThe type and location of the properties are important.A diversified portfolio of attractive residential properties in metropolitan cities is a liquidity reserve during the entire business cycle.

Akelius estimates that within three to six months, anything from small to large properties can be sold.

Overall, Akelius has sold properties forEUR 4,826 million since 2012,on average 15 percent higher than the fair value at the beginning of each respective year. Properties that are sold within a portfolio usually stipulates a premium towards individual properties. Apartments that are sold are usually valued higher than the entire property.

unencumbered assetsEUR 5,932 millionUnencumbered assets reduce risk and increase financial flexibility.

Unencumbered properties

- are easier to sell and provide higher cash flow when sold

- contribute to higher availability of new unsecured and secured funding

Unencumbered assets amounted to EUR 5,932 million at year-end 2019,1.87 times net senior unsecured loans.

99.6 percent of the unsecured debt is borrowed by the parent company.

unencumbered asset ratio

2016

1.18

1.631.74

2015

1.00

2017 2018

1.87

2019

encumbered and unencumbered propertiesEUR million

Stockholm

Malmö

Berlin

Hamburg

Toronto

Montreal

Washington D.C.

Boston

Paris

New Yo

rk

CopenhagenLondon

unencumberedencumbered

1,657

970

3,038

816 908 828444

943541 402 322

951

2019

1,616

300

2018

737957

615

201720162015

realized gaininvestmentsacquisition price

divestmentsEUR million

76

February 10, 2020 EUR 500 million hybrid bond issue

December 20, 2019SEK 6,545 million preference share redemption

November 5, 2019SEK 1,000 million bond issue

October 8, 2019EUR 385 million D-share issue

October 9, 2018 USD 250 million private placement

October 3, 2018 SEK 1,000 million bond issue

April 5, 2018 EUR 500 million hybrid bond issue

November 7, 2017 EUR 500 million bond issue

September 26, 2017 SEK 1,000 million bond issueSEK 500 million bond issue

September 8, 2017 GBP 300 million bond issue

May 23, 2017 EUR 600 million bond issue

November 17, 2016 EUR 600 million bond issue

September 16, 2015 EUR 300 million bond issue

June 17, 2015 SEK 500 million bond issue

April 24, 2015 SEK 2,000 million preference share issue

March 19, 2015 SEK 1,400 million bond issue

January 15, 2015 SEK 500 million bond issue

September 16, 2014 SEK 3,000 million preference share issue

June 18, 2014 SEK 350 million bond issue

May 26, 2014 SEK 1,020 million preference share issue

access to the capital marketWith residential properties in Europe and North America, Akelius has natural access to several local capital markets.

Financial markets are volatile and terms and conditions between markets vary.Akelius has a competitive advantage as the most attractive source of funding can be chosen at any time.

The majority of the bank funding is raised from conservative mortgage banks.They provide Akelius with long-term funding, which contributes to stability and low cost.

Large commercial banks provide Akelius with flexible mid- to long-term funding, an increasing proportion of which is unsecured.

Akelius has borrowed in the European, British, Swedish and US capital markets.

During 2019 Akelius issued a SEK bond and common shares in EUR.

For further information about activities in the capital market,see note 3 on page 112.

activities in the capital market

bondsbanks

number of funding sources

35

3

36

4

36

9

36

2015 2016 2017 2018

11

31

12

2019

77

safety first What is Akelius' most significant features when it comes to financing?

We put safety first and the desire to improve constantly. High liquidity, low leverage, long-term funding and diversification are examples of putting safety first.

What can we say about the interest rate risk?

We want to lock in our funding cost for many years,so that a sudden interest increase does not affect us.It is worth mentioning that our liquidity covers the annual interest cost seven times and that our loan-to-value is only 40 percent.So our financial resilience is high,should the interest expenses increase.

How do you view the funding situation for Akelius?

It is very strong, partly due to our own strength and partly because we are not dependent on one or a few creditors. We have access to multiple capital markets and seven bank markets. It is a luxury that not all of our peers have.

What is the next improvement?To issue more debt in North America.It makes sense,

as we are increasing our property holdings there.With a natural need for USD and CAD when growing our portfolio,we want to increase our presence in the capital market as well.

Liquid assets and liquid financial markets, please give some examples from Akelius' perspective.

Late in 2018 we started the project increase rating to BBB+,which mainly included sale of properties.

After a successful year of divestments, the conclusion is that our properties are easy to sell.

The possibility to raise money fast in the capital market in good times,we share with many peers.

With better rating the possibilities to raise funding even in times when the market sentiment is weaker.The purpose of the project is to become an even more resilient company in the future.

Safety first,is our slogan when it comes to financing.

Sandra Blomqvist Group Treasurer

Sandra Blomqvist, Group Treasurer

78

limited interest rate risk

Interest rate risk is the risk of being negatively affected by changes in interest rates. Akelius monitors and takes action to limit the interest rate risk.

long-term loans reduce riskAkelius’ ambition is to minimize the cash flow effects of sudden increases in interest rates.The cost of loans is based on the underlying interest rate and the lenders’ credit margins.A low variance in credit margins is ensured through diversified funding and long-term credit agreements.The underlying interest rate level is guaranteed by long-term fixed interest rate loans and derivatives for an average of 4.5 years.

621

2020

interest rate hedge

EUR million

2021

331

2022

603

2023

223

>2024

2,430

649

2024

interest derivatives are used to hedge loansChanges in the value of interest rate derivatives depend on how the market develops in relation to the agreed interest rate and the remaining maturity.

At the end of the year, the negative value of the derivative portfolio amounted to EUR 61 million (46). The fair value of a derivative agreement at maturity is zero. Consequently, the change in value over time has no effect on equity.

change in interest rate derivatives value, EUR million

+1 percentage point market rent 36one year shorter maturity 11

change in interest expenses, EUR million

+1 percentage point market rent 3.1+1 percentage point credit margin 2.5

average interest ratepercent

3.44

Dec 312015

2.62

Dec 312016

2.58

Dec 31 2017

2.64

Dec 31 2018

fixed interest termyears

4.3

2015

4.5

2016

5.3

2017

4.5

2018

4.5

2019

2.25

Dec 31 2019

79

EBITDA EUR 227 million

interest coverage ratio sensitivity

2019

227

2014

202

2015

221

2016

233

2017

231

2018

236

stable and increasing revenues reinforce interest coverageThe ability to cover interest expenses increases over time as Akelius’ properties generate steadily increasing net operating income.

The interest coverage ratio for 2019 was 7.8 (2.8). Excluding realized value growth on the property portfolio,the interest coverage ratio was 2.0 (1.8).

During 2019, the average interest rate on the loans decreased to 2.25 percent (2.64).The amount of loans decreased due to the divestment of properties.The full effect on the interest cost and therefore also on the interest coverage ratio will show in 2020.Since most loans are with a fixed interest rate, a sudden increase in interest rates will only affect a minor part of the loans.

If the interest rates momentarily increase by five percentage points on all loans with floating interest rates, the interest coverage ratio for 2020 would be 1.6.

interest coverage ratio 7.8

adjusted EBITDA

realized value growth

4.5 4.7

3.0

1.7

7.8

2.8

2.01.5 1.6

2.6

1.9

2.8

1.9

20192014 2015 2016 2017 2018

1.8

1.0

5.8

1.4

1.6

2019

2.0

earnings capacity

1.8

interest rate plus 2.5

percentage points*

2.5

interest rate plus 5.0

percentage points*

*) affects only short-term debt

80

EUR millionJan–Dec

2019

Earnings capacity as at Dec 31, 20191

Rental income 496 5252

Operating expenses -210 -195Maintenance -31 -28Net operating income 255 302Central administration -36 -36Other income and expenses 3 3Reversal operational exchange differences -2 -2Reversal depreciation 7 7EBITDA 227 274Other financial income and expenses 1 2Adjusted EBITDA 228 276Net interest expenses -115 -109Interest coverage ratio excluding realized value growth 2.0 2.5Realized value growth 673 -Interest coverage ratio 7.8 -

Net debt as per Dec 31, 2019 4,838 4,838Net debt/EBITDA 21.3 17.7Net debt/EBITDA including realized value growth 5.4 - 1) The earnings capacity is based on the property portfolio as at Dec 31, 2019 and the property portfolio’s gross rent, real vacancy, estimated operating expenses, maintenance costs and central administration during a normal year. 2) Includes EUR 456 million in residential rental value as at Jan 1, 2020, EUR 38 million in rental income for commercial properties and parking, EUR -7 million in real vacancy for apartments and EUR 38 million in other income.

current interest and debt coverage capacity

realized value growthAkelius manages and develops residential properties with the ability to generate stable and growing net operating income. Higher net operating income leads to a positive value development. A part of the business model is to realize value growth, 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.

earnings capacityNet operating income and realized value growth are reinvested in existing and new properties. This leads to a growing net operating income.

It is therefore more appropriate to analyze the business based on the situation on the balance sheet date. The earnings capacity 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 the loans’ interest rate level on the balance sheet date. Average exchange rates for the last year have been used. No tax has been calculated as it relates mainly to deferred tax,which does not affect cash flow. The earnings capacity is not a forecast for the coming twelve months, as it contains no estimate of rents, vacancy, currency exchange rate, future property purchases and sales or interest rate changes.

81

sensitivity analysis for exchange rate fluctuation

CurrencyNet assets in

EUR million

Effect on net assets of a 10 percent

stronger EUR

Effect on net assets of a 10 percent

weaker EUR

Equity ratio,

percentEUR 1,471 - -GBP 373 -34 41SEK 1,044 -95 116CAD 1,193 -108 133USD 1,360 -124 151DKK 85 -8 9Total 5,526 -369 451 45.5+10 percent 5,157 45.0- 10 percent 5,977 46.0

minimized currency risk

The goal is to minimize the effects of exchange rate fluctuations on the equity ratio. A constantly high equity ratio reduces risk for the company’s shareholders, creditors and other stakeholders.

This is achieved by ensuring that the currency position in each currency corresponds to the Group’s equity ratio multiplied by assets in each currency. Today, variations in exchange rates have very little effect on the equity ratio.

sensitivity analysis of changes in the fair value of properties

Should the market’s capitalization rate, rental income, vacancy level and cost level change,the fair value in EUR million would be affected as shown in the table below.

EUR million Sweden Germany Canada England FranceUnited States

Den-mark Total

Capitalization rate+0.1 percentage point -95 -122 -48 -25 -12 -49 -12 -363-0.1 percentage point 102 129 50 26 13 52 13 385

Rental income+1 percent 23 24 7 3 1 8 3 69-1 percent -23 -24 -7 -3 -1 -8 -3 -69

Operating expenses+1 percent -13 -8 -9 -3 -1 -10 -2 -46-1 percent 13 8 9 3 1 10 2 46

82

1650 Harvard Street, Northwest, Washington


83

result for the yearrental income EUR 496 million Like-for-like growth in rental income was EUR 20 million (12), or 5.7 percent (3.2). Rental income totaled EUR 496 million (482), an increase of 2.7 percent compared to the same period of 2018. The increase in rental income was slightly lower than last year. This is mainly due to sales of properties in Sweden, Germany and Canada in 2019.

The real vacancy rate decreased by 0.3 percentage points to 1.1 percent (1.4). The vacancy rate for residential units was 8.6 percent (9.6), of which 88 percent (86) was due to upgrades or planned sales of apartments.

Out of the 44,226 apartments (50,407) owned as at December 31, 2019,33,842 rental contracts (26,118) with a yearly rent of EUR 410 million (253) were renewed or renegotiated during the year. The new yearly residential rent is EUR 418 million (258), an increase of 1.8 percent.

net operating income EUR 255 millionProperty expenses totaled EUR 241 million (223). EUR 31 million (28) was attributable to maintenance, corresponding to EUR 10 (9) per square meter and year.

Like-for-like growth in net operating income was 2.9 percent (5.1).

The net operating income margin was 51.5 percent (53.6). The decrease is due to increased costs related to maintenance and property administration.

Adjusted net operating income margin was 64.1 percent (69.3). 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 3.4 percentThe increase in property value was EUR 423 million (553), 3.4 percent (5.2). The growth in value is mainly due to increased cash flows and property sale over fair value.

net financial items EUR -161 million Interest expenses were EUR -116 million (-129) and the interest incomes was EUR 1 million (1). The decrease in interest expenses is due to a lower average interest rate and reduced average loan volume during 2019 compared to 2018. Interest expenses for the hybrid bond were EUR -19 million (-14).

Financial derivatives affected earnings with EUR -28 million (0).

Other financial income and expenses amounted to EUR 1 million (-3).

profit before tax EUR 464 millionProfit before tax was EUR 464 million (634). The increase in fair value on properties had a positive impact on the profit, but to a lesser extent than previous period.

tax expenses EUR 79 millionTax expenses totaled EUR 79 million (127). EUR 50 million (124) relates to deferred tax, mainly due to unrealized gains on properties.Akelius has no ongoing tax disputes.

84

property portfolio

fair value EUR 11,964 millionThe fair value was EUR 11,964 million (12,379), which is equivalent to EUR 4,031 (3,617) per square meter. The average capitalization rate was 3.67 percent (3.67), which is the same as at the beginning of the year.

property purchases EUR 181 million Property purchases amounted to EUR 181 million (1,286) during the period. The average capitalization rate for purchased properties was 4.15 percent (3.95).

property investments EUR 468 millionInvestments in properties totaled EUR 468 million (349), corresponding to EUR 147 per square meter (105) on an annual basis.

property sales EUR 1,616 million Akelius sold properties for EUR 1,616 million (300) during 2019. EUR 505 million (285) were for properties in Sweden, EUR 991 million (15) were for properties in Germany, EUR 119 million (0) were for properties in Canada and EUR 1 million (0) for properties in England.

Income from the sale of properties totaled EUR 194 million (4) and transaction costs amounted to EUR 18 million (5).

Well-kept residential properties are attractive investments for many types of investors and provide a liquidity reserve during the entire business cycle.

cash flow

Operating cash flow before changes in working capital was EUR 69 million (97).Cash flow from investments was EUR 991 million (-1,241). Cash required for the acquisition of properties is secured before the acquisition agreements are signed. Profitable but non-mandatory upgrades can, if needed, be stopped within a three-month period.

Cash flow from financing activities was EUR -1,034 million (1,129). EUR -40 million (-37) were paid in dividends to the holders of preference shares.

85

other financial informationParent companyThe Parent company is Akelius Residential Property AB (publ). The Parent company’smain activity is to own shares in operational subsidiaries and provide financing to the subsidaries.

Net financial items amounted to EUR -6 million (142).2019 includes Group contributions received of EUR 14 million (-147) and tax of EUR 4 million (-1).Profit for the year amounted to EUR 75 million (-1).

The Annual General Meeting in 2018 resolved to amend the Articles of Association regarding the accounting currency from Swedish kronor to euro as of 2019.

In accordance with the Board’s resolution at the extraordinary general meeting in 2019, Akelius has issued 220,000,000 D-shares at EUR 1.75 per share.

The Board of Directors of Akelius Residential Property AB (publ) resolved to redeem all 18,835,606 preference shares. The last day of trading in the preference shares was December 13, 2019. The redemption price was SEK 347.5 per preference share, of which SEK 2.5 per share was accrued dividend. In total, the redemption amounted to SEK 6,545 million.

sustainability reportAkelius publishes a sustainability report. The report is available on Akelius' website, https://website-backend.prod.k8s.azure.akelius.com/site/binaries/content/assets/pdf/investor/sustainability/sustainabili-ty-en-2019.pdf

proposed appropriation of profitsThe Annual General Meeting has at its disposal

Retained earnings -46,513,991Share premium reserve 1,101,872,180Profit for the year 74,955,386Total 1,130,313,575

The Board proposes the amount to be allocated as follows

EUR 0.06 per A-share 191,508,548EUR 0.10 per D-share 22,000,000Carried forward 916,805,027Total 1,130,313,575

The Board has decided to propose to the Annual General Meeting to authorize the Board to issue a maximum of 110,000,000 class D ordinary shares. Furthermore, the Board propose to elect Kerstin Engström as new bord member.

A dividend of EUR 0.025 per D-share will be recorded on the following dates: May 5, 2020, August 5, 2020, November 5, 2020, and February 5, 2021. The proposal is based on all ordinary shares outstanding as at December 31, 2019.

Board statement on the proposed dividendThe Group and the Parent Company have good liquidity, and following the proposed dividend, the equity-to-assets ratios of the Group and the Parent Company will be 44 percent and 16 percent, respectively.

According to the Board’s assessment, which takes into account liquidity needs, the proposed business plan, investment plans and the ability to raise long-term credit, there are no indications that the Group or the Parent Company will have insufficient equity following the proposed dividend.

The Board hereby finds the proposed dividend justifiable with regard to Chapter 17, Article 3 of the Swedish Companies Act.

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corporate governance reportAkelius Residential Property AB (publ)Akelius Residential Property AB (publ) is a Swedish public limited company with its registered office in Stockholm. The Company’s object is to own and manage properties and pursue other closely related activities.

In 2014, the company’s preference shares were listed for trading on Nasdaq First North Growth Market. All preference shares were redeemed in December 2019. D-shares was issued in October 2019. D-shares are listed for trading on Nasdaq First North Growth Market. Corporate governance is primarily regulated by the Swedish Companies Act, the Swedish Annual Accounts Act and Nasdaq’s rules for issuers on First North Growth Market which can be found on the exchange’s website, www.nasdaqomxnordic.com, and by other applicable laws and regulations.The general mandate from the shareholders is to provide a high and stable long-term return. Ensuring this requires good corporate governance with a clear separation of responsibilities between the shareholders, the Board and Management.

articles of associationThe Articles of Association contain no specific provisions regarding the appointment and dismissal of Board members.

the General MeetingThe General Meeting is the company’s highest decision-making body, through which the shareholders influence the company’s affairs.

