financial risks

Real estate companies have two main property related financial risks

  • decreasing property values
  • lower rental income

Akelius mitigates the property risk by investing in

  • residential properties
  • stable countries
  • growing metropolitan cities
  • attractive locations

Real estate companies main debt related financial risks are

  • liquidity
  • leverage
  • interest payments

A low property risk mitigates debt related financial risk, because

  • stable income supports interest payments
  • stable property values stabilise leverage
  • attractive properties in liquid property markets support liquidity
  • lenders prefer stable assets

liquidity, re-financing

Akelius has a policy to mitigate liquidity and re-financing risks

  • liquidity of at least EUR 300 million
  • liquidity sources must be larger than liquidity uses
cash uses, cash sources, EUR million

cash uses and cash sources 12 months forward, 2019-06-30, MEUR

Akelius prioritizes long-term loans to mitigate
re-financing risks. 
The average debt maturity is 5.7 years.
Short-term loans amount to 6 percent of total loans.

test

debt maturities per year, 2019-06-30, MEUR

loan-to-value sensitivity

Akelius policy is to be able to withstand a
25 percent decrease in property values.
Such a decrease would increase loan-to-value from 40 to 53 percent.

Akelius' bond terms stipulate that no additional debt may be incurred or no net dividend may be paid if loan-to-value exceeds 60 percent. 

loan-to-value, current and after 25 percent drop in property values , percent

loan-to-value, 2019-06-30, percent
current and with 25 percent lower property values

interest coverage sensitivity

Akelius policy is to be able to withstand a five percentage point increase in interest rates. 
Akelius secures interest rates for long periods. 
This reduces the effect of sudden interest rate increases.

A five percentage point increase in interest rates on loans with variable interest rates will lower the interest coverage ratio to 1.87 commencing twelve months.

Akelius' bond terms stipulate that no additional debt may be incurred or no net dividend may be paid if the interest coverage ratio is below 1.5.

test

interest coverage ratio, 12 months forward, per 2019-06-30

The risk for not being able to pay interest is mitigated by liquidity and low leverage.

interest costs and liquidity, EUR million

interest costs and liquidity, 2019-06-30, MEUR

property fair value sensitivity

To mitigate negative effect of change in capitalization rate,
property holdings are diversified across countries.

change in required rates of return, percentage points

value change, percent, due to increased capitalization rate, percentage points, 2019-06-30