At the Annual General Meeting, the Board and the auditors are appointed, the income statement and balance sheet are adopted, resolutions are passed regarding the allocation of the company’s earnings, the discharge of liability, and changes to the Articles of Association. The annual general meeting also resolves on any new share issues.

Extraordinary Meetings are held when requested by the shareholders or the Board.

2019 Annual General MeetingThe Annual General Meeting of the company was held on April 11, 2019. At the Annual General Meeting, almost 100 (100) percent of the votes were represented. The meeting passed resolutions on the matters to be addressed by the Meeting.

ownership structureNumber of

A-sharesNumber of D-shares*

Total number of shares

Share, percent

Votes, percent

Akelius Apartments Ltd 2,713,037,769 - 2,713,037,769 79.51 84.42Xange Holding Ltd 319,180,914 - 319,180,914 9.36 9.93

Giannis Beta Ltd 159,590,457 - 159,590,457 4.68 4.97

Other owners - 220,000,000 220,000,000 6.45 0.68Total 3,191,809,140 220,000,000 3,411,809,140 100 100Share, percent 93.55 6.45

*) each D-share confers the right to one-tenth of a vote

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2019 Annual General Meeting, continuedIt was hence decided- to adopt the profit or loss statement and the balance sheet, as well as the consolidated profit or loss statement and the consolidated balance sheet- in accordance with the proposal by the board to pay a dividend of SEK 20 per preference share- that the Board of Directors shall consist of four regular members and no deputy board members

- to reelect all board members i.e. Pål Ahlsén, Igor Rogulj, Anders Lindskog and Lars Åhrman- that the board should appoint one of the Board members to the Chairman- to pay fees in the amount of SEK 500,000 to the Chairman of the Board and of SEK 300,000 to each regular Board member. No fees will be paid to board members employed in the Group

- to change the currency and the limit for the companys share capital, and to amend the wording of Article 4 of the Articles of Association to the following; “The share capital shall be at least 100,000,000 euro and a maximum of 400,000,000 euro” - in accordance with the Boards' proposal, authorize the Board to, one or more occasions until the next annual general meeting 2020, without deviation from the shareholders precedence, resolve on new issue of a maximum 500,000,000 ordinary shares of class A.

Extraordinary General Meeting 2019An Extraordinary General Meeting in the company was held on 2 September 2019.Almost 100 percent of the votes were represented were represented at the general meeting.

It was hence decided- to change the articles of association with the purpose to introduce a new class of shares, class D ordinary shares, and to enable the proposed authorization for the board of directors to issue class D ordinary shares - to authorize the board of directors in accordance with its proposition to, on one or more occasions before the annual general meeting 2020, with or without deviation from the shareholders’ preferential rights, resolve on new issues of in total not more than 330,000,000 class D ordinary shares against payment in cash, with provisions of payment in kind or set-off of claims or other conditions

The Board of Directors decided on October 4, 2019 on the basis of the authorization from the Extraordinary General Meeting to issue new shares of a total of 220,000,000 ordinary shares of class D.

external auditAccording to the Articles of Association, the Annual General Meeting shall appoint at least one but not more than two auditors. The appointed auditors shall audit the annual accounts, the consolidated accounts, the subsidiaries’ annual accounts and the administration by the Board of Directors and the CEO.

The Annual General Meeting held on April 11, 2019, decided to reelect Ernst & Young AB as the company’s auditor. Fees are to be paid according to the approved account.

risk management regarding financial reportingThe risk assessment is continuously updated to include changes that significantly affect the internal control of financial reporting.The most significant risks identified are inaccuracies in the accounting and valuation of the property portfolio, deferred tax,interest-bearing liabilities, taxes and risk of fraud of assets.

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internal controlThe Board has overall responsibility for the internal control of the corporate financial reporting.

The purpose of internal control of financial reporting is to ensure that the reporting is reliable and that the financial statements are prepared in accordance with GAAP and otherwise comply with applicable laws and regulations.

To ensure internal control, the Board has established a number of policies on the basis of an overall governance structure. Based on those policies, the CEO is responsible for designing internal processes and establishing internal policies and instructions.

Examples of internal controls- the planning, governance and control of operations to follow the organizational structure- business plans are prepared for the Group as a whole and for each operational department reporting directly to the CEO- key operative indicators are reported every month and provide important information about the business

- follow-up of the accounting process, including financial statements and consolidated accounts and its compliance with applicable regulations, accounting and valuation principles- approval from the Board is required for important decisions including the acquisition and sale of new major properties - clear delegation of authority- the “open door policy” is a process whereby employees can report on behavior or actions that are possible violations of Group policies

Akelius has information and communication channels designed to ensure that information easily reaches all employees and managers.

Regular internal control reviews are performed internally as well as externally for the major subsidiaries. Additionally, the annual audits are prepared and conducted in close collaboration with the external auditors.

The Board has assessed that the control activities are sufficient.

internal auditIn 2015, an internal audit function was established, that reports to the main owner.

The Board annually propose a risk-based plan that the internal audit team should implement to ensure that they focus on the right areas.

audit committeeThe Board has appointed an Audit Committee consisting of two members of the Board.

The Audit Committee’s areas of responsibility are established by the Board.

The Audit Committee shall prepare the Boards’ work on quality assurance of the financial reporting process, including significant accounting issues.

The committee oversees the internal control process, property valuations, tax management, risk and corporate governance issues.

The Audit Committee frequently meets the auditor to obtain information about the audit’s focus, scope and results.This is done by the committee taking part of the auditor’s written report and the auditor attending some of the committee meetings.The committee reviews the result of the audit work and prepares for the appointment of the auditor.

In 2019, the audit committee consisted of Anders Lindskog and Lars Åhrman. During the year, the committee held three meetings. The company’s auditor participated in all of the meetings. The CFO, who is the secretary of the committee, participated in all meetings.

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CEO and Group managementThe Board has delegated the day-to-day responsibilities for the company’s management to the CEO. The Board appoints the CEO and adopts instructions that govern the division of work and responsibilities between the Board and the CEO. The CEO is responsible for operating activities and financial reporting. The CEO shall regularly report to the Board on the company’s development in relation to the established policies.

Group management In 2019, the operations are organized into three regions.Copenhagen, Stockholm and Malmö are part of the region Scandinavia. London, Paris, Berlin, Hamburg and other cities in Germany are part of the region Europe.New York, Washington D.C., Boston, Montreal and Toronto are included in the region North America.

The organization is supported by central Group functions. The Group Management, including the CEO, consisted of 13 (13) people at year-end.

regional managersThe regional managers are responsible for the profitability in their respective region. This means responsibility for property management, lettings, service, upgrades, projects, purchases and sales, property valuations, accounting in subsidiaries and tax and VAT compliance. The regions had 1,137 (1,009) employees at year-end.

central Group administration

Central administrative functions include finance, IT, business development, staff, and education. In addition, Group functions have been created in the key areas of construction, procurement, logistics, property management and customer services. In total, central Group functions employed 319 (317) people at year-end.

CEOPål Ahlsén

CFOLeiv Synnes

Head of StaffKristina Jansson

Vice President Lars Lindfors

Head of Procurement Patrik Mårdvall

Chief Business Development Officer

Andreas Wallén

Head of ConstructionNiall McLoughlin

Head of ScandinaviaPeter Ullmark

Head of EuropeRalf Spann

Head of North AmericaShelly Lee

Head of Educationvacant

Senior Advisor Fredrik Lindgren

Head of ArchitectureStephen Form

Head of TechnologyMartin Rek

Head of Property and Business

Jordan Milewicz

Head of CustomerUlf Robertsson

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the BoardThe Board is appointed by the Annual General Meeting for the period up to the end of the next Annual General Meeting. According to the Articles of Association, the Board should consists of a minimum of three and a maximum of seven members, with a maximum of two deputies.

The Board’s overall task is to be responsible for the organization and administration of operations and for the financial reporting. The Board is also responsible for establishing systems for governance, internal control and risk management. The Board’s work and responsibilities, and its separation from the work and responsibilities of the CEO, are regulated by the Rules of Procedure and the instructions for the CEO that are established at the statutory meeting held directly after the Annual General Meeting.

work of the Board 2019Since the 2019 Annual General Meeting, the Board has consisted of four members. The Board has held 21 meetings in 2019. The Board meetings dealt with matters of considerable importance to the company, such as the establishment of policy documents, strategic decisions, purchases and sales of properties and financing.Furthermore, the Board was informed about the prevailing business climate in the property and credit markets.

A statutory Board meeting was held after the Annual General Meeting, at which resolutions were passed regarding signatories, the Board’s Rules of procedure, the CEO’s instructions and a plan for scheduled Board meetings during the year.

remuneration to Board membersThe Annual General Meeting resolves on the remuneration to Board members. In 2019, it was decided that an annual fee of SEK 300,000 would be paid to Board members who are not employed by thecompany and SEK 500,000 to the Chairman of the Board.

The Chairman of the Board and other Board members who are not employed by the company have no pension or severance agreements.

committeesCommittees make decisions on the development of the company, including- defining and applying Akelius’ concepts within each area- finding concrete solutions- measuring the quality of the activities performed- following up on previous decisions, especially time frames

The committees usually meet once a month.

business committeeThe Business Committee consists of CEO Pål Ahlsén, Anders Lindskog and Igor Rogulj. The committee has the mandate to decide on investments of up to EUR 100 million.

finance committeeThe Finance Committee consists of the CEO Pål Ahlsén, the CFO Leiv Synnes and the Board member Lars Åhrman. The Finance Committee is authorized to enter into loans and other financial commitments up to the equivalent of EUR 100 million.

audit committeeSee page 88.

other committees include - construction, procurement, logistics - customer - IT

- property - staff - education

otherThe company has chosen not to establish a remuneration committee. Instead, the Board handles these matters. The CEO does not participate when the Board handles remuneration issues.

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Lars ÅhrmanBoard member since 2017 born 1951

business and economics, Gothenburg University independent of major shareholders independent of the company and the company management

Anders LindskogChairman, board member since 2017 born 1961

civil Engineering, KTH Royal Institute of Technology, Stockholm dependent of major shareholders independent of the company and the company management

Igor RoguljBoard member since 2010 born 1965

architect, University of Zagreb dependent of major shareholders dependent of company and the company management

Pål AhlsénBoard member and CEO since 2010 born 1972

executive office, employed in Akeliusmaster of science in economics, Stockholm University independent of major shareholders dependent of the company and the company management

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key figuresDec 31

2019Dec 31

2018Dec 31

2017Dec 31

2016Dec 31

2015

EquityEquity, EUR million 5,526 5,370 4,901 4,279 3,357Equity to assets ratio, percent 45 43 46 46 41Equity and hybrid capital ratio, percent 50 47 46 46 41Return on equity, percent 8 9 19 37 29Net asset value, EUR million 6,533 6,284 5,840 5,127 4,027

Net operating incomeRental income, EUR million 496 482 469 472 464Growth in rental income, percent 2.7 2.8 -0.6 1.8 17.1Like-for-like growth in rental income, percent 5.7 3.2 5.1 4.1 4.3Net operating income, EUR million 255 259 251 244 232Growth in net operating income, percent -1.3 3.3 4.4 6.3 15.6Like-for-like growth in net operating income, percent 2.9 5.1 10.7 8.0 4.0Net operating income margin, percent 51.5 53.6 53.4 51.7 50.1Adjusted net operating income margin, percent1 64.1 69.3 68.0 66.2 -

FinancingLoan-to-value, secured loans, percent 14 19 18 24 36Loan-to-value, percent 40 44 44 43 48Unencumbered asset ratio 1.87 1.74 1.63 1.18 1.00Interest coverage ratio 7.8 2.8 4.7 4.5 3.0Interest coverage ratio excluding realized value growth 2.0 1.8 1.9 1.9 1.6Average interest rate, percent 2.25 2.64 2.58 2.62 3.44Fixed interest term, year 4.5 4.5 5.3 4.5 4.3Capital tied up, year 5.4 5.7 5.6 5.0 5.7

PropertiesNumber of apartments 44,226 50,407 47,177 46,516 51,231Rentable area, thousand sqm 2,968 3,422 3,228 3,236 3,587Real vacancy rate residential, percent 1.1 1.4 0.9 1.1 1.3Vacancy rate residential, percent 8.6 9.6 6.6 5.0 4.3Turnover of tenants, percent 15 15 14 14 15Fair value, EUR per sqm 4,031 3,617 3,292 2,834 2,220Capitalization rate, percent 3.67 3.67 3.60 3.82 4.33Change in capitalization rate, percentage points 0.00 0.02 -0.22 -0.49 -0.36

Opening balance fair value, EUR million 12,379 10,624 9,171 7,965 6,068Change in fair value, EUR million 423 553 886 1,343 857Investments, EUR million 468 349 288 316 237Purchases, EUR million 181 1,286 1,297 643 1,293Sales, EUR million -1,616 -300 -737 -957 -615Exchange difference, EUR million 129 -133 -281 -139 125Closing balance fair value, EUR million 11,964 12,379 10,624 9,171 7,965

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Dec 31 2019

Dec 31 2018

Dec 31 2017

Dec 31 2016

Dec 31 2015

Properties SwedenAverage residential rent, SEK/sqm/year 1,372 1,316 1,287 1,246 1,184Growth in average residential rent2, percent 3.5 2.3 2.4 2.6 2.6Growth in rental income3, percent 4.0 2.4 3.8 1.9 3.0Growth in net operating income3, percent 6.6 5.0 10.8 2.4 1.8Fair value, EUR per sqm 3,279 2,976 2,821 2,421 1,877Capitalization rate, percent 2.89 3.02 3.00 3.43 4.30Number of apartments 10,000 12,298 13,808 17,381 23,520Vacancy rate, residential, percent 1.6 2.1 1.1 1.2 1.5Real vacancy rate, residential, percent 0.0 0.0 0.0 0.1 0.1

Opening balance fair value, EUR million 3,068 3,205 3,382 3,472 3,108Change in fair value, EUR million 47 116 376 712 313Investments, EUR million 78 65 65 104 92Purchases, EUR million 12 103 167 55 114Sales, EUR million -505 -285 -692 -805 -290Exchange difference, EUR million -52 -136 -93 -156 135Closing balance fair value, EUR million 2,648 3,068 3,205 3,382 3,472

Properties GermanyAverage residential rent, EUR/sqm/month 9.81 9.48 8.98 8.56 8.13Growth in average residential rent2, percent 6.9 6.3 5.7 5.0 5.1Growth in rental income3, percent 8.6 4.3 2.6 6.3 6.0Growth in net operating income3, percent 4.7 3.3 2.8 10.3 3.9Fair value, EUR per sqm 3,353 3,201 2,941 2,583 2,078Capitalization rate, percent 3.44 3.52 3.54 3.84 4.35Number of apartments 18,106 21,727 20,463 19,932 20,307Vacancy rate, residential, percent 4.4 7.4 6.5 4.8 4.9Real vacancy rate, residential, percent 1.0 1.4 1.3 1.1 2.0

Opening balance fair value, EUR million 4,525 3,924 3,363 2,725 2,225Change in fair value, EUR million 263 249 360 542 399Investments, EUR million 131 132 119 103 80Purchases, EUR million 49 235 127 90 188Sales, EUR million -991 -15 -45 -97 -167Exchange difference, EUR million - - - - -Closing balance fair value, EUR million 3,977 4,525 3,924 3,363 2,725

94

Dec 312019

Dec 31 2018

Dec 31 2017

Dec 31 2016

Dec 31 2015

Properties CanadaAverage residential rent, CAD/sqft/month 2.03 1.90 1.92 1.89 1.79Growth in average residential rent2, percent 6.5 3.5 4.4 6.7 3.6Growth in rental income3, percent 2.0 3.1 9.5 7.0 4.1Growth in net operating income3, percent -6.8 0.7 28.2 29.0 25.1Fair value, EUR per sqm 3,895 3,147 2,968 2,743 2,345Capitalization rate, percent 4.21 4.26 4.29 4.36 4.37Number of apartments 7,366 7,779 5,500 4,513 3,999Vacancy rate, residential, percent 14.9 13.0 3.9 7.1 11.1Real vacancy rate, residential, percent 1.4 2.3 0.6 3.4 3.6

Opening balance fair value, EUR million 1,487 994 737 532 361Change in fair value, EUR million 153 119 83 33 65Investments, EUR million 75 36 30 37 21Purchases, EUR million 35 390 189 90 137Sales, EUR million -119 - - - -12Exchange difference, EUR million 105 -52 -45 45 -40Closing balance fair value, EUR million 1,736 1,487 994 737 532

Properties United StatesAverage residential rent, USD/sqft/month 3.02 2.88 2.77 2.51 2.26Growth in average residential rent2, percent 5.9 6.5 4.1 4.2 -Growth in rental income3, percent 4.2 1.4 10.7 - -Growth in net operating income3, percent -4.2 11.3 63.6 - -Fair value, EUR per sqm 6,812 6,623 5,758 5,929 5,339Capitalization rate, percent 4.37 4.33 4.36 4.42 4.47Number of apartments 3,931 3,782 3,127 2,309 1,534Vacancy rate, residential, percent 19.9 21.4 17.3 10.6 9.8Real vacancy rate, residential, percent 3.1 2.9 2.2 1.7 2.8

Opening balance fair value, EUR million 1,741 1,199 979 597 -Change in fair value, EUR million -36 68 27 41 3Investments, EUR million 111 70 44 30 2Purchases, EUR million 80 341 278 267 582Sales, EUR million - - - - -Exchange difference, EUR million 32 63 -129 44 10Closing balance fair value, EUR million 1,928 1,741 1,199 979 597

95

Dec 312019

Dec 31 2018

Dec 31 2017

Dec 31 2016

Dec 31 2015

Properties EnglandAverage residential rent, GBP/sqft/month 2.88 2.77 2.75 2.55 2.07Growth in average residential rent2, percent 3.6 0.3 3.3 5.9 11.5Growth in rental income3, percent 4.4 4.2 16.2 7.5 15.1Growth in net operating income3, percent 2.2 5.1 15.4 15.4 23.0Fair value, EUR per sqm 9,106 8,772 8,689 8,274 7,407Capitalization rate, percent 4.13 4.14 4.16 4.11 4.22Number of apartments 2,242 2,244 2,148 1,224 1,404Vacancy rate, residential, percent 16.0 19.1 14.7 12.4 8.0Real vacancy rate, residential, percent 1.7 3.0 2.0 3.7 2.8

Opening balance fair value, EUR million 878 780 473 530 357Change in fair value, EUR million -20 -7 11 15 78Investments, EUR million 44 20 13 36 40Purchases, EUR million 5 93 301 21 181Sales, EUR million -1 - - -55 -146Exchange difference, EUR million 45 -8 -18 -74 20Closing balance fair value, EUR million 951 878 780 473 530

Properties FranceAverage residential rent, EUR/sqm/month 25.61 22.79 23.40 20.99 22.50Growth in average residential rent2, percent 11.7 8.4 14.9 1.7 15.7Growth in rental income3, percent 16.2 6.3 -1.4 11.9 -Growth in net operating income3, percent -67.5 254.1 -7.1 241.1 -Fair value, EUR per sqm 7,559 7,143 6,883 6,411 6,857Capitalization rate, percent 4.06 4.06 4.16 4.20 4.21Number of apartments 1,550 1,546 1,100 941 467Vacancy rate, residential, percent 38.6 43.8 46.4 46.2 35.3Real vacancy rate, residential, percent 2.3 1.8 1.3 3.7 1.3

Opening balance fair value, EUR million 380 245 193 109 17Change in fair value, EUR million 1 -8 8 2 -1Investments, EUR million 21 19 13 6 2Purchases, EUR million - 124 31 76 91Sales, EUR million - - - - -Exchange difference, EUR million - - - - -Closing balance fair value, EUR million 402 380 245 193 109

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Dec 31 2019

Dec 31 2018

Dec 31 2017

Dec 31 2016

Dec 31 2015

Properties DenmarkAverage residential rent, DKK /sqm/year 1,065 1,011 936 916 -Growth in average residential rent2, percent 5.4 8.0 5.3 - -Growth in rental income3, percent 11.8 0.9 - - -Growth in net operating income3, percent 28.9 12.1 - - -Fair value, EUR per sqm 3,649 3,385 3,129 2,836 -Capitalization rate, percent 2.95 2.99 3.09 3.42 -Number of apartments 1,031 1,031 1,031 216 -Vacancy rate, residential, percent 1.0 4.2 6.1 1.9 -Real vacancy rate, residential, percent 0.0 0.1 0.6 - -

Opening balance fair value, EUR million 300 277 44 - -Change in fair value, EUR million 15 16 22 - -Investments, EUR million 8 7 4 - -Purchases, EUR million - - 204 44 -Sales, EUR million - - - - -Exchange difference, EUR million -1 - 3 - -Closing balance fair value, EUR million 322 300 277 44 -

1) Adjustment for revenue from operating expenses invoiced to the tenants in Canada, the United States, Sweden, Germany and France amounted to EUR 97 million (109).

2) Like-for-like growth from period start to period end.

3) Like-for-like growth for the period compared to the same period in the previous year.

See definitions on pages 166-168.

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Neuer Pferdemarkt 17, Altona, Hamburg


financial statements

98

EUR million note 2019 2018Rental income 6 496 482Operating expenses 8 -210 -195Maintenance -31 -28Net operating income 255 259Central administrative expenses 10, 11 -36 -29Other income and expenses 9 3 3Realized revaluation of investment properties* 12 176 -1Unrealized revaluation of investment properties 12 227 547Operating profit 625 779Interest income 13 1 1Interest expenses 13 -116 -129Interest expenses hybrid bond 13 -19 -14Other financial income and expenses 13 1 -3Change in fair value of derivatives 13, 20 -28 -Profit before tax 464 634Tax 14 -79 -127Profit for the year 385 507

Other comprehensive incomeItems that may be reclassified to profit or lossCurrency translation difference 124 35Change in the hedging of currency risk -98 -113Tax attributable to the change in hedging of currency risk 4 23Revaluation reserve** 1 2Tax attributable to the change of the revaluation reserve - -Total other comprehensive income 31 -53Comprehensive income for the year 416 454

Profit attributable to - owners of the Parent Company 379 501 - non-controlling interests 6 6

Total comprehensive income attributable to - owners of the Parent Company 410 448 - non-controlling interests 6 6Earnings per share before and after dilution, EUR 25 0.11 0.15

*) EUR 18 million (5) refers to transaction costs **) the revaluation reserve consists of owner-occupied properties

consolidated statement of comprehensive income


99

EUR million noteDec 31

2019Dec 31

2018AssetsIntangible assets 15 19 11Investment properties 5, 12 11,760 11,891Owner-occupied properties 5, 12 73 39Lease agreement, right-of-use assets 7 16 -Tangible fixed assets 15 6 6Derivatives 16, 20, 21 1 2Deferred tax assets 14 2 1Financial assets 16, 17 4 4Total non-current assets 11,881 11,954Trade and other receivables 16, 17 116 86Derivatives 16, 20, 21 2 14Cash and cash equivalents 16, 18, 21 19 13Assets held for sale* 5, 27 131 449Total current assets 268 562Total assets 12,149 12,516Equity and liabilitiesShare capital 199 211Share premium 1,102 1,460Currency translation reserve -155 -209Retained earnings 4,295 3,830Total equity attributable to the Parent Company’s shareholders 5,441 5,292Non-controlling interests 85 78Total equity 25 5,526 5,370Loans 3, 16, 19, 21 4,267 5,180Hybrid bond 16, 19, 21 499 499Lease liability 7 13 -Derivatives 16, 20, 21 60 46Deferred tax liability 14 935 885Provisions 23 2 1Other liabilities 16, 22 17 16Total non-current liabilities 5,793 6,627Loans 3, 16, 19, 21 590 339Lease liability 7 3 -Derivatives 16, 20, 21 4 -Provisions 23 - 1Trade and other payables 16, 22 220 121Liabilities held for sale 27 13 58Total current liabilities 830 519Total equity and liabilities 12,149 12,516Interest-bearing liabilities-unsecured loans 3,199 3,173-secured loans 1,658 2,346Subtotal 4,857 5,519- hybrid bond 499 499Total 5,356 6,018*) EUR 131 million (449) is attributable to investment properties

consolidated statement of financial position


100

consolidated statement of changes in equity

Attributable to the Parent Company’s shareholders

EUR millionShare

capital

Share pre-

mium

Currency trans-lation

reserveRetained earnings Total

Non- controlling

interestsTotal

equity

Balance at January 1, 2018 204 1,504 -154 3,327 4,881 20 4,901Profit for the year - - - 501 501 6 507Other comprehensive income - - -55 2 -53 - -53Total other comprehensive income - - -55 503 448 6 454Acquired minority - - - - - 52 52Dividend - -846 - - -846 - -846Share issue 7 802 - - 809 - 809Balance at December 31, 2018 211 1,460 -209 3,830 5,292 78 5,370EUR conversion* -24 -145 24 145 - - -Adjusted opening balance,January 1 2019 187 1,315 -185 3,975 5,292 78 5,370Profit for the year - - - 379 379 6 385Other comprehensive income - - 30 1 31 - 31Total other comprehensive income - - 30 380 410 6 416Redemption of shares -1 -585 - -21 -607 - -607Share issue 13 372 - -7 378 - 378Dividend - - - -32 -32 - -32Acquired minority - - - - - 1 1Balance at December 31, 2019 199 1,102 -155 4,295 5,441 85 5,526 *) the Parent Company, Akelius Residential Property AB, changed functional currency from Swedish kronor to euro as of 2019


101

consolidated statement of cash flows

EUR million note 2019 2018Net operating income 255 259Central administrative expenses -36 -29Other income and expenses 1 3Reversal of depreciation 15 4 3Interest paid -132 -136Income tax paid -23 -3Cash flows before changes in working capital 69 97Change in current assets -44 1Change in current liabilities 24 11Cash flows from operating activities 49 109

Investments in intangible assets 15 -10 -7Investments in investment properties 5, 12 -468 -349Acquisition of investment properties 5, 12 -181 -1,186Acquisition of net assets 5 40Proceeds from sale of investment properties 5, 12 1,616 300Proceeds from sale of net assets -49 -31Purchase and sale of other fixed assets 78 -8Cash flows from investing activities 991 -1,241

Share issue 378 809Redemption of preference shares -607 -Acquisition of minority shares 1 5Loans raised 19, 21 1,686 3,650Repayment of loans 19, 21 -2,406 -2,438Purchase and sale of derivatives 20, 21 -44 -51Amortization IFRS 16 leasing -2 -Dividends ordinary shares - -809Dividends preference shares -40 -37Cash flows from investing activities -1,034 1,129

Cash flows for the year 6 -3Cash and cash equivalents at the beginning of year 13 16Translation differences in cash and cash equivalents - -Cash and cash equivalents at end of year 19 13


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accounting principles and notesnote 1 general informationThe consolidated financial statements include the Parent Company, Akelius Residential Property AB, corporate identity number 556156-0383, and its subsidiaries (together referred to as the “Group” or “Akelius”). Akelius Residential Property AB is based in Stockholm, Sweden.

The annual accounts were approved by the Board and the CEO on March 12, 2020 and submitted to the annual general meeting for adoption on April 3, 2020.

note 2 summary of significant accounting policiesThe most important accounting policies applied in the preparation of these consolidated financial statements are presented below. These policies have been applied consistently for all years presented here, unless otherwise stated.

The figures in this annual 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.

basis for preparing the accountsThe consolidated financial statements of Akelius have been prepared in accordance with the Swedish Annual Accounts Act, International Financial Reporting Standards (IFRS) and interpretations by the IFRS Interpretation Committee (IFRIC) as adopted by the EU, as well as the Swedish Financial Reporting Board’s recommendation RFR 1: Supplementary Accounting Rules for Groups.

The financial statements are prepared using the historical cost convention, except for the revaluation of investment properties, owner-occupied properties and derivatives, which are valued at fair value. Deferred tax is valued at nominal value. Assets held for sale are valued at fair value less selling expenses.

Unless otherwise stated, all amounts are reported in EUR million and refer to the period from January 1 to December 31 for income statement items and December 31 for balance sheet items.

The preparation of reports in compliance with IFRS and generally accepted accounting policies requires that management make assessments and estimates. Furthermore, management must make assumptions in the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses.

Estimates and assumptions are based on historical experience and other factors that under the current circumstances seem reasonable. The results of these estimates and assumptions are then used to assess the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Estimates and assumptions are reviewed regularly. Changes in estimates are recognized in the period when the change is made if the change affects only that period or in the period of the revision and future periods if the change affects both current and future periods.

Areas that involve a high degree of judgment, are complex or are areas where assumptions and estimates are of considerable significance to the consolidated accounts are presented in note 4.

Standards, amendments and interpretations that came into effect during the year have not had any significant impact on the Group.

classificationNon-current assets and non-current liabilities comprise amounts that are expected to be recovered or paid more than twelve months after the balance sheet date.

Current assets and current liabilities comprise amounts that are expected to be recovered or paid within twelve months after the balance sheet date.


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note 2 summary of significant accounting policies, continued

basis of consolidation Subsidiaries are companies in which the Parent Company, either directly or indirectly, has a controlling influence. There is control when the Company has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to use its power to affect its returns. Subsidiaries are included in the consolidated financial statements from the day on which the controlling influence is transferred to the Group and are excluded from the consolidated financial statements from the date on which the controlling influence ceases.

Intercompany receivables and liabilities, revenues and expenses, and unrealized gains or losses arising on transactions between Group companies are eliminated in their entirety when preparing the consolidated financial statements.

Acquisitions can be classified as either business combinations or asset acquisitions. A case-by-case assessment is made for each individual acquisition. In cases where the primary purpose is the acquisition of a company’s property and where the acquired company lacks management organization and administration, or when this is of secondary importance to the acquisition, the acquisition is classified as an asset acquisition. Other corporate acquisitions that typically contain an independent business are classified as business combinations.

For asset acquisitions, the acquisition cost is distributed between the acquired net assets in the purchase price allocation.

Business combinations are accounted for using the purchase method, whereby subsidiaries’ equity, defined as the difference in fair values between assets and liabilities, is eliminated in full. Acquisition related costs are expensed as incurred. When the consideration transferred exceeds the net amount of acquired assets and liabilities, the difference is accounted for as goodwill.

The share of equity attributable to owners of non-controlling interests are reported as a specific item in equity separate from the share of equity attributable to the owners of the Parent Company. In addition, separate information is provided about the non-controlling interests’ share of the profit for the period.

segment reportingAn operating segment is a segment of the Group which engages in operations from which it may earn revenues and incur expenses and for which independent financial information is available. Operating segments are reported in accordance with the internal reporting to the CEO, who is the chief operating decision maker. The chief operating decision maker is the function responsible for allocating resources and assessing the performance of the operating segments.

Metropolises are considered as operating segments within Akelius. Metropolises are divided into regions, which are led by a regional manager. This region-based classification of operating segments refers to both economic and geographical factors. These regions tend to have similar economic attributes and follow the internal organization within Akelius, with its regional managers.

During 2019, Akelius was organized in three regions. Stockholm, Malmö and Copenhagen are included in the Scandinavian region. Berlin, Hamburg, London and Paris are included in the European region. New York, Washington D.C., Boston, Montreal and Toronto are included in the North American region.

The accounting policies used for segment reporting are consistent with those applied by the Group.


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translation of foreign currencies, functional and reporting currencies Items included in the financial statements for the various units in the Group are valued in the currency used in the economic environment in which each company primarily operates, that is, the functional currency. The functional currency for the Parent Company is euro, which is also the reporting currency for the Parent Company and the Group.

transactions and balance sheet items Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the transaction date or the date when the items were revalued. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate prevailing on the balance sheet date.

Exchange rate differences are recognized in the income statement, except when the loans are used for hedge accounting of net investments in foreign operations or for certain receivables or liabilities of foreign operations where gains and losses are recognized in other comprehensive income.

In order for receivables from or liabilities to a foreign operation to be revalued in other comprehensive income, it is required that the settlement is neither planned nor likely to occur in the foreseeable future and consequently forms part of the net investment in the foreign operation.

Non-monetary assets and liabilities carried at historical cost are translated at the exchange rate prevailing on the transaction date.

Non-monetary assets and liabilities carried at fair value are translated to the functional currency at the exchange rate prevailing on the date of valuation at fair value.

translation of foreign Group companies Assets and liabilities of foreign operations are translated to euro at the exchange rate prevailing on the balance sheet date. Revenues and expenses are translated to euro at an average rate that approximates the exchange rates at the transaction dates. Translation differences arising on translation of foreign operations are recognized in other comprehensive income as a currency translation reserve.

income and expenses rental incomeRevenue is recognized in the income statement when the significant risks and rewards have been transferred to the counterparty. Revenue is recognized at the fair value of the consideration received or expected to be received. Where applicable, services provided such as electricity and heat are included. The Group’s rental income is classified as operating leases under IFRS 16.

Rental income is recognized in the period to which it relates, using the straight-line approach. Any discounts given due to limitations in the right of use, for example discounts given during redevelopment, are recognized in the period to which they relate.

Upon early termination of leases, revenues are accrued over the original term of the contract, unless a new contract is signed, in which case the redemption amount is recognized as income in its entirety.

Year-end rate Average rateExchange rate used 2019-12-31 2018-12-31 2019 2018GBP – England 1.1754 1.1179 1.1393 1.1303SEK – Sweden 0.0957 0.0973 0.0944 0.0975CAD – Canada 0.6850 0.6408 0.6732 0.6539USD – United States 0.8902 0.8734 0.8933 0.8467DKK – Denmark 0.1338 0.1339 0.1339 0.1342


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service revenuesIn some cases, operating costs are not included in the rent. Heating, electricity, water and property tax are invoiced to tenants based on invoices from the suppliers. Service revenue is reported in the income statement when each service has been performed.

other servicesOther services, such as use of laundry room and other premises, are recognized when the service is performed.

revenue from investment property salesSee the section, investment properties on the next page.

operating expensesOperating expenses are recognized in profit or loss when services are used or expenses are incurred.

central administration expensesCentral administration expenses include expenses for Group Management and Group functions.

financial income and expensesFinancial income comprises interest income on cash and cash equivalents, receivables and financial investments as well as interest subsidies.

Financial expenses comprise interest expenses and other expenses for borrowing. Expenses for the issuing of mortgage deeds are reported when incurred as a financial expense, with the exception of the issuing of mortgage deeds in conjunction with an acquisition, in which case the expense is capitalized as a value-enhancing investment.

Interest income and interest expenses are calculated using the effective interest rate method. Financial income is recognized in the income statement in the period to which they relate. Financial expenses are recognized in the income statement in the period to which they relate, except borrowing cost related to extensive renovations, which are capitalized during the renovation period.

leasesAkelius as the lesseeA contract includes a lease, if a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. A right-of-use asset and a lease liability is recognized upon lease commencement. The right-of-use asset is measured at cost less accumulated depreciation and impairment. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the lease agreements interest rate. Amounts expected to be payable by the lessee under residual value guarantees are also included in the measurement of the lease liability. The lease liability is subsequently remeasured to reflect changes in the lease term, the assessment of a purchase option, amounts expected to be payable under residual value guarantees, and change in future lease payments. Lease payments for short-term and low value leases are expensed on a straight-line basis over the lease term. The Group’s leases refer to offices, site leaseholds, cars, and office equipment.

Akelius as the lessorLeases where essentially all the risks and benefits associated with ownership fall to the lessor are classified as operating leases. As a consequence, all of the Group’s rental agreements are classified as operating leases. Properties that are let under operating leases are included in the item investment properties. The policy for reporting rental income is presented in the section on rental income above.


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investment propertiesInvestment properties are held in order to generate rental income and value growth. Investment properties comprise freehold land and freehold buildings. Investment property is initially recognized at acquisition value, including directly attributable transaction costs. After initial recognition, investment properties are recognized at fair value.

Fair value is based in the first instance on prices in an active market and is the amount for which an asset could be transferred between initiated parties that are independent of one another and have an interest in conducting the transaction.

In order to establish the fair value of investment property for the annual accounts, all properties are valued internally. See the section property valuation on page 37.

Changes in the fair value of investment property are reported as changes in value in the income statement. Additional expenses are capitalized if they entail economic benefits for the company, that is, they increase valuation and can be reliably calculated. Borrowing costs related to extensive renovations are capitalized during the renovation period. Repair and maintenance expenses are continually expensed in the periods in which they arise.

Investment properties are valued according to Level 3 in the fair value hierarchy according to IFRS 13. Realized and unrealized changes in value are recognized in the income statement. Gains or losses from the sale or disposal of investment properties are the difference between the selling price and the carrying amount based on the fair value in the latest annual financial statements less transaction costs incurred in connection with the sale of investment properties.

Transaction costs incurred in connection with the sale of investment properties are recognized as realized revaluation of investment properties in the consolidated income statement.

Income from property sales is normally reported on the hand-over date unless the risks and rewards have been transferred to the buyer on an earlier occasion. Control of the asset may have been transferred at an earlier time than the date of access and if this is the case, income from a property sale is recognized on that earlier date. In assessing the timing of income recognition, consideration is given to agreements between the parties regarding the risks and benefits and involvement in the ongoing management.

owner-occupied propertiesOwner-occupied properties belong to their own asset category and are measured at fair value in accordance with the IAS 16 revaluation method. According to the revaluation model, the asset is recognized at fair value on the reclassification date. Revaluated assets are depreciated over the useful life of the asset, 40 years. If a revaluation gives rise to an increase in value, it shall be credited to other comprehensive income and accrued in equity. If it refers to the reversal of a revaluation loss of the same asset previously reported as an expense, it should be recognized in the income statement. A decrease in value arising from revaluation should be recognized as an expense insofar as it exceeds an amount previously credited to the surplus related to the same asset.

intangible and tangible assetsIntangible and tangible assets are recognized at acquisition value less amortization/depreciation and impairment. The acquisition value includes expenses that are directly attributable to the acquisition of the asset. They are depreciated on a straight-line basis over each asset’s estimated useful life. The estimated useful life is five years for intangible assets. For tangible assets it varies between 3 and 10 years.


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impairmentTangible assets and intangible assets are written down to the lower amount of the book value and the recoverable amount. The recoverable amount is the greater of the assets’ fair value less selling expenses and its value in use. Value in use is defined as the present value of the estimated future cash flows generated by the asset.Investment properties are recognized in the consolidated financial statements at fair value through profit or loss. Investment properties are therefore not covered by the above principle for impairment.

financial instrumentsA financial instrument is defined as any contract that gives rise to a financial asset in one company and a financial liability or equity instrument in the counterparty.

Financial instruments recognized as assets in the balance sheet include cash and cash equivalents, accounts receivable, derivates and other receivables. Financial instruments recognized as liabilities include trade payables, loans, derivatives, and other payables.

Financial instruments are initially recognized at fair value plus transaction costs, except for financial assets or liabilities recognized at fair value through profit or loss. Financial assets or liabilities recognized at fair value through profit or loss are initially recognized excluding transaction costs.

Subsequent changes in fair value of financial assets or liabilities at fair value through profit or loss like derivatives are recognized in profit or loss. Other liabilities are subsequently measured at amortized cost using the effective interest method. Subsequent measurement for loans and receivables is at amortized cost.

A financial asset or financial liability is recognized in the consolidated statement of financial position when the company becomes party to the instrument’s contractual terms. Accounts receivables are recognized when invoiced.

Rent receivables are recognized as receivables in the period when performance has been delivered and payments corresponding to the value of the receivable have not yet been received.Liabilities are recognized when the counterparty has performed and there is a contractual obligation to pay, even if an invoice has not been received. Accounts payables are recognized when received.

A financial asset is removed from the consolidated statement of financial position when the contractual rights to receive cash flows are realized, expire or the company loses control of them. The same applies to part of a financial asset. A financial liability is removed when the contractual obligation is fulfilled or otherwise eliminated. The same applies to part of a financial liability.

Financial instruments are recognized at amortized cost or fair value depending on the initial categorization under IFRS 9. Akelius recognizes its financial contracts at gross value for financial instruments such as currency futures contracts and interest rate swaps.

financial assets and liabilities at fair value through profit or lossThis category includes financial assets and financial liabilities held for trading. Derivatives are classifies as held for trading if they are not identified as hedges. Financial instruments in this category are measured at fair value with changes in value recognized in the consolidated income statement.

financial assets and liabilities at fair value through other comprehensive incomeFinancial instruments in this category are measured at fair value with changes in value recognized in other comprehensive income. Akelius does not have any financial instruments in this category.


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financial assets measured at amortized costFinancial instruments that are not measured at fair value through profit or loss are measured at amortized cost using the effective interest rate method. Trade receivables including rent receivables and other current receivables that normally have a maturity of less than twelve months are reported at fair value. Impairment losses are recognized for doubtful receivables and are recorded in operating expenses.

The model to calculate the provision of bad debt is based on historical credit loss experiences and forward-looking factors. The model includes operational simplifications for lease and trade receivables.

The Group considers a financial asset in default when contractual payments are 90 days past due. The Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

financial liabilities measured at amortized costTrade payables are obligations to pay for goods or services acquired from the suppliers in the ordinary course of business.

Trade and other payables with short maturities are reported at nominal value without discounting. Interest-bearing liabilities are initially recognized at fair value, net of transaction costs. Interest-bearing liabilities are subsequently stated at amortized cost and any difference between proceeds, net of transaction costs, and the redemption value, is recognized in the income statement over the period of the borrowings using the effective interest rate method.

Long-term liabilities have an expected maturity of more than one year, while current liabilities have a maturity of less than one year.

derivativesinterest rate derivativesAkelius uses derivatives in accordance with the Group’s financial policy to achieve the desired average fixed-interest term and interest risks. Interest rate derivatives are reported in the balance sheet as of the contract date and are valued continuously at fair value through profit or loss.

The fair value of derivatives not listed in an active market is determined according to valuation techniques, based on a series of methods and assumptions relating to market conditions as of the reporting date. The Group does not apply hedge accounting for interest rate derivatives.

currency derivativesThe Group uses currency derivatives to achieve the desired currency exposure. Currency derivatives are reported in the balance sheet as of the contract date and are valued continuously at fair value through profit or loss. The fair value of derivatives not listed in an active market is determined according to valuation techniques, based on a series of methods and assumptions relating to market conditions as of the reporting date.

As at April 1, 2016 the Group defined currency derivatives as hedge instruments for net investments in foreign operations and reports changes in fair value on currency derivatives in other comprehensive income.

The Group continues to apply hedge accounting in accordance to IAS 39, which is currently allowed under IFRS 9.

cash and cash equivalentsCash and cash equivalents include cash, bank balances and other short-term investments with maturities of less than three months from the acquisition date that have only an insignificant risk of changes in value. Cash and cash equivalents are carried at nominal value.


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employee benefitsEmployee benefits in the form of wages, paid holidays, paid sick leave, etc. and pensions are recognized as earned. The company’s obligation is limited to the contributions the company has undertaken to pay.

pensionPensions and other post-employment benefits are classified as defined contribution plans or defined benefit plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions to an insurance company. A defined benefit plan is a pension plan that is not a defined contribution plan, but instead is based on the size of the pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary.

Defined contribution plans are plans where the company’s obligation is limited to the contributions the company has undertaken to pay. In such cases, the size of the employee’s pension depends on the contributions the Group pays to an insurance company and the capital return on those contributions. Consequently, it is the employee who bears the actuarial risk (that benefits will be less than expected) and investment risk (that the invested assets will be insufficient to meet expected benefits).

The Group’s obligations for contributions todefined contribution plans are recognizedas an expense for the Group as they areincurred.

The Group’s pension commitments consist of defined contribution pensions with no obligations from the company other than the payment of annual premiums during the period of employment. This means that after termination of employment, the employees are entitled to decide during which time the previously defined contributions and returns thereon are taken out as a pension.

There are exceptions for those persons covered by defined benefit ITP plans with continuous payments to Alecta in ITP 2. For white-collar workers in Sweden, the ITP 2 plan’s defined benefit pension commitments for retirement and family pensions are secured through insurance in Alecta. According to a statement from the Swedish Financial Reporting Board, UFR 10 classification of ITP plans financed through insurance with Alecta, is a multi-employer defined benefit plan.

For the fiscal year, the Group has not had access to the information required to account for its proportionate share of the plan obligation, assets and costs, which means that it has not been possible to account for the plan as a defined benefit plan. The pension plan ITP 2, which is secured through insurance in Alecta, is therefore reported as a defined contribution plan. At the end of the financial year, Alecta had a financial leverage ratio of 148 percent (142).

The obligations for pensions for white-collar employees in Germany, Canada, England, USA, France and Denmark is accounted for as a defined contribution plan.

termination benefitsA provision is recognized in connection with the termination of employees only if the Group is obligated to terminate the employment before the normal retirement time or when remuneration is paid as an offer to encourage voluntary redundancy. Provision and expense are recognized for the period over which the company does not receive any service in return.


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assets and liabilities held for saleAssets are classified as held for sale if their value, within one year, will be recovered through a sale and not through continued use in the operations. On the reclassification date, assets and liabilities are measured at the lower of fair value less transaction costs and the carrying amount. Following reclassification, the assets are no longer depreciated/amortized.

The fair value measurement is based on thepurchase price stated in the signed purchase agreement between the buyers and sellers at the time when agreements were signed. The fair value is adjusted for additional investments and transaction costs. The purchase price is considered to belongto Level 1 of the fair value hierarchy in IFRS13. When no signed agreement exists, the fair value is determined in the same manner as for investment properties.

current and deferred taxThe tax expense for the year includes current and deferred tax. The current tax expense is calculated based on the tax regulations that have been adopted, or for all intents and purposes have been enacted or substantively enacted, as of the balance sheet date in the countries in which the Parent Company and its subsidiaries operate and generate taxable income. Current tax also includes adjustments of current tax attributable to prior periods.

Deferred tax is recognized according to the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not recognized on temporary differences arising as a result of a transaction that constitutes initial recognition of an asset or liability that is not a business combination and that at the time of the transaction affects neither reported profit nor taxable profit.

Deferred income tax is determined using the tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax is recognized at nominal value.

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.

Offsetting of deferred tax claims and deferred tax liabilities takes place when there is a legal right to implement such offsetting. Tax is recognized in the income statement, except when the tax relates to items recognized in other comprehensive income or directly in equity. In such cases, the tax is also recognized in other comprehensive income or equity.

provisions and contingent liabilitiesProvisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be estimated reliably. The amount expected to be required to settle the obligation is recognized as provision.

Provisions are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date, in which case it is classified as a non-current liability.

Contingent liability refers to a possible obligation that arises from past events and whose existence is confirmed only by one or more uncertain future events or when there is a commitment that is not reported as a liability or provision because it is not probable that an outflow of resources will be required.


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cash flow analysisThe consolidated cash flow statement is prepared according to the indirect method. This means that operating profit is adjusted for transactions that do not entail incoming or outgoing payments during the year and for any income and expenses attributable to cash flow from investing or financing activities.

new and amended IFRS standards adopted by the EU applied as at January 1, 2019New and amended standards that entered into force as at January 1, 2019 have had limited impact on the Group’s 2019 financial statements.

IFRS 16 “Leases”IFRS 16 Leases has been implemented from January 1, 2019. The Group applied the cumulative catch-up approach in the transition. Comparative figures are not restated. The standard has an impact on the lessee as no distinction is made between operational and finance leases. The lessor’s accounts has essentially remained unchanged.

IFRS 16 has affected the Group’s accounts of the leases where the company is a lessee. Akelius’ rental agreements for offices and site leaseholds are reported in the balance sheet, increasing the balance sheet total. The cost for site leasehold fees are reported as a financial expense, unlike the previous policy, according to which the fees were reported as operating costs. The rent cost is allocated between impairments and financial expenses.

The introduction of the standard have had a limited impact on the financial reports as the Group acts mainly as a lessor.

At the balance sheet date on December 31, 2018 the value of Akelius’s leases was EUR 12 million, divided into site leasehold agreements of EUR 6 million and rental agreements of EUR 6 million. Operating lease commitments as at December 31, 2018 were EUR 5 million. The increase to EUR 12 million is due to discounting with the incremental borrowing rate of EUR 3 million, land lease of EUR 6 million, and the exclusion of leases of low value assets of EUR -2 million.


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refinancing and liquidity risksRefinancing risk is the risk of not having access to adequate financing on acceptable terms at any point in time. Liquidity risk is the risk of not having access to funds due to poor market liquidity. The refinancing risk is reduced by raising funds from 31 (36) different lenders, by having a low loan-to-value ratio of 40 percent (44), and by having unutilized credit agreements of EUR 814 million (448).

Liquidity is secured by entering into long-term credit facility agreements with several banks. See additional information about refinancing and liquidity risk on page 70 to 79.

The following table shows the maturity structure of Akelius’ financial assets and liabilities. The figures are undiscounted cash flows based on contract dates and include both interest and nominal amounts.

Maturity, December 31, 2019 0–1 year 1–5 years > 5 yearsInterest-bearing liabilities 665 2,128 2,504Derivatives 13 34 35Trade payables 15 - -Other payables 85 - -Total 778 2,162 2,539

Maturity, December 31, 2018 0–1 year 1–5 years > 5 yearsInterest-bearing liabilities 424 2,582 3,022Derivatives - 30 39Trade payables 24 - -Other payables 70 - -Total 518 2,612 3,061

interest rate riskInterest rate risk is the risk that Akelius is negatively affected by changes in interest rates. In order to further reduce the risk, or fluctuations in cash flow, interest rates are fixed in the long term. At year-end, 50 percent (50) of property loans had a fixed interest period of more than five years and 13 percent (17) had a fixed interest period of less than one year.Given the low share of loans with variable interest rates, a change in market interest rates would have a limited impact on earnings.

In order to obtain the desired fixed interest rate, interest rate derivatives are used. The interest rate derivatives’ value development depends on how the market develops in relation to the contractual interest rate, currency and remaining maturity.

At the end of the year, the net value of the interest rate derivative portfolio was EUR -61 million (-46). A one percentage point change in market rates would impact the valuation of the interest rate derivatives portfolio by EUR 36 million (44).

note 3 financing and financial risk management

Akelius is through its operations exposed to various operational risks, including rental income, fair value of properties and financial

risks, including funding and liquidity risks, interest rate risk, currency risk and credit risk.


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December 31, 2019 December 31, 2018

Maturity, yearsLoans,

EUR millionAverage interest

rate, percentLoans,

EUR millionAverage interest

rate, percent0–1 621 3.75 955 5.131–2 331 2.22 493 3.322–3 603 1.74 343 0.923–4 223 1.22 652 1.694–5 649 1.65 290 1.125–6 1,265 2.15 608 1.516–7 444 2.52 1,267 2.127–8 381 1.58 358 2.178–9 193 2.91 223 2.919–10 46 0.64 191 3.47> 10 101 4.48 139 4.27Total 4,857 2.25 5,519 2.64

currency riskAkelius operates in various geographic markets and undertakes transactions denominated in different currencies and, consequently, is exposed to exchange rate fluctuations.

A single company may have monetary assets and liabilities denominated in a currency other than its functional currency, which are translated to the functional currency at the closing day rate. Upon settlement of monetary assets and liabilities, a foreign exchange rate difference arises between the transaction day rate and the transaction price. All changes in exchange rates attributable to the translation or settlement of monetary items are recognized in the income statement.

Revenues, expenses, assets and liabilities in a functional currency other than the Group’s reporting currency, EUR, are translated at the average rate and the closing rate, respectively.

The effect arising from the change in the closing exchange rate compared to the exchange rate at the beginning of the year and the average annual rate are recognized in the translation reserve in other comprehensive income.

Currency fluctuations have limited impact on the Group’s consolidated financial statements- operating income and expenses are largely denominated in local currency- foreign investments shall be financed in the local currency so that the relation between net assets in the local currency and gross assets is at the same level as the Group’s equity-to-assets ratio- currency derivatives are defined as hedging instruments

note 3 financing and financial risk management, continuedThe average interest rate, which takes into account the effects of swap agreements, amounted to 2.25 percent (2.64).The average interest hedge was 4.5 years (4.5). With the breakdown of fixed rate terms applicable at the beginning of 2020,

a change in the market interest rate by one percentage point at the beginning of the year corresponds to EUR 3.11 million (7.54) in changed interest expenses for all active instruments. For more information, see page 78.


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credit riskOperational credit risk is the risk that Akelius’ tenants will not meet their payment obligations.

The Group has no significant concentrations of credit risk since rent is charged in advance and tenants pay deposits.

Trade receivables 2019 2018EUR million Gross Impairment Gross Impairment0–30 days 2 - 2 -31–60 days 1 - 2 -61–90 days - - - -> 90 days 6 -3 5 -3Total 9 -3 9 -3

Provision for bad debtEUR million 2019 2018Opening balance 3 3Provisions recognized for potential losses 3 3Confirmed losses -3 -2Reversal impairment losses - -1Closing balance 3 3

note 3 financing and financial risk management, continued

External loans and currency derivatives are used to reach the desired currency position. The interest rate components of the currency derivatives are considered as ineffective and are recognized in income statement.

Hedge effectiveness is reached by continuously rebalancing the currency portfolio to make sure that currency exposure in each currency is in line with the Group’s equity-to-asset ratio. Test is performed to make sure that nominal value of hedge instruments is not higher

than the value of the foreign net investment. When a foreign operation that was hedged is disposed of, the amount from the foreign currency translation reserve is reclassified to profit or loss. The disposal of a foreign operation should be equivalent to the divestment of a whole metropolitan area. The currency translation reserve in respect of that foreign operation is reclassified.

For more information, see page 81.

Trade receivables of EUR 6 million (6) are reported net after provisions for bad debt and other impairments amounting to EUR 3 million (3).

Provisions for doubtful accounts receivables and impairment losses recognized in the income statement totaled EUR 3 million (3).


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note 4 estimates and judgements

The preparation of financial statements requires the Board and Management to make estimates and use certain assumptions. Estimates and assumptions affect both the income statement and balance sheet as well as disclosures such as contingent liabilities. Estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events considered reasonable under the circumstances.

property valuationEstimation of fair value of properties is described on pages 37-38.

deferred taxDeferred tax is recognized using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Akelius reports deferred tax assets based on Management’s estimates of future taxable profits affected by the tax laws that apply in the jurisdictions where the company operates. The outcome may be different depending on changes in tax rules and the business climate.

classification of acquisitionsIn accordance with IFRS 3, acquisitions may be classified as either business combinations or asset acquisitions. This assessment must be made on a case-by-case basis for each individual acquisition. In cases where the primary purpose is the acquisition of a company’s property and where the acquired company lacks management organization and administration, or when this is of secondary importance to the acquisition, the acquisition is classified as an asset acquisition.

Other corporate acquisitions that typically contain an independent business are classified as business combinations.

On asset acquisition, no deferred taxes related to property acquisition are recognized. Business combinations are accounted for using the purchase method and deferred tax is recognized at the nominal current tax rate with no discount.

Historical acquisitions within the Group has usually been asset deals and not business combinations.

note 3 financing and financial risk management, continued

capital riskThe Group’s objectives for capital management are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. Akelius reduces the cost of capital by having an optimal capital structure. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares, convert debt into equity or sell assets to reduce debt.

The Group evaluates capital based on the loan-to-value ratio. The loan-to-value ratio is defined as net debt divided by net assets. At the end of the year, loan-to-value ratio was 40 percent (44). According to the financial policy, the loan-to-value ratio should be limited to 40 percent from 2020.


116

operating segments, 2019

EUR million EuropeScandi-

naviaNorth

America TotalRental income 227 122 147 496Operating expenses -90 -45 -75 -210Maintenance -13 -10 -8 -31Net operating income 124 67 64 255Central administrative expenses -36Other income and expenses 3Realized revaluation of investment properties 176Unrealized revaluation of investment properties 227Operating profit 625Net interest income/expense -115Other financial income and expenses 1Interest hybrid bond -19Change in fair value of derivatives -28Profit before tax 464

Net operating income 124 67 64 255Change in fair value 244 62 117 423Total property return 368 129 181 678Total property return, percent 6.4 3.8 5.6 5.5

investment properties and owner-occupied properties 2019


naviaNorth

America TotalOpening balance 5,783 3,368 3,228 12,379Investments 196 86 186 468Change in fair value 244 62 117 423Purchases 54 12 115 181Sales -992 -505 -119 -1,616Translation differences 45 -53 137 129Total properties 5,330 2,970 3,664 11,964Assets held for sale -125 - -6 -131Owner-occupied properties -56 - -17 -73Closing balance investment properties 5,149 2,970 3,641 11,760

note 5 segment reporting

The business is organized in three regions, Scandinavia, Europe and North America.

Operating segments are reported in accordance with the internal reporting provided to the CEO, who is the chief operating decision maker.

The division of responsibility for financial performance between segments includes net operating income and change in fair value for property. Of the items in the balance sheet, investment properties and owner-occupied properties are divided by segment.


117

note 5 segment reporting, continued

operating segments, 2018


naviaNorth

America TotalRental income 219 143 120 482Operating expenses -84 -54 -57 -195Maintenance -11 -11 -6 -28Net operating income 124 78 57 259Central administrative expenses -29Other income and expenses 3Realized revaluation of investment properties -1Unrealized revaluation of investment properties 547Operating profit 779Net interest income/expense -128Other financial income and expenses -3Change in fair value of derivatives -14Profit before tax 634

Net operating income 124 78 57 259Change in fair value 234 132 187 553Total property return 358 210 244 812Total property return, percent 7.2 6.0 11.1 7.6

investment properties and owner-occupied properties 2018


naviaNorth

America TotalOpening balance 4,949 3,482 2,193 10,624Investments 171 72 106 349Change in fair value 234 132 187 553Purchases 452 103 731 1,286Sales -15 -285 - -300Translation differences -8 -136 11 -133Total properties 5,783 3,368 3,228 12,379Assets held for sale - -449 - -449Owner-occupied properties -39 - - -39Closing balance investment properties 5,744 2,919 3,228 11,891


118

note 7 leases

right-of-use assets

EUR million offices site leasehold 2019Opening balance 6 6 12Depreciation -3 - -3Additions to right-of-use assets 6 1 7Total 9 7 16

note 6 rental income

EUR million 2019 2018Residential rent 356 330Commercial rent 29 31Other rental income 10 8Service revenues* 97 109Other income 4 4Total 496 482

Akelius is a lessee in lease contracts for offices, site leaseholds, cars, and office equipment. The Group has certain leases of cars and office equipment with lease terms of twelve months or less and with low value.

The Group applies the exceptions for short-term leases and leases of low-value assets in the recognition of these leases. Comparative figures are not restated according to the cumulative catch-up approach.

*) Including utility expenses and property taxes invoiced to the tenants.In Germany and France, Akelius’ rental agreements relate to net cold rents and operating costs. Akelius acts as the principal on the basis of the provisions in IFRS 15 for operating

cost of the tenancy agreement in Germany, France, Sweden, USA, and Canada.Akelius has the power to provide these goods and services and therefore has a performance obligation towards the tenant. Akelius retains the risk related to vacancies.

non-cancellable leasesEUR million 2019 20180–1 year 182 1821–2 years 20 262–3 years 13 133–4 years 8 114–5 years 8 10> 5 years 20 26Total 251 268

All investment properties are let to tenants under operating leases and generate rental income. The contracts usually have a term of between three months and five years and

include clauses for periodic adjustment of rent. Residential lease contracts usually run with a notice period of three months.


119

amounts recognized in the statement of profit or loss

EUR million 2019Depreciation of offices 3Interest expense leasing liabilities 1Cost low-value assets 1Total 5

lease liabilities

EUR million 2019Current 3Non-current 13Total 16

non-cancellable leasesEUR million 0–1 year 1–5 years > 5 yearsPremises 4 8 1Cars 1 1 -Office equipment - - -Total 5 9 1

note 7 leases, continued

note 8 operating expenses

EUR million 2019 2018Utility expenses 56 56Operating expenses 47 45Property tax 29 25Property administration 78 69Total 210 195

Total cash outflows for leases during 2019 was EUR 3 million.

The discount rates in the fair value assessment of our properties in 2018 has been used as the incremental borrowing rate.

The discount rate per country has been used for assets with the same characteristics. When a new lease contract is entered into, the previous year’s discount rate is used. See the discount rates on page 38.

Personnel costs are included in property administration costs and are disclosed in note 11.


120

note 10 audit expenses

EUR million 2019 2018PricewaterhousecoopersAudit - 1Subtotal Pricewaterhousecoopers - 1Ernst & YoungAudit 1 1Subtotal Ernst & Young 1 1Other consultants 1 -Total 2 2

The audit assignment refer to the review of the financial statements and accounting records and the management by the Board of Directors and the CEO.

This item also includes other duties that the company’s auditors are obliged to perform as well as advice or other assistance that is occasioned by observations during the review or implementation of such other duties.

note 11 employees – salaries, other remuneration and social costs

average number of employees 2019 2018

Women Men Total Women Men TotalParent CompanySweden 23 38 61 15 29 44GroupSweden 79 79 158 58 62 120Germany 212 291 503 176 226 402Canada 105 183 288 71 132 203England 24 34 58 21 24 45United States 68 122 190 67 156 223France 39 23 62 25 16 41Denmark 6 17 23 5 11 16Total 557 786 1,343 438 656 1,094

note 9 other income and expenses

EUR million 2019 2018Operational foreign exchange differences 2 1Other revenues, external services 1 2Total 3 3

At the end of 2019, the number of employees in the Group was 1,456 (1,326).


121

salaries, other remuneration and social security expensesEUR million 2019 2018Senior executives 3 3Other employees 73 54Total salaries and other remuneration 76 57Pension costs- Senior executives - -- Other employees 3 3Social security expenses- Senior executives 1 1- Other employees 13 11Total 93 72

senior executivesOther senior executives comprise 12 employees (12), of which 2 are women (1). Salaries and other remuneration to the CEO and other senior executives consist of fixed salaries and loyalty bonuses paid during 2019. Akelius signed loyalty bonus agreements with the CEO and 9 (9) other senior executives. These agreements will expire in 2020, 2022 and 2023. In 2019, the total amount accrued was EUR 2.3 (1.9) million. Part of the accrual for loyalty bonuses includes amounts already earned but not cashed out.9 members of the senior executives are entitled to six to eighteen months’ salary if the company terminates their employment.

A mutual notice of termination of employment of one to six months apply.The variable compensation is included in the basis for pension benefits. Other benefits consist of company cars and private health care insurance. For expatriates, certain benefits are paid in compliance with Akelius’ rules. No stock option program has been offered.

Board of DirectorsBoard fees to the Chairman and other Board members are paid in accordance with the decision of the Annual General Meeting, which means that a member who is employed by the Akelius Group receives no board fees. No variable remuneration or bonuses have been paid.

note 11 employees – salaries, other remuneration and social costs, continued


122

note 11 employees – costs and benefits, continued

salaries, other remuneration and social security expenses of Board members and Management

2019, EUR million

Salary and other

remunerationPension

costs

Social security

expenses Total

Holding of D-shares per

December 31, 2019

Board membersChairman of the Board Anders Lindskog 0.05 - 0.01 0.06 -Igor Rogulj 0.03 - 0.01 0.04 427,350Lars Åhrman 0.05 - - 0.05 15,000Leif Norburg* 0.01 - - 0.01 -ManagementCEO Pål Ahlsén 0.41 0.04 0.14 0.59 7,850Other senior management 2.42 0.37 0.53 3.32 148,571Total 2.97 0.41 0.69 4.07 598,771

*) resigned as Chairman on October 17, 2018

**) elected to Chairman of the Board on October 17, 2018

All Board members were men.

*) resigned at the Annual General Meeting held on April 11, 2019

All Board members are men.

Holdings of preference shares was redeemed in 2019. Board members and management have invested in D-shares.

2018, EUR million

Salary and other

remunerationPension

costs

Social security

expenses Total

Holding of preference shares per

December 31, 2018

Board membersChairman of the Board Anders Lindskog ** 0.01 - - 0.01 -Chairman of the Board Leif Norburg* 0.03 - 0.01 0.04 1,880Igor Rogulj 0.03 - 0.01 0.04 -Anders Lindskog** 0.03 - 0.01 0.04 -Leif Norburg* 0.01 - - 0.01 -Lars Åhrman 0.02 - - 0.02 400ManagementCEO Pål Ahlsén 0.37 0.04 0.13 0.54 450Other senior management 2.42 0.34 0.44 3.20 5,544Total 2.92 0.38 0.60 3.90 8,274


123

note 12 investment properties and owner-occupied properties

owner-occupied properties

EUR million 2019 2018Opening balance 39 35Transfer from investment property 28 -Investment 5 3Change in fair value 1 1Translation differences - -Closing balance 73 39

investment properties

EUR million 2019 2018Opening balance 12,340 10,589Transfer to owner-occupied properties -28 -Investment* 463 348Change in fair value 422 550Acquisitions 181 1,286Disposal -1,616 -300Translation differences 129 -133Total 11,891 12,340Assets held for sale -131 -449Closing balance 11,760 11,891

Three properties located in Germany, England, and Canada are classified as owner-occupied properties and are measured at fair value in accordance with the IAS 16 revaluation method.

Accumulated changes in fair value amounted to EUR 4 million.

*) including EUR 26 million (7) in capitalized borrowing costs In 2019, the capitalization rate to calculate borrowing cost eligible for capitalization was 2.42 percent (2.64).

The value of the properties is based on internal valuations.The estimated future cash flows are based on existing rental income and operating and maintenance costs adjusted for expected changes in rental and vacancy levels.The fair value of the properties comprises the sum of the discounted cash flows during the calculation period and the residual value.

The valuation is made according to IFRS 13, level 3, see page 129.The capitalization rate is determined by adding interest rates and risk premiums.The risk premium covers the market risk and the property-related risk based on the building’s location and the prevailing housing supply and demand.The capitalization rate is assessed, as far as possible, using the property transactions completed in the market, invitations to buy and sell and by looking at comparable prop-erties.

In 2019, primarily CBRE valued 247 properties out of 950 properties owned.


124

note 12 investment properties and owner-occupied properties, continued

EUR million 2019 2018Capitalization rate+ 0.1 percentage point -363 -375- 0.1 percentage point 385 398Rental income+ 1 percent 69 72- 1 percent -69 -72Operating expenses+ 1 percent -46 -48- 1 percent 46 48

investment properties and owner-occupied properties, 2019

EUR millionSales

proceedsBook value

Trans- action costs

Realized revaluation

of investment properties

Unrealized revaluation

of investment properties

Unrealized revaluation

of owner-occupied

properties

Total revaluation

of properties

Sweden 505 -498 -2 5 40 - 40Germany 991 -811 -14 166 81 1 82Canada 119 -113 -2 4 147 - 147England 1 - - 1 -21 - -21United States - - - - -36 - -36France - - - - 1 - 1Denmark - - - - 15 - 15Total 1,616 -1,422 -18 176 227 1 228

note 13 net financial items

EUR million 2019 2018Interest income on derivatives - 1Interest expenses on derivatives -11 -24Change in derivatives -28 -Total from financial instrument measured at fair value through profit or loss -39 -23

sensitivity analysis of changes in the fair value of properties

Should the market’s capitalization rate, rental income, vacancy level or cost level change, the fair value in EUR million would be affected as shown in the table below.

At December 31, 2019 the average capitalization rate was 3.67 percent (3.67) and the discount rate was 5.66 percent (5.66).


125

note 13 net financial items, continuedEUR million 2019 2018Interest income 1 -Interest income from Group companies - -Financial exchange difference 3 -Other financial incomes 1 -Total from financial assets measured at amortized cost 5 -

Interest expenses -105 -105Interest expenses, Hybrid loan -19 -14Interest expenses from Group companies - -Other financial expenses -3 -3Total from financial liabilities measured at amortized cost -127 -122

Net financial items -161 -145

reconciliation of income taxesEUR million 2019 2018Profit before income taxes 464 634Income taxes based on national rates -93 -146- in percent 20.0 23.0Non-taxable income on sold properties 24 21Non-deductible interest -6Other non-taxable income and non-deductible expenses 1 -9Change in tax rate on temporary differences - 17Change in capitalization of tax losses carried forward -5 -10Total -79 -127

Effective tax rate, percent 17.0 20.0

note 14 taxes

EUR million 2019 2018Current taxes -29 -3Deferred taxes -50 -124Total -79 -127

The national corporate tax rates are 21.4 percent (22.0) in Sweden, 30.175 percent (30.175) in Germany, 26.5 percent (26.5) in Canada, 19.0 percent (19.0) in England,

28.0 percent (28.0) in France, 26.0 percent (26.0) in the United States and 22.0 percent (22.0) in Denmark.


126

change in deferred taxes in the balance sheet

2019 2018

EUR million Assets LiabilitiesNet

liabilities Assets LiabilitiesNet

liabilitiesOpening balance 1 885 884 1 838 837Acquisitions - - - 1 13 12Sold properties - -40 -40 - 4 4Changes through income statement 26 76 50 -4 120 124Changes through other comprehensive income 4 - -4 23 - -23Transferred to liabilities held for sale - 43 43 - -58 -58Translation differences 1 1 - - -12 -12Redistribution -30 -30 - -20 -20 -Closing balance 2 935 933 1 885 884

note 14 taxes, continued

nature of deferred tax liability

EUR millionInvestment properties Derivatives

Tax loss carried

forward Other TotalNet liability December 31, 2018 1 043 -7 -151 -1 884Acquisitions - - - - -Sold properties -40 - - - -40Changes through income statement 72 5 -30 3 50Changes through other comprehensive income - - - -4 -4Transferred to liabilities held for sale 43 - - - 43Translation differences 2 - -2 - -Net liability December 31, 2019 1 120 -2 -183 -2 933

Deferred tax on temporary differences is calculated with current national tax rates except for Sweden and England. Tax have been calculated with the new rate.The tax rate in Sweden will be reduced to 20.6 percent in 2021.

The tax rate in England will be reduced to 17.0 percent in 2020. The effect of reduced tax rates in Sweden and England was reported in 2018, when the decision were made to change the national corporate tax rates.

For the Group, the gross amount of capitalized tax loss carried forward is EUR 720 million (595). There is no expiration date for the utilization of the major part of the tax losses carried forward for which deferred tax assets have

been recognized. The gross amount of non-capitalized tax losses carried forward is EUR 135 million (98), which corresponds to a tax amount of EUR 20 million (15) and has no expiration date.


127

amortization and depreciation

EUR million 2019 2018Operating expenses -2 -1Central administrative expenses -2 -2Total -4 -3

note 15 intangible and tangible fixed assets

intangible assets

EUR million 2019 2018Acquisition valueOpening balance 16 9Investments 10 7Closing balance 26 16AmortizationOpening balance -5 -3Amortization for the period -2 -2Closing balance -7 -5Carrying amount 19 11

tangible assets

EUR million 2019 2018Acquisition valueOpening balance 12 9Investments 2 3Closing balance 14 12DepreciationOpening balance -6 -5Depreciation for the period -2 -1Closing balance -8 -6Carrying amount 6 6

Intangible assets consist of internally generated development costs for internal business support systems.

Tangible assets mainly consist of office equipment and cars.


128

note 16 financial instruments

financial instruments by fair value hierarchy

EUR million

Assets and liabilities

measured at fair value

through profit or loss

Financial assets

measured at amortized

cost

Financial liabilities

measured at

amortized cost

Total book value Level 1 Level 2

Total fair

valueDecember 31, 2019AssetsDerivatives 3 - - 3 - 3 3Trade and other receivables - 61 - 61 - 61 61Cash and cash equivalents - 19 - 19 - 19 19Total 3 80 - 83 - 83 83LiabilitiesInterest- bearing liabilities - - 4,857 4,857 2,884 2,065 4,949Hybrid loan - - 499 499 532 - 532Derivatives 64 - - 64 - 64 64Other financial liabilities - - 100 100 - 100 100Total 64 - 5,456 5,520 3,416 2,229 5,645

December 31, 2018AssetsDerivatives 16 - - 16 - 16 16Trade and other receivables - 28 - 28 - 28 28Cash and cash equivalents - 13 - 13 - 13 13Total 16 41 - 57 - 57 57LiabilitiesInterest-bearing liabilities - - 5,519 5,519 2,770 2,599 5,369Hybrid loan - - 499 499 487 - 487Derivatives 46 - - 46 - 46 46Other financial liabilities - - 94 94 - 94 94Total 46 - 6,112 6,158 3,257 2,739 5,996


129

note 16 financial instruments, continued

Of the Group’s total derivatives, derivatives with a fair value of EUR -1 million (16) are hedges of net investments in foreign operations. EUR 2 million (18) refers to financial assets and EUR -3 million (-2) are financial liabilities.

The result of all instruments used to hedge net investments in foreign operations are recognized continuously in a separate item in other comprehensive income. In the event of a sale of the hedged business, the cumulative result of the hedge will be recognized in the income statement.

fair value measurementMeasurement of financial instruments can be classified at different value levels depending on how the underlying data for determining fair value is obtained.

fair value hierarchylevel 1Quoted prices on active markets for identical assets and liabilities.

level 2Other observable data for the asset or liability other than quoted prices included in level 1.

level 3Data for the asset or liability that is not based on observable market data. At this level, assumptions that market participants would use when pricing the asset or liability, including risk assumptions, should be taken into account.

fair value of financial instrumentsThe fair value of a financial instrument traded in an active market is based on valuations using current market data. The appropriate bid price is used for financial assets while the appropriate ask price is used for financial liabilities.

The fair value of derivatives not traded in an active market is calculated as the current value of future cash flows.

The fair value of borrowings through listed bonds are reported according to level 1. Other interest-bearing liabilities are reported according to level 2. The fair values of interest-bearing liabilities are calculated by discounting the future contracted cash flows to the current market interest rate.

The fair values of derivatives are based on level 2 of the fair value hierarchy. Compared to 2018, no transfers have taken place between the various hierarchical levels and no significant changes have been made as regards the valuation method. The cash flow from derivative contracts is compared with the cash flow that would have been obtained if the contracts had been settled at market price on the closing day. The difference in the cash flow is discounted at a rate that takes into account the counterparties’ credit risk. Accrued interest on derivatives are excluded from the fair value through profit or loss and records separately.

In the case of financial instruments such as trade receivables and payables for which observable market data is not available, the fair value is assessed to correspond to the book value, since these instruments have short maturities. The instruments are recognized at amortized cost with deductions for any impairment. These are also classified according to level 2.


130

EUR million 2019 2018Receivables from Group companies 1 -Restricted cash* 3 4Non-current receivables 4 4Trade receivables 6 6Receivables from Group companies - 1Prepayments for properties 6 30Restricted cash* 40 6Prepaid expenses and accrued income 16 17Bonds 9 -Inventory 6 6Other receivables 33 20Current receivables 116 86Total trade and other receivables 120 90

note 18 cash and cash equivalents

EUR million 2019 2018Bank deposits and cash 19 13Total 19 13

The change in cash and cash equivalents is shown in the consolidated statement of cash flows. Cash and cash equivalents mainly include bank deposits.

There are unutilized credit agreements of EUR 814 million (448). These are not included in cash and cash equivalents.

note 17 trade and other receivables Trade receivables are primarily attributable to residential tenants.See Note 3 for additional information.Receivables from Group companies are

attributable to transactions between the Parent Company and the subsidiaries. Intragroup loans are subject to market terms and are without collateral.

*) restricted cash relates mainly to guarantees to banks for derivative

transactions and deposited funds from tenants


131

note 19 interest-bearing liabilities and hybrid bond Unsecured interest-bearing liabilities and hybrid bond at year-end refer to 12 listed bonds and loans from related companies.

See note 26 for further information about transactions with related parties.

Assets pledged as collateral for mortgages have decreased from EUR 2,790 million at the end of 2018 to EUR 2,321 million.

At the end of the period, available funds in the form of cash and secured but unutilized credit facilities totaled EUR 841 million, compared to EUR 461 million at the end of 2018. Most borrowings contain financial covenants, specific to each counterpart. Loan-to-value ratio and interest coverage ratio are the most common for Akelius.

See note 3 on page 112 to 115 for additional information.

interest-bearing liabilities per currency

2019 2018EUR million Local currencies EUR million Local currencies

SEK 1,330 13,892 917 9,428EUR 1,691 1,690 1,968 1,968CAD 495 722 849 1,324GBP 576 490 550 492USD 548 616 1,063 1,217DKK 217 1,624 172 1,285Total 4,857* 5,519 *) including EUR 3,514 million related to bonds and other capital market borrowings

listed bonds

interest-bearing liabilities

Nominal value, million

Market value EUR million

Maturity

Rating

Annual coupon

Identification

number*EUR 300 307 Sep 2020 BBB 3.375% XS1295537077SEK 500 48 Oct 2021 BBB Stibor 3 months +0.90% XS1692931808SEK 1,000 96 Oct 2021 BBB 1.125% XS1692931980EUR 600 618 Jan 2022 BBB 1.5% XS1523975859SEK 700 68 Oct 2023 BBB Stibor 3 months +1.30% XS1889043193SEK 300 29 Oct 2023 BBB 1.875% XS1889043359EUR 500 512 Mar 2024 BBB 1.125% XS1717433541SEK 800 77 Nov 2024 BBB Stibor 3 months +1.05% XS2079078478SEK 200 19 Nov 2024 BBB 1.125% XS2079078049EUR 600 629 Feb 2025 BBB 1.750% XS1622421722GBP 400 480 Aug 2025 BBB 2.375% XS1684269761

hybrid bond

Nominal value, million

Market value EUR million

Maturity

Rating

Annual coupon

Identification

number*EUR 500 532 Oct 2078 BB+ 3.875% XS1788973573 All bonds are listed on the Irish Stock Exchange ISE.


132

maturity structure of interest-bearing liabilities as at December 31, 2018 Fixed interest rates

EUR millionSecured

borrowingUnsecured borrowing

Total borrowing

Share, percent

0–1 year 561 394 955 101–5 years 662 1,116 1,778 39> 5 years 1,123 1,663 2,786 51Total 2,346 3,173 5,519 100Average interest rate hedge, years 4.9 4.3 4.5Average interest rate, percent 3.5 2.0 2.6

Capital tied up

EUR millionSecured


Total borrowing

Share, percent

0–1 year 164 175 339 61–5 years 869 1,335 2,204 40> 5 years 1,313 1,663 2,976 54Total 2,346 3,173 5,519 100

note 19 interest-bearing liabilities and hybrid bond, continued

maturity structure of interest-bearing liabilities as at December 31, 2019 Fixed interest rates

EUR millionSecured


Total borrowing

Share, percent

0–1 year -58 679 621 131–5 years 567 1,239 1,806 37> 5 years 1,149 1,281 2,430 50Total 1,658 3,199 4,857 100Average interest rate hedge, years 6.4 3.5 4.5Average interest rate, percent 2.7 2.0 2.3

Capital tied up

EUR millionSecured


Total borrowing

Share, percent

0–1 year 185 405 590 121–5 years 281 1,513 1,794 37> 5 years 1,192 1,281 2,473 51Total 1,658 3,199 4,857 100


133

note 20 derivatives

EUR million 2019 2018Interest rate derivativesAssets - -Liabilities -61 -46Cross currency swapsAssets 2 6Liabilities - -Foreign exchange forwardsAssets 1 10Liabilities -3 -Total net fair value -61 -30Nominal value 2,407 2,261

*) realized changes in the value of currency derivatives have generated additional cash

flows of EUR -27 (5) million, which are recognized in other comprehensive income

Derivative transactions are undertaken with approved counterparts for which credit limits are established and with which

ISDA, International Swaps and Derivatives Association, master agreement applies.

changes during the year

EUR million 2019 2018Opening balance -30 -101Outgoing derivatives* 17 56Revaluation of derivatives reported in the income statement -28 -Revaluation of equity -20 11Translation differences - 4Closing balance -61 -30of which, long-term portion -59 -169

maturity structure

EUR million 2019 20180–1 year -2 1391–5 years -9 130> 5 years -50 -299Total -61 -30


134

note 21 net debt reconciliation

2019 Assets

Liabilities

EUR million

Cash and cash

equivalents

Other cash

assets*Deriva-

tives

Short-term loans

Long-term loans**

Deriva- tives Total

Balance at January 1, 2019 -13 -1 -16 339 5,679 50 6,038Cash flow -6 1 - -146 -574 -44 -769Reclassification - - -3 390 -390 3 -Acquisitions - - - - 5 - 5Non-cash transactions*** - - 16 - 1 56 73Translation difference - - - 7 45 -1 50Balance at December 31, 2019 -19 - -3 590 4,766 64 5,397

2018 Assets

Liabilities

EUR million

Cash and cash

equivalents

Other cash

assets*Deriva-

tives

Short-term loans

Long-term loans**

Deriva- tives Total

Balance at January 1, 2018 -16 -1 -6 316 4,431 107 4,831Cash flow 4 - - -69 1,281 -51 1,165Reclassification - - -10 91 -91 10 -Acquisitions -1 - - - 62 - 61Non-cash transactions*** - - - - 16 -12 4Translation difference - - - 1 -20 -4 -23Balance at December 31, 2018 -13 -1 -16 339 5,679 50 6,038

*) pledged asset **) includes the hybrid bond ***) including EUR -5 million in realized and EUR -11 million in unrealized value changes of currency derivatives recognized in other comprehensive income

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.

*) pledged asset **) includes the hybrid bond.

***) including EUR 27 million in realized and EUR -19 million in unrealized value changes of currency derivatives recognized in other comprehensive income


135

note 22 trade and other payables

EUR million 2019 2018Rent deposits 17 16Total non-current portion 17 16Trade payables 15 24Prepaid rental income 12 12Accrued interest expenses 41 41Other accrued expenses 27 18Prepayment received for properties 84 -Other payables 41 26Total current portion 220 121Total trade and other payables 237 137

note 23 provisions

EUR million 2019 2018Balance at January 1 2 2Provision made 1 1Provision used -1 -1Balance at December 31 2 2Long-term part of debt 2 1Short-term part of debt - 1Total 2 2

Maturity structure

EUR million 2019 20180–1 year - 11–5 year 2 1> 5 years - -Total 2 2

note 24 pledged assets and contingent liabilities

EUR million 2019 2018Pledged assetsPledged bank assets - 1Property mortgages 2,321 2,790Shares in subsidiaries 104 234Total 2,425 3,025

EUR million 2019 2018Contingent liabilitiesOther guarantees 35 4Total 35 4


136

note 25 equity

At the end of the year, equity amounted to EUR 5,526 million (5,370), equivalent to an equity ratio of 45 percent (43).

In October 2019, Akelius Residential Property AB issued D-shares for EUR 385 million at EUR 1.75 per share. Akelius’ D-shares are listed on Nasdaq First North Growth Market. The new issue results in a dilution for existing shareholders of 6.4 percent as regards shares and 0.7 percent as regards votes. At December 31, 2019, the price paid per D-share was EUR 1.83.

In December 2019, a mandatory redemption of all 18,835,606 preference shares were carried out at SEK 345 per preference share.The company’s share capital was reduced by EUR 1,099,643 through redemption.

Dividends of EUR 32 million were distributed to the holders of preference shares.

The statement of changes in equity shows a complete reconciliation of all changes in equity.

The share capital consists of 3,191,809,140 A-shares with one vote per share and 220,000,000 D-shares, each with 1/10 vote per share.

Number of shares A-shares D-shares

Preference shares Total

Opening balance 3,191,809,140 - 18,835,606 3,210,644,746Issued shares - 220,000,000 - 220,000,000Redeemed shares - - -18,835,606 -18,835,606Closing balance 3,191,809,140 220,000,000 - 3,411,809,140

earnings per share 2019 2018Profit attributable to the owners of the Parent Company, EUR million 379 501Earned dividend, preference shares EUR million 32 37Basic weighted average number of shares outstanding 3,191,809,140 3,065,579,400Diluted weighted average number of shares outstanding 3,242,578,371 3,149,848,155Basic earnings per share, EUR 0.11 0.15Diluted earnings per share, EUR 0.11 0.15

Adjusted opening balance* Issued shares Redeemed shares Closing balance

Pair value, EUR 0.07 0.06 -0.06 0.07Total share capital, EUR 187,440,947 12,843,840 -1,099,643 199,185,144

*) adjusted opening balance amounted to EUR 23,838,274, related to the euro conversion of the Parent Company


137

note 26 related parties

Akelius Apartments Ltd, Cyprus, holds 79.51 percent of the shares and exercises control over the Group. Xange Holding Ltd, Cyprus, holds 9.36 percent of the shares and Giannis Beta Holding Ltd, Cyprus, holds 4.68 percent of the shares. D-shares correspond to 6.45 percent of the total share capital of the company.

Akelius Apartments Ltd is a subsidiary of Akelius Foundation, Bahamas. The Board of Directors and senior management are also related to Akelius Residential Property AB.

Transactions with related parties are carried out on market terms. For information on the remuneration of board members and senior executives, see note 11. For details about intercompany interest income and interest expenses, see note 13.

No Board member or member of management has directly or indirectly been involved in any business transaction with Akelius beyond what is stated in this note and note 11.

transactions with companies in the Akelius Foundation GroupEUR million 2019 2018Ordinary shares, issue - 809Ordinary shares, dividend - -809Purchase of company and other net assets - 64Borrowings from Group companies -12 43Receivables from Group companies 1 1Sales of products and other services 1 2Sales of minority holdings - -48Transactions with companies controlled by Board members and other senior executives or related to themPurchases of services - -

note 27 - assets held for sale

Akelius has signed an agreement for the divestment of 523 apartments. 486 are located in Germany and 37 are located in Canada. Closing date will be during 2020. As at December 31, 2019, investment properties of EUR 131 million and deferred taxes of EUR 13 million were reported as assets and liabilities held for sale.

Realized results are reported when the property has been handed over to the buyer. Assets held for sale are valued at selling price less transaction costs and additional investment costs.

Contracted price amounts to EUR 134 million. Additional investment amounts to EUR 1 million and transaction costs of EUR 2 million.

EUR million 2019 2018Assets classified as held for saleInvestment properties 131 449Liabilities directly related to assets classified as held for saleDeferred tax liabilities 13 58


138

note 28 - contracted property acquisitions

On December 16, 2019, Akelius entered into a contract to acquire Jahnstraße 15, Berlin, for EUR 2 million.In 2017 and 2018, Akelius also entered a contract to buy two more properties in Berlin for a total of EUR 8 million.As at 31 December, 2019, the transactions have not yet been finalized. Akelius expects the transactions to be completed in 2020.

On December 2, 2019, Akelius entered a contract to acquire development land on 230 Oak Street, Toronto. The transaction was closed on January 6, 2020 for CAD 14 million.

note 29 - subsequent events

A stricter rent regulation in Berlin indicates a risk for EUR 20 million annual rent reduction. Akelius Residential Property AB (publ) has issued a EUR 500 million hybrid bond.


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statement of comprehensive income for the Parent Company

EUR million note 2019 2018Group revenue 28 23Administration costs 4,5 -33 -26Operating profit -5 -3Profit from shares in subsidiaries 6 68 8Financial income 7 198 303Financial expenses 7 -178 -140Change in fair value of derivatives 15 -26 -21Profit before appropriations 57 147Appropriations 8 14 -147Profit before tax 71 0Tax 9 4 -1Profit for the year 75 -1

The Parent Company does not have any items in other comprehensive income.

Parent Company


140

EUR million noteDec 31

2019Dec 31

20181 Jan 2018

AssetsIntangible assets - - -Total intangible assets - - -Shares in subsidiaries 10 2,629 2,655 1,358Receivables from Group companies 11,12 4,161 3,751 4,100Other receivables 12 7 9 11Derivatives 11,15 1 - -Deferred income tax assets 9 44 43 46Total financial assets 6,842 6,458 5,515Total non-current assets 6,842 6,458 5,515Receivables from Group companies 11,12 46 306 960Derivatives 11,15 2 - -Other current investments 11 9 - -Other current receivables 11,12 16 4 7Prepaid expenses and accrued income 12 5 3 2Prepaid expenses Group companies 11,12 4 2 17Cash and cash equivalents 11,13 - 1 -Total current assets 82 316 986Total assets 6 924 6,774 6,501Equity and liabilitiesShare capital 199 187 188Statutory reserve 3 3 3Total restricted equity 202 190 191Retained earnings - - -Share premium reserve 1,102 1,315 1,399Profit for the year 28 -1 18Total non-restricted equity 1,130 1,314 1,417Total equity 19 1,332 1,504 1,608Interest-bearing liabilities 11,14 2,889 3,475 2,925Interest-bearing liabilities, Group companies 11,14 988 951 1,736Hybrid loan 11 499 499 -Derivatives 11,15 51 25 34Total non-current liabilities 4,427 4,950 4,695Interest-bearing liabilities 11,14 492 184 114Interest-bearing liabilities, Group companies 11,14 624 68 38Derivatives 11,15 6 19 7Other current liabilities 11,17 1 10 11Accrued expenses and prepaid income 11,17 42 39 27Accrued expenses and prepaid income, Group companies 11,17 - - 1Total current liabilities 1,165 320 198Total equity and liabilities 6,924 6,774 6,501

statement of financial position for the Parent Company


141

statement of changes in equity for the Parent Company

Restricted equity Non-restricted equity

EUR millionShare

capitalStatutory

reserveRetained earnings

Share premium reserve

Total equity

Balance at January 1, 2018 180 3 - 1,358 1,541Profit for the year - - -1 - -1Issue of ordinary shares 7 - - 828 835Dividend - - - -871 -872

Balance at December 31, 2018 187 3 -1 1,315 1,504Change in accounting principle, IFRS 9 - - 14 - 14Adjusted opening balance January 1, 2019 187 3 13 1,315 1,518

Profit for the year - - 75 - 75Share issue 13 - -7 372 378Redemption of shares -1 - -21 -585 -607Dividend - - -32 - -32Balance at December 31, 2019 199 3 28 1,102 1,332


142

statement of cash flows for the Parent Company

EUR million note 2019 2018Gross profit - -Administrative expenses -5 -3Other income and expenses - -Reversal of depreciation - -Interest received -200 215Interest paid -161 -72Income taxes paid - -Cash flows before changes in working capital 34 140Change in current assets -14 2Change in current liabilities -16 8Cash flows from operating activities 4 150

Investments in tangible and intangible assets - -Proceeds from the sale of tangible assets - -Proceeds from investments in subsidiaries - -Acquisition of subsidiaries - -Proceeds from the sale of subsidiary - -Investments in financial assets - -Cash flows from investing activities - -

Proceeds from borrowings 14 2,603 2,589Net from Group borrowing 14 449 -523Repayment of borrowings 14 -2,790 -2,159Share issue 378 837Redemption of preference shares -607 -Purchase hybrid loan - -4Purchase and sale of derivatives 15 2 -16Dividends paid -40 -874Cash flows from financing activities -5 -150

Cash flows for the year -1 -Cash and cash equivalents at the beginning of year 1 1Cash and cash equivalents at the end of the year - 1


143

Parent Company accounting policies and notesnote 1 general informationAkelius Residential Property AB, corporate identity number 556156-0383, is the parent company of Akelius. Akelius Residential Property AB is based in Stockholm, Sweden.

The annual accounts were approved by the Board and the CEO on March 12, 2020 and submitted to the Annual General Meeting for adoption on April 3, 2020.

The smallest group that Akelius Residential Property AB is included in is Akelius, which is presented in this report. The consolidated financial statements presented by Akelius Apartments Ltd, are the largest group that Akelius Residential Property AB is part of. The consolidated accounts for Akelius Apartments Ltd are available where the Parent Company has its registered office, Flat 201, 91 Lemesou Avenue, Aglantzia 2121, Nicosia, Cyprus.

During 2018, parts of the funding of the Swedish companies where moved from the Parent Company to Akelius Lägenheter AB, owner of the Swedish subsidiaries.The Parent Company’s functional currency changed to euro as of 2019. Akelius Residential Property AB uses euro as the accounting currency as of 2019. Comparative data for 2018 have been translated from Swedish kronor to euro. Assets and liabilities have been translated into euros at the prevailing exchange rate at December 28, 2018. Revenues and expenses have been translated into euros at an average rate that approximates the rates during the period. Exchange rates are retrieved from the European Central Bank.

note 2 accounting policiesThe Parent Company applies the Swedish Annual Accounts Act and RFR 2: “Accounting for Legal Entities”. The accounting policies of the Parent Company have been applied consistently for all years presented here unless otherwise stated.

A more extensive explanation of the applied accounting policies is presented in note 2 of the Group. The Parent Company applies different accounting policies than the Group in the cases specified below.

forms of presentationThe income statement and the balance sheet are presented in accordance with the Swedish Annual Accounts Act.This entails differences compared to the consolidated accounts, primarily as regards financial income and expenses, comprehensive income, provisions and changes in equity. The presentation of some notes also differs compared to the consolidated accounts.

currencyThe Parent Company’s functional currency is euro, which is the reporting currency of the Parent Company. Unless otherwise stated, all amounts are reported in EUR million and refer to the period from January 1 to December 31 for income statement items and December 31 for balance sheet items.

participations in Group companiesParticipations in Group companies are recognized at acquisition value less deductions for any impairments. The acquisition value includes acquisition related costs and any contingent consideration. When there are indications that participations in Group companies have decreased in value, the recoverable amount is calculated. If this is lower than the carrying amount, the participation is impaired. Impairment is recognized under the item “Income from participations in Group companies”.

financial guaranteesFinancial guarantees from the parent in favor of subsidiaries are not valued at fair value. They are reported as contingent liabilities, unless it is likely that the guarantees will lead to payments. In such cases, an accrual is reported.


144

note 2 accounting policies, continued

financial instrumentsThe Parent Company apply IFRS 9 with the exception of financial guarantees for group companies.

In 2019, the Parent Company changed the accounting principle for financial current assets. All derivatives are measured at fair value. Comparative figures are measured at lowest value principle. Other financial non-current assets are measured at amortized cost. The impact of the change in accounting principle is shown in note 15 derivatives and in the statement of changes in equity for the Parent Company.

impairment

The financial assets are reported in the balance sheet at amortized cost, that is, net of gross value and loss reserve. Changes in the loss reserve are reported in the income statement.

The model to calculate the provision of bad debt is based on historical credit loss experiences and forward-looking factors. The model includes operational simplifications for lease and trade receivables. The simplified model is applied to accounts receivable, contract assets and lease receivables where loss reserve is reported for the expected remaining term.

The calculations of the loss reserve made according to the above methods have not shown any material amounts to reserve. Therefore no expected credit loss on financial assets has been reserved in the company.

Derivatives held by the company primarily comprise interest rate swaps and currency swaps, which are used to hedge interest rate risk exposure and currency exposure. Interest rate differences that are to be received or paid as a result of interest rate swaps are reported under the item financial expenses and are distributed over the term of agreement.

Group contributions and shareholder contributionsIn Sweden, group contributions are deductible, unlike shareholder contributions. Group contributions paid and received are reported in the income statement. Shareholder contributions are reported as an increase of participations in Group companies and tested for impairment.

incomeAs a Parent Company, Akelius Residential Property AB provides its subsidiaries with services related to its operations, IT, business development, staff, education, management, finance, construction, architecture, purchasing and logistics, customer service and legal advice. Revenues are reported in the period they relate to and are based on allocation keys for the respective subsidiary’s leasable space, IT users, staff and participants in activities.

The Parent Company records gross revenue in the transactions where the company is the principal. In cases where the company acts as an agent, revenue is reported at the net amount that the company receives for its services.

new and amended IFRS standards adopted by the EU applied as at January 1, 2019New and changed accounting principles that entered into effect as at January 1, 2019 have not had any significant impact on the Parent Company’s financial statements in 2019.

IFRS 16 Leases applies from January 1, 2019. The company applies full exemption from IFRS 16 in accordance with RFR2, which is why this standard has no significant impact on the company’s earnings or financial position.

No leasing expenses were reported in the Parent Company. Akelius is a lessee in leases of low value assets, mainly relate to a premise and cars.


145

Maturity, December 31, 2019 0–1 year 1-5 years > 5 yearsInterest-bearing liabilities 543 1,791 1,336Interest-bearing liabilities, Group 636 1,010 -Derivatives 11 27 33Trade payables - - -Other payables 40 - -Total 1,230 2,828 1,369 Maturity, December 31, 2018 0–1 year 1-5 years > 5 yearsInterest-bearing liabilities 242 1,997 1,744Interest-bearing liabilities Group 31 1,030 -Derivatives - 11 29Trade payables - - -Other payables 60 - -Total 333 3,041 1,773

note 4 audit expensesEUR million 2019 2018Pricewaterhousecoopers ABAudit - 1Total Pricewaterhousecoopers AB - 1Ernst & Young ABAudit 1 -Total Ernst & Young AB 1 -Total 1 1

The audit assignment refers to the review of the financial statements and accounting records and the administration by the Board of Directors and the CEO.

This item also includes other duties that the company’s auditors are obliged to perform as well as advice or other assistance that is occasioned by observations during the review or implementation of such other duties.

The following table shows the maturity structure of the Parent companys' financial assets and liabilities.

The figures are undiscounted cash flows based on contract dates and include both interest and nominal amounts.

note 3 financing and financial risk management


146

note 5 employees – costs and benefits

Average number of employees 2019 2018

Women Men Total Women Men TotalSweden 23 38 61 15 29 44

senior executivesOther senior management comprises 5 employees (5), of which 1 is a woman (0). Salaries and other remuneration to CEO and other senior executives consist of fixed salaries and loyalty bonus paid during 2019. Akelius signed loyalty bonus agreements with the CEO and 4 (4) other senior executives that expire in 2020, 2022 and 2023. 6 senior executives are entitled to six to eighteen months’ salary if the company terminates their employment.

A mutual notice of termination of employment of two to six months apply.The variable compensation is included in the basis for pension benefits. Other benefits consist of company cars and private health care insurance. For expatriates, certain benefits are paid in compliance with Akelius’ rules. No stock options have been offered.

For information about remuneration to the Board of Directors, see note 11 in the Group.

Salaries, other remuneration and social security expensesEUR million 2019 2018Senior executives 1 1Other employees 4 3Total salaries and other remuneration 5 4Pension costs:- Senior executives - -- Other employees 1 1Social security costs- Senior executives 1 -- Other employees 1 1Total 8 6

At the end of 2019, the number of employees was 62 (55).


147

note 6 profit from shares in subsidiaries

EUR million 2019 2018Impairment losses on shares in subsidiaries -27 -6Dividends 95 14Total 68 8

note 8 appropriations

EUR million 2019 2018Group contribution 14 -147Total 14 -147

not 7 net financial items EUR million 2019 2018Interest income on derivatives financial instruments -9 -19Change in derivatives financial instruments -26 -21Total from financial instruments measured at fair value through profit or loss -35 -40Interest income from Group companies 198 228Financial exchange differences - 75Total from financial assets measured at amortized cost 198 303Interest expenses -122 -98Interest expenses, Hybrid loan -2 -2Interest expenses from Group companies -29 -19Financial exchange differences -14 -Other financial expenses -2 -2Total from financial liabilities measured at amortized cost -169 -121

Net financial items -6 142


148

change in deferred taxes in the balance sheet

2019 2018

EUR million Assets LiabilitiesNet

assets Assets Liabilities Net assetsParent CompanyOpening balance 43 - 43 46 - 46Changes through profit for the year 1 - 1 -1 - -1Translation difference - - - -2 - -2Closing balance 44 - 44 43 - 43

nature of deferred taxes

EUR million DerivativesTax loss carried

forward Other TotalNet balance December 31, 2018 -9 -33 - -43Changes through income statement 9 -10 - -1Net balance December 31, 2019 - -43 - -44

reconciliation of income taxes

EUR million 2019 2018Profit before income taxes 71 -Income taxes based on national rates -15 -- in percent 21.4 22.0Non-taxable income on sold properties -6 -Dividends from subsidiaries 20 2Other non-taxable income and non-deductible expenses 4 -Change in capitalization of tax losses carried forward - -3Adjustment of tax from prior years 1 -Income taxes 4 -1Effective tax rate, percent -6.0 250.0

note 9 tax

EUR million 2019 2018Current taxes - -Deferred taxes 4 -1Total 4 -1

The current tax has been calculated on the basis of a nominal tax rate in Sweden of 21.4 (22.0).


149

CompanyCorporate ID

number DomicileHolding percent Shares

Net book value,

EUR million

Akelius GmbH HRB101392B Berlin 94.9* 2,000 610Akelius Lots GmbH & Co KG HRA47950B Berlin 94.9 - 25Akelius Lägenheter AB 556549-6360 Stockholm 100 20,541,962 554Akelius Procurement AB 559051-1845 Danderyd 100 1,000 -Akelius Hotell och Fastigheter AB 556650-2414 Danderyd 100 5,000 -Akelius Lönnlöven AB 556878-6502 Danderyd 100 1,000 127Akelius UK Holding 1 AB 556709-6028 Danderyd 100 1,000 309Akelius France 1 AB 556878-6494 Danderyd 100 1,000 106Akelius Systems AB 556705-7756 Danderyd 100 1,000 1Akelius US Holding 1 AB 556954-1518 Danderyd 100 1,000 824Akelius Denmark Holding 1 AB 556954-1393 Danderyd 100 1,000 73Akelius Energy Holding AB 559212-8838 Danderyd 100 6,500 -Akelius General AB 559173-5831 Danderyd 100 100,000 -Closing net book value 2,629

note 10 shares in subsidiaries

EUR million 2019 2018Opening balance 2,683 1,325Capital contribution 1 1,360Disposal through liquidation - -2Closing balance, acquisitions 2,684 2,683Opening balance, impairment losses -28 -24Additional write-downs -27 -6Disposal through liquidation - 2Closing balance, impairment losses -55 -28Closing balance 2,629 2,655

*) together with holdings via Group companies, the Group owns 99.7 percent of Akelius GmbH

In 2019, Akelius Kanada AB was merged with Akelius Residential Property AB.

During the year, capital contributions of EUR 1 million were made to Akelius Procurement AB.


150

note 11 financial instrument


EUR million

Financial assets


through profit or

loss

Financial assets

measured at

amortized cost

Financial liabilities

measured at

amortized cost

Total book value

Level 1

Level 2

Total fair

valueDecember 31, 2019AssetsReceivables from Group companies - 4,211 - 4,211 - 4,211 4,211Derivatives 3 - - 3 - 3 3Trade and other receivables - 25 - 25 - 25 25Cash and cash equivalents - - - - - - -Total 3 4,236 - 4,239 - 4,239 4,239LiabilitiesLiabilities to Group companies - - 1,612 1,612 - 1,612 1,612Interest-bearing liabilities - - 3,880 3,880 3,416 589 4,005Derivatives 57 - - 57 - 57 57Other financial liabilities - - 40 40 - 40 40Total 57 - 5,532 5,589 3,416 2,298 5,714


151

EUR million

Financial assets


through profit or

loss

Financial assets and

liabilities measured

at amortized

cost

Financial assets and

liabilities measured at lowest

value principle

Total book value

Level 1

Level 2

Total fair

valueDecember 31, 2018AssetsReceivables from Group companies - 4,059 - 4,059 - 4,059 4,059Derivatives - - - - - - -Trade and other receivables 2 - - 2 - 2 2Cash and cash equivalents

1 - - 1 - 1 1Total 1 4,059 - 4,062 - 4,062 4,062LiabilitiesLiabilities to Group companies - 1,019 - 1,019 - 1,019 1,019Interest-bearing liabilities - 4,158 - 4,158 3,257 736 3,993Derivatives - - 44 44 - 44 44Other financial liabilities - 47 - 47 - 47 47Total - 5,224 44 5,268 3,257 1,846 5,103

note 11 financial instrument, continued



152

EUR million 2019 2018Receivables from Group companies 4,161 3,751Hybrid loan 7 9Non-current receivables 4,168 3,760Receivables from Group companies 50 308Restricted cash* 15 -Prepaid expenses and accrued income 5 3Other receivables 1 4Current receivables 71 315Total trade and other receivables 4,239 4,075

note 13 cash and cash equivalents

EUR million 2019 2018Bank deposits and cash - 1Total - 1

The change in cash and cash equivalents is shown in the cash flow statement.

Cash and cash equivalents mainly include bank deposits.

Receivables from Group companies are attributable to transactions between the Parent Company and the subsidiaries.

Intragroup loans are subject to market terms and are without collateral

note 12 trade and other receivables

*) restricted cash relates mainly to guarantees to banks for derivative transactions


153

note 14 interest-bearing liabilities

maturity structure as at December 31, 2019

Fixed interest rates

EUR millionSecured


Total borrowing Share, percent

0–1 years 285 1,639 1,924 391–5 years 72 1,255 1,327 27> 5 years 461 1,281 1,742 35Total 818 4,175 4,993 100Average, years 1.0 3.4 3.0Average interest rate, percent 3.1 1.8 2.0

Capital tied up

EUR millionSecured



0–1 year 723 393 1,116 221–5 years 95 2,501 2,596 52> 5 years - 1,281 1,281 26Total 818 4,175 4,993 100

maturity structure as at December 31, 2018

Fixed interest rates

EUR millionSecured



0–1 year 89 1,106 1,195 41–5 years 128 1,275 1,404 62> 5 years 417 1,663 2,080 34Total 634 4,044 4,678 100Average, years 1.9 4.1 3.8Average interest rate, percent 8.1 2.4 3.2

Capital tied up

EUR millionSecured



0–1 year 79 173 251 51–5 years 555 2,209 2,764 59> 5 years 0 1,663 1,663 36Total 634 4,044 4,678 100


154

note 15 derivatives

EUR million 2019 2018Interest rate derivativesAssets - -Liabilities -52 -25Cross currency swapsAssets 2 -Liabilities - -Foreign exchange forwardsAssets 1 -Liabilities -5 -19Total net fair value -54 -44Nominal value 2,194 2,003

Derivative transactions are undertaken with approved counterparts for which credit limits are established and with which

ISDA, International Swaps and Derivatives Association, master agreement applies.

changes during the year

EUR million 2019 2018Opening balance -44 -41Outgoing derivatives 9 16New derivatives -11 -Change in accounting principle 18 -Revaluation of derivatives reported in the income statement

-26 21

Exchange difference - 2Closing balance -54 -44of which, long-term portion -50 -25

maturity structureEUR million 2019 20180–1 year -4 -191–5 years -5 -4> 5 years -45 -21Total -54 -44


155

note 16 net debt reconciliation

2019 Assets

Liabilities

EUR million

Cash and cash

equivalents

Pledged cash

assets*Deriva-

tives

Short-term loans

Long-term loans

Deriva- tives Total

Balance at January 1, 2019 1 - - 252 4,925 44 5,222Cash flow - - - 560 -281 2 281Reclassification - - 21 304 -304 -21 -Non cash transactions -1 -18 - - 32 13Translation difference - - - - 36 - 36Balance at December 31, 2019 - - 3 1,116 4,376 57 5,552*) restricted cash

2018 Assets

Liabilities

EUR million

Cash and cash

equivalents

Pledged cash

assets*Deriva-

tives

Short-term loans

Long-term loans

Deriva- tives Total

Balance at January 1, 2018 1 - - 152 4,661 41 4,855Cash flow - - - 88 355 -16 428Reclassification - - - 18 -18 21 21Translation difference - - - -6 -73 -2 -81Balance at December 31, 2018 1 - - 252 4,925 44 5,222*) restricted cash

note 17 trade and other payablesEUR million 2019 2018Accrued interest expenses 39 37Other accrued expenses 3 2Other payables 1 10Total current portion 43 49Total trade and other payables 43 49


156

note 18 pledged assets and contingent liabilities

EUR million 2019 2018Pledged assetsPledged bank assets - -Property mortgages - -Shares in subsidiaries - -Total - -

EUR million 2019 2018Contingent liabilitiesGuarantees on behalf of subsidiaries 662 552Other guarantees 33 -Total 695 552

note 19 equityproposed appropriation of profitsThe Annual General Meeting has the following amount at its disposal in the Parent Company, in EUR

Retained earnings -46,513,991Share premium reserve 1,101,872,180Profit for the year 74,955,386Total 1,130,313,575

The Board proposes that the amount be allocated as follows:EUR 0.06 per A-share 191,508,548EUR 0.10 per D-share 22,000,000Carried forward 916,805,027Total 1,130,313,575

Board statement on the proposed dividendThe Group and the Parent Company have good liquidity, and following the proposed dividend, the equity ratios of the Group and the Parent Company will be 44 percent and 16 percent, respectively.

In the Board’s assessment, which takes into account liquidity needs, the proposed business plan, investment plans and the ability to raise long-term credit, there are no indications that the Group or the Parent Company will have insufficient equity following the proposed dividend.

note 20 related parties

The Parent Company has a controlling influence over its subsidiaries as described in note 11.

The Parent Company has sales to Group companies amounting to EUR 28 million (23).

The Parent Company’s purchases from Group companies amounted to EUR 21 million (17).

Related party transactions for the Group is described in note 26 for the group.

note 21 - subsequent events

Akelius Residential Property AB (publ) has issued a EUR 500 million hybrid bond.


157

signatures

The board assures that the annual accounts have been prepared using generally accepted accounting policies. The annual accounts give a true and fair view of the company’s financial position and performance and the directors’ report gives a fair review of the development of the company’s operations, financial position and performance and describes the principal risks and uncertainties facing the Group.

The consolidated accounts have been prepared in accordance with the international set of accounting standards referred to in Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of July 19, 2002 on the application of international accounting standards. The consolidated accounts give a true and fair picture of the Group’s financial position and performance and the directors’ report gives a fair review of the development of the Group’s operations, financial position and performance and describes the principal risks and uncertainties facing the Group and the companies in the Group.

Stockholm, March 12, 2020

Anders Lindskog Igor Rogulj Lars Åhrman Chairman of the Board

Pål Ahlsén Managing Director

Our audit report for these annual accounts was issued on March 12, 2020. Ernst & Young AB

Ingemar Rindstig Jonas Svensson Authorized Public Accountant Authorized Public Accountant

158

independent auditor’s report

To the general meeting of shareholders of Akelius Residential Property AB (publ), corporate identity number 556156-0383

report on the annual accounts and the consolidated accounts

opinions

We have audited the annual accounts and consolidated accounts of Akelius Residential Property AB (publ) except for the corporate governance statement on pages 86-91 for the year 2019. The annual accounts and consolidated accounts of the company are included on pages 70-157 in this document.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2019 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2019 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 86-91. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of shareholders adopts the statement of comprehensive income and the statement of financial position for the parent company and the consolidated statement of comprehensive income and consolidated statement of financial position for the group.

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.

basis for opinions

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

159

key audit matters

Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

valuation of investment properties

description

The recorded fair value of investment properties is 11 760 mEUR at 31 December 2019. The recorded fair value is based on an internal valuation of each property. The valuations policy and valuation model is consistently used in all countries where Akelius has property operations. To validate the internal valuation approximately one third of the property portfolio value has been reviewed by external appraisers.

Based on the high degree of assumptions and assessments which are made in connection with the property valuations, we believe that this area is a particularly

important area in our audit. A description of the valuation of the property portfolio is stated in the section on accounting principles in note 2 and note 12 on investment properties.

how our audit addressed this key audit matter

In our audit we have evaluated the company´s process for property valuation by evaluating the valuation methodology, and input data in the prepared valuations. We have evaluated the skills and objectivity of the internal experts and the external experts. We have obtained the external appraisers’ review and assessed if the difference against the internal valuations is within the normal uncertainty range.

We have made comparisons to known market information. Based on our valuation expertise, we have reviewed the model used for the property valuation. We have also reviewed the reasonability of the adopted assumptions such as yield requirements, property investments and vacancy rates with support of internal valuation experts. For a sample of properties, we have tested rental income and operating costs as well as arithmetical accuracy of the calculation. We have reviewed the appropriateness of the disclosures provided in the annual accounts.

other information than the annual accounts and consolidated accounts

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 2-69 and 164-169. The Board of Directors and the Managing Director are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

160

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things oversee the company’s financial reporting process.

auditor’s responsibility

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

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- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Managing Director.

- Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company’s and the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation.

- Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.

We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.

We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes disclosure about the matter.

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report on other legal and regulatory requirementsopinions

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Akelius Residential Property AB (publ) for the year 2019 and the proposed appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated (loss be dealt with) in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

basis for opinions

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group’s type of operations, size and risks place on the size

of the parent company's and the group’s equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.

Auditor’s responsibility

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

- has undertaken any action or been guilty of any omission which can give rise to liability to the company, or

- in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

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Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional skepticism throughout the audit. The examination of the administration and the proposed appropriations of the company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company’s situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss we examined the Board of Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.

the auditor’s examination of the corporate governance statement

The Board of Directors is responsible for that the corporate governance statement on pages 86-91 has been prepared in accordance with the Annual Accounts Act.

Our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard RevU 16 The auditor´s examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.

Ernst & Young AB, Box 7850, 103 99 Stockholm was reappointed auditor of Akelius Residential Property AB by the general meeting of the shareholders on the 11 April 2019 and has been the company’s auditor since 2018.

Ingemar Rindstig Authorized Public Accountant

Jonas Svensson Authorized Public Accountant

Stockholm March 12, 2020 Ernst & Young AB

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net asset value to asset ratio and loan-to-value ratio

EUR million 2019

Dec 312018

Dec 31Equity 5,526 5,370Deferred tax 933 884Deferred taxes reported as liability held for sale 13 -Derivatives 61 30Net asset value 6,533 6,284

Total interest-bearing liabilities 5,356 6,018Hybrid bond -499 -499Cash and liquid assets -19 -13Pledged cash equivalents - -1Net debt 4,838 5,505Total assets 12,149 12,516Cash and cash equivalents -19 -13Pledged cash assets - -1Net assets 12,130 12,502Loan to value, percent 40 44

Net Debt 4,838 5,505Less senior unsecured debt -3,199 -3,173Secured debt minus pledged cash, cash and cash equivalents 1,639 2,332Net asset 12,130 12,502Loan-to-value ratio, secured loan, percent 14 19

Equity 5,526 5,370Hybrid bond 499 499Equity and hybrid bond 6,025 5,869Total asset 12,149 12,516Equity ratio, percent 45 43Equity and hybrid capital ratio, percent 50 47

adjusted net operating income

EUR million 2019

Adjustment for other services

Adjusted2019

Rental income 496 -97 399Operating expenses -210 97 -113Maintenance -31 -31Net operating income 255 255Net operating income margin, percent 51,5 64,1

alternative performance measures

Reconciliation for the purposes of the Guidelines published by the European Securities and Markets Authority, ESMA, is set out below.

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EUR million 2019 2018Intangible assets 19 11Unencumbered properties 5 766 5,344Lease agreement, right-of-use assets 16 -Tangible fixed assets 6 6Deferred tax 2 1Financial assets 4 4Trade and other receivables 116 86Derivatives 3 16Unencumbered assets 5,932 5,468Unsecured debt 3,199 3,173Subordinated debt -12 -25Less cash and cash equivalents -19 -13Net unsecured senior debt 3,168 3,135Unencumbered asset ratio 1.87 1.74

rental income and net operating income growth for like-for-like properties

EUR million 2019 2018Growthpercent

Rental income 496 482 2.7Exchange differences - 1Service revenue -79 -87Purchases and sales -40 -40Like-for-like rental income 377 356 5.7Net operating income 255 259 -1.3Purchases and sales -40 -50Like-for-like net operating income 215 209 2.9

realized value growth

unencumbered asset ratio

EUR million 2019 2018Proceeds from the sale of properties 1,616 300Costs of sale -18 -5Acquisition costs -663 -112Accumulated investments -262 -54Realized value growth 673 129

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definitions adjusted EBITDAEBITDA plus other financial income and expenses. It highlights current cash flow capacity from property management excluding financial income and expenses.

adjusted net operating income marginNet 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.

annual property returnGain 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 rateThe rate of return used in assessing the terminal value of property in the fair value assessment.

cash sources Cash sources include liquidity, contracted sales and profit before tax and revaluation.

cash usesCash uses include investments, contracted purchases and short-term loans.

debt maturities, yearsVolume-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 earnings capacity is based on the property portfolio at balance sheet date and the portfolio’s gross rent, real vacancy, estimated operating expenses and maintenance costs during a normal year, as well as central administrative expenses.

discount rateRate of return used in assessing the present value of future cash flow and terminal value in the fair value assessment of properties.

EBITDANet operating income and 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.

equity ratioEquity in relation to total assets. It highlights the company’s financial stability.

income returnNet 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.

in-place rent Contracted rent, excluding rental discounts and temporary charges.

interest rate hedge total loans year Volume-weighted remaining term of inter-est rates on interest-bearing liabilities and derivatives on the balance sheet date. It illustrates the company’s financial risk.

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interest coverage ratio Adjusted EBITDA plus realized value growth for the latest rolling 12-month period in relation to net interest expenses for the latest rolling 12-month period. 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. It is used to calculate liquidity.

liquidity The liquidity reserve consists of free cash, unused credit lines and assets that can be liquidized within three working days.

like-for-like properties Properties owned during the compared periods. This means that properties that were acquired or sold during any of the compared periods are excluded. It facilitates the analysis and the comparison between different periods, when properties that do not figure in all the periods are excluded.

loan-to-value ratio Net debt divided by net assets. This key figure shows financial risk.

loan-to-value ratio, secured loans Net debt reduced by unsecured interest-bearing debt divided by net assets. This key figure shows financial risk.

net asset Total assets minus pledged cash, cash and cash equivalents. It is used to illustrate the company’s net assets.

net asset value Equity, deferred tax and derivatives. It is used to highlight the company’s long-term capital that is not interest-bearing.

net debt Interest-bearing liabilities, less subordinated debt, cash and cash equivalents. It is used to facilitate analysis of the company’s real indebtedness.

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

net letting The sum of agreed contracted annual rents for new lettings for the period less terminated annual rents. Demonstrates the effect of the vacancy development illustrated in annual rent.

net interest expenses Total interest expenses less interest on subordinated debt, one-off financing charges and interest on cash, cash equivalents and liquid financial assets. It is used to facilitate analysis of the company’s interest results.

net operating income Rental income less property costs. It highlights the ongoing earning capacity from property management.

net operating income margin Net operating income in relation to rental income. It highlights the ongoing earning capacity from property management.

other income and expenses Items from secondary activities such as gains on disposals of fixed assets other than investment properties, income and expenses from temporary services rendered after the sale of properties. It summarizes income and expenses from business operations ancillary to the main business operations.

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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, owner-occupied properties, 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. This item demonstrates the actual result of sales measured from the acquisition to sale.

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. This rate facilitates the analysis of long term vacancy for the company.

renewed and renegotiated rental contracts All changes in rental levels for remaining tenants. This item highlights changes in contracts with existing customers.

rental income Rental value less vacancies and rent discounts.

rental value 12 months rent for apartments, including a market rent for vacant apartments. It illustrates what is accountingly included in the company’s rental income.

rent potential The new lease level per area the last 12 months divided by the rent per area per December 31, 2019 for all occupied apartments.

return on equity Comprehensive income divided by opening equity. It shows the return offered on the owners’ invested capital.

unencumbered asset ratio Unencumbered assets divided by cash equivalents divided by unsecured debt minus subordinated debt and cash equivalents. It is used to assess unencumbered assets in relation to unsecured senior interest-bearing liabilities.

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

value growth Changes in the value of investments properties excluding investment and change in currencies. It demonstrates the changes in value of properties cleared for currency effects and capital spent.

walk score Rating of how easy it is to complete daily errands without a car. Locations are rated on a scale from 0 to 100, where 100 is the best. Walk score is provided by Walkscore.com and grade the locations of the properties.

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Head office, SwedenSvärdvägen 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

GermanyErkelenzdamm 11-13D-10999 Berlin+49 (0) 30 7554 110 akelius.de

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

England10 Bloomsbury WayLondon WC1A 2SL+44 (0) 2 078 719 695akelius.co.uk

France24 rue Cambacérès75008 Paris+33 1 40 06 85 00akelius.fr

United States300 A Street, 5th FloorBoston, MA 02210+1 857 930-39 00akelius.us

DenmarkNørre Voldgade 80, 2. floor1358 Copenhagen K+45 88 62 62 78akelius.dk

Documents

annual report 2019 - Cision · Akelius focuses on properties with the ability to generate a stable increase in rental income. Rental income is the most important value driver in real